"254 Certain trust money to be deposited in general trust account
(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.
(2) Subject to section 258A, a law practice that has received money that is the subject of a written direction mentioned in subsection (1) (a) must deal with the money in accordance with the direction:
(a) within the period (if any) specified in the direction, or
(b) subject to paragraph (a), as soon as practicable after it is received.
Maximum penalty: 100 penalty units.
(3) The law practice must keep a written direction mentioned in subsection (1) (a) for the period prescribed by the regulations.
Maximum penalty: 50 penalty units.
(5) A person is an "appropriate person" for the purposes of this section if the person is legally entitled to give the law practice directions in respect of dealings with the trust money."
- The Respondent received total payments in the sum of $84,580 on account of legal costs and disbursements from Ms Tyack.
- No receipts were ever provided by the Respondent or the Law Practice to Ms Tyack with the exception of the sum of $3,000.
- None of the payments made in cash on account of legal costs and disbursements were deposited into the Respondent's trust account as required by the terms of Section 254.
- The Respondent also received the sum of $209,583.79 on behalf of Ms Tyack which was deposited into his trust account on 13 January 2012 in accordance with S254 of the Act.
- Thereafter, the Respondent without Ms Tyack's knowledge, authority or direction withdrew various amounts for costs and barrister's fees. The Respondent's conduct in dealing with the money without the authority or direction of Mrs. Tyack and in failing to hold the money exclusively for the person on whose behalf the money was received was in breach of S255 of the Act. No tax invoices were ever received by Ms Tyack nor did she receive a trust account statement.
- On the evidence before us, the Tribunal finds the grounds made out.
The Kahlefeldt Securities Pty Ltd matter
- Rule 12 of the Reviewed Professional Conduct and Practice Rules provides:
"12.1 A practitioner must not borrow any money, nor assist an associate to borrow any money from a person:
12.1.1 who is currently a client of the practitioner, or the practitioner's firm;
12.1.2 for whom the practitioner or practitioner's firm has provided legal services, and who has indicated continuing reliance upon the advice of the practitioner, or practitioner's firm in relation to the investment of money; or
12.1.3 who has sought from the practitioner or the practitioner's firm, advice in respect of the investment of any money, or the management of the person's financial affairs;
12.2 This clause does not prevent a practitioner or an associate of a practitioner borrowing from a client, which is a corporation or institution described in the Schedule to this Rule, or which may be declared by the Council of the Law Society to be exempt from this Rule.
12.3 A practitioner must not maintain a private finance company and invite, directly or indirectly, the deposit of money with the company on the basis of a representation that:
12.3.1 the money is repayable at call, or on short notice, if that is not assured when the money is deposited; or
12.3.2 that the deposit of the money is, or will be secured, unless the money is specifically secured by an instrument identifying the lender, the amount deposited and the security.
12.4 A practitioner must not borrow any money, or permit or assist an associate to borrow any money, from a private finance company which is operated or controlled by the practitioner or the associate of the practitioner.
12.5 A practitioner must not cause or permit a private finance company to pay to any depositors of money to the company a rate of interest on their deposits which is less than the rate charged by the company to borrowers.
The Schedule
1. A banker duly authorised to carry on banking business;
2. An insurance company duly authorised to carry on insurance business.
3. A company registered under the Life insurance act 1945 of the Commonwealth.
4. A building society registered under the Co-operation Act 1923 or listed in the Second Schedule of that Act.
5. A building society governed by the Financial Institutions Code 1992.
6. A credit union governed by the Financial Institutions Code 1992
7. A trustee company mentioned in the First Part of the Third Schedule to the Trustee Companies Act 1964.
8. The Public Trustee.
9. A non-bank financial institution which is governed by the Financial Corporations Act 1974 of the Commonwealth or the Financial Institutions Code 1992.
10.A company the securities in which are listed on a member exchange of the Australian Associated Stock Exchanges or a foreign company the securities of which are quoted for trading on a stock exchange or in a market for the public trading in securities.
11. A government, governmental body, agency, department, authority or instrumentality, whether foreign, federal, state or local.
12. A company having the majority of its issued share capital to which voting rights attach owned by any government, governmental body, agency, authority or instrumentality, whether foreign, federal, state or local.
13. A company related to any of the companies referred to above or a company in which any entity of a type described above has a substantial shareholding as defined in Section 708(i) of the Corporations Law.
14. A member of the immediate family of the practitioner or a corporation, partnership, syndicate, joint venture or trust in which, or in the shares in which, the whole of the beneficial interest is presently vested in one or more members of the immediate family
- In breach of Rule 12, the Respondent as a director of the Law Practice caused the Law Practice to borrow $350,000 from an existing client of the Law Practice being Kahlefeldt Securities Pty Ltd, a company for whom the Respondent had carried out legal work for a considerable number of years.
- At the time the loan moneys were paid to the Respondent's Law Practice, the Respondent placed himself in a conflict of the type that Rule 12 seeks to avoid.
- On the evidence before us, the Tribunal finds the ground made out.
The Ross and Kathleen Barby matter
- On 10 November, 2004, the Respondent received the sum of $150,037.11 on trust as a result of District Court Orders on his undertaking to disperse those funds in a particular manner and priority.
- Between 10 November, 2004 and 14 May, 2008 the Respondent dispersed the moneys but for the sum of $3,570.23. On 31 May, 2011 the Respondent transferred this sum from the trust account to the office account of the Law Practice. There were no documents retained in the Law Practice file which supported this transfer that is no direction from the person on whose behalf the trust funds were held. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent has failed to hold the money exclusively for the person on whose behalf the money was received.
- On the evidence before us, the Tribunal finds the grounds made out.
The Beverley Anne Kennewell matter
- The Law Practice trust account records show a credit balance of $5,908.52 as at 21 August, 2008 at the time the Law Practice changed its accounting software from 'Perfect Balance' to the 'Leap' system. The funds were held on behalf of the Estate of the late Beverley Anne Kennewell.
- On 21 May, 2011, the Respondent transferred the above amount from the trust account to the Law Practice office account in payment of 'Invoice #4001 trust to office transfer'.
- There were no documents retained in the Law Practice file which supported this transfer, that is, no direction from the person on whose behalf the trust funds were held. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent has failed to hold the money exclusively for the person on whose behalf the money was received.
- On the evidence before us, the Tribunal finds the grounds made out.
In the matter of Carolyn Barby
- On 21 August, 2008 the Law Practice trust account records for Carolyn Barby show a credit balance of $15,999.29 at the time the Law Practice changed its accounting software from 'Perfect Balance' to the 'Leap' system.
- On 31 May, 2011 the Respondent transferred the above amount from the trust ledger to his office account in payment of 'Invoice #4000 trust to office transfer'.
- There were no documents retained in the Law Practice file which supported this transfer, that is, no direction from the person on whose behalf the trust funds were held. Ms. Barby in her Affidavit evidence confirmed she had never received the tax invoice nor trust statements nor did she authorise the transfer of the funds from the trust account to the Law Practice office account.
- Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent has failed to hold the money exclusively for the person on whose behalf the money was received.
- On the evidence before us, the Tribunal finds the grounds made out.
- In the matter of Estate of late Terry Paul Jones
- On 3 November, 2008 the Law Practice trust account records held in the name 'Estate Administration Mr. Timothy John Hay' showed a credit balance of $3,744.85.
- On 6 July, 2010 the Respondent caused the sum of $3,744.85 to be transferred from the trust account ledger to the Law Practice office account with narration 'paid to: Friedlieb Byrne Solicitors. Reason: Invoice #2747 trust to office transfer.'
- There were no documents retained in the Law Practice file which supported this transfer, that is, no direction from the person on whose behalf the trust funds were held and this fact was confirmed in Mr. Hay's Affidavit who deposed that he had never authorised the transfer, nor received the tax invoice nor was he aware the funds existed. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent failed to hold the money exclusively for the person on whose behalf the money was received.
- On the evidence before us, the Tribunal finds the grounds made out.
In the matter of John Thomas McCurdy
- On 26 March, 2009 moneys were received into the Law Practice Trust Account for provision of legal services by the Law Practice in relation to the above Estate, the trust account records being held in the name of 'Matter Code 08114319, Probate, Mr. Gregory Thomas McCurdy'. The moneys were disbursed but for the sum of $12,532.20 which was the credit balance of the trust account as at 23 April, 2009.
- Between 23 February, 2011 and 11 April, 2012 the Respondent caused the sum of $12,532.20 to be transferred from the trust account ledger to the Law Practice office account in payment of four (4) tax invoices issued by the Law Practice to the client.
- There were no documents retained in the Law Practice file which evidenced the work completed to support the transfer of $12,532.20 to the Law Practice.
- There were no documents retained in the Law Practice file which supported the transfers, that is no direction or authority from the person on whose behalf the trust funds were held.
- There were no documents retained in the Law Practice file which indicated that the Tax Invoices or Trust Account statements had ever been sent to the client.
- The Affidavit of Mr. McCurdy in evidence before us, confirmed the contents of paragraphs 131, 132 and 133 above.
- On the evidence before us, the Tribunal finds the ground made out.
Conclusion
- The Respondent's conduct discloses three major areas of concern in relation to his professional activities. Firstly his dishonesty in misappropriating Mrs. Sievert's funds for his own personal gain and secondly his irregular practice of withdrawing moneys from his trust account and crediting them to his office account without authority.
- In the case of Mrs. Sievert, the Respondent's conduct in using her funds to pay his Law Practice's debt to the Australian Taxation Office and to not disclose that conduct until over 12 months later, and only in circumstances when Mrs. Sievert asked for a return of her funds, was grossly dishonest in the view of the Tribunal.
- Secondly in relation to his 'mopping up' of the various trust account balances as set out in these Reasons, the Respondent demonstrated a complete lack of proper regard for the fiduciary obligations owed by him to his clients whose money he held in his trust account.
- As was stated by Street C.J. in the decision of The Law Society of New South Wales v. Jones, Unreported, NSW CA 333 of 1977, 27 July, 1978 '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. 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 money on their behalf. The Court must ensure that this trust is not misplaced.....'
- The Kahlefeldt Securities matter did not involve dishonesty in that it was a consensual transaction with full disclosure at the time the loan was made, however the conflict in which the Respondent placed himself resulted in a clear breach of Rule 12 as set out above.
Orders sought by the Applicant
- The Applicant seeks an order that the Respondent be removed from the Roll together with costs.
- We have no hesitation in concluding that the Respondent's conduct in the Sievert matter would 'reasonably be regarded as disgraceful and dishonourable by professional brethren of good repute and competency' (to quote from Mason P's judgment in New South Wales Bar Association v. Hamman [1999] NSWCA 404 at [21], citing Allinson v. General Council of Medical Education and Registration [1894] 1 QB 750.) It therefore manifestly amounted to professional misconduct at common law.
- As regards the matters of unauthorised transfers from trust to office as set out in these Reasons, we find the Respondent's conduct falls into the same category of 'disgraceful and dishonourable' conduct such that it amounted to professional misconduct.
- The standards of the profession must be fully maintained at all times, particularly with members of the public who find need to use the services of the profession from time to time. The instances of professional misconduct show that at the time when the Respondent engaged in it he was not a fit and proper person to remain on the Roll. He has chosen not to defend the proceedings nor present any evidence or advance any submission suggesting that he recognises the wrongfulness of his past misconduct and is sorry for it or that he might now be a fit and proper person to practise law. In those circumstances, we make the orders set out below.
Orders
- The Orders are:
1. The Respondent Solicitor is found guilty of professional misconduct.
2. Pursuant to section 562(2)(a) of the Act the name of the Respondent Solicitor is to be removed from the Local Roll.
3. The Respondent Solicitor is to pay the costs of the Applicant 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: 09 March 2015