Council of the Law Society of New South Wales v Wall

Court of Appeal (NSW)|2010-07-08

CITATION: Council of the Law Society of New South Wales v Wall [2010] NSWADT 176

APPLICANT Council of the Law Society of New South Wales

PARTIES: FIRST RESPONDENT Dawn Wall

SECOND RESPONDENT Legal Services Commissioner

EXTEMPORE DECISION DATE: 8 July 2010 BEFORE: Chesterman M - Deputy President; Molloy G - Judicial Member; Hayes E - Non-Judicial Member

CATCHWORDS: Solicitor - disciplinary application - breach of trust account requirements - misappropriation - failure to account - instrument of consent

LEGISLATION CITED : Legal Profession Act 1987 Legal Profession Act 2004

Council of the Law Society of New South Wales v Bharati [2010] NSWADT 159 Council of the Law Society of New South Wales v Karam [2010] NSWADT 170 CASES CITED: Council of the Law Society of New South Wales v Koffel [2010] NSWADT 149 Council of the New South Wales Bar Association v Butland [2009] NSWADT 177 Law Society of New South Wales v Bannister [1993] NSWCA 157 New South Wales Bar Association v Murphy [2002] NSWCA 138

APPLICANT A Matalani, solicitor

REPRESENTATION: FIRST RESPONDENT In person

SECOND RESPONDENT L Muston, solicitor

By consent: 1. The First Respondent is guilty of professional misconduct ORDERS: 2. The First Respondent is publicly reprimanded 3. (a) The First Respondent is not to be permitted to hold an unrestricted principal practising certificate or to become a solicitor/director of any incorporated legal practice for 3 years.(b) Thereafter, the First Respondent is not to be permitted to hold an unrestricted principal practising certificate or to become a solicitor/director of any incorporated legal practice unless any application for a certificate containing authorisation to such effect is accompanied by a report from a psychiatrist or clinical psychologist of the First Respondent's choice and approved by the Manager for the time being of the Professional Standards Department, certifying the First Respondent's medical and psychiatric fitness to practise in such capacity. 4. The First Respondent is to pay the Applicant's costs in these proceedings, as agreed in the sum of $2,500, by instalments of $50 per month to be paid on the first of every month.

1 On 25 February 2010, the Council of the Law Society of New South Wales ('the Law Society') filed an Application alleging that the First Respondent, Dawn Wall ('the Solicitor'), while practising as a solicitor, was guilty of professional misconduct on the following Grounds: (1) failure to account; (2) misappropriation of monies; and (3) wilful breach of section 61 of the Legal Profession Act 1987 ('the 1987 Act'). Particulars of the alleged misconduct were supplied in a schedule to the Application.

2 In the Application, the Law Society sought orders as follows against the Solicitor: (a) a public reprimand; (b) payment of the Applicant's costs; and (c) such further and other orders as the Tribunal deems appropriate.

3 On 25 February 2010, the Law Society also filed an affidavit in support of the Application, sworn by its solicitor, Mr Raymond Collins, on the preceding day. On 6 July 2010, the Society filed a further affidavit by Mr Collins, sworn on the day of filing.

4 In her Reply, dated 28 March 2010, the Solicitor admitted each of the three Grounds set out in the Application and all of the Particulars except for the final paragraph (paragraph 18).

5 On 18 May 2010, an Instrument of Consent, which included a statement of the three grounds set out in the Application and a section headed 'Particulars', was filed in the Tribunal. It was executed by the Law Society, the Solicitor and the Legal Services Commissioner. It indicated that the signatories gave their consent to the Tribunal making (a) a finding that the conduct of the Solicitor described in the Particulars amounted to professional misconduct and (b) the following orders, by consent:- 1. The Solicitor be publicly reprimanded. 2. The Solicitor not be permitted to hold an unrestricted principal practising certificate or become a solicitor/director of any incorporated legal practice for 3 years and thereafter, the Solicitor should not be permitted to hold an unrestricted principal practising certificate or become a solicitor/director of any incorporated legal practice unless any such application is accompanied by a report from a psychiatrist or clinical psychologist of the legal practitioner's choice and approved by the Manager for the time being of the Professional Standards Department certifying the Solicitor's medical and psychiatric fitness to practice in such capacity. 3. The Solicitor is to pay the costs of the Council of the Law Society in these proceedings agreed in the sum of $2,500 with monthly instalments of $50 per month to be paid on the first of every month.

6 At the hearing before us, which took place on 8 July 2010, Ms Muston represented the Legal Services Commissioner. Through so appearing, pursuant to an entitlement conferred by section 559(1)(c) of the Legal Profession Act 2004 ('the 2004 Act'), the Commissioner became a party to the proceedings (as the Second Respondent) under section 559(5).

7 Mr Matalani, appearing for the Law Society, tendered unopposed the two affidavits sworn by Mr Collins and the Instrument of Consent. The Solicitor tendered unopposed a letter from Centrelink showing that she was currently in receipt of a weekly amount as Newstart allowance. She indicated from the Bar table that she was presently unemployed but that there were good prospects of her obtaining employment as a solicitor in the new future. In response to a question from the Bench, she stated that her potential employer was aware of the allegations made against her in the Application and of the stage that these proceedings had reached.

8 Mr Matalani, with support from the Solicitor and from Ms Muston, requested us to make orders in terms of those contained in the Instrument of Consent. He pointed out that the second of the three orders set out in this Instrument was intended to be included in the Application but had been omitted through an oversight. He indicated also that paragraph 18 of the Particulars in the Application, which the Solicitor had not admitted in her reply, had been omitted from the Particulars in the Instrument of Consent because it contained an allegation that had not been put to her during the Law Society's investigation of the complaint against her. He added that in other respects the two sets of Particulars were identical.

9 At the conclusion of the hearing, we stated that we would grant this request. We made orders in the terms proposed in the Instrument of Consent, preceded by an order declaring the Solicitor to be guilty of professional misconduct. Those orders take effect from the date of the hearing. We also indicated that the Registry would send to the parties a Notice of Decision embodying our orders and that we would publish written reasons. The present decision constitutes those reasons.

10 The Solicitor was admitted to practice on 7 November 1986 and, except for two relatively brief periods, has held a practising certificate since that date.

11 At the commencement of the agreed Particulars that formed part of the Instrument of Consent, it was stated that paragraphs 1 - 10 related to Ground 3 of the Application (wilful breach of section 61 (1987 Act)) and paragraphs 1 - 17 related to the other two Grounds (failure to account and misappropriation). The term 'VLA' was defined to mean Victoria Legal Aid and 'the firm' to mean Wall Lawyers.

12 The Particulars were as follows:- 1. Whilst a principal of the firm, the Solicitor acted on behalf of Ms Jana Simone, in relation to Family Law matters that were listed for hearing at the Family Court in Melbourne. 2. The matter was funded by VLA. 3. The Solicitor retained Ms Elizabeth Johnson of Counsel, a Victorian Barrister, to act for Ms Simone in the Family Court proceedings in Melbourne. 4. On 4 July 2004 the Solicitor forwarded a Tax Invoice to VLA in the sum of $8,899.00 made up of $1,265 for costs and the following Disbursements:- L Athanasopoulos - brief to appear on stay $965.00 Fax $20.00

E Johnston - brief to appear on hearing of appeal $4,074.00 Hogg & Reid - as agents to file and serve appeal papers $176.00 5. The Solicitor sold her practice in September 2004. 6. On 5 October 2004, the Solicitor was declared bankrupt (discharged on 28 April 2008). 7. On or about 10 November 2004, VLA sent a cheque to the Solicitor, in the amount of $4,799 ("the funds") for fees and disbursements regarding Ms Simone's matter. 8. Of the funds paid by VLA to the Solicitor, $2,373 related to fees allowed for Ms Johnson being less than the amount claimed [$4,074.00]. The amount claimed for Ms Athanasopoulos [$965.00] was allowed in full and later paid to her by the Solicitor. 9. The Solicitor was entitled to her costs and the disbursement [$20.00] from the funds in the amount of $1,285.00 as her claim was allowed in full. 10. On 6 December 2004, the Solicitor deposited the funds into the firm's Office Account. Prior to the deposit, the firm's Office Account was in debit, in the sum of $208.61. 11. On 9 December 2004 a cheque to Ms Athanasopoulos drawn on the firm's Office Account in the sum of $965.00 was met. 12. On 22 March 2005, the Solicitor completed a Statement of Affairs for the Trustee in Bankruptcy, and listed Ms Johnson as a creditor. 13. The Solicitor made the following transfers from the funds in the Office Account, between December 2004 and November 2005: (a) Periodical (monthly) loan repayments to "Crooks & Goddard" in the amount of $45.30 per month; (b) Periodical (monthly) payments of $18.90 to AHAC Insurance; (c) Periodical (monthly) payments of $30.45 to Medibank (Private Health) Insurance; and (d) Periodical (monthly) payments of $222.00 to NAB in repayment of a personal loan to the Solicitor. 14. On 2 September 2005, Ms Johnson made a complaint to the New South Wales Office of the Legal Services Commissioner. 15. The periodical payments referred to at 13(a) to 13(d) above continued, until the full proceeds of the cheque from VLA were dissipated. 16. The Office Account went into debit from 1 November 2005. 17. On or about 24 July 2008, the Solicitor sent Ms Johnson a cheque in the amount of $3,250; representing the $2,373 owing plus interest from 6 December 2004 at 10% per annum.

13 The complaint against the Solicitor that gave rise to the allegation of failure to account in the Application was made by Ms Johnson on 2 September 2005. The complaint giving rise to the allegations of misappropriation and breach of section 61 of the 1987 Act was made by the Law Society on 19 June 2008. The conduct of the Solicitor to which the two complaints relate occurred between 6 December 2004 and 20 November 2005.

14 As already stated, the Application to the Tribunal was filed on 25 February 2010. Accordingly, even though the date of the first complaint and significant aspects of the relevant conduct of the Solicitor preceded the repeal of the 1987 Act and the commencement of the 2004 Act on 1 October 2005, the present proceedings are governed by Chapter 4 of the 2004 Act (see clauses 16 and 17 of Schedule 9 to this Act). This is subject to the proviso that the Tribunal 'may not make any determination or order of a disciplinary nature' against the Solicitor that is 'more onerous than could have been made' under the 1987 Act.

15 Under section 498(1)(a) of the 2004 Act, a list of types of conduct that are 'capable of being unsatisfactory professional conduct or professional misconduct' includes 'conduct consisting of a contravention of this Act'. Subsection (2) states that such a contravention 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.

16 As already indicated, the Application alleged that the Solicitor wilfully breached section 61 of the 1987 Act. So far as relevant here, section 61 stated:- Money received by solicitor on behalf of another (1) A solicitor who, in the course of practising as a solicitor in this State, receives money on behalf of another person:…

(a) must pay the money, within the time prescribed by the regulations, into a general trust account in New South Wales at an approved financial institution and must hold the money in accordance with the regulations relating to trust money, or… (c) if the person on whose behalf the money is received directs that it be paid otherwise than into a general trust account or to a third party, must pay the money as directed and (if the money is to be held under the direct or indirect control of the solicitor) must hold the money in accordance with the regulations relating to controlled money.

(2) In any of those three cases, the solicitor must hold the money exclusively for, and must disburse the money in accordance with the directions of, the person on whose behalf it is held…. (8) It is professional misconduct for a solicitor to wilfully contravene subsection (1) or (2).

17 A similar provision in the 2004 Act, section 254, relevantly states:- 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

(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.

18 Under section 562 of the 2004 Act, the Tribunal, after finding that a legal practitioner is guilty of professional misconduct or unsatisfactory professional conduct, may make one or more of a number of orders. These include an order under paragraph (e) of section 562(2) reprimanding the practitioner and an order under paragraph (d). The latter paragraph refers to an order that: (i) specified conditions be imposed on the practitioner's practising certificate issued or to be issued under this Act, and (ii) the conditions be imposed for a specified period, and (iii) specifies the time (if any) after which the practitioner may apply to the Tribunal for the conditions to be amended or removed.

19 Under the heading 'Consent orders', section 564 states:- (1) The Tribunal may, with the consent of the Australian legal practitioner concerned contained in a written instrument, make orders under this Part without conducting or completing a hearing in relation to the complaint.

(2) Consent may be given before or after the proceedings were commenced in the Tribunal with respect to the complaint.

(3) If consent is given before the proceedings were commenced, the requirement to conduct an investigation of the complaint (whether commenced or not) may be dispensed with, and any investigation of the complaint already being conducted may be suspended or terminated.

(4) This section does not apply to consent given by the practitioner unless the practitioner, the Commissioner and (if applicable) the relevant Council have agreed on the terms of an instrument of consent.

(5) Without limiting what may be included in the instrument of consent, the instrument is to contain an agreed statement of facts (including as to the grounds of complaint) and may contain undertakings on the part of the practitioner.

(6) The instrument of consent must be filed with the Tribunal.

(7) Nothing in this section affects the procedures regarding the commencement of proceedings in the Tribunal where consent was given before the proceedings are commenced.

(8) If consent was given before the proceedings are commenced, the proceedings are nevertheless to be commenced with respect to the complaint in the same way as if the consent had not yet been given.

(9) The Tribunal is to be constituted in the same way as for the conduct of a hearing into the complaint.

(10) In deciding whether to make orders under this Part pursuant to an instrument of consent, the Tribunal may make such inquiries of the parties as it thinks fit and may, despite any such consent, conduct or complete a hearing in relation to the complaint if it considers it to be in the public interest to do so.

20 Under the heading 'Costs', section 566(1) states:- The Tribunal must make orders requiring an Australian legal practitioner 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.

21 In the very recent decision of the Tribunal in Council of the Law Society of New South Wales v Karam [2010] NSWADT 170, the Tribunal Panel (which included two members of the Panel in these proceedings) said at [16] that a passage (which it quoted) from the Tribunal's decision in Council of the New South Wales Bar Association v Butland [2009] NSWADT 177 (at [29 - 31], [33] and [35]) provided 'useful guidance' as to the matters to be taken into account in deciding whether to make consent orders suggested in an instrument of consent filed under section 564. We will not reproduce that passage here, but will simply indicate that in these proceedings we have taken account of what the Tribunal said in Butland.

22 On reviewing the evidence tendered and admitted at the hearing, we find that it adequately substantiates the matters outlined in the Particulars. We find also that the Particulars provide a sufficient factual basis for each of the three Grounds stated in the Application. Ground 1 - failure to account - is established by the Solicitor's receipt of funds from Victoria Legal Aid (paragraph 7) and her failure to pay the fees owing to Ms Johnson until 24 July 2008 (paragraph 17). Ground 2 - misappropriation of monies - is established by the transfers from the Solicitor's office account listed in paragraph 13. Ground 3 - wilful breach of section 61 of the 1987 Act - is established by paragraph 10.

23 In making brief submissions to us, Mr Matalani drew our attention to a report on a psychiatric assessment of the Solicitor conducted by Professor Stephen J Woods, a clinical and forensic psychologist. A copy of this report, which was dated 22 September 2008, was annexed to Mr Collins' first affidavit.

24 Professor Woods indicated that he was aware of the allegations being made against the Solicitor in these proceedings. He said that according to her account she was 'first diagnosed' with depression during 1998 and had had a number of episodes of depression since then. He described a number of aspects of her life to which these experiences could readily be ascribed. He expressed the opinion that at the time of the conduct with which this case is concerned, the Solicitor was probably suffering from a 'quite severe Major Depressive Episode', caused by 'a number of major stressors'. He added that these stressors appeared to have 'overwhelmed' her, 'causing her to be emotionally dissociate', and that 'viewed from a clinical perspective, and having regard for her personal history, this reaction was to some extent predictable'.

25 Professor Woods concluded his report as follows:- It is encouraging to note that Ms Wall has been able to obtain and maintain stable employment, and is now receiving psychological treatment. The risk of ever repeating the behaviour that led to the complaint relapse ( sic ) will be minimal if she continues to receive appropriate treatment and is able to maintain stable employment in a supportive environment. I do not believe it would be in Ms Wall's psychological interests or the interests of the community for her to return to a self-employed sole practitioner situation. Finally, and having regard for Ms Wall's clinical history I would strongly recommend that she be encouraged to continue in therapy.

26 Mr Matalani pointed out that the proposed restrictions on the Solicitor's future activities as a practitioner contained in the second of the three orders in the Instrument of Consent (see [5] above) received support from the last sentence of the first paragraph in this passage.

27 Ms Muston advised us that the Legal Services Commissioner, when considering whether to execute the Instrument of Consent, derived 'comfort' from passages in two Court of Appeal decisions, Law Society of New South Wales v Bannister [1993] NSWCA 157 and New South Wales Bar Association v Murphy [2002] NSWCA 138, and from two recent decisions of the Tribunal, Council of the Law Society of New South Wales v Koffel [2010] NSWADT 149 and Council of the Law Society of New South Wales v Bharati [2010] NSWADT 159.

28 In Bannister, the respondent solicitor misappropriated $3,000 that was due to be paid to a client, claiming falsely that he was entitled to this sum on account of costs. By making false entries in the firm's ledger, he concealed the misappropriation from his partners. It only came to light about a year later because of a police investigation. The Court of Appeal held that he should be struck off. The passage to which Ms Muston referred us is in the judgment of Sheller JA (with whom Gleeson CJ and Handley JA agreed) at p 12:- I reiterate that this is not the case of a solicitor who on the spur of the moment misappropriated his client's money and then within a short time, overcome by remorse, made good the misappropriation. This is a case of premeditated and carefully planned misappropriation.

29 In Bharati, the Tribunal relied on this passage (which it quoted at [152] along with other parts of Sheller JA's judgment) in determining what orders it should make under section 562 by way of penalty for professional misconduct. The respondent solicitor had misappropriated funds totalling $13,723.23 from a client and in so doing had contravened the present-day equivalent of section 61(1) of the 1987 Act (i.e., section 254(1) of the 2004 Act: see [17] above). The Tribunal held that he should not be struck off, but should be reprimanded and should only be permitted to practise under a restricted practising certificate.

30 As Ms Muston pointed out, a factor given significant weight by the Tribunal in Bharati (see the decision at [156]) was that according to a psychiatric assessment of the respondent, a depressive illness from which he suffered at the time was 'a substantial factor contributing to' his misconduct. It should be noted also that he repaid the misappropriated funds to his client not long after being requested to do so and did not engage in measures such as falsification of his firm's accounting records in order to conceal what he was doing.

31 In Koffel at [50 - 55], the Tribunal, in dismissing an application alleging professional misconduct on the part of a solicitor, emphasised that in deciding whether a particular act by a practitioner warranted a striking-off order, not just the act itself but the surrounding circumstances had to be taken into consideration. It made a number of references to the judgment of Giles JA in New South Wales Bar Association v Murphy, including (at [54]) the following:- And, at [107] the Court said that the "test of a fit and proper person to hold a practising certificate is stated as to each act of bankruptcy, indictable offence and tax offence. But the fact of commission of an act of bankruptcy, indictable offence or a tax offence is not what matters. The Council and the Court must look to the circumstances in which the act of bankruptcy, indictable offence or tax offence was committed. If no more than the fact of commission of an act of bankruptcy, an indictable offence or a tax offence is known, an opinion as to what the circumstances of the commission showed could not be held. What matters are the circumstances of which the act of bankruptcy, indictable offence or tax offence was committed." And, at [108], the "circumstances must show that the legal practitioner is not a fit and proper person to hold a practicing certificate. The Council (Court) must be persuaded. An even balance means that the circumstances do not show what must be shown". And, at [109], what "the circumstances must show is not that the legal practitioner is not a fit and proper person to be a legal practitioner … (but rather the circumstances must show conduct that) "would justify a finding that the legal practitioner is not of good fame and character or is not a fit and proper person to remain on the roll of legal practitioners".

32 We are satisfied that the conduct of the Solicitor described in the Instrument of Consent amounts to professional misconduct. No other conclusion could be reached in a case involving misappropriation by a legal practitioner in the course of his or her practice.

33 We are also satisfied that, by virtue of principles outlined in the decisions of the Court of Appeal and of the Tribunal to which we have just referred, it cannot be said of the Solicitor that she is currently unfit to practise. The public will be sufficiently protected and the important objective of general deterrence will be sufficiently promoted if she is publicly reprimanded and her entitlement to practise in future is restricted in the proposed manner.

34 Finally, the evidence discloses no 'exceptional circumstances' such as to preclude a costs order in favour of the Law Society under section 566 of the 2004 Act.

35 For reasons explained above at [14], we may not make an order of a disciplinary nature against the Solicitor that is more onerous than could have been made under the 1987 Act. Under section 171C(1)(e) of that Act, the Tribunal could have ordered that she be publicly reprimanded. Under section 171(2)(g), it could have imposed conditions on her practising certificate. The power to order her to pay the Law Society's costs would have been available under section 171E(1).

36 On this basis, we are satisfied that the orders set out in the Instrument of Consent are not more onerous than could have been made under the 1987 Act.

37 The orders that we made on 8 July 2010, the date of the hearing, are based on the foregoing considerations. They are reproduced on the cover sheet of this decision with minor stylistic amendments. In this amended form, they constitute our final orders.

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.

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