Council of the Law Society of NSW v Batalha - [2020] NSWCATOD 158 - NSWCATOD 2020 case summary — Zoe

NSWNSWCATOD

Council of the Law Society of NSW v Batalha

[2020] NSWCATOD 158

NCAT Occupational|2020-09-22|Before: Legislation Amendment J

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Court

NCAT Occupational

Decision date

2020-09-22

Before

Legislation Amendment J

Source

Original judgment source is linked above.

Judgment (29 paragraphs)

[1]

Introduction and procedural history

On 12 June 2018 the Council of the Law Society of New South Wales (the Law Society) commenced proceedings 2018/182407 against Luis Batalha (Mr Batalha), by filing an Application for Disciplinary Findings and Orders in this Tribunal.
On 2 October 2019 that application was dismissed by the Tribunal (not as currently constituted), with the consent of the parties and with no order as to costs. In its written submissions in the current proceedings, the Law Society said that the application was dismissed as a result of procedural defects of the nature identified in Council of the Law Society of New South Wales v DXW [2019] NSWCATOD 101.
On 28 January 2020 the Law Society commenced further proceedings against Mr Batalha by filing an Application (the Application), which attached the application in proceedings 2018/182407 and relied on the same grounds and particulars. The Application also sought orders: 1. As per attached Application in proceedings 2018/182407; and that 2. The material filed by the Applicant in proceedings 2018/182407 be deemed to have been filed in these proceedings.
Cl 23(5)(a) of Part 5 to Schedule 9 of the Legal Profession Uniform Law Application Act 2014, (Application Act), incorporated into the Application Act by the Justice Legislation Amendment Act (No 2) 2019 (Justice Amendment Act) provides that: Any proceedings commenced in a court or tribunal by an authorised delegate or subdelegate that were terminated on a relevant invalidity ground during the relevant period at the instigation of an authorised delegate or subdelegate - (a) may be recommenced under the authority of this clause by the same delegate or subdelegate in the court or tribunal on the basis of the applications and other documents by which those proceedings were last commenced.
In its Application the Law Society sought an order recommending that Mr Batalha's name be removed from the Roll. The grounds and particulars referred to four separate complaints against Mr Batalha and that he was guilty of professional misconduct in relation to each.

[8]

The relevant factual background

This is best explained by referring to the four separate transactions which underlie the complaints, and which involved the transfer of money to and from Mr Batalha's bank accounts. The following facts were common to each transaction: 1. Mr Batalha is and has been since 2 February 2004, the sole Legal Practitioner Director of Batallion Legal Pty Limited (the Law Practice); 2. At all relevant times: 1. the Law Practice operated a Business Transaction account with the Commonwealth Bank (the Office Account); and 2. Mr Batalha had other bank accounts with the Commonwealth Bank, including an Everyday [mortgage] Offset account (the Mortgage Account), an account described as a streamline account (the Streamline Account) and an account described as a MISA Account (the MISA Account #2). 1. The Law Practice did not maintain a general trust account.
We have taken these facts (except for the reference to the Streamline Account) from a document entitled Respondent's Statement of Facts. This was a document prepared by the Law Society with marked up amendments from Mr Batalha. The parties had been directed to file an agreed statement of facts, but they had been unable to reach a consensus on a common document. Nevertheless it is evident from this document that many of basic facts were agreed. The Streamline Account was not referred to in that document, but subsequently the parties appear to have agreed that Mr Batalha also held this account.
We now set out the specific facts relevant to each of the four transactions. We have taken these matters from the pleadings, as well as from the Statement of Agreed Facts.
The transactions, in date order, are as follows: 1. The Tan transaction 1. On 10 February 2015 Mr Batalha received the amount of $18,000 and the amount of $49,830 from his client Mr Halim Tan. These amounts were paid into the Office Account. The funds were settlement monies for a property purchase. 2. On the same day Mr Batalha forwarded a tax invoice to Mr Tan in the amount of $67,830. The invoice referred to professional costs of $500 and the balance of $67,380, as disbursements, including an item referred to as "settlement cheque". 3. On 11 February 2015 an amount of $67,158.32 was withdrawn from the Office Account, comprising settlement funds of $67,158.32 and $10 for a bank cheque. 1. The MVRC transaction 1. On 1 April 2015, Mr Batalha received the amount of $78,370 from his client, MVRC Property Group Pty Limited ("MVRC"). Again, the funds were deposited into the Office Account. 2. The funds were received following a request from Ms Chandni Singh, a director of MVRC, that Mr Batalha assist her in the settlement of a property purchase which required the tender of a bank cheque, by her paying the settlement amount to the Law Practice by EFT, and by Mr Batalha drawing a bank cheque on her behalf. 3. On 1 April 2015, and before the EFT transfer to the Office Account, Mr Batalha forwarded a tax invoice to Ms Singh in the amount of $78,370 which followed the same format as the Tan transaction, in that it claimed $200 plus GST as professional costs and described the balance of $78,150 as disbursements including an amount of $78,088.71 for "settlement funds". 4. On 1 April 2015, Mr Batalha withdrew an amount of $80,000 from the Office Account and deposited it into the Mortgage Account. (This was the allegation in the Application, however in its written submissions the Law Society said that the funds were in fact paid from the Office Account into the MISA Account #2. Nothing appears to turn on this point, and it appears to have been accepted by Mr Batalha). 5. On 7 April 2015 Mr Batalha withdrew the amount of $78,088.71 from the MISA Account #2, obtained a bank cheque for this amount and delivered it to the vendor. 1. The Hitiris transaction 1. On 1 September 2015 Mr Batalha received a request from a client, Mr Nick Hitiris, a director of Tracs RTO Pty Limited ("Tracs"), to assist Mr Hitiris in paying to another Tracs shareholder and fellow director, a dividend of $36,000 due from the company. Mr Batalha agreed to accept these funds and to make the payment to that shareholder and director because Mr Hitris advised him that the company did not have a cheque book. 2. On 4 September 2015 Mr Batalha issued a tax invoice to Mr Hitiris in the amount of $36,520, comprising professional costs of $450 plus GST, and disbursements of $36,025, which included the notation "cheque for ,,,,, dividend". 3. The same day Mr Batalha received a cheque for $36,570 and deposited it into the Office Account. 4. On 6 September 2015, Mr Batalha transferred $40,000 from the Office Account to the Streamline Account, and on the same day $41,000 from that account to the Mortgage Account. On 9 September 2015, Mr Batalha substantially reversed those transactions - that is to say, he paid $40,000 from the Mortgage Account to the Streamline Account and then $36,000 from that account to the Office Account. 5. On 7 September 2015, Mr Batalha drew a cheque on the Office Account in the amount of $36,000 payable to the other shareholder and director. The cheque was presented on 14 September 2015. 1. The Cornock transaction 1. On 3 September 2015, Mr Batalha received a bank cheque for $61,740 from the law firm, Peter Cornock & Associates. The cheque was made out to Batallion Legal Pty Limited and was a deposit for a conveyancing purchase. Mr Batalha's client, Abichandani Investments Pty Limited (Abichandani Investments) was the vendor. The money was deposited into the Office Account. 2. The contract for sale for the relevant property contained the following special condition: 30 Release of deposit: 30.1 The purchaser agrees to the release of all or any part of the deposit to the vendor, immediately upon the vendor requesting it, including, without limitation, upon exchange of contacts. The deposit may be released for any purpose the vendor requests. 1. On 9 September 2015 Mr Batalha transferred an amount of $50,000 from the Office Account to the Streamline Account and then transferred $50,000 from the Mortgage Account to the Abichandani Superannuation Fund. At that date, contracts had not been exchanged for the sale of the property. 2. On 11 September 2015 a further amount of $11,740 was transferred from the Office Account to the Streamline Account and then paid directly from that account to the Abichandani Superannuation Fund. Contracts had still not been exchanged for the sale of the property. 3. On 24 September 2015 Mr Batalha informed Ms Collyer, a solicitor from Peter Cornock & Associates' office who was acting for the purchaser in the transaction, that the deposit had been released to the vendor, although contracts were not exchanged. On 28 September 2015 Ms Collyer notified the Office of the Legal Services Commissioner and the Law Society. 4. On 28 September 2015 the amount of $61,740 was transferred by Mr Batalha from the Mortgage Account to Peter Cornock & Associates' trust account.

[11]

Our findings in respect of the admitted allegations

The Tan, MVRC and Hitiris transactions followed a similar pattern - that is, clients of Mr Batalha asked him to make payments to third parties on their behalf. That would have been a straightforward exercise if Mr Batalha had operated a trust account. Instead Mr Batalha paid the monies into his Office Account, rendered small tax invoices for processing the funds (that step was not in itself the subject of any complaint), and then described the payments as disbursements in those invoices.
Mr Batalha's initial response to these allegations, was that the funds received were either transit moneys, or that he had written directions to deal with the money otherwise than by depositing it into a general trust account. We do not propose to make findings in relation to these matters given his subsequent admissions. However we make the following observations.
S 254(1) of the LPA is in the following terms: (1) Subject to section 258A, as soon as possible 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 and on behalf of another person. Maximum penalty: 100 penalty units.
Transit money is defined in s 243 as: money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice.
S 257(1) provides that: (1) Subject to section 258A, a law practice that has received transit money must pay or deliver the money as required by the instructions relating to the money, (a) within the period (if any) specified in the instructions, or (b) subject to paragraph (a), as soon as practicable after it is received. Maximum penalty: 50 penalty units
S137 of the Uniform Law is in relevantly identical terms to s 254(1) of the LPA. S 128 also contains the same definition of transit money as is found in the LPA and s 140 is in relevantly similar terms to s 257 of the LPA.

[12]

Allegations 4 and 6

Our understanding is that transit money is money received by a law practice, usually in the form of a cheque, which is payable to a third party in order for it to be forwarded to that third party. In other words the money is not capable of payment into the law practice's trust account, although strictly, the money has been entrusted by delivery to that practice. If a wider definition of transit money were to be accepted, it would be difficult to distinguish transit moneys from trust moneys in the ordinary course, in that trust moneys are invariably received subject to instructions, express or implied, to be paid to a third party. Thus we agree that the funds that Mr Batalha received from his clients Mr Tan, Ms Singh and Mr Hitiris, and payable to the Law Practice cannot be construed as transit monies. There was also no evidence put forward by Mr Batalha that he had received written directions from any of these clients authorising him to deal with the money otherwise than by depositing it in a trust account, and in relation to this issue, he had the onus to establish those matters.
The funds received were trust moneys and were required to be deposited into a general trust account and not into the Office Account. As Mr Batalha did not have a trust account, and in the absence of written directions from his clients, he should not have accepted the payments.
The Law Society's alternative submission was that even if the funds received by Mr Batalha were to be construed as transit moneys, that did not prevent a finding that there had been breaches of s 254(1) of the LPA or s137 of the Uniform Law. The definition of trust money in both statutes includes transit money, so that, although Mr Batalha may not have been obliged to pay this money into a trust account, he was still obliged to otherwise deal with the money as if it were trust money.
We have already held that the deposits were trust monies, so it is not necessary for us to determine this submission. However, we doubt that it is correct. S 254 of the LPA and s137 of the Uniform Law are concerned only with the circumstances in which trust money must be deposited into a general trust account, and the receipt of transit money is an exception to the general obligation. It may be that by first transferring the funds to one or more of his other accounts, Mr Batalha's failed to pay these moneys "as soon as practicable" to their intended recipients and that this constituted a breach of the transit money provisions in the LPA and the Uniform Law, but it is difficult to construe this conduct as a breach of s 254 or s137 of the relevant statutes if the funds were truly transit monies.

[15]

Do the admitted allegations constitute professional misconduct

This Tribunal has held that breaches, even multiple breaches of the trust account provisions in the Uniform Law or the LPA, do not always constitute professional misconduct. Recent decisions to that effect are Council of the Law Society of New South Wales v Thornton NSWCATOD [2020] 103 and Council of the Law Society of New South Wales v Thadsanamorthy [2019] NSWCATOD 96, where findings of unsatisfactory professional conduct have been made following findings of breaches of this nature. However in these proceedings we have no doubt that the breaches that have been established do amount to professional misconduct on the part of Mr Batalha.
This is not a case (except in relation to the Tan transaction), where Mr Batalha simply deposited trust monies into the Office Account and then paid the funds from the Office Account to their intended recipients. Instead the funds were transferred first to one or more of Mr Batalha's personal accounts, before ultimately being paid to their intended recipients. Mr Batalha gave no plausible explanation for transferring the funds internally in this way except to say that he regarded the Mortgage Account as a de facto trust account. The transfers were not made to benefit his clients, nor Peter Cornock & Associates' client nor any of the intended recipients of the funds, but may have benefitted Mr Batalha personally.
Furthermore, the amounts of the internal transfers did not match exactly the initial deposits into the Office Account. The only explanation given by Mr Batalha for these discrepancies was that there was a daily limit of $50,000 on the amount that he could transfer between his accounts. This may explain why $50,000 and then separately, $11,740 was transferred from the Office Account to the Streamline Account in the Cornock transaction, but not the other transfers.
Also there are the tax invoices that Mr Batalha issued to his clients in relation to the Tan, MVRC and Hitiris transactions, describing the deposits as disbursements. When cross examined about this issue, Mr Batalha said that that it provided his clients with evidence that he had received their deposits. We do not regard that to be a credible explanation. To achieve that purpose Mr Batalha could have issued a simple pro forma receipt. The Law Society did not allege, at least in relation to these allegations, that by documenting the transactions in this way, Mr Batalha had attempted to disguise their true nature or committed any other offence in relation to the transactions. Thus we do not propose to take the invoices into account in relation to determining whether the admitted allegations amount to professional misconduct.
We nevertheless find, for the reasons set out in paragraphs 38 and 39 above, that these breaches amount to professional misconduct in that they demonstrate unsatisfactory professional conduct where the conduct involves a substantial failure by Mr Batalha to reach or maintain a reasonable standard of competence and diligence within the meaning of s 297(1)(a) of the Uniform Law and the equivalent provision in the LPA.

[17]

Our findings in respect of allegation 2

Mr Batalha's argument that special condition 30.1 entitled him to release the deposit when he did, cannot be correct. It displays a fundamental misunderstanding of basic contractual principles. There was no contract in existence at the time Mr Batalha made the payment, so the construction of special condition 30.1 does not arise for consideration. Thus we do not accept that this explanation provides any justification for his conduct.
Allegation 2 in the Application was said to give rise to a charge of Release of trust funds without authority. During the hearing we expressed doubt that such a charge existed under the general law. The Law Society's counsel informed us that it was "not a common sort of complaint" and, although analogous to the charge of misappropriation, it did not require us to make a finding of dishonesty. We asked counsel why the charge had been drafted in this way and to provide us with any decisions of this Tribunal or its predecessors where the issue had been considered. We were not referred to any relevant decisions during the hearing, nor in the list of authorities provided to us by the Law Society after the hearing had concluded.
Counsel said that the charge could also be read as an allegation of a breach of s138(1) of the Uniform Law. That section provides that: Except as otherwise provided by this Part, a law practice must - (a) hold money deposited in the law practice's general trust account exclusively for the person on whose behalf it is received; and (b) disburse the trust money only in accordance with a direction given by the person. Civil penalty: 50 penalty units
The payment of the deposit to the trustee of Abichandani Supperannuation Fund before the exchange of contracts appears to constitute a breach of s 138(1) of the Uniform Law. However we are not inclined to read the charge in this way. The Application sets out, separately, the statutory breach allegations and the general law misappropriation allegations and then this allegation against Mr Batalha. If allegation 2 was intended to be a statutory breach allegation, it could easily have been drafted in that form, as allegations 1,4,5 6 and 7 had been drafted, but it was not. Furthermore the Law Society did not seek leave to amend its Application after the issue had been raised during the hearing.
The guiding principle in s 34 of the Civil and Administrative Tribunal Act 2013 (NCAT Act), is that the Tribunal's role is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Nevertheless, in Legal Services proceedings, where the professional livelihood of the practitioner is in issue, we consider that a degree of formality and precision is required.
There is a further reason why we decline to treat this allegation as a breach of s 138 of the Uniform Law. If the charge had been drafted in this way rather than as a general law claim, it is possible that Mr Batalha may have admitted it, as he had all the other statutory breach allegations.
Thus, although we do not accept Mr Batalha's explanation for paying the deposit to his client before the exchange of contracts, we must dismiss this allegation. We are not satisfied that the charge of releasing trust funds without authority exists under the general law, and we do not read the charge as an allegation of breach of s138(1) of the Uniform Law.

[18]

Allegations 3 and 8 - the misappropriation allegations

We now turn to the misappropriation allegations. In the course of the four transactions Mr Batalha made three series of transfers, which, in the Law Society's submission, amounted to the misappropriation of trust funds. These were: 1. The transfer of $50,000 from the Office Account to the Streamline Account, and then $54,000 transferred from that account to the Mortgage Account on 9 September 2015, in the course of the Cornock transaction - allegation 3. 2. The transfer of $36,000, being part of the $40,000 transferred from the Office Account to the Streamline Account, and then the transfer of $36,000, being part of the $41,000 transferred from the Streamline Account to the Mortgage Account on 6 September 2015, in the course of the Hitiris transaction - also part of allegation 3. 3. The transfer of $78,000 being part of the $80,000 transferred from the Office Account to the MISA Account #2 on 1 April 2015, in the course of the MVRC transaction - allegation 8.
The Law Society accepted that it had the onus of proving "dishonesty" in relation to the misappropriation allegations. As to what constitutes dishonesty in this context, it referred us to the following passage in Brereton v Legal Services Commissioner [2010] VSC 378, where Bell J said: [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 honest 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 as follows: 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.
On appeal to the Victorian Court of Appeal - Legal Services Commissioner v Brereton [2011] VSCA 241, Tate JA thought it unclear whether dishonesty was a necessary element of misappropriation in the common law sense, observing that, in the professional disciplinary context, there has always been a distinction between a charge of misappropriation and a charge of fraudulent misappropriation. The other members of the court agreed with that view, but the Court did not finally determine the issue.
Thus this Tribunal has continued to apply the three stage test, referred to in Peters, and as explained by Bell J in Brereton, when considering what constitutes dishonesty in the context of a charge of misappropriation against a solicitor - see Council of the Law Society of New South Wales v Haseldine [2017] NSWCATOD 156 at [141].

[21]

The Judgment in Carr v Council of the Law Society of New South Wales

On 10 November 2020, after we had reserved our decision, the Law Society wrote to the Registrar to inform the Tribunal that it recently became aware that it had reasonable grounds to believe that a judgment delivered by the Court of Appeal on 4 November 2020, Carr v Council of the Law Society of New South Wales [2020] NSWCA 276, was directly in point against the Law Society's misappropriation case in these proceedings against Mr Batalha.
On 30 November 2020, the Tribunal received a further written submission from the Law Society's counsel. The submission noted that: 3. The Court of Appeal relevantly held that the Tribunal's finding that Mr Carr had misappropriated certain monies should be set aside, as there was no misappropriation of any property or any money belonging to the client because upon deposit, the money ceased to be the client's property and became the property of Mr Carr's bankers, being transferred into a debt owed by the bankers to Mr Carr. 4. The complaints of misappropriation against the Respondent in the present proceedings involved deposits made to the Respondent's Office Account. Applying the Carr judgment, the deposits were transformed into choses in action, ceased to be the property of the clients and became the property of the Respondent's bankers. The Respondent's dealings with those deposits did not result in the misappropriation of any property or any money. While the Society considers that there may be a basis to distinguish the Carr judgment on the facts in certain cases, it cannot press its complaint of misappropriation. 5. Consequently, the Society withdraws the following complaints of misappropriation against the Respondent: (these were allegations 3 and 8).
Although the Law Society has now withdrawn these allegations, we propose to make some findings in relation to the misappropriation evidence because these findings will be relevant to the consequential orders that we are required to make in "stage 2" of these proceedings.
We accept that neither Mr Batalha's clients or any other party suffered any financial loss as a consequence of his actions. However, in relation to the statements in Mr Sofiak's report, it is apparent that when he prepared his executive summary, Mr Sofiak was not aware that Mr Batalha operated other bank accounts in addition to the Office Account. When cross examined, Mr Batalha conceded that he did not inform Mr Sofiak about the existence of these accounts or the transfers to and from them. Also, when Mr Abichandani and Mr Hititis provided their statutory declarations, neither were aware of the internal transfers between those accounts.
We also find that Mr Batalha did receive a benefit, which was more than negligible, (to use Mr Batalha's words) by the transfer of these monies from the Office Account into his personal accounts. The Mortgage Account was an offset account intended to reduce his interest commitment to the bank on his home loan, and the Streamline Account and MISA Account #2 operated in the same way for his investment properties. Furthermore, if Mr Batalha were to have defaulted on his obligations to his bank, the bank would have been entilted to apply the funds in those accounts to discharge his debts.

[25]

Mr Batalha's submissions in response

In his March 2019 affidavit, Mr Batalha had said, at [23] - [26]: 23 Since the start of these proceedings, I have obtained the opportunity to obtain professional legal advice (which I did not obtain during the course of my dealings with the Law Society). I now understand that because I was not able to bring an objective approach to what I considered to be personal attacks against me, the tone of my correspondence was, in instances, inappropriate. 24 As at the date of swearing this affidavit, I accept: a. that the Law Society was simply applying its view of the law to my case; b. that the tone of my correspondence to the Law Society was frequently inappropriate and unhelpful to the advancement of my case; and c. during the course of this correspondence, I did not display the insight (which I now have), that despite what I considered to be (the) unreasonable making of the initial complaint, it was necessary for me to engage with any proper allegation of breach of the relevant legislation. 25 Although I do not expect that I will ever find myself in the position of being subject to a complaint by the Law Society again, I now understand that taking professional legal advice at an earlier stage would have helped me to understand the nature of my obligations to the matters in relation to the matters which the Law Society was investigating. Accordingly, if I am ever the subject of another complaint by the Law Society, I would do it very differently to the way that I dealt with the complaints which are the subject of the present application. 26 I now appreciate that my response to the Law Society indicated a lack of insight into the conduct which the Law Society was investigating. Although I plainly did not have sufficient insight into those matters at the time that the Law Society was investigating them, I now consider that (having had the opportunity to obtain independent legal advice, which has allowed me to understand the professional conduct issues with an objectivity that may have been lacking in my earlier correspondence) that I do have insight into these matters which have led to the current application, as set out by my evidence in this affidavit.
In relation to his contrition, Mr Batalha said: The respondent is genuinely sorry for his conduct in 2015. The conduct was unacceptable and for that he sincerely apologizes to the Society and to the Tribunal.
He added that he had just completed an online course on trust accounting offered by the Legal Bookkeepers Institute and received a mark of over 90%. He was able to complete the modules in this course in two and a half hours.
In his evidence during the hearing, Mr Batalha added that he had been in practice for 24 years and had no other complaints made against him. He referred to the many character references from clients and professional colleagues which he had provided to the Law Society before the proceedings were commenced, and which were contained in the exhibit to Ms Foord's affidavit. All referees said that they were willing to entrust him with their funds. However he conceded that none of these persons had been contacted subsequently to comment on the actual allegations in the Application.
He said that establishing and building his practice was his greatest achievement in life. The stress caused by the investigation and the institution of these proceedings had already taken a heavy toll on him, in that he had lost motivation. He now only employed only one person, and that person off site, whereas he had previously had six people working for him. At one stage he became quite emotional when describing his present circumstances.

[26]

Our findings in relation to the Stage 2 submissions

Even if the misappropriation allegations had been pressed and upheld by the Tribunal, we would not have recommended that Mr Batalha's name be removed from the roll. We had formed the view that he was not presently, nor permanently or indefinitely unfit to practise. Nevertheless, consistent with the Tribunal's decisions in Council of the Law Society of New South Wales v Nasr [2015] NSWCATOD 70 and Council of the Law Society of New South Wales v Davidson [2020] NSWCATOD 71, we would have given consideration to making an order that he be issued with a restricted practising certificate.
During the hearing we asked the Law Society's counsel why the Law Society had not taken action earlier if it believed that Mr Batalha was unfit to practise, given that all the conduct relied upon had occurred in 2015. We were informed that there had been extensive correspondence between the parties before the Application had been filed, that Mr Batalha had been tardy in filing his Reply and that the decision in DXW had caused further delay.
We do not regard those matters as providing a satisfactory answer to our question. The Law Society has other weapons in its arsenal in relation to the issuing of practising certificates which it could have, but did not employ. Also we regard the delay of three years from the receipt of the first complaint until the commencement of proceedings 18/182407 to be unreasonable.
Whilst Mr Batalha's March 2019 affidavit gave a very detailed response to the charges against him and displayed evidence of his insight and contrition, it was apparent that in his July 2020 submissions, he had taken a more combative stance. However at the start of the hearing Mr Batalha informed the Tribunal that he did not rely on those submissions and he did not refer to them again. He asked us to rely only on his further written submissions and on his oral evidence and we will therefore not take these earlier submissions into account.
We were also able to observe Mr Batalha when giving his evidence under oath and when cross examined by the Law Society's counsel. Initially, we found his responses unsatisfactory in some respects. Rather than answering "yes" or "no", when the question allowed for this form of answer, he tended to give a rambling account of all the facts that he thought relevant to the issue. When this was brought to his attention, he did make a conscious effort to respond directly to the question.
When cross examined he confirmed that he understood that the funds in question were trust monies. He conceded that there was no reason for his transferring the funds between the Office Account and his other accounts, and that he could have simply paid the moneys in and out of the Office Account. He said that it was wrong to have described the deposits he had received in the Tan, MRVC and Hitiris transactions as disbursements, but he believed that this was an appropriate course to adopt, because he did not operate a trust account. He apologised again for his conduct.
Overall, Mr Batalha appeared to us to be a truthful witness and we accept that his remorse and contrition is genuine. His occasional argumentative responses under cross examination, and some of the statements in his July 2020 submissions, we will accept were the result of the emotional strain that the complaints and the proceedings had caused him over the past five years.
Nevertheless, the five allegations that we have found to constitute professional misconduct warrant a significant sanction. It is not the Tribunal's role in this process to punish the practitioner. Rather its role is to make orders which protect clients and members of the public, and in particular in the present circumstances, to make orders which protect them from conduct which is in breach of the law regarding the handling of clients' money.
Therefore the first order that we propose to make is that Mr Batalha be publically reprimanded for his conduct.
We also remained concerned that notwithstanding our findings in relation to his insight and contrition, Mr Batalha does not have an appropriate understanding of the principles of legal practice management, and, in particular, the law and practice regarding the handling of money received from clients and third parties. We accept the Law Society's submission that Mr Batalha should also undertake a comprehensive course of study of these subjects, as approved by the Law Society. The Legal Bookkeepers Institute course, to which he referred us, is well short of what is required.
The Law Society's submission received on 30 November 2020 contained further education orders in a form that we consider to be generally appropriate to meet our concerns, and subject to two amendments, we will make orders in these terms. The first amendment we have made is to increase the pass mark for the course from 50% to 70%. We believe that what may be described as a "bare pass" of 50% is not sufficient to meet community expectations that Mr Batalha has the appropriate level of knowledge in relation to practice management and, in particular, in relation to trust accounting. Secondly, given the results are likely to be released electronically, we have added that Mr Batalha is entitled to provide to the Law Society a legible copy of his course result in the place of the original. We have set out in full this education order, as amended by us, in our Orders below. If Mr Batalha has not completed successfully the relevant course within the 12 month period provided, his practising certificate is liable to be suspended.

[27]

Costs

Cl 23(1) of Schedule 5 to the NCAT Act requires the Tribunal to make orders requiring an Australian legal practitioner whom it has found to have engaged in professional misconduct or unsatisfactory professional conduct, to pay the costs of the Law Society, unless it is satisfied that exceptional circumstances exist. The Law Society had submitted and continued to submit even after it had determined not to press the misappropriation charges, that there were no exceptional circumstances and that it should be entitled to its costs.
Mr Batalha had raised a number of matters which he said constituted such circumstances. All, except one, in our view, were not relevant. That circumstance was Mr Batalha's claim that he was entitled to seek a costs order against the Law Society when proceedings 18/182407 were dismissed, but chose not to press this claim. As we have already observed, Mr Batalha was legally represented at that time and the proceedings were dismissed by consent and with no order as to costs. There is no materal in Mr Batalha's affidavits or in his oral evidence to support this claim - just his bare assertion that he chose not to ask for his costs. Even if there were evidence in support, it is unlikely that we would have regarded this as constituting an exceptional circumstance.
Mr Batalha now submits that the withdrawal of the misappropriation charges constitutes further exceptional circumstances which justify the displacement of the usual costs rule. We agree with that position. The Law Society should only be entitled to its costs in respect to those charges which have been established, and Mr Batalha should be entitled to his costs in relation to the allegations withdrawn after the hearing and also in relation to allegation 2 which we have dismissed. If the misappropriation charges had been withdrawn before the hearing and not fully argued, Mr Batalha might not have been entitled to his costs in relation to those matters, but that is not what occurred. Furthermore, when we reserved our decision on 22 September 2020, the Law Society did not inform the Tribunal that the decision in Carr was pending, although it had been heard in the Court of Appeal on 30 June 2020.
In Council of the Law Society of New South Wales v Wehbe [2018] NSWCATOD 14, the Tribunal observed, when awarding costs, that it was not uncommon for the Law Society to fail to establish every element of its case, whilst succeeding overall. That was a very different situation to what has occurred in these proceedings where a very significant part of the Law Society's case has been unsuccessful, or not pressed and only after the Tribunal had reserved its decision. Whilst it is difficult to assess precisely how costs should be apportioned in these circumstances between the successful and the unsuccessful charges, we estimate that not less than 50% of the Law Society's costs were incurred in relation to the misappropriation charges and allegation 2.
In Xu v Council of the Law Society of NSW [2009] NSWCA 430, the Court of Appeal determined in somewhat similar circumstances, that where the Law Society had an entitlement to costs in respect of the charges on which it had succeeded, and the solicitor had an entitlement to costs of approximately the same amount, the sensible course to avoid two cost assessments, was that there should be no order as to the costs of the Tribunal proceedings. We believe that this is the appropriate way to deal with costs in these proceedings, and so therefore we will not make any cost orders.