Council of the Law Society of NSW v Gallego

NCAT Occupational|2017-03-24

trious [2015] NSWCA 258 Category: Principal judgment Parties: Council of the Law Society of New South Wales (Applicant) Mark Francesco Gallego (Respondent) Representation: Solicitors: Council of the Law Society of New South Wales (Applicant) Respondent (self-represented) File Number(s): 1620128 Publication restriction: Nil

Introduction

On 24 February 2017 we published our reasons for decision Council of the Law Society of New South Wales v Gallego [2017] 29. We found Mark Francesco Gallego (the practitioner) guilty of professional misconduct. At the request of the practitioner, and with the consent of the Council for the Law Society of New South Wales (the Council), we stood over for a separate hearing the issue of the penalty to be imposed on the practitioner as a result of our findings. These are our reasons for decision following the penalty hearing.
In our decision of 24 February 2017 we found the practitioner had failed to place funds provided to him by a client for an appeal to the NSW Court of Appeal into a trust account in breach of s 254 of the Legal Profession Act 2004 (NSW) (repealed) (the Act), that he failed to keep trust records in breach of s 264 of the Act and did not provide statements to the client. We also found the practitioner caused a deficiency in trust funds by drawing cheques from funds he held in a NAB bank account from time to time for the client without authorisation. Further, we found he did not make a proper costs disclosure to the client as required under s 309 of the Act.

Relevant provisions of the Act

The orders that may be made by the Tribunal are set out at s 562 of the Act. They include the following: 562 Determinations of Tribunal (1) Orders generally If, after it has completed a hearing under this Part in relation to a complaint against an Australian legal practitioner, the Tribunal is satisfied that the practitioner has engaged in unsatisfactory professional conduct or professional misconduct, the Tribunal may make such orders as it thinks fit, including any one or more of the orders specified in this section. (2) Orders requiring official implementation in this jurisdiction The Tribunal may make the following orders under this subsection: (a) an order that the name of the practitioner be removed from the local roll, (b) an order that the practitioner's local practising certificate be suspended for a specified period or cancelled, (c) an order that a local practising certificate not be issued to the practitioner before the end of a specified period, (d) 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, (e) an order reprimanding the practitioner, (f) … (3) … (4) Orders requiring compliance by practitioner. The Tribunal may make the following orders under this sub-section:.: (a) an order that the practitioner pay a fine of a specified amount, (b) an order that the practitioner undertake and complete a specified course of further legal education, (c) an order that the practitioner undertake a specified period of practice under supervision, (d) an order that the practitioner do or refrain from doing something in connection with the practice of law, (e) …, (f) an order that the practitioner's practice, or the financial affairs of the practitioner or of the practitioner's practice, be conducted for a specified period in a specified way or subject to specified conditions, (g) an order that the practitioner's practice be subject to periodic inspection for a specified period, (h) an order that the practitioner undergo counselling or medical treatment or act in accordance with medical advice given to the practitioner, (i) an order that the practitioner use the services of an accountant or other financial specialist in connection with the practitioner's practice, (j) an order that the practitioner not apply for a local practising certificate before the end of a specified period. Note : This subsection is not an exhaustive statement of orders that must be complied with by the practitioner. (5) Ancillary or other orders The Tribunal may make ancillary or other orders, including an order for payment by the practitioner of expenses associated with orders under subsection (4), as assessed or reviewed in or in accordance with the order or as agreed. (6) … (7) Maximum fine The amount ordered by the Tribunal under this section to be paid by way of fines by any one Australian legal practitioner in connection with the Tribunal's findings about a complaint must not exceed in total: (a) $10,000 in the case of unsatisfactory professional conduct not amounting to professional misconduct, or (b) $75,000 in the case of professional misconduct. If the Tribunal finds that the practitioner has engaged in both professional misconduct and unsatisfactory professional conduct not amounting to professional misconduct, the amount must not exceed $75,000 in total. (8) Reprimands If the Tribunal makes an order reprimanding the practitioner, the Tribunal is to publish the order and a statement of its reasons for making the order. (9) It is sufficient compliance with the requirement to publish an order under subsection (8) if the Tribunal provides to the Commissioner sufficient information to enable the Commissioner to exercise the Commissioner's powers or functions in respect of the Register of Disciplinary Action required to be kept under Part 4.10 (Publicising disciplinary action).
It is also appropriate at this point that we repeat s 497 of the Act as it was under s 497 (a) that we reached our finding of professional misconduct.
Section s 497 provides: 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.

The Council's submissions

Prior to the commencement of the liability hearing, comprehensive and helpful written submissions were provided to us on behalf of the Council by Ms Anne-Marie Foord (Ms Foord) dated 18 November 2016.
At [74] of her written document Ms Foord submitted there were five options to be considered by us. First, she submitted that the practitioner could be permitted to continuing as a unrestricted principal with permission to hold a trust account. However, she did not, at that time, support such a course having regard to the practitioner's conduct in respect of the client's monies.
Second, she submitted that the practitioner could be entitled to continue to practise as an unrestricted principal without permission to hold a trust account. However, she suggested there was nothing at that time before us that would give us comfort that the practitioner's prior conduct would not be repeated.
Third, she submitted that the practitioner may only be entitled to work as an employed solicitor. But she noted that even when the practitioner was practising as an employed solicitor he was found by a differently composed Tribunal to be guilty of professional misconduct because he practised outside the conditions of that practising certificate "often as an uninsured unrestricted principal styled as a 'consultant' Council of the Law Society of New South Wales v Gallego [2014] NSWCATOD 102". Ms Foord submitted that, if the practitioner is permitted to practice as an employed solicitor he may, based on his past conduct, again breach the restrictions on his practising certificate if he could not obtain employment.
Fourth, Ms Foord referred to the circumstances where a suspension of a person's practising certificate can be appropriate. But she submitted this was not a case where circumstances that would presently render the practitioner unfit to practise could be "safely predicted to pass".
Finally, Ms Foord referred to removal from the Roll. She submitted: Where a solicitor lacks a visceral sense of his or her fundamental duties and lacks knowledge and skill in relation to the legislation that prescribes legal practice, then, for the purposes of protecting the public against the practices of incompetent solicitors; noting the unacceptability of the conduct involved; educating other members of the profession as to the necessity of maintaining proper standards; and maintaining public confidence in the profession; that person's name should be removed from the roll Meakes.
In support of her submission that the practitioner should be removed from the roll, Ms Foord drew our attention to the decision of Law Society v Walsh [1997] NSWCA 185.

The practitioner's submissions

The practitioner at [2] of his affidavit sworn 21 March 2017 says, referring to [2] of our liability reasons, "you float the idea that I might be restricted to practising as an employed solicitor". Paragraph [2] of our reasons records the orders sought by the Council namely, cancellation from the roll, or in the alternative, that the practitioner be permitted to continue to practise but as an employed solicitor.
The practitioner submits that we should not make an order restricting his ability to practise limited to that of an employed solicitor as, at 58 years of age, he would be unable to obtain employment.
The practitioner at [4] refers to suffering lower back pain from an injury sustained twenty-three years ago and that he suffered from a large cancerous tumour which was removed from his face in November 2015 necessitating 32 stitches. He deposes that when he was told about the cancer, about a year before the surgery, "my ill health was an enormous source of distress".

The previous disciplinary proceedings

Ms Foord annexed to her submissions a copy of the Tribunal's 2014 liability decision dealing with its findings that the practitioner practised contrary to the provisions of his practising certificate. As we indicated to the parties at the penalty hearing we have read the earlier Tribunal's reasons published on 23 February 2015.
In the reasons published 23 February 2015 the Tribunal, having found the practitioner was guilty of professional misconduct under s 497 (a) of the Act and noting the seriousness of the practitioner's repeated breaches of conditions on his practising certificate, nevertheless took into account the very difficult financial and health circumstances of the practitioner at that time. The Tribunal recorded a reprimand, ordered the practitioner to pay a fine of $1,000 and the Council's costs in the sum of $2,000.

The practitioner's oral submissions in response to the Tribunal's questions

During the hearing the Tribunal members raised a number of matters with the practitioner relating to his health, employment status and the scope of his present practice.
It is not in dispute that the practitioner is in receipt of Newstart benefits, and that he satisfies the Australian Government's requirements to receive this social security benefit including demonstrating to Centrelink that he has been unable to obtain employment as a solicitor or otherwise. He has worked occasionally managing a rural property at Mudgee in return for board and keep. The practitioner tendered his bank statements. These statements corroborate his assertions of receipt of Newstart benefits.
At the hearing the practitioner tendered a medical certificate from his general practitioner. While tendered in explanation of the practitioner's delay in providing affidavit evidence for this hearing, it corroborates the practitioner's history of low back injury and pain.
The practitioner is currently practising from the rented accommodation where he resides. He states he has little administrative support, and that his practice in the preceding twelve months was limited. Although he did not to provide evidence of his earnings, he explained that those earnings were very modest. He has been required to borrow to pay for his professional indemnity insurance.
It was in these circumstances that the practitioner submitted that, by reason of his age and health, an order that required him to practice as an employed solicitor would, in reality, mean he will remain unemployed and dependent on Newstart benefits. Further, he submitted that he would suffer financial hardship if he is ordered to pay a fine.
The practitioner freely acknowledged that he had not, at the relevant time, known and understood the provisions of the Act and rules breaches of which occasioned these proceedings. This deficit he acknowledged had been causative of his conduct. He also acknowledged that his conduct was inappropriate and unprofessional.
The practitioner also confirmed his earlier evidence that he does not wish to operate a trust account, and that it was at his instigation a Manager was appointed to his practice.

Discussion and findings

As set out in our earlier reasons, although we found the practitioner guilty of professional misconduct that finding was based on s 497 (1) (a) of the Act.
Professional disciplinary proceedings have a unique character. The orders made are not to punish the practitioner but are designed to protect and inform the public, uphold the integrity of the profession, and act as a deterrent to like conduct by other practitioners. The Tribunal is charged with making factual findings about conduct, and classifying whether or not the conduct meets the common law definition of professional misconduct, and/or satisfies the statutory definitions set out in s 497 of the Act if such conduct is alleged in the application for disciplinary findings and orders.
In our earlier reasons we summarised at [71]-[72] those matters we found constituted professional misconduct because of the consistent failure of the practitioner to reach or maintain a reasonable standard of competence and diligence. That lack of competence and diligence is now acknowledged by the practitioner. But we maintain a lingering doubt about the practitioner's level of up to date knowledge, particularly in circumstances of the introduction of the new statutory regime and rules consequent on the coming into force of the Legal Profession Uniform Law 2014 (NSW).
While the practitioner submits that he will be deprived of the ability to practice if he is required to work as an employed solicitor that cannot be the only matter we take into account. We discern it is the Council's position that as an employee the practitioner will not have the responsibility to manage a trust account, and will be subject of some level of supervision.
Dealing with Ms Foord's submissions it is unnecessary we consider whether the practitioner should be entitled to practise with an unrestricted practising certificate and the responsibility of managing a trust account. We accept that the practitioner does not, at least at this point in time, seek to maintain his practising certificate on these terms and intends, if permitted to practise, to do so without operating a trust account. Those funds currently in his trust account remain and will remain until the costs dispute with his former client is resolved under the management of the appointed Manager.
As we noted earlier in these reasons, Ms Foord submits that the practitioner should not be entitled to practice with an unrestricted practising certificate but not holding a trust account because, at the time of her submission, she asserted we could not be confident that the practitioner would not again transgress.
The authorities which deal with cases of misappropriation of trust funds are clear and unambiguous and in such circumstances absent unusual circumstances such as found in Council for the Law Society of New South Wales v Wall [2010] NSWADT 176 an order will be made for removal of the practitioner's name from the roll.
The seriousness with which misappropriation is viewed is cogently explained by the Court of Appeal in Dupal v Law Society of New South Wales [1990] NSWCA 56. Extracts of the decision in that matter and other relevant authorities on the topic are conveniently summarised and discussed in Law Society NSW v Feerick [2017] NSWCATOD 54. Those authorities emphasise the seriousness of such conduct, and the usual consequence of removal of the practitioner's name from the roll. We adopt and follow [33]-[40] of the decision in Law Society v Feerick.
As a matter of general principle, we find the comments of Meagher JA in Prothonotary of the Supreme Court of New South Wales v Dimitrious [2015] NSWCA 258 set out the relevant principle with clarity. His Honour said: Legal practitioners are expected to act and must act with scrupulous honesty when discharging their obligations generally, and specifically with respect to the receipt and payment of monies on behalf of clients. There is an unqualified expectation that they adhere to those standards. The position was stated plainly by Ipp JA in Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32; Aust Torts Reports 81-730 at [118]: ... The trust and confidence which clients place in their solicitors are a basic element of the administration of justice in this country. Violations by legal practitioners of trust accounts betray that trust and harm public confidence in the legal system. This explains the sacrosanct nature of trust accounts and the acute concern that courts have when practitioners, in breach of their fiduciary obligations, misuse trust moneys for their own benefit. There have been many statements to a similar effect. See, for example, Law Society of New South Wales v Bannister [1993] NSWCA 157; 4 LPDR 24 at 30 (per Sheller JA); Johns v Law Society of New South Wales [1982] 2 NSWLR 1 at 15 (per Moffitt P); Prothonotary of the Supreme Court of New South Wales v Da Rocha [2013] NSWCA 151 at [16] (per Ward JA).
There are a number of distinguishing factors in this case to the misappropriation cases where a practitioner has engaged in deliberate conduct in order to personally benefit from misappropriated funds, whether or not the practitioner has subsequently demonstrated recognition of the inappropriateness of his or her conduct and remorse for that conduct.
Here the practitioner did express orally before us a level of insight into his conduct, and an acknowledgment his conduct was careless. He expressed a willingness to undergo any course that the Tribunal may order to address deficiencies in his knowledge.
We are mindful that this is not the first occasion the practitioner's actions have been subject of disciplinary proceedings, and that in the previous Tribunal proceedings the practitioner's attitude to the conditions on his practising certificate and ensuring that he had professional indemnity insurance when practising as a "consultant" was described by the earlier Tribunal as "cavalier".
We have taken into account the practitioner's earlier conduct when considering the conduct the subject of these proceedings. Our findings demonstrate that the practitioner did not misappropriate client funds for his own benefit, rather he was careless in failing to properly designate the accounts he opened as controlled monies accounts. He was also careless in failing to keep proper records of all authorities to pay out expenses incurred in the Court of Appeal litigation and to provide trust account statements when requested.
The present arrangements in place by reason of the Manager's appointment should ensure the proper distribution of the trust funds still held in respect of the unresolved costs dispute arising out of the Court of Appeal litigation. These matters give us some confidence that in the future the behaviour which brought the practitioner before us in these proceedings is unlikely to be repeated, particularly if conditions are placed on the practitioner's unrestricted practising certificate precluding him holding funds in trust and requiring him to undertake prescribed education courses at his expense.
For completeness, we turn then to consider the position as to whether the more appropriate order would be one that permits the practitioner only to practise as an employed solicitor.
While the solicitor submits that he will be deprived of the ability to practise if he is required to work as an employed solicitor that cannot be the only matter we take into account. We discern it is the Council's position that, as an employee, the practitioner will not have the responsibility to manage a trust account, and will be subject of some level of supervision.
We accept, as did the previous Tribunal, that the practitioner has, since 2014 and following, qualified for Newstart. This has required him to seek employment on a regular basis and he has been unsuccessful in that endeavour for many months.
If the practitioner is not able to hold trust funds then one plank of the rationale for requiring him only to work as an employer is negated. Given the practitioner's age and level of experience, we do not consider the level of supervision the practitioner would receive, if able to obtain employment, would be any more protective of the public than would a requirement that the practitioner undertake and satisfactorily complete prescribed continuing professional development within a defined period.
We are satisfied that the practitioner's conduct must attract a reprimand to reflect his carelessness in many aspects of his practice including the failure to make a proper costs disclosure, to provide trust statements when requested and to properly designate a bank account as a controlled monies account. We are reinforced in this conclusion because of the practitioner's prior conduct found in the earlier disciplinary proceedings.
The previous Tribunal at [42] took into account the practitioner's impecuniosity when determining the quantum of a fine to be imposed to reflect the seriousness of the conduct found established. That Tribunal fixed a fine at a much lower level than it determined would otherwise be appropriate but nevertheless found a fine should be imposed.
We have also taken into account the practitioner's current parlous financial circumstances. He told us he owns no assets, he is living in rented accommodation and has no savings. Nevertheless, we are satisfied that the imposition of the fine is warranted. The imposition of a fine has a deterrent effect and sends a message to other practitioners that careless conduct is not acceptable.
We have considered the range of fines which may be imposed having regard to the authorities considered in the Court of Appeal in Russo v Council of the Law Society of New South Wales [2016] NSWCA 306. We conclude that a fine of $1,000 should be imposed. This is a fine which is considerably less than we would have imposed but for the practitioner's difficult financial situation.
For the reasons discussed above, we find that the practitioner's conduct warrants orders that: 1. he be reprimanded; 2. pay a fine of $1,000; 3. that his practising certificate be subject of conditions that restrict his ability to operate a trust account; and 4. at his expense he attend and successfully complete within six months of the date of these orders a course in trust accounts and costs disclosure or such other course as approved by the Professional Standards Committee of the Society.

Costs

Having regard to the provisions of Schedule 5 of the Civil and Administrative Tribunal Act 2013 (NSW), we order that the practitioner must pay the Society's costs as agreed or failing agreement as assessed under the provisions of the Legal Profession Uniform Law Application Act 2014 (NSW).

Orders The Tribunal having found Mark Francesco Gallego ("the practitioner") guilty of professional misconduct orders that:

The practitioner is reprimanded.
The practitioner is fined $1,000.
The practitioner shall be entitled to continue to hold an unrestricted practising certificate subject to the following conditions: (i) The practitioner shall not operate a trust account; (ii) The practitioner shall within six months of the date of these orders and at his own expense enrol in and satisfactorily complete a trust accounts course approved by the Professional Standards Department of the Law Society of NSW (the Department); (iii) The practitioner shall within six months of the date of these orders and at his own expense attend a continuing professional development seminar approved by the Department dealing with the cost disclosure and the cost agreement provisions of the Legal Profession Uniform Law (NSW) and the Legal Profession Uniform Law Application Act 2014 (NSW) or if such a course is not available such continuing professional development seminar as may be approved by the Department. (iv) The practitioner shall provide written evidence to the Department within 14 days of his enrolment in the trust accounts course referred to in Order 3 (ii) and within 14 days of his satisfactory completion of the course. (v) The practitioner shall provide written notification to the Department of the proposed continuing professional development seminar for approval and on receipt of approval shall attend the seminar. On completion of the seminar the practitioner shall provide written evidence of his attendance to the Department.
The practitioner may after a period of two years from the date of these orders apply for condition (i) of Order 3 to be removed.
The practitioner shall pay the costs of the Council of the Law Society of NSW as agreed and failing agreement as assessed under the Legal Profession Uniform Law Application Act 2014 (NSW). 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: 27 April 2017

Legal Profession Act 2004(NSW)

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