Council of the Law Society of NSW v Gurusamy

NCAT Occupational|2019-05-27|Before: Mr P

REASONS FOR DECISION

On 14 November 2018 the Council of the Law Society (the Society) filed an Application for Disciplinary Findings and Orders against the Respondent, Baskaran Gurusamy (the Solicitor).
In the Application the Society sought the following Orders: 1. the solicitor be reprimanded 2. the solicitor pay a fine 3. the solicitor pay the costs of the Society as agreed or assessed 4. any further or other order the Tribunal deems fit
It was alleged that that the Solicitor is guilty of professional misconduct in that he: 1. Breached section 254 of the Legal Profession Act 2004. 2. Breached section 255 of the Legal Profession Act 2004. 3. Breached section 260 of the Legal Profession Act 2004. 4. Breached section 137 of the Legal Profession Uniform Law (NSW). 5. Breached section 138 of the Legal Profession Uniform Law (NSW). 6. Breached section 146 of the Legal Profession Uniform Law (NSW). 7. Failed to maintain a file register. 8. Failed to disclose to his client a financial benefit that he paid to [a named person] for referring that client.
In support of the application the Society filed the following affidavits: 1. Affidavit dated 13 November 2018 of Anne-Marie Foord 2. Affidavit dated 13 November 2018 of Chandrasekaran Sivakumar, one of the Society's Trust Account Investigators who conducted an investigation of the Solicitor's practice and who had provided a report under s 165 of the Legal Profession Uniform Law (NSW) dated 17 August 2016.
On 3 December 2018 the Solicitor filed a Reply to the Application, and on 10 January 2019 filed an affidavit sworn on 7 January 2019.
On 23 May 2019 an Instrument of Consent bearing signatures on behalf of the parties was filed pursuant to s 144 of the Legal Profession Uniform Law Application Act 2014. The Instrument was dated 22 May 2019 and includes an Agreed Statement of Facts.
The hearing of the Application took place before us on 27 May 2019. Mr L. Pierotti, solicitor, appeared for the Society and Mr P. Gnana-Karan, solicitor, appeared for the Solicitor, who was also present and who gave evidence. The affidavits referred to above were taken into evidence without objection.

Agreed Statement of Facts

The Agreed Statement of Facts which were attached to the Instrument of Consent set out particulars of the grounds relied on by the Society.

Grounds 1-6

From each of 20 [named] clients the Solicitor requested and received into his office account, payment in advance on account of legal costs and disbursements, totaling $8,120 paid between 12 August 2013 and 19 March 2016.
The moneys received were trust funds and should have been banked into a trust account.
The Solicitor did not send any tax invoices to those clients prior to receiving payment into the office account. Accordingly, the Solicitor had no entitlement to appropriate the trust funds in respect of each of those matters as and when they were received into the office account.
Further, in one [identified] matter in respect of 2 clients to the same transaction (Client 1 and Client 2, respectively): 1. A costs agreement was signed by client 1 on 4 April 2014 which recorded, relevantly at Clause H, that fees were payable on completion of your purchase totaling $1,200 2. On 9 April 2014, the Solicitor received the sum of $10,600 into the office account described as Transfer from [Client 2] NetBank [Client 1] Home. This amount included the payment of the deposit and 50% of the fees payable to the Solicitor for acting on the purchase. 3. On 11 April 2014, a tax invoice was issued by the Solicitor to both Client 1 and Client 2 in the sum of $600. 4. The purchase of the properly settled on 22 July 2015. 5. On 22 July 2015 a tax invoice was issued by the solicitor to Client 1 and Client 2 in the sum of $1,200 6. The Solicitor repaid the sum of $600 to Client 1 by electronic funds transfer on 14 August 2015.
Because of the dates of the misconduct, Grounds 1, 2 and 3 applied to 17 of the matters. The applicable sections of the Legal Profession Act 2004 provide, relevantly: Section 254 (1) … as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless: … Section 255 (1) A law practice must: (a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and … Section 260 (1) A law practice must not, otherwise than as permitted by subsection (2), mix trust money with other money. …
Grounds 4 - 6 applied to the remaining 3 matters. The applicable sections of the Legal Profession Uniform Law (NSW) provide, relevantly: Section 137 A law practice must deposit trust money (other than cash) into the law practice's general trust account as soon as practicable after receiving it unless … Section 138 (1) Except as otherwise provided in this Part, a law practice must (a) hold trust money deposited in the law practice's general trust account exclusively for the person on whose behalf it is received; and … Section 146 A law practice must not mix trust money with other money …

Ground 7

The Solicitor did not maintain a file matter register as required by Rule 93 of the Legal Profession Uniform General Rules, which provides: Rule 93 (1) A law practice must maintain a register of files opened …

Ground 8

The Solicitor's office account statements inspected by the Trust Account investigator identified a total of 16 payments - some of $200 and some of $400 - made by the Solicitor during the period from 3 April 2013 to 2 December 2015 totaling $5,400 and representing payments made by the Solicitor to a third person for referring clients to the Solicitor in conveyancing matters. The Solicitor acknowledged that he did not disclose to clients that there had been such an arrangement.
At the hearing the Society said it relied on the common law principle in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 in that the Solicitor's conduct in paying a commission constituted disgraceful and dishonourable conduct and would have been regarded as such by his peers of competence and repute.

Further Considerations in relation to the Grounds

In his Reply, filed on 3 December 2018, the Solicitor noted in relation to the matter referred to above, that the $10,000 should have been paid by the clients to the real estate agent, and not to him. He provided a copy of his advice to the client to this effect, which was sent the day after the money was received. He immediately took steps to return the money to the client.
As to Ground 7, the Solicitor wrote that he had taken steps to set up a file register. Attached to his affidavit was a copy of entries in the register from 26 April 2016.
As to Ground 8, the Solicitor wrote that the commission payments were made from the professional fees he received and that the clients were not overcharged to cover the commission. He had discontinued the practice of paying commission for referrals.
In his affidavit, the Solicitor apologised for his failings and observed that no client had been disadvantaged by his conduct and that he had taken steps to rectify the issues that had been identified by the trust account inspector.
In his evidence, the Solicitor repeated the matters in his affidavit and said that he had now set up a trust account. He said that he only undertakes conveyancing and, of the 150 or so matters he conducts per annum, has only 3-4 matters that require deposits into his trust account. He said he has purchased accounting software and has engaged an accountant to oversee his trust account. It was a condition of his practising certificate for the year ended 30 June 2017, that he undertook a trust accounting course and he successfully completed the course, which included an examination. Since the investigation that gave rise to this application, his practice has been audited annually without any adverse findings.
The Tribunal has a discretion whether or not to make orders proposed in an Instrument of Consent under s 144 of the Legal Profession Uniform Law Application Act 2014. The Tribunal does not act, nor should it be seen to act, as merely a "rubber stamp". In this matter, we are comfortably satisfied as to the accuracy of the Agreed Facts and that it is appropriate to make the proposed findings.
We therefore find that the Solicitor is guilty of professional misconduct in relation to Grounds 1-8 of the Application.
We are also comfortably satisfied that the proposed Orders are appropriate.

Quantum of the fine

The Solicitor consented to the imposition of a fine.
The Solicitor gave oral evidence in relation to this issue, in which he said that he has been a sole practitioner for about 12 years. He asserted that the gross income from his practice is about $150,000 to $160,000 per year and that his annual taxable income for the last financial year was $85,000. However, he expects that his taxable income in the current financial year will be about $10,000 less, possibly because of the downturn in the property market. He also said that his wife in engaged in full-time professional work and they have no dependents. He has no other sources of income and he did not give any evidence regarding his expenses or liabilities.
The Solicitor said that he has found the present proceedings to be very stressful, especially as it is now over 3 years since the trust account investigation. He has apologised and said he is now very careful in the way that he conducts his practice. He gave some evidence that provides us with a degree of confidence that he will not fail to comply with his professional obligations in the future.
Disciplinary proceedings are concerned with the protection of the public, rather than being punitive in nature: see Beazley JA in Law Society of New South Wales v Walsh [1997] NSWCA 185, at [40] and more recently, in Council of the New South Wales Bar Association v Breeze [2015] NSWCATOD 152. However, the Tribunal's orders may be used to mark the community's disapproval of lapses from the high standard of conduct that are legitimately expected of legal practitioners. They also act as a specific deterrent to the legal practitioner involved and as a general deterrent to all other practitioners with a view to maintaining proper standards of conduct within the legal profession.
Based upon a consideration of all of the evidence, we consider that a fine of $5,000 is appropriate.
The Solicitor also consented to an order that he pay the Society's costs.

Findings and Orders

We are satisfied that all of the grounds of the Application have been made out and that the orders proposed in the Instrument of Consent are appropriate.
Accordingly, the Tribunal makes the following Orders: The Solicitor is guilty of professional misconduct in relation to Grounds 1-8 of the Application; 1. The Solicitor is reprimanded; 2. The Solicitor is fined the sum of $5000; and 3. The Solicitor is to pay the Law Society's costs as agreed or assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 June 2019

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