Council of the Law Society of NSW v Thadsanamorthy

NCAT Occupational|2019-06-03

Solicitors: Council of the Law Society of NSW (Applicant) Di Lizio & Associates (Respondent) File Number(s): 18/248475 Publication restriction: Pursuant to s. 64 of the Civil and Administrative Tribunal Act 2013, and subject to any further order of the Tribunal: Publication of the names the persons listed in paragraph 5 of the affidavit of Anne-Marie Foord sworn 8 August 2018 is prohibited; andaccess to and disclosure of documents and evidence filed with the Tribunal in this application be restricted to any designated local regulatory authority under the Legal Profession Uniform Law (NSW) and its delegates, the parties and their respective legal representatives.

Background to the application

On 13 November 2018 the Council of the Law Society of New South Wales (the Law Society) filed an Application for Disciplinary Findings and Orders in which it contended that Viji Thadsanamorthy (the Solicitor) engaged in 3 counts of professional misconduct and 6 counts of unsatisfactory professional conduct.
The Solicitor filed a Reply dated 5 October 2018 in which she admitted the conduct the subject of all grounds except one in relation to professional misconduct, and contended with respect to the 2 other counts of professional misconduct that the conduct should be deemed only unsatisfactory professional conduct.
At the hearing the Law Society sought an order pursuant to s. 64 of the Civil and Administrative Tribunal Act 2013 restricting the publication of the names of persons who were either clients of the Solicitor, or the former wife of the Solicitor's client (the Wife) in proceedings under the Family Law Act 1975 (the family law proceedings). This course was consented to by the Solicitor's representative. Accordingly, the Tribunal ordered that: Pursuant to s. 64 of the Civil and Administrative Tribunal Act 2013, and subject to any further order of the Tribunal: publication of the names the persons listed in paragraph 5 of the affidavit of Anne-Marie Foord sworn 8 August 2018 is prohibited; and access to and disclosure of documents and evidence filed with the Tribunal in this application be restricted to any designated local regulatory authority under the Legal Profession Uniform Law (NSW) and its delegates, the parties and their respective legal representatives.

Evidence before the Tribunal

The Law Society relied on the following evidence:

affidavits of Anne-Marie Foord sworn 8 August 2018 (with Exhibit AMF-1) and 20 November 2018
affidavit of Ronald Frederick Dunlop, trust account inspector, sworn 8 August 2018 (with Exhibit RD-1) Mr Dunlop also gave evidence and was cross-examined.
affidavit of a client (the Husband) sworn 12 July 2018

The Solicitor also provided an affidavit affirmed on 29 October 2018. She also gave evidence. She also provided an affidavit by Steven Scott sworn 27 February 2019.

Applicable legislation

The proceedings are to be determined pursuant to the Legal Profession Uniform Law 2015 (Uniform Law). Some of the conduct concerned breaches of the Legal Profession Act 2004 while others related to the Solicitor's conduct prior to the enactment of the Uniform Law. Clause 27 of Schedule 4 of the Uniform Law provides that conduct occurring prior to 1 July 2015 may be the subject of a complaint and investigated in accordance with the Uniform Law.

Ground 1 - breach of s. 137 Uniform Law

Section 137 relevantly provides: 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 …
On 2 February 2016, consent orders were made in the family law proceedings. Order 7 provided that the Wife would pay the Husband's costs of the application in the sum of $2,048 and counsel's fees of $1,500 (a total of $3,548) from the Wife's share of the proceeds of the sale of the former matrimonial home. Pursuant to Order 7 the Solicitor provided a cheque direction to the Wife's solicitor for a cheque for $3,548.00 to be drawn in the Solicitor's name. On 14 March 2016 the Wife's solicitor paid that sum to the Solicitor. On the same day the Solicitor, a sole practitioner who did not operate a trust account, deposited the cheque into her bank account.
Money paid to a law practice to cover payments due to third parties, including counsel and expert witnesses, is "trust money" which is "entrusted to" the law practice and required to be deposited into a trust account: Council of the Law Society of New South Wales v Bouzanis [2017] NSWCA 330. In accordance with s. 137 of the Uniform Law, the sum of $1,500 for counsel's fees was required to be deposited into a trust account.
The Solicitor admitted the conduct the subject of Ground 1 but submitted that the conduct should be characterised as unsatisfactory professional conduct rather than professional misconduct.

Ground 2 - breach of s. 146 Uniform Law

Section 146 provides, relevantly: A law practice must not mix trust money with other money …
The deposit of the cheque paid pursuant to Order 7 into the Solicitor's bank account caused trust money in the sum of $1,500 to be intermixed with other money in contravention of s. 146 of the Uniform Law.
The Solicitor admitted the conduct the subject of Ground 2 but again said that the conduct should be characterised as unsatisfactory professional conduct rather than professional misconduct.

Grounds 3 - misappropriation

The Law Society contended that the deposit of $1,500 by the Solicitor into her bank account constitutes a misappropriation of those funds. The Solicitor denied Ground 3. The Solicitor contended that, at the relevant time, she held an honest and reasonable belief, formed on the advice of Counsel for the Husband (Counsel), that she was entitled to the $1,500.
During submissions Counsel for the Law Society drew the Tribunal's attention to the Court of Appeal's recent decision in Berger v Council of the Law Society of New South Wales [2019] NSWCA 119 (Berger) where an issue was whether the Law Society had pleaded or conducted a case of dishonesty before the Tribunal below. The Court of Appeal found that although the subject Complaint was "ambiguous" the manner in which the case was opened by the Law Society made it clear that dishonesty was alleged: at [245] and [249]. Further, the Law Society's opening written submissions commenced with the allegation, and continued, that Mr Berger's conduct was dishonest, at [250] and[251].
In the present proceedings, whilst it is true that the particulars in the Application (which should inform the Complaint) do not in terms allege dishonesty, the way the case was conducted and the written submissions of both parties, make it plain that dishonesty was alleged, and responded to, in relation to Complaint 3.
Both the Law Society's written submissions, dated 5 March 2019, at [30 - 37] and the Solicitor's written submissions, dated 15 May 2019, at [11 - 13] deal squarely with the issue and an allegation of dishonesty, such that there was no denial of procedural fairness to the Solicitor to prevent a finding on Complaint 3.
In his affidavit the Husband said that on 6 November 2015 he had a conversation with the Solicitor to the effect that she would not charge him any more fees for acting for him, but, if successful in defending the Second [family law] Proceedings, she would seek a cost order against the Wife and take the amount determined by the court as compensation. The Husband, whose evidence was unchallenged, said he understood that he would not be charged for any further work.
The Solicitor said she had communicated with Counsel on a number of occasions before she issued the cheque directions to the Wife's solicitor on 14 February 2016. She said Counsel told her that she, the Solicitor, should keep the whole amount. In her evidence she said that Counsel had said "you keep it", so "[she] did".
In her affidavit she said that after she had collected the cheque for $3,548 and before banking it, she had telephoned Counsel and had asked what to do with "the cheque". She said Counsel said: You keep the cost order cheque. You did a lot of work and didn't charge, so you keep it.
Counsel informed Mr Dunlop though that she told the Solicitor that, as all her fees had been paid, the payment of her costs by the Wife should be "applied/credited to fees owed to [the Solicitor's] practice." She said that she told the Solicitor on a number of occasions that the money should "simply be credited to her client's costs".
The Solicitor denied that Counsel had told her to credit the amount to the Husband's fees and had simply told her to keep it. It is perhaps unfortunate that Counsel was not called as a witness in the present proceedings. The Tribunal observes that Counsel's version of events formed part of the Exhibit to Mr Dunlop's affidavit, which affidavit was admitted without objection.
The Solicitor acknowledged that if Counsel had already been paid her fees in full then payment of the $1,500, would have resulted in her being overpaid. When it was put to the Solicitor in cross examination that the Husband was therefore entitled to that amount, the Solicitor's response was that $1,500 had been sent to the Husband on 27 February 2017 by her representative. In forwarding the money to the Husband, the covering letter the Solicitor was said to be of the view that there was "ambiguity' with respect to Order 7 in that she was of the understanding that the Husband had authorised her to receive the whole of the Cost Order in payment of the legal fees incurred by him and the money was returned "as an ex gratia gesture". When asked in cross examination if she was still of the view that she was entitled to the money, she said only that she had returned it.
It was submitted on the Solicitor's behalf that she had acted on what "turned out to be the mistaken advice of [Counsel]". Further, it was submitted that Counsel's advice was unintentionally misleading in that Counsel did not turn her mind to the fact that having given that advice, she should have deducted $1,500 from her own fees in relation to the work she carried out in respect of the second proceedings which gave rise to Order 7. The Solicitor acknowledged, however, that a careful reading of Counsel's tax invoices for the relevant period would have revealed the error.
Mr Dunlop provided a copy of a text message he said the Solicitor sent to him on 10 June 2016. The Solicitor denied sending the message. There, the Solicitor allegedly wrote that she spoke with the Wife's solicitor and Counsel and misunderstood the reason for the payment. Amongst other things, the note alleged she said that the "wording" [of Order 7] was to be "disregarded". She said that according to the Wife's solicitor and Counsel the amount was "legal costs" and that the Husband was not entitled to the amount as he did not pay those costs. She conceded, somewhat confusedly it appeared to the Tribunal, that she had told Mr Dunlop that if she was not entitled to the payment then she would return it to the Wife's solicitor.
An allegation of misappropriation against a solicitor is not made out unless there is shown to be dishonesty. In Brereton v Legal Services Commissioner [2010] VSC 378 (Brereton) at [53]-[54], Bell J gave the following explanation of the concept of "dishonesty" in this context: [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 dishonest 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; (1998) 192 CLR 493 as follows (at 503-504): 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.
The principles in Brereton were applied in Council of the Law Society of New South Wales v Shehadie [2016] NSWCATOD 46 (Shehadie), where the Tribunal stated: … the general law … in dealing with proof of dishonesty does not go so far as to require that the [alleged wrong-doer] knew at the time of the conduct that what he did was dishonest. Proof of 'subjective' dishonesty in that sense is not required.
In Shehadie the Tribunal said that the three steps in Brereton draw a clear distinction between the understanding of the Solicitor when engaging in the conduct and the characterisation of that understanding. Commonly, evidence will establish a state of knowledge, belief or intent in relation to the conduct under notice, and the issue will then be (step three) whether the proven state of understanding can fairly and properly be found to be dishonest. In making that finding the Tribunal is to look at the totality of the evidence, and apply the standards of the community to what has been put to it by the Solicitor in that regard.
More recently, in Berger, the Court of Appeal referred to the meaning of "dishonesty" at common law, when, as is the case here, there is no specific statutory definition of the term. The Court of Appeal referred to Peters v the Queen (1998) 192 CLR 493 where Toohey and Gaudron JJ said: [15] There is a degree of incongruity in the notion that dishonesty is to be determined by reference to the current standards of ordinary, honest persons and the requirement that it be determined by asking whether the act in question was dishonest by those standards and, if so, whether the accused must have known that that was so. That incongruity comes about because ordinary, honest persons determine whether a person's act is dishonest by reference to that person's knowledge or belief as to some fact relevant to the act in question or the intention with which the act was done. They do not ask whether he or she must be taken to have realised that the act was dishonest by the standards of ordinary, honest persons. Thus, for example, the ordinary person considers it dishonest to assert as true something that is known to be false. And the ordinary person does so simply because the person making the statement knows it to be false, not because he or she must be taken to have realised that it was dishonest by the current standards of ordinary, honest persons. ... [18] 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. Necessarily, the test to be applied in deciding whether the act done is properly characterised as dishonest will differ depending on whether the question is whether it was dishonest according to ordinary notions or dishonest in some special sense. 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. … (Footnotes omitted.)
The Law Society pointed to the failure of the Solicitor to deposit the sum of $1,500 into a trust account; and the deposit of that sum into her own account. Further, the Solicitor had provided a cheque direction to the Wife's solicitor by letter dated 14 March 2016 specifically directing a cheque for $3,548.00 to be paid pursuant to Order 7 and that the Solicitor was aware that of the terms of Order 7 specifically provided that $2,048 was to be paid for the Solicitor's own costs and $1,500 was to be paid to Counsel. On the same day as the cheque was received, the Solicitor also received another cheque in payment of her costs and disbursements pursuant to her tax invoice provided to the Wife's solicitor.
The Solicitor contacted Counsel, on receipt of the cheque and, on her evidence, asked Counsel: "What do I do with the cheque for the costs order?".
The Solicitor was not entitled to the sum of $1,500; and the Solicitor did not deduct the sum of $1,500 from any of the tax invoices she rendered to the Husband.
The Solicitor told Mr Dunlop during his investigation by text message received by him on 10 June 2016 that, in relation to Order 7: The entire sum was made payable to me as legal costs per costs structure prepared and presented to court for work carried out by me which was not paid. The wording is to be disregarded. That $1500 was from the wife. According to [the Wife's solicitor] and counsel it is legal costs. [the Husband] is not entitled to that as he did not pay that costs. If I am not entitled it has to be returned to [the Wife's solicitor].
In a subsequent text message to Mr Dunlop the Solicitor stated received by him on the same date: The judge ordered the payment to my firm as i was entitled to costs in a sum of $5000, but agreed to accept $300odd. That is a reason for the cheque being made out to my name. [the Husband] has the costs structure. He took it from me on some pretense and never returned it.
The Solicitor did not, at the time, account for the sum of $1,500 to the Husband, nor did she deduct the sum of $1,500 from any of the tax invoices rendered to the Husband or the tax invoice provided to the Wife's solicitor.
Further, the Solicitor did not repay the sum of $1,500 to the Husband until 27 February 2017, when her representative sent a letter attaching a cheque to the Husband which stated inter alia: Our client's action in returning the $1,500 is not to be construed as an admission, but rather as an ex-gratia gesture on her part.
The Tribunal considers the Solicitor was aware, or should have been aware, that $1,500 should have been deposited into a trust account, and was not hers to keep. In providing a cheque direction to the Wife's solicitor for $3,548.00 to be paid pursuant to Order 7 the Solicitor was aware that of the terms of that Order 7, namely that $2,048 was to be paid for her costs and $1,500 was to be paid to Counsel. The other cheque paid to her on the same day was in payment of any other of her costs and disbursements.
The Solicitor contended that she had been unsure how to deal with the $1,500. While she sought the views of Counsel and the Wife's solicitor as to how to deal with payment she did not, at any time, seek instructions from the Husband as to the disbursement of the $1,500, neither did she even inform the Husband of the receipt of the sum of $1,500. For this, the Solicitor offered no explanation. Pending those instructions, the Solicitor was required to hold the money in a trust account but did not do so.
The Solicitor's explanations given to Mr Dunlop and repeated at the hearing that the terms of Order 7 were to be "disregarded" and her assertion that the Husband was not entitled to the money are at odds with Order 7. At the time the cheque was received, the Solicitor also received another cheque in payment of her costs, so it might be reasonable to assume that this represented the balance of her fee entitlement, other than the $2548 paid pursuant to Order 7.
One submission on the Solicitor's behalf was that Counsel should have deducted $1,500 from her own fees. If this were correct, on payment of the $1,500 by the Solicitor, Counsel would have needed to provide a cheque to the Solicitor in the same amount, which would have served only to have left the Solicitor in the same predicament. If Counsel had already been paid her costs for appearing on 2 February 2016, it was clear that neither Counsel nor the Solicitor was entitled to the $1,500, especially as the balance of the cheque contained a component for the Solicitor's costs.
Even on the Solicitor's own evidence, that she understood Counsel to have told her to keep the money, the Solicitor was not absolved from her responsibility to account for the money to her client. That she reimbursed the Husband $1,500 in February 2017 is irrelevant to the consideration of her conduct at the time she appropriated the money to her own use.
The Tribunal considers that ordinary and decent people would regard the Solicitor's conduct as dishonest; we do not consider that any belief that she was entitled to the sum of $1,500 can be considered to be honest and reasonable. If this was her belief, then it was so unreasonable as to amount to dishonesty. Order 7 was clear - $1,500 was to be paid to Counsel, and in no circumstances could it reasonably have been considered to be hers.
The Tribunal therefore finds Ground 3 to be proven.

Ground 4 - breach of s. 254 LPA 2004

Section 254 provides, relevantly: … as soon as practicable after receiving trus t money, a law pr actice must deposit the money in a general trust account of the practice unless:…
The Solicitor admitted the conduct the subject of Ground 4, which was to the effect that the Solicitor failed to deposit into a trust account cash of $1,000 received from the Husband on 9 September 2014 nor $2,000 received from the Husband on or about 11 October 2014. The two sums were not paid by the Husband in response to a tax invoice - the first invoice issued by the Solicitor to the Husband was not sent to him until 1 July 2015. Those sums were trust money as they were paid by the Husband to the Solicitor on account of legal costs in advance of the Solicitor providing legal services.
The Solicitor said, however, that in respect of the $1,000 that she had done work for the Husband prior to receiving the payment, namely work following a conference of over 4 hours. She did not accept the Law Society's characterisation of the payment as amount on paid in advance on account of legal costs.
In her affidavit the Solicitor said that she was contacted by the Husband in April 2014. She understood he had previously engaged solicitors but they were no longer acting for him. She said he spoke to her by phone a number of times seeking advice. In early September 2014 she told him that if he wanted advice he would have to pay her hourly rate of $350. They arranged to meet at the offices of the Law Society on 9 September 2014. For the meeting, which lasted for 4 hours, she told him he owed her $1,200. He took a "costs structure" which indicated her hourly rate, went to the bank and returned with $1,000 in cash for which a receipt was issued. (In her evidence the Solicitor specifically denied that the "costs structure" was a costs agreement.)
In her affidavit the Solicitor said that she was contacted by the Husband in April 2014. She understood he had previously engaged solicitors but they were no longer acting for him. She said he spoke to her by phone a number of times seeking advice. In early September 2014 she told him that if he wanted advice he would have to pay her hourly rate of $350. They arranged to meet at the offices of the Law Society on 9 September 2014. For the meeting, which lasted for 4 hours, she told him he owed her $1,200. He took a "costs structure" which indicated her hourly rate, went to the bank and returned with $1,000 in cash for which a receipt was issued. (In her evidence the Solicitor specifically denied that the "costs structure" was a costs agreement.)
The Husband told Mr Dunlop, and said in his affidavit, that, at that time, the Solicitor had asked for $3,000 but he paid her only $1,000 and agreed to pay the balance later. The Solicitor told Mr Dunlop she kept the cash for work she had already done. The Solicitor agreed that the payment was not made in response to a tax invoice. Consequently, the money was trust money and should have been deposited in a trust account.
In respect of the $2,000 received on 11 October 2014 the Husband, in his affidavit, said that it was the balance of the $3,000 the Solicitor had requested on 9 September 2014. The Solicitor, on the other hand, said that that it was money requested by Counsel. It was submitted on her behalf that this money was transit money (which is also required to be deposited into a general trust account), and was not in advance of the Solicitor's costs for legal services.
In her affidavit the Solicitor said that on 19 September 2014 the Husband sought an urgent meeting and they met soon thereafter. She had a subsequent conversation with the Husband in which she said that she did not think she could continue to act for him - she was interstate attending to a personal matter. Nonetheless, in early October 2014 she again met with the Husband. She told him that the matter required advice from counsel and she telephoned Counsel, with whom they both spoke. Counsel told her that she needed $2,000 deposited into her account and gave the Solicitor her account details which the Solicitor said she passed on to the Husband. The Solicitor said that a few days later she contacted the Husband to tell him Counsel had said the amount had not been received and it needed to be paid. She said she met the Husband at a club, where he gave her $2,000 in cash. She said she caught the bus straight to Counsel's chambers to deliver the money to her clerk. It was pointed out to her in cross examination that 11 October 2014 was in fact a Saturday and chambers would not have been open. She said that there may have been more than one payment of $2,000 to Counsel.
The Husband told Mr Dunlop that on 11 October 2014 he when he met the Solicitor at the club and paid her $2000 cash, he was not provided with a receipt. He said that this was the balance of the $3,000 the Solicitor had requested on 9 September 2014, he having paid her $1,000 on the day of the request.
Mr Dunlop produced relevant portions of the Solicitor's records. The Tribunal had available to it an undated tax invoice in the sum of $26,853.97 in the family law proceedings. On 11 October 2014 there was an entry for $2,000 for "preparing brief to counsel and counsel's advice". An amount of $2,000 was recorded as "paid" the same day. There was no reference to the $1,000 paid on 9 September 2014, nor what, if any of the $2,000 was paid to Counsel.
When the Solicitor was interviewed by Mr Dunlop she reportedly told him that she had told the Husband that she needed $1,200 for Counsel and she charged $800 for preparing the brief. In her response to the Law Society received on 9 August 2016 following the Husband's complaint she said that she had paid $1,200 to counsel and retained $800 for her costs of preparing the brief. She said she gave the $1,200 cash to Counsel at her chambers the next morning. She said she kept the $800 for work she had done. In cross examination though the Solicitor denied that she had told Mr Dunlop that. She appeared to contradict her evidence that she had given Counsel the whole of the $2,000 the Husband gave her, by saying that she had retained $800 for herself.
The Solicitor said in her evidence that she did recall paying Counsel $2,000 but the Tribunal observes that Counsel referred to this amount being paid at Court on the day of the hearing. Her Memorandum of Fees dated 15 August 2015 refers to a payment of $2,000 being made on 4 November 2014.
Counsel was contacted by Mr Dunlop. She said she had been unwilling to undertake any work for the Husband until some fees were paid. She said that due to computer problems she was unable to access any records relating to payments on behalf of the Husband in 2014, nor could she locate a hard copy of her fee note or a receipt. She did locate her case outline for the matter for which she estimated 3-5 hours work would have been required, fees for which would have been $1,200 to $2,000. Counsel noted that fees were paid but could not indicate when they were paid; she informed Mr Dunlop that she would not have undertaken the work had the fees not been paid.
The Tribunal finds that the Solicitor retained $800 from the $2,000 paid by the Husband and that it was not in response to a tax invoice. Consequently, the money was trust money and should have been deposited in a trust account.

Ground 5 - issued a tax invoice to the complainant and charged GST when not entitled

Between 3 October 2015 and 9 March 2016 the Solicitor issued 5 invoices to the Husband, each of which claimed GST. As at the date of each of the invoices, the Solicitor was not registered for GST.
The Solicitor admitted the conduct the subject of Ground 5.

Ground 6 - breach of s. 258A LPA 2004

Section 258A Legal Profession Act LPA 2004 requires trust money received in the form of cash to be deposited into a general trust account of the law practice.
Ground 6 also concerns the Solicitor's failure to deposit the two sums the subject of Ground 4 into a trust account.
The Solicitor admitted the conduct the subject of Ground 6.

Ground 7 - charged GST on tax invoices issued to two [named] clients when not entitled

The Solicitor did not register for GST until March 2016, although the registration was backdated to 1 January 2015.
In respect of one client, her invoice dated 16 October 2014 included an amount of $1,111.50 for GST. The Solicitor subsequently remitted the GST to the Australian Taxation Office.
In respect of a second client, the Solicitor, on a date unknown, issued a tax invoice. The sum of $10,567.52 was received by the Solicitor in payment of the tax invoice on or about 23 December 2014. The Solicitor was unable to produce a copy of the tax invoice during the trust account inspection, but informed Mr Dunlop that the sum of $10,567.52 included an amount for GST. The Solicitor subsequently remitted GST of $960.50 to the Australian Taxation Office.
The Solicitor admitted the conduct the subject of Ground 7 in respect of both clients.

Grounds 8 and 9: failure to keep a file register

Ground 8. Rule 48 of the New South Wales Professional Conduct and Practice Rules 2013 (failure to keep file register) applies with respect to the period 22 March 2014 to 30 June 2015, during which the LPA 2004 applied.
Ground 9: Rule 93 of the Legal Profession Uniform General Rules 2015 (failure to keep file register) applies from l July 2015.
The Solicitor informed Mr Dunlop during the interview on 22 March 2016, that she had not kept a file register in the previous two years. The Solicitor has admitted the conduct.

Does the conduct with respect to Grounds 1-3 constitute professional misconduct or unsatisfactory professional conduct?

The Law Society contended that the conduct the subject of Grounds 1-3 each constitutes professional misconduct within the meaning of s. 297 of the Uniform Law. The Solicitor however contended that the conduct is properly characterised as unsatisfactory professional conduct rather than professional misconduct: s 296 Uniform Law.
"Professional misconduct" is defined in s. 297(1) of the Uniform Law as including: unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and conduct of a lawyer 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 lawyer is not a fit and proper person to engage in legal practice.
The Law Society submitted that transferring trust monies without authority would be regarded as disgraceful and dishonourable by reputable members of the legal profession: per Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 (Allinson) and, as such, constituted professional misconduct at common law. Professional misconduct at common law includes conduct in the pursuit of professional activities that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency: see for example, Prothonotary of the Supreme Court of New South Wales v McCaffery [2004] NSWCA 470 at [46]. See also Council of the New South Wales Bar Association v Sahade [2007] NSWCA 145 at [54], where Basten JA noted the adoption for legal practitioners of the test propounded in Allinson being conduct in the pursuit of professional activities that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency.
"Unsatisfactory professional conduct" is defined in s. 296 of the Uniform Law as including: ... conduct of a lawyer occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer.
The parties provided submissions about whether the Solicitor's conduct in relation to Grounds 1-3 was appropriately considered to involve a "substantial failure to maintain a reasonable standard of competence and diligence": per s. 297(1) of the Uniform Law. The Law Society referred, in particular, to Council of the Law Society v Terepo [2018] NSWCATOD 106 (Terepo), where the Tribunal found that the solicitor's misappropriation of $850 constituted, amongst other things, a substantial failure to maintain a reasonable standard of competence and diligence. The submissions on behalf of the Solicitor were to the effect that Terepo was not authority for a general proposition that the amount involved need not be large to amount to a "substantial" failure. We accept, however, that notwithstanding the amount misappropriated in that matter was only $850, the Tribunal was able to be comfortably satisfied that the solicitor's misappropriation of that amount constituted professional misconduct.
Further, we observe that in Council of the Law Society of New South Wales v Winter [2019] NSWCATOD 2 the Tribunal adopted the reasoning in Council of the Law Society of New South Wales v Webb [2013] NSWCA 423 where the term "substantial or consistent failure" was considered in the definition of "professional misconduct": 22. The distinction made by that definition is between conduct which involves a "substantial" failure to reach or maintain the required standard and conduct which involves a "consistent" failure to do so. The former directs attention to the nature and consequences of the failure, which may be sufficiently serious to raise questions as to the lawyer's competence and diligence and thereby warrant the description "substantial"…

Grounds 1 and 2

The Law Society contended that the Solicitor's failure to deposit trust money into a trust account and the consequent intermixing of that trust money with other money constitutes professional misconduct. However, the Solicitor contended that the admitted conduct should be found to constitute only unsatisfactory professional conduct due to a "misunderstanding".
As discussed above, the "misunderstanding" to which the Solicitor referred was her view that Order 7 could be "disregarded" and that she thought Counsel told her she could keep the sum of $1,500, notwithstanding that she had already received payment of her costs and disbursements as itemised in her tax invoice provided to the Wife's solicitor on the same day.
The Tribunal considers it is altogether unclear how the Solicitor could have reasonably thought she would have been entitled to that money. Even if she was unsure what to do with money, it properly was trust money.
The Tribunal finds that the Solicitor's conduct in failing to deposit the cheque into a trust account thereby resulting in the intermixing of trust monies with other money would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency, and therefore is properly characterised as professional misconduct: per Allinson.

Ground 3

Misappropriation of trust money is serious breach of a solicitor's obligations. As stated by Meagher JA in Prothonotary of the Supreme Court of New South Wales v Dimetrious [2015] NSWCA 258 at [21]: 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.
See also Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 at [118] per Ipp JA: 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.
The Tribunal has found that the Solicitor's conduct was dishonest and that any belief that she was entitled to the sum of $1,500 was not reasonable.
The amount misappropriated, and the fact that the Solicitor repaid the sum of $1,500 to the Husband in February 2017, does not deprive the conduct of its characterisation as professional misconduct.

Conclusion as to Grounds

The Tribunal considered that the Solicitor's conduct in relation to Grounds 1-3 involved a substantial failure to maintain a reasonable standard of competence and diligence; is conduct that demonstrates that the Solicitor is not a fit and proper person to engage in legal practice; and is conduct that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency.
The Tribunal therefore is comfortably satisfied that the Solicitor is guilty of professional misconduct in relation to Grounds 1 - 3 of the Application and unsatisfactory professional conduct in relation to Grounds 4 - 9.

What Orders should the Tribunal make?

The Law Society sought orders that the Solicitor be reprimanded, pay a substantial fine, undertake further education in practice management, and pay the costs of the Law Society as agreed or assessed. The Tribunal is comfortably satisfied that the orders sought are generally appropriate.
The Law Society submitted that the Solicitor's evidence does not demonstrate any insight into the wrongness of her conduct, nor is there any expression of contrition or remorse. The Tribunal considered that this accurately reflected its own views of the Solicitor's evidence, which it found confusing, and sometimes contradictory, and in part, at odds with what she was alleged to have told Mr Dunlop during the investigation.
The Solicitor relied on the affidavit of Steven Scott, with whom she had worked. Mr Scott deposed that he is aware of the allegations and of the nature of these proceedings, although it is unclear exactly what detail he may have been provided with about the allegations. Mr Scott considered the breaches were not made intentionally and that those breaches that were admitted were a result of "an oversight".
It appeared that Mr Scott worked with the Solicitor from February 2000 but the Solicitor ceased employment at that firm in December 2003. From Mr Scott's affidavit he was absent from the firm during that period for some months, but he and the Solicitor have kept in contact since they worked together. Consequently, the Law Society submitted, and the Tribunal agrees, that limited weight could be given to Mr Scott's evidence.
The Solicitor is now 69 years of age. The Tribunal was informed that she is unlikely to continue to practice as a solicitor for much longer and currently does not have ongoing matters, although according to the Law Society's website she has a current practising certificate. She is now in receipt of an age pension. Her husband is also retired.

Reprimand

The Solicitor consented to a reprimand being imposed. The Tribunal considers a reprimand is appropriate, as it has the effect of identifying professional standards, the establishment and maintenance of which protects the public: Prothonotary of the Supreme Court of New South Wales v Chapman (unreported) 14 December 1992 per Cripps JA.

Quantum of the fine

The Law Society submitted that a "substantial fine" should be imposed. The maximum fine which can be imposed under the Uniform Law for professional misconduct is $100,000 and $25,000 for unsatisfactory professional conduct. It was submitted on the Solicitor's behalf that imposition of a "substantial" fine would be an undue and overly harsh punishment.
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.
While each matter before the Tribunal turns on its own facts, the Law Society helpfully summarised fines imposed by the Tribunal in other recent matters where complaints of a similar nature were proven. The fines imposed range from $1,000 to $10,000. It submitted that a fine at the lower end of the range was appropriate.
Based upon a consideration of all of the evidence, we consider that a fine of $5000 is appropriate.

Further education

While the Tribunal accepts that the Solicitor may have remedied the issues with GST and her failure to maintain a file register, we consider that she has demonstrated inadequacies in relation to administrative aspects of the conduct of a solicitor's practice. It was submitted on her behalf that she accepts that her understanding of the requirements in relation to "trust funds" has been shown to be "limited".
The Tribunal considered that the majority of the complaints arose due to the Solicitor's poor administrative systems and accounting practices. Moreover she displayed a definite lack of knowledge in respect of trust monies. While it was submitted on the Solicitor's behalf that she is unlikely to continue to practice as a solicitor for much longer and currently does not have ongoing matters, she retains her right to practise.
The Law Society proposed that the Solicitor undertake and pass a course in practice management. As it remains a possibility that the Solicitor's circumstances may change and she re-invigorates her practice, the Tribunal agreed that she would benefit from undertaking a course in practice management, and in particular, in relation to trust accounting.

Costs

The Tribunal is generally required to make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay the Applicant's costs: clause 23(1) of Schedule 5 of the Civil and Administrative Tribunal Act 2013. Such an order may not be made only if the Tribunal is satisfied that exceptional circumstances exist. In this matter the Tribunal finds there are no exceptional circumstances.

ORDERS

Consequent upon the findings of professional misconduct and unsatisfactory professional conduct the Tribunal makes the following Orders: 1. the Solicitor is reprimanded; 2. the Solicitor is to pay a fine in the sum of $5,000; 3. the Solicitor is to undergo education as follows: 1. the Solicitor must, at her own expense, complete within 12 months of these Orders an appropriate course in practice management which includes trust accounting (Course) as approved by the Council of the Law Society of NSW, and therein achieve a pass mark of not less than 50% (Pass Mark); 2. within seven (7) days of receipt of notification of the result of her participation in the Course, the Solicitor must provide to the Council of the Law Society of NSW, the original of such notification; 3. should the Solicitor fail to achieve the Pass Mark, she must complete any further course in practice management including trust accounting as approved by the Council of the Law Society of NSW until such time as she achieves the Pass Mark in any further nominated course; and 4. should the Solicitor fail to achieve the Pass Mark within the time period prescribed in (a) above, any practising certificate then held by her shall be suspended (or if not holding a current practising certificate, no such certificate is to be issued to her) until such time as she achieves the Pass Mark; 1. the Solicitor is to pay the costs of the Applicant as agreed or assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 28 June 2019

At a glance

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Judgment (23 paragraphs)

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Cases Cited (15)

Cited By (4)