COUNCIL OF THE LAW SOCIETY OF THE ACT v LEGAL PRACTITIONER E

COUNCIL OF THE LAW SOCIETY OF THE ACT v LEGAL PRACTITIONER E - [2013] ACAT 7 - ACAT 2013 case summary — Zoe

[11]

The report of Mr Glanville identifies a total of $12,746 withdrawn from trust by the practitioner as legal fees in relation to FB's matter for which there is no corresponding invoice.
The tribunal cross referenced the report of Mr Glanville with the solicitor's trust account statements produced by the Commonwealth Bank, the invoices produced by FB and the reconstruction of the practitioner's trust account. The practitioner's trust account records are poor, nevertheless, they reveal that on at least two occasions the practitioner invoiced FB for payment of an amount claimed as a disbursement, and, FB paid those invoices; the practitioner also withdrew that amount from his trust account: that is, the records show that the practitioner both received money pursuant to the invoice levied and withdrew the equivalent amount from funds already in trust.
A comparison of the amounts paid from trust to the practitioner's general business account revealed that the amounts transferred from trust did not always correspond to the invoices produced by the practitioner: on more than one occasion the practitioner paid monies from trust in excess of the total amount invoiced.
In cross examination, the practitioner conceded that he paid an amount of $18,040 for counsel's fees from monies already held in trust and invoiced the client a further $18,040 for counsel's fees. There was no evidence that the practitioner took steps to investigate or correct this double counting.
Having examined and cross referenced the evidence before the tribunal, the tribunal is satisfied that the practitioner withdrew amounts totalling $12,746 from his trust account in excess of invoices produced. In breach of section 223 of the Act the practitioner failed to hold trust money exclusively for the person on whose behalf that money was received and failed to disburse trust money in accordance with the directions of his client. As a result of double payment and, especially as a result of failing to maintain proper accounts and therefore failing to correct the double payment, the practitioner, in breach of section 230 of the Act, caused deficiencies in his trust account and failed to properly account to FB for the amount of $12,746 .

[13]

SS gave evidence that on or about 6 January 2009 she lent the practitioner an amount of $6,000. On or about 28 April 2009, she telephoned the practitioner and asked him to repay the money. Later that day the practitioner drove his car to SS's place of work and telephoned her. She went outside to see him. The practitioner threw a cheque out of the window of the car. SS gave evidence that when she picked it up and looked at it; she noticed that it was a trust cheque.
The practitioner's trust account statement shows that a cheque in the amount of $3,500 was drawn on 28 April 2009. The tribunal received evidence of the cheque butt upon which the practitioner had written "S.. S.. as instructed by F.. B.. - $3500".
In his own evidence, the practitioner admitted that he drew a cheque in favour of SS in the amount of $3,500 from his trust account. He identified that the $3,500 was paid from money he held in trust on behalf of FB. His evidence was that he had written the cheque to SS on the instructions of FB. In his affidavit response to the original complaint he stated "on 28 April 2009 FB telephoned me and requested that I write a cheque for $5,000 to SS. She then changed her mind for 3,500 which I did".
The practitioner produced no written authority by FB to pay this amount from monies held in trust on her account. He produced in evidence a copy of what he said was a contemporaneous file note stating that FB telephoned him and asked him to write the cheque for SS.
Both SS and FB gave evidence to the contrary. Telephone records for the practitioner's and FB's office and mobile telephones do not show any call made by FB to the practitioner on 28 April 2009. The records of the practitioner's mobile phone show that he called SS three times on 28 April 2009. The evidence establishes that he wrote a cheque for $3,500 to SS, from FB's trust account monies. The evidence of both FB and SS is accepted by the tribunal. The tribunal is satisfied that the practitioner had no instructions or authority from FB to pay the amount of $3,500 from money held on her behalf to SS.
ACAT is not satisfied that the file note produced by the practitioner is a contemporaneous record of events. ACAT accepts the evidence of SS that the cheque was written to partly repay a loan made by her to the practitioner. ACAT accepts the evidence of FB that she had no conversation with him in relation to payment of any money by her to SS. She did not instruct the practitioner to make the payment, nor did she in any way authorise the payment.
This ground is established. The tribunal is satisfied that the practitioner breached section 223(1) of the Act because he failed to hold trust money in the trust account of his practice exclusively for the person (FB) on whose behalf that money was received. He breached section 230 of the Act by causing deficiencies in his trust account.

[15]

The evidence establishes that on 31 August 2009 the practitioner transferred an amount of $10,000 from trust account monies held on behalf of FB to his office account. This is conceded by the practitioner.
The practitioner alleges that FB attended his office and said that she urgently needed money. After some discussion it was agreed that he would transfer $10,000 from the trust account to his office account, withdraw that amount in cash and give it to her. He further alleges that on 2 September 2009, FB attended his office and took the $10,000 cash. The practitioner produced what were said to be contemporaneous file notes supporting his evidence. ACAT does not accept that the file notes were a contemporaneous record of events.
During cross examination, the practitioner agreed that he transferred $10,000 from FB's trust account monies to his office account and that he had no written authority or receipt from FB to support his assertion that she requested and received the money. He acknowledged that he had not made any entry on his trust account ledger in relation to the payment until 11 September 2009. He acknowledged that the entry in the trust account ledger misrepresented the facts because it stated that the payee of the cheque was FB, when in fact the payee was his office account.
FB gave evidence that she lent the practitioner $10,000 in March 2009 and that on or about 2 September 2009 he asked to borrow a further $10,000 from her. She refused to make the second requested loan. She said that she knew nothing of the $10,000 withdrawal from her trust account on around 2 September 2009 until it was drawn to her attention by Ms Jean Sayer who prepared a report for the applicant. In cross examination FB rejected the suggestion that she asked the practitioner for cash and that she had been handed $10,000 cash by the practitioner on or about 2 September 2009.
Records for FB's home phone and mobile phone show that she made no call to either of the practitioner's phone numbers on either 31 August or 2 September 2009.
Records for mortgage accounts, credit card accounts and savings accounts of the practitioner and his wife for the period March to August 2009 show that the practitioner was under extreme financial stress at the time the $10,000 was removed from FB's trust monies.
The evidence given by the practitioner in relation to this ground is unsatisfactory. At best, it reveals a cavalier and careless approach to his obligations in relation to trust accounts, a very poor understanding of his obligation to his clients, and no real understanding of the requirements to properly and truthfully account for moneys held on trust.
The evidence of the practitioner is not accepted by the tribunal: none of the independent evidence supports his version of events, his oral evidence was unconvincing and there is a reasonable basis for suspecting that his file notes were generated post complaint. The tribunal finds the practitioner's evidence in relation to this ground to be untruthful.
The tribunal is satisfied that the practitioner failed to hold trust money in the trust account of his practice exclusively for the person on whose behalf that money was received and failed to disburse that money in accordance with the direction of the client in breach of section 223 of the Act.
The tribunal is further satisfied that the practitioner caused deficiencies in his trust account and failed to account to his client, FB for the amount of $10,000 paid from trust without direction or authority in breach of section 230 of the Act.

[20]

The practitioner's evidence painted a picture of a legal practice conducted in a haphazard way: he had no support staff or secretary, all bills, correspondence and filing were attended to by him. He said that he was not proficient at typing and that he often did not mark correspondence as sent or received.
A comparison of the invoices produced by the practitioner and withdrawals from the trust account recorded as relating to the payment of fees owed, shows that the amount of the invoice and the withdrawal from the trust account matched on only one occasion. The tribunal identified five separate occasions between December 2007 and November 2008 on which the amount transferred by the practitioner from trust monies on account of legal fees owed exceeded the total of the invoices rendered. The tribunal also notes that the practitioner made payments from trust monies after his retainer ended and the practitioner offered no explanation for those payments. In general, the evidence indicates a pattern of conduct consistent with the practitioner withdrawing money as he needed it, rather than as he generated invoices for legal work performed.
ACAT has been unable to identify amounts totalling $47,278 as set out in Ground 4. The applicant said that the amounts withdrawn from the trust account by the practitioner for legal costs after 22 February 2008 for which no notice of withdrawal was given, nor a tax invoice rendered, was detailed on page 2 of Attachment 7 of a report in relation to FB. ACAT assumes this refers to a report by Miss Sayer. ACAT had before it in Mr Glanville's report, a reconstructed trust ledger for FB: this report has been used to identify payments totalling $33,215.
It is difficult to extract exact amounts from the evidence presented: the applicant's evidence is based on reports from Miss Sayer and Mr Glanville. Much of Mr Glanville's report is based on reconstructions. In addition, analysis of the records is complicated by the poor record-keeping of, and double payments made to, the practitioner.

[23]

In her original complaint FB said ...in March 2009 he asked me if he could borrow $10,000 off me. He wrote a cheque from trust for $15,000 [drawing on funds held in trust on behalf of FB] which I put into my account on 10 March 2009 and waited for it to clear and then withdrew $10,000 on 10 March and gave it to him in cash. He said he would have it paid back to me in 3 months. She repeated the allegation in her affidavit of 22 September 2011.
FB's daughter, C, gave similar evidence. Although C could not precisely identify the date of the transactions, she said that she had been with her mother when an amount of $10,000 was withdrawn from the bank and that she had seen her mother deliver the money to the practitioner. She said that her mother told her the money was for the practitioner and that it would be paid back.
Both FB and her daughter were cross-examined. Each was unshaken as to the key fact that on or about 19 March 2009, FB withdrew $10,000.00 in cash and handed it to the Practitioner. C showed some confusion about the timing of the transaction, however was clear in her evidence that her mother had lent $10,000 to the practitioner.
The practitioner denies the loan, without any explanation. He did not deny the payment of the cheque of $15,000.00, but gave an explanation about it which related to FB "having trouble" with C. This was not established by any evidence.
An examination of the records of the mortgage accounts, credit card and savings accounts of the practitioner and his wife reveal that the practitioner was under extreme financial stress in March 2009.
SS, also a client of the practitioner, gave evidence that the practitioner borrowed money from her which he had failed to repay in full.
Taking into account the above evidence and particularly noting: the corresponding accounts given by FB and her daughter, and the practitioner's financial circumstances, the tribunal is comfortably satisfied that the practitioner did borrow $10,000 from his client FB on or about 10 March 2009 in breach of rule 10.1 of the Rules.

[34]

BB gave evidence that she paid an amount of $26,000 into the practitioner's trust account on 1 July 2008. BB intended that the money should be used for the payment of $20,000 to Counsel for fees and was specifically for "the trial" involving her brother. She was definite in this belief and not shaken from it in cross examination. Both her brothers corroborated that the money was paid to the practitioner for Counsel's fees. Mr Purnell SC deposed to a meeting that he had with BB at which she repeated her understanding that she had paid $20,000 to the practitioner for Counsel's fees.
The reconstructed trust ledger and the reports prepared by Mr Glanville show that the whole of the $26,000 was used for purposes other than the trial. The reconstructed trust ledger shows that most of the $26,000 was drawn for the practitioner's legal fees alone. The practitioner submitted that BB had misunderstood the significance of the money being paid into trust. The tribunal does not accept his submission.
On the evidence before it the tribunal is comfortably satisfied that BB paid more than $80,000 to the practitioner. Of that amount, $26,000 was specifically paid into his trust account for fees relating to her brother's trial - that is $20,000 for Counsel's fees and $6000 for the practitioner's fees. The practitioner withdrew the amount from trust without rendering appropriate invoices and without obtaining the proper authority from BB.
The tribunal is satisfied that the practitioner breached section 223 of the Act by failing to hold money deposited in his trust account exclusively for the person on whose behalf it was received and by disbursing that money in breach of the direction given by the client and without authority for the manner in which it was disbursed.
The applicant also alleges under this ground that the practitioner withdrew amounts totalling $16,880 from trust on account of invoices rendered, when in truth such withdrawals were not supported by the invoices because BB had already made cash payments to the practitioner in satisfaction of the invoices. The practitioner has withdrawn amounts of $1000 from trust on 5 July 2008 purportedly on account of GST owed to Mr Purnell SC when in truth BB had already satisfied that liability by a cash payment made to the practitioner in December 2007.
The evidence before the tribunal was that the practitioner made constant requests to BB for cash payments, that cash payments were made to him by BB, that the practitioner did not issue receipts for the cash payments and that the practitioner withdrew amounts from trust that were not referred to in corresponding invoices. Once again, the evidence of the practitioner in relation to these allegations is contradictory and reveals a failure by the practitioner to keep proper accounts, or to meet his obligations in relation to the trust money of his clients.
The tribunal accepts BB's evidence that she made cash payments to the practitioner. Her evidence is corroborated by bank statements, diary records and her brothers' evidence. The practitioner deposed that he had provided all records relating to BB accounts, yet he produced no receipts for the payments made either in cash or from his trust account. Further, the practitioner did not provide any appropriate authority for the withdrawals he made from the trust monies held for BB's matters. The practitioner has not accounted to BB for moneys paid into trust, withdrawn from trust or remaining in trust when his retainer came to an end.
On the evidence before it the tribunal is satisfied that the practitioner breached section 223 of the Act by failing to hold money deposited into his trust account exclusively for the person on whose behalf it was received and by failing to disburse that money according to the direction given by the client.

[42]

On or about 27 March 2007, SS and her ex-husband (J) instructed the practitioner to act for J in an appeal. The practitioner briefed Dr Doug Hassall of Counsel to appear in the appeal.
SS says that from around 9 April 2007 until 25 June 2008, she paid the practitioner $1000 a week in cash. In addition, at around 27 March 2007, the practitioner required SS to pay him $6000 in cash so that he could obtain an opinion from Dr Hassall, a copy of the transcript of a Court decision and cover other disbursements including photocopying. On and from 9 July 2008, SS paid the practitioner the lesser sum of $500 a week until December 2008. By that time SS had made cash payments to the practitioner in the order of $75,000.
It is alleged that the practitioner failed to deposit the sums received from SS (with the apparent exception of $1000 on 5 October 2008) into his trust account or to account to her for the funds; the practitioner failed to issue receipts for the payments and or to issue any invoices to SS in relation to the work undertaken for her.
SS deposed in her affidavit and said when giving oral evidence, that she paid weekly cash payments of one thousand dollars to the practitioner for over twelve months. This was based on an estimate by the practitioner that SS's matter would cost in excess of $50,000. SS gave evidence that she worked two jobs and borrowed money from her daughter and her father to fund the payments.
SS adhered to her evidence in cross-examination and was not shaken. She conceded that she had not properly or completely disclosed her income in a financial statement prepared for court proceedings. She stated, and the tribunal accepts, that the practitioner assisted her with the completion of her financial statement, and encouraged her to not disclose the fact that she was paying him $1000 a week in cash.
SS gave evidence that she maintained handwritten records of the dates and the amounts paid to the practitioner on small pieces of paper. SS provided the tribunal with the originals of handwritten documents in which she recorded the weekly payments made to the practitioner. SS's schedule of the cash payments made by her to the practitioner from April 2007 to December 2008 total approximately $56,000, reflecting an average weekly payment of $650. The tribunal had the following documents:

[60]

The Act gives the tribunal power to make orders for the discipline of legal practitioners where the tribunal is satisfied that a practitioner is guilty of either unsatisfactory professional conduct or professional misconduct. Those terms are defined in sections 386 and 387 respectively of the Act. The definitions are inclusive definitions. They elucidate or add to the relevant common law rather than replace it.
Professional misconduct is defined in section 387 as including unsatisfactory professional conduct that involves a substantial or consistent failure to reach or to maintain a reasonable standard of competence and diligence. It also includes conduct that justifies a finding that the practitioner is not a fit and proper person to engage in legal practice. Section 389 of the Act contains a list of conduct that is capable of being unsatisfactory professional conduct or professional misconduct: paragraph (a) provides that conduct consisting of a contravention of the Act can be professional misconduct.
The common law definition of professional misconduct is drawn from a test formulated in the English medical profession case of Allinson v. General Council of Medical Education and Registration [1894] 1 QB 750 at 763.5-7_._ In summary, the test provides that a professional engages in professional misconduct if his, or her, behaviour would reasonably be regarded as disgraceful or dishonourable by professional colleagues who are of good repute and competency. The test has been recognized as applying to Australian legal practitioners in a long line of authorities.[2]
In Council of the Law Society of New South Wales v Fitzsimons [2012] NSWADT 242 (23 November 2012), the tribunal, at paragraph 70, noted there are no fixed categories of professional misconduct. Much depends on whether the conduct falls outside "generally accepted standard[s] of common decency and common fairness." Previous examples of professional misconduct have included wilfully misleading the court (New South Wales Bar Association v Livesey [1982] 2 NSWLR 231); removing documents in contravention of a court order (Howes v Law Society of the ACT (Supreme Court of ACT, Gallop ACJ, Higgins and Crispin JJ, 23 July 1998, Unreported); permitting conflicts of interest to arise (Law Society of NSW v Moulton [1981] 2 NSWLR 736); failing to account for money received ( Re Walker; Ex pane Kemp [1887] NSWLawRp 44; (1887) 3 WN (NSW) 123); misleading a client (Hoshott v Council of the Law Society of NSW (Supreme Court of NSW, Meagher, Sheller and Stein JJA, 17 December 1997, Unreported); gross neglect and delay (Legal Practitioners Conduct Board v Hay [2001] SASC 322; (2001) 83 SASR 454); failing to adequately supervise an unqualified clerk (Law Society of NSW v Foreman (1991) 24 NSWLR 238); breaching an undertaking given to another lawyer (Wade v Ll.Gardy (1993) 33 NSWLR 1); and, in certain situations, criminal and/or personal misconduct (Ziems v Prothonotary of the Supreme Court of NSW[1957] HCA 46; [1957] HCA 46; (1957) 97 CLR 279).
'Disgraceful' or 'dishonourable' behaviour requires more than mere negligence, however, behaviour that is grossly negligent or reckless may constitute misconduct. [3]

[62]

The Act gives the tribunal a broad discretion to make disciplinary orders according to the designation and seriousness of the conduct that is established by the evidence. The tribunal is not able to inform itself about the relevant evidence as it thinks fit. Section 420 of the Act provides that the rules of evidence apply to disciplinary actions against legal practitioners.
The applicant bears the onus of proof on the balance of probabilities. A line of authorities establish that the standard of proof as described in Briginshaw v Briginshaw is appropriate for disciplinary proceedings because of the potential serious consequences for a practitioner who is found guilty of misconduct.
The tribunal taking into account the definition of professional misconduct as set out in section 387 of the Act, and at common law, finds the practitioner guilty of professional misconduct.
The tribunal concludes that the conduct of the practitioner in failing to keep proper trust account records, that the conduct of the practitioner in paying money from his trust account to himself without the proper and appropriate written authority was a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence.
The tribunal further finds that the practitioner's conduct in demanding and receiving cash payments, failing to issue receipts for those cash payments, failing to deposit those payments into trust, failing to produce appropriate and proper invoices, paying amounts to himself from trust in excess of invoices rendered is conduct that would reasonably be regarded as disgraceful or dishonourable by professional colleagues who are of good repute and competency.
The tribunal also finds that the practitioner's approach to the original complaints and his conduct during the hearing would justify a finding that the practitioner is not a fit and proper person to engage in legal practice. ACAT notes that this is the second occasion on which the applicant has prosecuted the practitioner.
The tribunal finds that the conduct of taking amounts of money from the trust account of clients and paying it to himself, which amounts to theft from clients; the practitioner's clear lack of understanding of his obligations in relation to trust accounting; his lack of credit and his cavalier attitude towards the conduct of the proceedings, results in the practitioner not being a fit and proper person to engage in legal practice and ought to be taken into account in relation to any future application to the legal profession for the granting of a practising certificate.
The tribunal makes no finding on the question of whether the practitioner has failed to properly declare his income to the Australian Taxation Office. The applicant may wish to refer the forensic accounting evidence to the appropriate authorities.
The applicant may also wish to refer the question of money taken from trust without authority and paid to the practitioner to the relevant police authorities.

[66]

an order that - 1. stated conditions be imposed on the practitioner's practising certificate granted or to be granted under this Act; and 2. the conditions be imposed for a stated period; and 3. states the time (if any) after which the practitioner may apply to the ACAT for the conditions to be amended or removed; 2. an order publicly reprimanding the practitioner or, if there are special circumstances, privately reprimanding the practitioner.
A reading of the whole of the Act indicates that its purpose is, broadly speaking, to control and regulate in the public interest the exercise of the privileges and the undertaking of the responsibilities attached to the carrying out within the ACT of the professional practice of a barrister and solicitor[5].
A number of common themes underlie the complaints brought by each of the complainants in these proceedings, and these are relevant to the sanction to be imposed because common themes go to the serious, substantial and consistent failure by the legal practitioner to conduct his practice in a manner consistent with appropriate diligence and competence. Each of the complainants was in a position of financial vulnerability; each gave evidence of having to incur debt and obtain loans from banks and family or friends to meet the financial commitment of the payment of the practitioner's legal fees over a period of years. Each complainant gave evidence that the practitioner required regular and large cash payments to be made to him, often otherwise than pursuant to invoices; and each of the complainants gave evidence that the practitioner did not issue receipts for most of the cash payments received. Each of the complainants gave evidence that they had received very few if any invoices from the practitioner; and SS gave evidence that she had never received a receipt or an invoice from the practitioner.
The forensic accounting evidence showed a haphazard and irregular approach to general office accounting and trust accounting. In his own evidence the practitioner admitted to having double counted an amount of $18,400 to be paid for counsel fees, but provided no explanation of any attempt to correct the accounts.
The conduct of the practitioner evidences a deliberate plan to collect cash from his clients in order to avoid payment of tax on the true income received. The conduct of the practitioner also evidences instances of large amounts of cash with no identified source being deposited into his personal and family accounts.
The legal practitioner has, in breach of the Rules, borrowed money from his clients and failed to repay the amounts borrowed.
The practitioner denied in his affidavits and in sworn oral evidence any romantic affair with his client SS. The transcript of the text messages sent by the practitioner to SS was admitted into evidence without qualification or objection following the inspection of SS's phone by the practitioner's legal representatives. The transcript is incontrovertible evidence of a romantic affair between the practitioner and SS.
In relation to the complaint made by FB, the practitioner produced in his affidavit of 10 August 2011, handwritten notes by him which he described as file notes on which he relied to substantiate his assertion that if FB had authorised payments of $3500 and $10,000 from her trust monies. The file notes are not supported by the ancillary evidence such as phone records. The practitioner did not produce these file notes in response to the original complaints, nor did he advert to them in his responses. If they were contemporaneous file notes and therefore existed at the time of the original complaints, the practitioner has failed in his duty of full and frank disclosure to the applicant. On this issue the practitioner gave oral evidence which contradicted his affidavit.
In general, the practitioner conducted his practice in an unsatisfactory manner, which would reasonably be regarded as disgraceful or dishonourable by professional colleagues who are of good repute and competency.
This is the second occasion on which the practitioner has faced the tribunal in relation to his professional conduct. On 7 September 2009 the practitioner was found guilty of professional misconduct by this tribunal and as a consequence received a public reprimand and had his unrestricted practising certificate suspended for a period of twelve months.
In determining what sanction, if any, is to be imposed upon the practitioner the tribunal must consider the seriousness of the conduct, the need to protect the public from such conduct, and, whether the conduct of the practitioner would tend to bring the legal profession into disrepute.
Conduct of such a nature tends to bring the legal profession into disrepute in a general sense. That is a bad thing for which the appellant must bear appropriate blame.[6] The public interest requires the prevention of such conduct. Therefore it is appropriate for the tribunal to recommend that the practitioner's name be removed from the local roll.

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COUNCIL OF THE LAW SOCIETY OF THE ACT v LEGAL PRACTITIONER E (Mamdouh Elmaraazey) (Occupational Discipline) [2013] ACAT 7 (30 January 2013)