DPP v Serong [2001] VSC 213

Supreme Court of Victoria|2001-06-29|Before: Eames J

SENTENCE - solicitor - theft - deficiency of money in Trust Account - obtaining money by deception - Legal Profession Practice Act 1958 s. 42 - Crimes Act 1958 ss. 74(1), 81(1)(2)(3)(4a).

The counts of theft arise under s. 74 of the Crimes Act and each carry a maximum sentence of 10 years' imprisonment. The counts of defalcation arise under s. 42 of the Legal Profession Practice Act 1958 and carry a maximum sentence of seven years' imprisonment, and the counts of obtaining property by deception arise under s. 81 of the Crimes Act and carry a maximum sentence of 10 years' imprisonment.

The offences involve four separate activities of dishonesty over a period between April 1991 and May 1994 at a time when you were practising as a solicitor in a sole practice in Clifton Hill and Carlton North.

Before turning to the issues raised in submissions on sentence, the circumstances of the offences need to be briefly set out.

5 Count 1 is an offence of theft relating to a sum of $38,000 given to you by Fr Kenneth Sinclair to invest on behalf of his aged mother for her care and needs. Fr Sinclair had a power of attorney over his mother's affairs and arranged for her solicitors to forward $38,000 to you to invest in his name on her behalf. You told him that the funds would be invested on first mortgage and would be fully secured, and you wrote to the solicitors advising that the funds had been invested in a property valued at over $200,000. At the time when you received the funds you were under the threat of legal proceedings being commenced against you to enforce a guarantee you had with the ANZ bank. On 22 April 1991, the day before the funds were received, you offered to pay your debt to the bank by instalments, and three days after receiving the funds in your trust account you withdrew $38,000 from the account by trust cheque and obtained a bank cheque payable to the solicitors for the ANZ bank in part payment of your debt. You recorded on the trust account cheque stub that it was a payment being made to the solicitors as investment funds for Fr Sinclair.

From time to time you made payments to Fr Sinclair, purportedly as instalments of interest from the invested funds. You gave repeated written assurances that the funds were invested in property but when Fr Sinclair's mother died in October 1995 and asked for the return of the funds for payment into the estate your theft was soon discovered.

Fr Sinclair was a personal friend who had known you for 30 years both through football and by other associations. He signed no investment authorities but trusted you implicitly both as a solicitor and as a friend.

8 Count 2 relates to the deficiency in your trust account created by the transfer of the $38,000.

9 Count 3 is a count of theft. You were executor and trustee of the estate of Eve Elizabeth Pemberton, who died on 19 November 1992. There were two beneficiaries under the will. Probate was granted on 23 December 1992 but on 20 November 1992 from the funds then held for the estate you drew a cheque payable to solicitors Rigby Cooke for $5644. No record of that withdrawal of funds appeared in the accounts of the estate. Upon the winding up of the estate you purported to charge an unauthorised commission in an attempt to disguise the fact that funds to the sum of $5644 had been stolen.

When interviewed by police you were extremely vague as to the purpose for the application of the funds in this way. You suggested that it might have been that you were paying a judgement sum due to the solicitors by another client, but you could not name the client and I have no other information as to the purpose of the payment. By your plea you admit that you stole these funds.

11 Count 4 relates to the deficiency in your trust account of $5644 which arose on 20 November 1992.

12 Counts 5 and 6 are two counts of obtaining property by deception, involving the sums of $66,000 and $10,000, those sums being the value of two cheques from Ian McDonald made payable to J.W. Coleman as to $66,000 and to W.M. Serong Mortgage Loan Account as to $10,000. The cheques were dated 6 August 1993.

These sums were received by you to invest following the sale and division of proceeds of your client's former matrimonial home. Mr McDonald was a former football writer who had been a close friend since 1958 and for whom you had acted as solicitor on many occasions. He trusted you implicitly. You advised that you had a reliable borrower, a builder or a building investor, and if the funds were invested through that source it would pay better interest than a bank. Mr McDonald thought he was investing in a mortgage loan. In fact, the funds were used by you, first, as to $66,000, to repay a loan which had been provided twelve months earlier to you by a bookmaker client, and friend, who had called for repayment. There is no suggestion that you were using the funds for gambling purposes, however. The remaining $10,000 was paid into a personal bank account of your own, and the funds applied otherwise to your own benefit.

14 Counts 7, 8 and 9 are three counts of theft of cheques each to the value of $9,857. The victims in these instances were three elderly siblings, two sisters and a brother, who lived together in Clifton Hill and who were to benefit equally from the proceeds of a superannuation fund in the name of their late brother, Francis Fry, deceased. You visited the two sisters at their home and persuaded them to invest their funds with you, and you endorsed the three cheques which had been paid to them by the fund so that the cheques were to be paid into your personal account; you then had both of them sign the cheques so endorsed, and at a later time had the brother also endorse his cheque. It is plain, however, as you knew, that they all thought the funds were being placed in your trust account for investment, not into your private account. You told one of the beneficiaries that the funds would be invested in your trust account and would pay approximately 7% interest. You paid the cheques into your personal account on 13 May and 16 May 1994. When interviewed by police you could not recall how you applied those funds which you had stolen.

The total sum stolen by you in the four instances of theft was $149,216. Only one of the victims recovered any money directly rather than through the Solicitors Guarantee Fund. Mr McDonald recovered his $76,000 although the funds with which he was repaid were not your own, but were, in part, funds borrowed by you from yet another friend, who also thought that he was investing funds with you, rather than providing money to meet a personal debt of yours. The funds obtained from that person, Mr Neil Roberts, are not the subject of any charge, he not having sought to press charges against you. I have no regard to his situation for the purposes of sentencing. The prosecutor told me, and your counsel did not challenge this contention, that some additional funds which were applied towards payment of Mr McDonald came from the Pemberton estate account, the beneficiaries of that estate having accepted your advice that funds should be retained in the account for 12 months and not distributed, as a contingency against any claims being made against the estate. No charge relates to the application of those funds for the purpose of payment of Mr McDonald, and although the prosecutor submitted that the circumstances in which you gained the use of those funds was a relevant and aggravating factor because the beneficiaries had not been properly advised by you, I do not consider it appropriate to regard it as a matter which aggravates the gravity of your offences.

Having pleaded guilty to serious offences of dishonesty in the conduct of your practice as a solicitor I must now consider what sentences are appropriate for those offences.

Mr Rush, who appeared on your behalf, conceded that the offences were serious but submitted that there were circumstances of mitigation of such weight, and factors personal to your situation of such significance, that I should either not impose a custodial sentence, at all, or else should wholly suspend any sentence of imprisonment which I might impose.

You are now aged 65 years. Your counsel described you as having had a career as a knockabout solicitor, and you always practised as a sole practitioner where your practice depended on you own endeavours, and your talents were most commonly employed in the day to day battle of the magistrates courts. It is not surprising that so many of those who have come forward to give character references for you are those who practised in and presided over magistrates courts. But the law was not your first choice of career.

After completing your intermediate as a 14 year old boy you worked for a year then returned to school and completed your Leaving certificate. Your first choice of career was teaching, and after a two year course in primary teaching you were posted to Terang for 12 months in 1955. As was the case throughout your life you displayed both exemplary work habits and also an exceptional sporting talent. Having been coach and captain of the Terang team as well as a local teacher you returned to Melbourne where for 6 years you were a star player with the Collingwood Football Club, playing in a premiership team in 1958 and being runner up in the Brownlow medal count in 1959. You then transferred to North Melbourne Club where you won the best and fairest award. Apart from football you had been a champion handball player from school days and then carried your talent into senior competition, being the Victorian and Australian champion many times.

After spending more time teaching you commenced a law course after matriculating in 1957. You then combined your studies with football. In 1961 both of your parents died and you assumed responsibility for the care and support of your aged grandmother, and for your 11 year old brother and 16 year old sister. Out of your earnings from football and part time jobs you paid the education expenses of your brother. You completed your law degree in 1962 and commenced articles in Echuca, where your football career was stopped by a serious injury.

You married in 1965 and commenced practice in Clifton Hill. You had 11 children. You were and remain a loving, and loved, father and all of those who have spoken and written about you have emphasised your remarkable dedication and love for your children. One of your sons was born with severe mental and physical disabilities, and was treated with great care by you. He died last year at age 31. One daughter has Down Syndrome and one other son in recent years was extremely ill with cancer. Your large family has brought great joy but also many pressures to your life. You have the support of your family at this dreadful time.

Raising such a large family placed considerable financial strains on what was a successful but small practice.

You held a full practising certificate from 8 June 1964 to 31 December 1995. You practised as a sole practitioner first at Clifton Hill, then in North Carlton and finally in West Melbourne. On 1 March 1996 a receiver was appointed and your practice closed. You were made bankrupt on 15 November 1996. In March 1996 you were disqualified from practice on your own account for five years by the Solicitors Disciplinary Tribunal, but the tribunal granted a right for you to apply to practice as an employee solicitor after six months, subject to conditions. You have not, however, sought to exercise that right to apply to recommence practice.

As I will later discuss, until these events of dishonesty commenced in 1991 you had enjoyed a very fine reputation within the legal and broader community. Given that background many of your friends who have given evidence or provided character references on your behalf have expressed shock and amazement that you could find yourself pleading guilty to such offences. One looks then for an explanation as to how this calamity could have occurred.

So far as I can tell, the seeds of your disaster were sown with an ambitious but utterly foolish business scheme in which you became enmeshed in about 1988. You entered into a project with some clients to develop first one, and then two bingo centres. When you first were attracted to the project only one centre was proposed. The estimated cost of setting up the centre was $120,000 but the cost escalated until it cost four times that sum. Foolishly, and obviously in anticipation of great profits, you decided that if a second centre was also established then the additional profits would mean that the start up costs would be more quickly met. Although the centres commenced operation they ultimately failed in 1991, when they were placed in receivership. You were not yourself putting up any funds but you had signed guarantees for bank loans of $350,000. You put up your home as collateral and when the businesses failed not only were you hit by the demand for repayment of principal but also a huge interest bill had accumulated. You had no secured interest in the company and gained nothing from its winding up. As a result of this venture you lost, over time, your family home in North Balwyn, a Queensland holiday property and two vacant blocks of land. You had, therefore, lost all of your property, and suffered the dislocation of your family as a result, and still your debts remained huge.

Coinciding with these financial pressures you also suffered serious health problems. Dr Rene Dupuche, a consultant physician, gave evidence on your behalf and a report was tendered from him. Both the report and the evidence were somewhat vague as to dates. He performed a successful hip replacement operation in 1990. You first consulted him in 1987, but Dr Dupuche did not say what that first consultation was about. He did say, however, that when you consulted him in 1990 you had already experienced some cardiac problems.

In December 1990 you suffered a pulmonary embolism, a potentially fatal condition, as you well recognised when you were rushed to hospital. In May 1992 a heart by pass operation was performed, which was not as successful as it should have been and as was anticipated. Dr Dupuche, however, said that you now have few if any symptoms from your coronary disease, due, no doubt, to your maintenance of an exercise regime and strict diet. You are also on anti coagulate, cholesterol lowering and anti angina medication.

In addition to those medical conditions, you also suffer from asthma and from severe osteoarthritis in both ankles, which severely restricts you, and which led to surgery in October 1991. You recently successfully had a melanoma removed, and you are presently suffering anxiety, depression and stress. You also have a reaction to blood products and to the anti coagulant heparin, which would add to the risks of any future surgery. Although there was very little income derived by you from football in the years when you were a very successful player, many of your arthritic injuries are the result of your sporting background.

I have no doubt that your health and financial worries must have caused you great stress and would have been significant factors in your decision, when first taken, to act dishonestly with your clients' funds. Your health problems also exacerbated your financial predicament because yours was effectively a one man practice which depended on your presence for the generation of income, and when you were hospitalised your financial situation became even more desperate.

In addition to those factors a range of other matters were identified by your counsel in mitigation of penalty.

Very impressive character evidence was called on your behalf. I heard oral evidence from one serving and one former Judge of the County Court, from a former Chief Magistrate and from a friend who worked with you in the establishment of an early intervention centre for Down syndrome children. They spoke of you in the highest terms as a person whose reputation was unblemished prior to these offences. In addition, a folder was tendered containing 38 written character references. The signatories were a remarkable cross section of people who know you by way of professional, sporting, community and family associations. They included friends who had known you for up to 60 years.

As your counsel noted, and your character references confirm, throughout your life you have made many sacrifices for others and have given freely of your time in voluntary community activities, including the Down Syndrome Society, the Right to Life Association, the Celtic Club, and the establishment of the eastern suburbs early intervention centre for Down syndrome children. Magistrates and others have attested to the fact that you frequently performed pro bono work when requested to act for persons who could not afford legal representation, and many other instances of personal generosity have been mentioned by family and friends.

The Prosecutor, on behalf of the Director of Public Prosecution, properly concedes that among other matters which weigh in favour of leniency in sentencing are your age, the fact that you practised for 31 years without a conviction or impropriety in your practice, your prior exemplary character and reputation, and your community service. In addition there is the important fact that you have pleaded guilty to these offences, and the fact that there has been considerable delay in this matter coming before the Court.

Three records of interview conducted with you by officers from the Fraud Squad, were tendered before me. The first took place on 8 July 1997, the second on 4 May 1998, and the last on 11 February 2000. The committal proceedings at which you pleaded guilty took place on 10 April 2001. The only explanation the prosecutor could offer for the inordinate delay was that the police officer who was the original informant left the police force and there was then a delay in the allocation of a replacement to that task. That is an inadequate explanation. There may be others, as I will later discuss, but I will take into account the fact that while suffering stress and poor health, you have had this matter hanging over your head for a very long time.

Your pleas of guilty are in themselves a demonstration of remorse, but there is additional evidence of the extent to which you have felt remorse for these offences.

Witnesses and statements described how you have cut yourself off from your life long friends, such is your sense of shame about the offences. It is not difficult to imagine how deep your own sense of shame must be when you can contrast these days with earlier years of respect and acclaim which accompanied your professional and sporting career. In a report tendered before me by psychologist Mr Ian Joblin, he details your depth of despair, and anxiety that you have let down friends and family. He considers that you are suffering depression.

The prosecutor submitted that you should also gain the benefit of having co-operated with the police investigation. I queried that concession, and the prosecutor then qualified the concession, stating that the Crown did not concede that you fully accepted the true position when you were interviewed. In my view, your first interview conducted on 8 July 1997, whilst very lengthy, and containing some admissions of relevant facts, could not be regarded as constituting a full and frank confession on your part. When you were asked about the $38,000 provided to you by Fr Sinclair you contended that it was a personal loan to you and was not required to have been invested on first mortgage. In support of that contention and in explanation why payments of interest were made in cash you hinted that Fr Sinclair might have been applying funds to his own use rather than for the benefit of his mother and that he may have wanted to avoid taxation liability. The investigating officers confronted you with the fact that upon receipt of the funds you had written to the solicitors for Fr Sinclair's mother advising, falsely, that you had invested the money in first mortgage in a property worth $210,000. Furthermore, you repeatedly gave written advice to Fr Sinclair which falsely suggested that the funds had been invested. When he sought the return of the funds after his mother's death you pretended that the borrower was overseas. It was not until question 448 that you admitted that you had applied the funds to your own benefit. By your plea you admitted that you stole these funds, and when I queried why you had hinted at impropriety on your client's behalf no explanation was offered. The approach you adopted in that interview with respect to that matter seems to me to be one which brings little credit to you. When interviewed about the McDonald matter you again claimed that it had been a personal loan, and was not intended by McDonald that it be invested in property. Your plea of guilty admits the falsity of that assertion.

The last matter raised by the police in the first interview related to the estate of Eve Pemberton when they queried your entitlement to claim a commission from the estate. That matter has not led to a charge. It was not known to the police at that time that you had paid a sum to solicitors Rigby Cooke which you now admit was stolen from the trust account. It was that matter which was the subject of the third interview, conducted with you 11 February 2000. On that occasion you said you could not remember who the client was for whom you may have paid that sum to Rigby Cooke.

It is apparent from Q 9 of the interview of 4 May 1998 that police also interviewed you on 20 October 1997, but that interview is not contained in the papers filed before me. In the interview on 4 May 1998, which is the second interview tendered before me, the police questioned you about the proceeds of the 3 IOOF cheques, which now form the counts 7, 8 and 9. You said that the events surrounding these dealings were a part of what you called "the big black hole that was my life and practice at the time" and you said that things had become very desperate at that time. You said that it was always your hope that you could make good the funds you had taken, if things turned out for the better, but the black hole created by the bingo venture kept getting bigger. You were holding out the forlorn hope, you said, that you might recover something out of the liquidation of the bingo company.

It seems to me to be likely that the fact that some of these matters were not ascertained immediately by the police, and were not volunteered by you, may be part of the explanation for the apparent delays in this matter coming to trial.

In summary, I give you credit for your participation in the three interviews, but that is not as significant a factor weighing in your favour as full and frank admissions, from the outset, would have been.

The prosecutor pointed to a number of factors which it was contended were aggravating factors in your case.

First there is the amount of money involved, nearly $150,000. None of the victims is out of pocket because as to three of the matters the Solicitors Guarantee Fund was called upon to make up the losses. As to the fourth, the McDonald matter, he was repaid by funds which you borrowed from Mr Roberts. I was told that funds in excess of $25,000 had been raised by friends to provide for the needs of you family. I make no criticism of the allocation of those funds; I have no doubt that your family was in need, but it must be said that you have not personally made any contribution towards the losses which these charges represent. Your own financial situation is undoubtedly parlous, although I was not given precise details. Having lost all your assets you now live in public housing with your wife and five of your children including the second youngest daughter who has Down Syndrome.

The second matter of aggravation is the fact that these were four separate occasions of deliberate acts of dishonesty instigated over a three year period, and continuing for years afterwards, with various means of subterfuge being maintained until your bankruptcy brought matters to a head.

Thirdly, the funds were obtained from friends or from persons to whom you had been recommended by friends. In some instances they were the funds of elderly people, and in one instance you attended at their home where you gave assurances that their funds would be safely invested.

There are many factors which I have discussed which would justify a lenient approach being adopted in sentencing you. I do not consider that factors of personal deterrence are relevant, because I do not consider that there is any risk that you will again commit any offence. At the same time, breaches of trust by solicitors involving substantial sums of money are matters which the appellate courts have repeatedly said prima facie justify a sentence of imprisonment, notwithstanding the fact, which is common in all such instances, that the offender has no prior convictions and invariably has an exemplary previous reputation: see the unreported decisions of the Court of Criminal Appeal in The Queen v Moffat, 4 December 1992; The Queen v Gough, 11 June 1993; The Queen v Bieske, 18 March 1994. In all of those cases their Honours accepted that special considerations might apply to mitigate that result. The question is whether this is such a case.

The pressures which led you to embark on a course of dishonest conduct were undoubtedly great. They arose from a disastrous commercial venture and your financial future, and that of your family, must have looked very bleak. Sadly, as must now be evident, had you then called on the substantial reservoir of support which was available to you from friends, a painful but honourable solution may have been found. The dilemma in which you found yourself was a very human one, and is one which might confront many legal practitioners. The option you took for its solution was disastrous, and having once taken the step into dishonesty you did not then stop and face up to your error, but repeated the mistake three more times, in some instances your later victims being elderly and vulnerable people, and in all instances being persons who trusted you. The fact that the Guarantee fund can avoid those clients suffering losses in my view does nothing to ameliorate your own conduct.

In my opinion, notwithstanding the powerful mitigating and personal factors which I have discussed, considerations of general deterrence are paramount here. The devastation of the loss of practice and of the good repute among friends and professional colleagues is a profound punishment, but in my view solicitors who abuse the trust of the clients not once but on repeated occasions must understand clearly that the most likely outcome of the repetition of such conduct is imprisonment. The message must be clearly given to solicitors that if they have once foolishly succumbed to financial pressure and have committed theft against a client, they must stop there, report the situation, and not, as happened here, continue to rob Peter to pay Paul in the desperate hope that a miracle might later save them. The repetition of the offences will also be reflected in the cumulation of two of the sentences which I will impose.

Having said that general deterrence is the paramount factor in your case, the personal and other mitigating factors are of such weight that I will substantially reduce the sentence which I would otherwise have imposed had they been absent or of lesser substance. I will also reduce the period of immediate imprisonment to the lowest which I consider to be consistent with the gravity of the offences, having regard to all of the circumstances. Notwithstanding the hardship which the sentence will impose on yourself, and your family, I do not consider it appropriate that the sentence be wholly suspended.

William Michael Serong, On Count 1, of theft, you will be sentenced to 9 months imprisonment.

On count 2, for a deficiency in your trust account, you will be sentenced to 6 months imprisonment.

On count 3, of theft, you will be sentenced to 6 months imprisonment.

On count 4, for a deficiency in your trust account, you will be sentenced to 4 months imprisonment.

On count 5, of obtaining property by deception, you will be sentenced to 12 months imprisonment.

On count 6, of obtaining property by deception, you will be sentenced to 6 months imprisonment.

On each of counts 7, 8 and 9, of theft, you will be sentenced to 9 months imprisonment.

I order that six months of count 9 be served cumulatively with the sentence on count 1.

The total effective sentence, therefore, is 15 months imprisonment.

I order that 12 months of that sentence be suspended for a period of 24 months. That leaves an immediate sentence of imprisonment of 3 months to be served.

I am required by the Sentencing Act to explain to you that if you commit another offence punishable by imprisonment during the operational period of the sentence you may be liable to actual imprisonment for the whole or part of the sentence imposed, but suspended.

Profession Practice Act 1958

At a glance

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Judgment (62 paragraphs)

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