BETWEEN : LEGAL PRACTITIONERS COMPLAINTS COMMITTEE

Practitioners - Tribunal finding unsatisfactory conduct - Withdrawals from testamentary fund - Withdrawals repaid - Benefit to fund - Complete records kept - Lack of dishonesty - Unusual circumstances - Practice under supervision since Tribunal findings

Legal Practice Act 2003 (WA), s 185, s 194

Continuation of supervision two years from date of Tribunal's order

1 JUDGMENT OF THE COURT: On 29 August 2007, the full bench heard an application by the Legal Practitioners Complaints Committee (the Committee) for an order that the name of the respondent, Patricia May Verschuer Edward (the practitioner), be struck off the roll of practitioners of this court: alternatively, that the practitioner be suspended from practice for a period of five years (or such further or other period as the court thought fit) and that the practitioner pay a fine of $10,000, and costs.

2 The application was made by notice of originating motion, following a reference to the court by the State Administrative Tribunal pursuant to s 185(2) of the Legal Practice Act 2003 (WA). As will be seen, the Tribunal was constituted by the members of the Legal Practitioners Disciplinary Tribunal which was seized of the matter before its jurisdiction was subsumed in that of the State Administrative Tribunal. For that reason, it will be convenient to refer to the tribunal members sitting in both capacities as 'the Tribunal'.

3 The Tribunal's decision is Legal Practitioners Complaints Committee and Edward [2006] WASAT 113.

4 At the conclusion of the hearing before the full bench, the court announced that it had decided not to make any order on the application, other than to continue an order made by the Tribunal for the supervision of the practitioner's trust account. The court then gave a brief outline of its reasons for making that decision, on the basis that full reasons would be published in due course. We now set out those reasons.

5 Division 5 of the Legal Practice Act 2003 deals with disciplinary proceedings in the State Administrative Tribunal (SAT). By s 185(1), SAT has jurisdiction to make a finding that a legal practitioner is guilty of 'unsatisfactory conduct'.

6 By s 185(2), if SAT makes a finding of unsatisfactory conduct, it may make and transmit a report on the finding to the full bench of the Supreme Court or deal with the practitioner as specified in s 187. However, under s 185(3), if SAT transmits a report to the full bench under s 185(2)(a), it may, pending the determination of the full bench, either suspend the legal practitioner from practice or restrict his or her entitlement to practise.

7 Section 187 provides SAT with a range of options, including suspension for a period not exceeding two years, the imposition of conditions or restrictions on the right of the practitioner to practise, for a period not exceeding two years, the payment of a fine not exceeding $25,000 and a reprimand. There are also provisions which enable SAT to order the practitioner to pay money for the benefit of the complainant or compensation where appropriate.

8 The powers of the full bench are set out in s 194 of the Act, which is in the following terms:

(1) If the State Administrative Tribunal under section 185(2)(a) or 190(4)(b) makes and transmits a report in respect of a legal practitioner to the Supreme Court (full bench), the report is to be taken to be conclusive as to all facts and findings mentioned or contained in the report.

(2) The Supreme Court (full bench) may, upon motion and upon reading the report, and without any further evidence, fine, suspend from practice, or strike off the Roll of Practitioners the legal practitioner or make any order which the State Administrative Tribunal might make under section 185(2)(b).

(3) The Supreme Court (full bench) may make such order as to the payment of costs by the legal practitioner as the Court thinks fit.

9 It is, perhaps unfortunate, that the above provisions appear under the heading 'Court to punish'. That is because it is well settled that although a fine might well be regarded as a punishment, the jurisdiction to suspend or strike off a practitioner is not necessarily exercised by way of punishment, but for the protection of the public and to uphold the standing of the legal profession.

10 Although, as provided by s 194(1) the report of SAT is to be taken to be conclusive as to all facts and findings mentioned or contained in the report, it is to be noted that by s 185(4) a report forwarded by SAT under s 185(2)(a) may include a record of the evidence taken at the hearing. The purpose of that provision seems to be to inform the full bench about the facts beyond those mentioned or contained in the report and to enable it to make any such further findings as might be appropriate in the circumstances.

11 As noted above, the Tribunal exercised its powers under s 185(3)(b) to place a restriction on the practitioner's management of her trust account pending the determination of the full bench.

12 Paragraph 2 of the order made by the Tribunal on 15 May 2006 provided that the report which it transmitted to the full bench was constituted by its reasons for decision. The Tribunal did not itself include a record of the evidence taken at the hearing. However, that record has been provided to us by the applicant.

13 Against that background, we turn to the facts of this case. As we are required to do, we take the facts as found by the Tribunal. We have regard also to the uncontested evidence given by the practitioner in the earlier proceedings, and to information provided by leading counsel for the practitioner, without objection, in the course of his submissions before the Tribunal and this court.

14 The practitioner was admitted as a practitioner of this court in August 1987, after completing the five year articles programme. The practitioner has practised continuously since her admission, initially as an employee of the firm at which she completed her articles; and from 1989, as a partner of that firm. In 2001, the partnership was dissolved: and in early 2003, the premises in Emerald Terrace West Perth, from which the partnership had carried on its practice, were sold. Following the resolution of a dispute in late August 2003, the practitioner received approximately $280,000 from the sale of the premises.

15 Following the dissolution of the partnership, the practitioner commenced practising on her account under the name Verschuer Edward and has continued to do so.

16 The practitioner's articles programme had been interrupted by her ill-health: she suffered from lung cancer. Later, when in practice, the practitioner became involved in the work of the Cottage Hospice at Shenton Park. That hospice is managed by the Cancer Council of Western Australia. The practitioner was invited to serve as a member of the Council's institutional ethics and research committee. She accepted that invitation, joined the committee and has remained a member.

17 As a result of her involvement with the hospice, the practitioner became aware that many patients were concerned that they had not put their affairs in order before their admission. Frequently, this was because the patients lacked the financial means to obtain proper professional advice. In those circumstances, the practitioner offered to prepare wills for patients at the hospice, to provide legal advice to assist them in managing their affairs, and to do so without charge.

18 In addition to providing this service to patients at the hospice, the practitioner also prepares wills free of charge for testators who are potential benefactors of the Royal Society for the Prevention of Cruelty to Animals (WA) Inc (RSPCA) and the Salvation Army, and who are referred to her by those charities.

19 The practitioner estimates that over the years she has prepared approximately 75 wills for hospice patients. In so doing, the practitioner always recommends that testators appoint as executors and trustees, persons whom they know well and who would well understand their wishes. The practitioner has no wish to act as an executor and trustee herself.

The practitioner makes a will for Herbert Raymond Hudson

20 In March 2002, the RSPCA referred Herbert Raymond Hudson to the practitioner for the purpose of preparing a will. The practitioner had some difficulty in obtaining proper instructions from Mr Hudson, but did eventually prepare a will which he duly executed on 12 March 2002. The will was witnessed by the practitioner's secretary and an articled clerk then in her employ, a Ms Carol Penn.

21 The practitioner regarded the will as somewhat provisional, having regard to the vague nature of Mr Hudson's instructions as to his residuary beneficiaries. However, Mr Hudson became unwell and died before this issue could be resolved to the practitioner's satisfaction.

22 Mr Hudson had no family and few friends. He had long since been divorced and had no children. Further, Mr Hudson disliked and distrusted institutions such as The Public Trustee and Perpetual Trustees. Mr Hudson asked the practitioner to act as his executrix: and in those circumstances, she agreed to do so.

23 The practitioner's appointment as Mr Hudson's executrix and trustee was set out in cl 1 of his will. Clause 2 of the will contained a bequest of $30,000 to the RSPCA.

24 By cl 3 of the will, Mr Hudson created a trust for sale of all his property. Following the usual provision for payment of funeral and testamentary expenses, debts and duties, the residuary estate was to be held

in or upon any investments for the time being authorised by law for the investment of trust funds with power in the discretion of my Trustee to vary or transpose such investments from time to time and to stand possessed of such monies and the investments for the time being representing the same and all such portions of my residuary estate as shall for the time being remain unconverted for my Trustee for such charitable or other purposes as she shall determine including but not limited to the provision of financial or other assistance to individuals or associations dedicated to the preservation of the Siberian Tiger.

25 Mr Hudson died on 12 October 2002 and his will was admitted to probate on 8 November 2002.

26 It may be noted here that one of the possible charitable uses for the HRH Fund which was considered by the practitioner was the payment of solicitors in a recently formed Sole Practitioners Group for preparing wills free of charge for elderly gentlemen. For reasons which are not presently relevant, the practitioner subsequently decided that it would be impracticable to pursue that matter.

27 The principal assets of Mr Hudson's estate were some $100,000 in a Challenge Bank account and a residential unit.

28 The unit was sold to Ms Penn for $95,000, that being in accordance with an appraisal provided for the practitioner by a real estate agent. The $30,000 bequest was then paid to the RSPCA. (It is not clear what became of the balance of the proceeds of sale of the unit, but nothing appears to turn on this.)

29 The practitioner closed the Challenge Bank account and deposited the balance of $105,185.87 into a cash management account with the Challenge Bank. The account was entitled 'HRH Fund'.

30 Shortly after the HRH Fund account was opened, Ms Penn drew the practitioner's attention to the fact that the interest rate paid by the Challenge Bank was substantially less than that it would earn if the funds were loaned at overdraft interest rates to the practitioner, for the purpose of her general practice. At that time, the practitioner was paying overdraft interest rates and expected to be doing so for several months until she received the proceeds of the sale of the premises at Emerald Terrace. As noted above, the premises were sold in August 2003.

31 The practitioner said in an affidavit sworn 26 September 2003, in support of an originating summons to which we shall refer below:

It seemed to me, and still seems to me, that provided I had authority under the terms of the will itself, as well as the Trustees Act, to use these funds in this manner that it would be preferable for the HRH Fund to have the benefit of this interest rather than the Challenge Bank.

32 The practitioner did follow that course. On 6 December 2002, the practitioner gave a written instruction to Ms Penn in the following terms:

Dear Carol,

This letter will serve as your authority to withdraw monies for miscellaneous purposes associated with my practice and for pro bono work from the HRH fund until such time as the fund is formally set up subject to:

(a) you keeping detailed and careful note of ALL withdrawals which must be individually authorised by me;

(b) you keeping me advised from time to time of how much interest is payable to the fund at a rate the same as my overdraft rate; and

(c) you seeking my prior approval before any monies are advanced to Carol Penn for pro bono work from the fund.

PLEASE NOTE: This fund is not be used for raising charges for wills prepared by this practice for the RSPCA, the Cancer Foundation, the Salvation Army, Hospice patients, any charitable association where the testator is making a bequest to charity or any individual where the Public Trustee is being replaced in the will by the testator by a member of his or her family or a friend. These wills must be done by all associates free of charge if for any reason I am unable to do them.

33 The practitioner also gave instructions for a record to be kept of all credits and debits to the HRH Fund.

34 The details of withdrawals are set out in the decision of the Tribunal at [9] and need not be repeated here. It is sufficient to note that over the period from December 2002 to August 2003, amounts totalling $99,153.47 were withdrawn from the HRH Fund and were used for the following purposes:

(1) reduction of the practitioner's business overdraft;

(2) payment of the practitioner's liabilities associated with her business;

(3) direct cash payments to or at the direction of the practitioner;

(4) reduction of the practitioner's personal credit card debt;

(5) payment of counsels' fees incurred by the practitioner in relation to other clients' matters;

(6) payment of debts of other clients of the practitioner.

The payments were made by way of loans to the practitioner. She intended to repay the money so borrowed, with interest at a rate greater than that paid by the Challenge Bank. Although the loans were not secured, the practitioner had the means to repay, from the proceeds of the sale of the West Perth premises.

The Legal Practitioners Complaints Committee intervenes

35 On 5 September 2003, the Law Complaints Officer wrote to the practitioner to inform her that the Committee was conducting an enquiry into 'possible unprofessional or illegal conduct' by the practitioner in relation to the estate of the late Mr Hudson. The Law Complaints Officer said she had received information to the effect that:

1. You drew Mr Hudson's will and by that will you were appointed Mr Hudson's executor.
2. Mr Hudson had no family and by his will he bequested $30,000 to the RSPCA, a sum to the Siberian Tiger Fund and the balance was to be distributed by you, presumably for charitable purposes.
3. Mr Hudson passed away in the earlier part of this year.
4. Mr Hudson owned a unit in Thomas Street and Mr Matthew Brain offered to purchase the property for $95,000 which you accepted Mr Brain could not then obtain finance. Your employee, Ms Penn, then offered to purchase it for the same amount and you agreed to this.
5. The proceeds of the estate were transferred from your trust account to a Challenge Bank cash management account earning interest.
6. You may have applied estate funds for your own benefit, in particular, to renovations to your office.

36 The clear implication from this letter is that instead of distributing Mr Hudson's residuary estate for charitable purposes, the practitioner might have used the funds for her own benefit. That, of course, put an entirely different complexion on the practitioner's conduct and her instructions in relation to the HRH Fund, as set out above.

37 On 8 September 2003, the practitioner wrote a letter to the Committee in which she categorised the allegations made in the letter of 5 September as 'idle and inaccurate gossip (which is) also indisputably malicious gossip'. The practitioner went on to admit the facts set out in par 1 to par 5 of the Committee's letter. As to par 6, the practitioner said:

I have used estate funds for various purposes, including renovations to my offices, but I have not in doing so engaged in unprofessional or illegal conduct. I have done so openly and honestly with the full knowledge and participation of my staff, in particular my bookkeeper and my former associate Ms Penn, and proper records have been kept of my use and my liability for interest for this use which at overdraft interest rates is considerably higher than that which these monies could earn in any cash management account.

I draw your attention to the fact that in using these monies I am not in any way breaching Rule 8.1 of the Professional Conduct Rules as I am not borrowing from a client. What I have done, while I would not seek to deny it may have been convenient to me to do it, was primarily to get a better interest return for the benefit of the ongoing fund which I am seeking to formally establish with Mr Hudson's monies hopefully to be administered by the newly formed Sole Practitioners Group for the purpose of putting his testamentary wishes into effect in particular with respect to wills for elderly gentlemen and donations to various animal organisations from time to time and for such other pro bono work as the members determine from time to time. I appreciate it is not a large fund but it is a sufficient nucleus to persuade the Sole Practitioners to help me set it all up properly.

I should also draw your attention to the fact that I am in no way breaching my duty as trustee to avoid a conflict of duty and interest nor is it arguable that the power conferred upon me as trustee to pay or apply the capital money subject to the trust for any purpose is not broad enough to allow me to use it in the manner in which I have. All I have done is allow the capital to earn a higher interest rate until such time as I have been able to put together a proposal which will be acceptable to the Sole Practitioners Group and with which they would be keen to join and assist. You should appreciate that with all I have had to go through with a dissolution of partnership, shifting office and recalcitrant former staff, I have got behind.

I should perhaps further add that the monies have never been at risk and in fact were it the case that I and the Sole Practitioners had done all that was necessary to set up the fund legally I would today be able to simply draw a cheque out of my general fund for this purpose to cover all monies loaned plus interest at bank overdraft rates.

I must say that in the circumstances it is quite devastating to find that I am now being accused of engaging in unprofessional conduct or illegal conduct without even an attempt being made to look at the will itself first. I have not retained or converted the trust property. I have exercised my right granted pursuant to the terms of the will to borrow it and I have ensured proper records were kept so that full interest can be paid to the benefit of the fund. It is a pity you unidentified informant didn't tell you the whole story.

You will note from the contents of the enclosed files that they have basically been conducted by Ms Penn alone, particularly the file dealing with the sale of the unit in Thomas St, but I was generally made aware of what she was doing except for December and January 2003 when I was in England. I note that the account drawn for that period on the probate file shows me as rendering the legal services but that is clearly an error as I was not here and Ms Penn was looking after the file and the trust monies entirely by herself.

39 The correspondence of 5 - 8 September 2003 was tendered by counsel for the applicant at the hearing before the full bench. It is to be noted that at no stage in these proceedings has the applicant sought to cross-examine the practitioner. No such application was made before the full bench. Accordingly, there is no reason to doubt the practitioner's assertion in her letter of 8 September 2003, that her primary purpose in using the HRH Fund as she did, was 'to get a better interest return for the benefit of the ongoing fund'. In the last of the paragraphs set out above, the assertion by the practitioner that she had 'not retained or converted the trust property' appears to be directed to the inference to be drawn from the Committee's letter that her conduct could be so categorised.

The practitioner applies to the Supreme Court

40 On or about 26 September 2003, the practitioner made an application to the Supreme Court by originating summons in which she sought the following directions and orders:

1. A direction as to whether it is open to the plaintiff to distribute the residuary estate of the deceased to a selection of charities namely:

(a) The Royal Society for the Protection of Cruelty to Animals WA (Inc);

(b) the Cancer Foundation of WA (Inc);

(c) the World Wide Fund for Nature Australia; and

(d) the Silver Chain Nursing Association (Inc).

1. Alternatively whether it is open to the trustee to apply the residuary funds in the estate of the deceased for the purpose of setting up a pro bono publico fund to be administered by a charitable association to be incorporated for this purpose and to be used to provide legal services to a specified section of the public, namely men over the age of 65 years.
2. A declaration as to whether or not such delay as has occurred in the bringing by the plaintiff of an application for directions constitutes a breach of trust.
3. A declaration as to whether or not the sale by the plaintiff of the deceased's unit for $95,000 constitutes a breach of trust.
4. A declaration as to whether pursuant to the terms of the will of the deceased, and pending the establishment of a pro bono publico fund or such other means of disposing of the residuary estate of the deceased as this court may direct, it is or was a breach of trust for the plaintiff to seek to increase the quantum of the residuary estate of the deceased by using it for short term lending and, if not, to whom the trustee may make such loans and upon what security.
5. In the event that it is found that there has been any breach or breaches of trust by the plaintiff then an order that the plaintiff be relieved from personal liability for such on the ground that the plaintiff has acted honestly and reasonably and ought fairly to be excused for the same and for omitting to obtain the directions of the Court in the matter in which she committed the breach.
6. An order that the plaintiff's costs of this application be taxed and paid out of the estate.

41 The application was supported by the practitioner's affidavit of 26 September 2003, to which we have referred above. In that affidavit, the practitioner gave a full account of the use to which the HRH Fund had been put.

42 The application was made to the court after the practitioner had received the complaint from the Committee and had responded to it. However, the Tribunal was told by leading counsel for the practitioner, on instructions, that the practitioner had commenced work on the application before she received the Committee's complaint in September 2003. An incomplete draft affidavit prepared by the practitioner in July 2003 was tendered in evidence before the Tribunal (exhibit 5). It does not refer to any borrowings of the HRH Fund by the practitioner. However, given that the affidavit is incomplete and that the practitioner was not cross-examined, no adverse inference can be drawn from that fact.

43 We were informed by leading counsel for the practitioner that at the hearing of the originating summons Pullin J made orders by consent for the Public Trustee to be appointed trustee of the HRH Fund in place of the practitioner. No other orders were made, apparently pending the resolution of the complaint.

44 On 13 October 2004, the Committee referred the complaint to the Tribunal. The terms of the reference were:

THAT the legal practitioner PATRICIA MAY VERSCHUER EDWARD ('the practitioner') was guilty of unprofessional conduct between December 2002 and August 2003 in that she put herself into a position of conflict of interest by using monies which she held as trustee of a deceased estate of a client for her own personal and business purposes.

45 Particulars were then given, in which the history of the matter was set out, including details of the payments totalling $99,153.47 from the HRH Fund. It is not necessary to set these matters out again: they were all admitted by the practitioner and were set out as findings of fact in the reasons for decision of the Tribunal at [9].

46 The practitioner filed an answer to the reference in which she admitted the matters alleged in the particulars and admitted further that she was guilty of 'unprofessional conflict' [sic] in the manner alleged in the reference. The practitioner went on to say:

(a) the payments referred to in paragraph 9 of the particulars to the Reference constituted loans to her which she at all times intended to repay with interest calculated at an appropriate commercial rate;

(b) she repaid to Mr Hudson's estate the moneys so advanced with interest calculated at the rate of 7.2 per cent per annum;

(c) she maintained a proper record of the amounts borrowed and the payments made by her;

(d) by originating summons dated 30 September 2003 in Civ 2171 of 2003 she applied to the Supreme Court for directions regarding the administration of Mr Hudson's estate. The directions sought included a declaration as to whether '... it is or was a breach of trust for the plaintiff [the Practitioner] to seek to increase the quantum of the residuary estate of the deceased by using it for short term lending ...';

(e) the affidavit sworn by her on 26 September 2003 in support of the originating summons fully disclosed the steps that she had taken in administering Mr Hudson's estate. In particular, the Practitioner disclosed that she had treated the funds held in the Cash Management Account as a loan to herself and had used them for the purposes of her practice or for purposes associated with her practice;

(f) the Practitioner now accepts (contrary to the belief she held at the time she swore the affidavit) that by borrowing the funds and using them to pay expenses associated with her practice she improperly placed herself in a position where her interests and those of the estate of Mr Hudson, for which she was trustee, were in conflict.

47 The Tribunal, constituted by a retired Supreme Court judge, a Queen's counsel, a senior practitioner and a lay member, heard the reference on 2 December 2004. At the conclusion of the hearing, the Tribunal recorded a finding that the practitioner had engaged in unprofessional conduct. The Tribunal delivered short ex tempore reasons for reaching that conclusion. The Tribunal said that notwithstanding the extremely serious nature of the practitioner's conduct:

By reason of various matters (the tribunal) is not persuaded that the matter requires a reference to the Full Court and the tribunal considers that it has available to it mechanisms under s 187 of the Legal Practitioners [sic - Practice] Act that will properly deal with the severity of the matter and safeguard the public interest.

48 The Tribunal then indicated its general view and adjourned the matter so that the parties would have an opportunity to agree appropriate orders.

49 The Tribunal proposed orders under s 187(1)(c) of the Legal Practice Act to require the practitioner to take advice about the management and conduct of her practice.

The Tribunal is subsumed in the State Administrative Tribunal (SAT)

50 On 1 January 2005, the State Administrative Tribunal Act 2004 (WA) came into operation. As a consequence, by s 167(4)(b) of that Act, the disciplinary jurisdiction of the Tribunal was transferred to SAT. However, for reasons which are set out fully in the decision of the Tribunal, there was a lacuna in the legislation which, until remedied, precluded the Tribunal from being constituted under the State Administrative Tribunal Act. That situation was remedied: and the matter proceeded before the original Tribunal members, sitting as a State Administrative Tribunal, on 20 December 2005.

The Tribunal's previous conclusion is reviewed

51 At the resumed hearing, senior counsel for the Committee submitted that the Tribunal's previous conclusion about the appropriate penalty should be revisited because

the admitted offence was of such gravity that the Tribunal could not possibly do otherwise than refer the complaint to the Supreme Court (full bench) of Western Australia (reasons, par 29).

52 As appears from the Tribunal's reasons, [30] - [37], senior counsel for the Committee submitted that the original hearing should have focused more on misappropriation of the funds rather than 'borrowing'. Counsel submitted that misappropriation was 'objective dishonesty' regardless of the state of mind of the practitioner.

53 The difficulty with that submission, as the Tribunal noted in its reasons, was that the Committee had not previously raised any suggestion of dishonesty, either in a subjective or objective sense. And as counsel for the practitioner pointed out

the practitioner had been totally open about her actions and submitted she had actually demonstrated an intent to benefit the trust fund by recording an obligation to pay the trust fund interest at a greater rate than it was receiving on bank investment.

54 Ultimately, the Tribunal was persuaded that it should permit the Committee to reopen its case, despite the obvious prejudice to the practitioner in so doing. However, after reviewing the authorities relating to penalty, the Tribunal reached the following conclusions:

At the time of the original hearing, the Tribunal recognised that the repeated personal usage by unauthorised borrowings from trust funds by a practitioner would not only be regarded as serious impropriety but usually warrant a referral to the Supreme Court (full bench). However, the Tribunal did not perceive the Committee as putting the complaint on that footing. There was no apparent emphasis of any form of dishonesty or any illegality when the reference was first heard by the Tribunal. The actions were conducted openly and interest on the borrowings was paid.

It was in those circumstances that the Tribunal concluded that the appropriate disposition of the complaint fell just short of a referral to the Supreme Court (full bench). Regrettably, with the benefit of further argument, we are persuaded that we would not be discharging our duty to the public to not refer the matter to the Supreme Court (full bench). In doing so, the Tribunal does wish to record the unfortunate history of the resolution of this complaint from the practitioner's perspective. This relates to both timing (in terms of the unavoidable delay in being able to conclude the matter while there was a hiatus in the legislation) and also in the need for the Tribunal to reconsider the appropriate order to be made.

In all those circumstances, including the apparent absence of precedent in this State of a 'borrowing' type of contravention, the Tribunal would not make a recommendation to the Supreme Court (full bench) that the practitioner be struck off the roll. The Tribunal notes that senior counsel for the Committee did not, in written or oral submissions, request that the referral should include a recommendation that the practitioner be struck off the Roll of Practitioners. Rather, the relief sought was that the matter be referred to the Supreme Court (full bench). Implicitly, a report to the Supreme Court (full bench) is appropriate in those circumstances in which the Tribunal does not consider that the penalties it may impose pursuant to s 187 of the 2003 Act are necessarily adequate or appropriate to deal with the professional misconduct under consideration.

The Tribunal considers that the nature of the contravention warrants a report being transmitted which it will do so by forwarding these reasons. The Tribunal notes that there has been no allegation of illegality or dishonesty in the complaint (although the Committee now raises a notion of 'objective dishonesty') and that no client has suffered a loss of money as a result of the misconduct. In addition, and largely as a result of the focus of the presentation of the complaint and supporting submissions by the Committee a year after the matter had been originally dealt with on the major issue of referring the matter to the Supreme Court (full bench), the Tribunal has concluded that it should, regrettably, re-visit its earlier conclusion on that point and should so refer the matter [71] - [74].

1. The Tribunal finds Patricia May Verschuer Edward (the practitioner) guilty of unprofessional conduct during the period from 12 December 2002 to 7 August 2003 under the Legal Practitioners Act 1893 (WA).
2. The Tribunal makes and transmits a report on the finding it has made to the Supreme Court (full bench) which, for purposes of the Legal Practice Act 2003 (WA), s 185(2)(a) is constituted by these reasons for decision.
3. No later than twenty-eight (28) days after the date of the order, if it has not already been paid, the practitioner is to pay the sum of $7156 to the Public Trustee of the estate of Herbert Raymond Hudson.
4. Pending the determination of the Supreme Court (full bench) in relation to the report transmitted to it by the Tribunal, in accordance with s 29A(3)(b) of the Legal Practitioners Act 1893 (WA) and s 187(1)(d) of the Legal Practice Act 2003 (WA), the following conditions shall be imposed on the right of the practitioner to practice for a period of two (2) years from the date of this Order:

(i) The practitioner must follow the procedures set out in paragraph (ii) below in relation to the trust account of the Practitioner's firm and in relation to the trust account of any other firm in which she may be a partner or sole practitioner.

(ii) The procedures referred to in paragraph (i) are as follows:

(a) On a daily basis, deposits to the trust account are to be reconciled, by an experienced bookkeeper or the Practitioner, with the trust account bank statement referenced by the internet.

(b) On a weekly basis, the trust account bank statement (referenced by the internet) is to be reconciled by an experienced bookkeeper with all deposits to and withdrawals from the trust account, and a copy of the reconciliation is to be provided to the practitioner, for her review, investigation and rectification of all outstanding items (such as outstanding deposits and issued unpresented cheques over 15 (fifteen) months old). The reviewed reconciliations are to be signed and dated by the practitioner and provided to a Senior Trust Account Inspector of the Legal Practice Board nominated by that Board within seven (7) days of the date on which reconciliation is provided by the bookkeeper to the practitioner.

(c) In addition to the annual audit required under the Legal Practice Act 2003 (WA), within seven (7) days of the end of each quarter, the practitioner must provide all material relating to the trust account, including bank statements, deposit slips, receipts and withdrawal authorities, to an independent firm of accountants/auditors for a quarterly review of the trust account operations. The practitioner must ensure that, within twenty-one (21) days of the end of each quarter, the independent firm of accountant/auditors provides a quarterly report on its review of the trust account operations to the practitioner and a Senior Trust Account Inspector of the Legal Practice Board nominated by that Board. The review is for the purpose of ensuring that the trust account is being properly maintained.

1. In accordance with s 29A(4) of the Legal Practitioners Act 1893 (WA) and s 87(2) of the State Administrative Tribunal Act 2004 (WA), the practitioner must pay the applicant its costs of and incidental to the hearing and determination of the proceedings, which are fixed in the sum of $8000.00, within twenty-eight (28) days of the date of this Order.
2. The reasons for decision and orders in this matter are not to be published until the determination of the Supreme Court (full bench) and then only if the Supreme Court (full bench) so orders.

56 It is to be noted that the sum of $7,156 referred to in par 3 above, represents the difference between the amount of interest the practitioner paid to the HRH Fund and the amount of interest she would have paid had she borrowed from her bank at overdraft interest rates.

57 A solicitor trustee is subject to the same fiduciary duties and obligations as any other trustee in relation to the trust property. It is trite law that a trustee must not profit from the trust (at least, without the informed consent of the beneficiary) and that the trustee must not place himself in a position where his duty conflicts with his personal interest.

58 The elementary mistake apparently made by the practitioner in the present case was to assume that because the HRH trust contained a wide power of investment, and because there was no clearly identifiable beneficiary, it would be proper for her to invest the fund by lending it to herself at interest, albeit in an informal way. The practitioner regarded herself as the client. She therefore failed to appreciate that because the trust was charitable in nature, she could not take that course without the consent of the Attorney General. Further, the practitioner failed to appreciate that there was a fundamental conflict between her personal interest as the borrower and her duty to the trust, as the trustee-lender.

59 It is also trite to say that not every misuse of trust funds involves the same degree of seriousness. At one extreme, a gross breach of trust by a solicitor trustee may well justify striking the solicitor's name from the roll of practitioners. At the other extreme, a solicitor trustee who acted honestly and reasonably might be excused from liability for the breach of trust under s 75 of the Trustees Act 1962 (WA).

60 There is no doubt, and it is accepted by the practitioner, that her conduct in the informal borrowing from the HRH trust fund involved a serious breach of fiduciary duty.

61 As the practitioner has admitted the charge, the only issue is the penalty. In its reasons at [51] to [65], the Tribunal set out a comprehensive review of the authorities relating to penalty, which we gratefully adopt, and need not revisit.

62 In essence, the applicant submits that in all the circumstances, the practitioner's name should be struck from the roll, this being the appropriate penalty in cases of dishonesty. The applicant relies on the decision of the Full Court of the Supreme Court of South Australia in Re a Practitioner (1982) 30 SASR 27 where King CJ held that

whenever a client's money is deliberately used for a purpose other than the purpose for which the client entrusts it to the practitioner, there is an act of dishonesty (31).

63 Similarly, in Re Nelson & Legal Practitioners Act 1970 (1991) 106 ACTR 1, the Full Court of the Australian Capital Territory held at 7 that a solicitor who had borrowed trust funds without proper authority had 'quite dishonestly' misappropriated the money.

64 In our view, the applicant's reliance on these authorities is somewhat misplaced because it did not proceed against the practitioner on the basis that she had acted dishonestly. As noted above, the reference asserted a conflict of interest. In our view, the fact that the practitioner's integrity has not been challenged by cross-examination, makes it inappropriate for the applicant to assert dishonesty of any kind against her. Indeed, as noted above, there is no challenge to the practitioner's statement that although the borrowing was of benefit to her, her primary objective was to benefit the trust.

65 It is, of course, not only the practitioner's misuse of the HRH trust fund which is serious, but also, her failure to appreciate that her conduct was improper. In this context, the applicant relies on the decision of the Court of Appeal of New South Wales in Law Society of New South Wales v Moulton [1981] 2 NSWLR 736. There, a solicitor had borrowed monies from his clients over a considerable period at rates of interest below the commercial rate and often on inadequate security. The solicitor had not given any or any adequate advice to his clients about the desirability or need for obtaining independent legal advice. Some of the beneficiaries of the relevant trusts were infants.

He is a professional man, put forth as a professional adviser and any person is entitled to have from a solicitor on the roll elementary advice on the law of trusts. It is not, in my understanding of what is the minimum standard required of a solicitor, that such ignorance, coupled with an unwillingness or incapacity to take the elementary steps necessary to equip himself with the requisite knowledge, should be tolerated. The respondent was at the time of hearing a practitioner of some eighteen years standing, and he was no mere tyro emerging from a law school. To look at this transaction purely in terms of whether or not he was guilty of a deliberate breach of trust is to weigh it, in my opinion, on entirely wrong principles. It, of itself, disqualifies him from remaining a solicitor, unless it is to be treated as an entirely exceptional aberration (754).

67 In the same case, Hope JA cited the decision of the High Court in New South Wales Bar Association v Evatt [1968] HCA 20; (1968) 117 CLR 177 where it was said that:

The respondent's failure to understand the error of his ways of itself demonstrates his unfitness to belong to a profession where, in practice, the client must depend upon the standards as well as the skill of his professional adviser.

A failure to understand and appreciate the care that must be taken by a solicitor who wants to make use of his trusting client's money for his own purposes would generally show an unfitness to remain on the roll. In so far as Mr Moulton's ignorance should be treated as a lack of knowledge rather than a lack of standards, it was not ignorance of some esoteric or difficult corner of the law; it was an ignorance of general principles applicable to common activities of a solicitor in which, for the most part, Mr Moulton was regularly engaged, and it was an ignorance which he took no steps to remedy (740 - 741).

69 In the present case, the practitioner's ignorance of her fiduciary obligations as a solicitor trustee is cause for considerable concern. However, there is a significant difference between this case and Moulton. There, the solicitor sought to justify his conduct. Here, although that was initially the practitioner's attitude, she had at least appreciated before the complaint was made against her that she should obtain some direction from the court as to the proper use of the HRH Fund: and as soon as the matter became contentious, she took advice from senior counsel who explained to her the error of her ways and whose advice she has accepted fully.

70 Further (although this is not an answer to the charge), all the HRH Fund borrowed by the practitioner has been repaid. Indeed, the Tribunal accepted that the practitioner had made arrangements for repayment before the complaint was made against her.

71 Ultimately, the rationale for striking a practitioner from the roll is not the punishment of the practitioner, but the protection of the public and the need to uphold the standards of the legal profession. And the question whether a practitioner is fit to remain in practice is to be decided at the date of the hearing: Prothonotary of the Supreme Court of NSW v P [2003] NSWCA 320 [17].

72 In the present case, the practitioner has been subject to a regime imposed upon her by the Tribunal in May 2006, whereby for a period of two years from that date, the practitioner was required on a daily basis to have an experienced bookkeeper reconcile deposits to her trust account with the trust account bank statement referenced by the internet. Further, on a weekly basis, the bookkeeper was to reconcile the trust account bank statement with deposits to, and withdrawals from, the trust account: and a copy of the reconciliation was to be provided to the practitioner for her review, investigation and rectification of all outstanding items. The reviewed reconciliations were to be signed and dated by the practitioner and provided to a senior trust account inspector of the Legal Practice Board within seven days.

73 Further again, in addition to the annual audit required under the Legal Practice Act, the practitioner was required to provide all material relating to the trust account to an independent firm of accountants/auditors for a quarterly review of her trust account operations. The review was for the purpose of ensuring that the trust account was being maintained properly.

74 We were informed at the commencement of the hearing that these arrangements have been operating satisfactorily since they were put in place over 15 months ago. We were informed further by leading counsel for the practitioner that she has taken it upon herself to advise all clients of the complaint made against her in these proceedings and her plea of guilty.

75 In all the circumstances, we do not think it necessary to deprive the public of the services of the practitioner who is, according to several references which have been provided for her, a well respected member of the legal profession.

76 It is to be noted that the Tribunal, consisting as it did of a retired judge of this court and senior members of the profession, although persuaded that the matter should be referred to the full bench, did not recommend that the practitioner's name be struck from the roll. That view is, of course, not binding on us, but it is a significant consideration: see Prothonotary of the Supreme Court of NSW v P at [17].

77 For these reasons, while we accept that this is a borderline case, we have concluded that having regard to the unusual circumstances, and in particular, the lack of any dishonesty or dishonourable conduct on the part of the practitioner, the fact that she has taken and accepted advice from senior counsel and recognises the error she had made and the view of the matter taken by the Tribunal, it is not necessary, for the protection of the public, to strike the practitioner's name from the roll.

78 We consider it sufficient to require the practitioner to continue to comply with the supervisory regime required by the Tribunal, for the full period of two years from the date of the Tribunal's order, and to order that the reasons for decision and the orders made by SAT on 15 May 2006 be published. We make no further order on the application, which should otherwise be dismissed. There will be no order as to costs.