1 Stephen Michael Grant, you have pleaded guilty before me to six counts of having a deficiency in your trust account as a solicitor, contrary to s.188(1)(a) of the Legal Practice Act 1996; three counts of dishonestly obtaining a financial advantage by deception, contrary to s.82(1) of the Crimes Act 1958; and one count of dishonestly producing an accounting document knowing it to be false with a view to gain for yourself, contrary to s.83(1)(b) of the Crimes Act 1958.
2 The counts on the presentment span a relatively short period from 2 December 2003 to 30 June 2004. During this period you were one of two partners of the firm of solicitors known as Nanscawen Grant.
3 It is sufficient at this stage to note that it would appear that your offending followed the receipt by you towards the end of 2003 of a demand for payment of over $200,000 by the Australian Taxation Office. In September 2003 you had belatedly filed seven outstanding tax returns for the financial years ending 30 June 1994 to 30 June 2000, followed later by the outstanding returns for the financial years ending 30 June 2001 and 2002. You were apparently not able to pay the amount claimed in full or by instalments and, accordingly, judgment for approximately $220,000 was entered against you in January 2004. Just over half of the tax bill was for overdue tax and the balance for interest and penalties for late payment.
4 The first count, one of dishonestly obtaining a financial advantage by deception, relates to a cheque drawn on your firm's trust account on 2 December 2003 in the sum of $5,445. This cheque was used to reduce the amount owed by you to the Australian Taxation Office by way of a proposed instalment plan. The $5,445 was debited to the funds held in your firm's trust account on behalf of Kadesh Christian Community Incorporated. That body had resolved in April 2002 that it be wound up voluntarily and that its funds be distributed to another named non-profit organisation. Some $7,262 remained in trust at this time. The withdrawal was falsely recorded in the relevant ledger as one for "GST and Tax Liability" of the Kadesh Christian Community Inc.
5 Count 2 is the false accounting document charge. In December 2003 a client of your firm was Mrs Gladys Potter. She had recently been repaid the sum of $100,000 previously lent by her, unsecured and interest free, to assist friends in the purchase of a motel business. You prepared an agreement whereby Mrs Potter agreed to lend the sum of $90,000 interest free to a fictitious person Matthew Gunnerson. The loan was repayable by four equal annual instalments of $10,000, commencing nine months after the advance of the principal sum, with the balance of $50,000 repayable five years after that date. Although the loan was said to be secured by a charge over the borrower's interest in any freehold or other assets, it was totally unsecured. The agreement was possibly signed by Mrs Potter. However, the signatures of Mr Gunnerson and the two witnesses were forged by you. The agreement, which was dated 8 January 2004, was supported by false file notes allegedly recording instructions from Mrs Potter and Mr Gunnerson and by false correspondence.
6 Count 3 was another of the dishonestly obtaining a financial advantage by deception charge. On 8 January 2004 a cheque was drawn on your firm's trust account in the sum of $79,000 payable to a fictitious company DCT Pty Ltd and purportedly sent to Mr Gunnerson as part of his $90,000 borrowing from Mrs Potter. In fact, you altered the payee's name to the Deputy Commissioner of Taxation and used it to further reduce your personal taxation debt. The drawing of this cheque reduced the amount held in trust for Mrs Potter to $16,500.
7 Count 4 is the first of the deficiency in your trust account charges. On 20 January 2004 a cheque was drawn on your firm's trust account in the sum of $7,414.55 payable to a fictitious person "D. Grant". The amount, which was described in the relevant ledger and on the cheque butt as being for "D. Grant Repayment-Estate", was debited to the Estate of Melva June Grant ("the Estate of Grant"). It was not, however, paid to the Estate of Grant or as directed by the executors of that estate. Instead, the cheque was made payable to your former sister-in-law who was pressing you for payment of her share of some legal costs which she was entitled to receive following a building case dispute, but which you had not got around to recovering from the other side. The drawing of this cheque reduced the amount held in trust for the Estate of Grant to $3,219.62.
8 Count 5 is another of the deficiency in your trust account charges. On 14 April 2004 a cheque was drawn on your firm's trust account in the sum of $3,206.00. The amount, which was described in the relevant ledger and on the cheque butt as being for "Refund of Monies", was debited to Mrs Potter. It was not, however, paid to Mrs Potter or as directed by her. Instead, the cheque was made payable to McPherson & Kelley for some legal costs which another of your clients had incurred but which you recognised were your responsibility. A letter dated 14 April 2004 falsely showed the trust account cheque for $3,206.00 being sent by you to Mrs Potter in accordance with her purported request.
9 Count 6 is the third dishonestly obtaining a financial advantage by deception charge. At this time, you held the title to your parents' unit as you had previously carried out the conveyancing of the sale of their previous home and of the purchase of their unit. That property was mortgage free, which was how you came to have the title to the unit still in your possession. You decided to use your parents' unit as security for a loan of $175,000 to pay out the balance of your debt to the Australian Tax Office. As a valuation was required for mortgage purposes, you falsely told your parents that it was being obtained for the purposes of the body corporate. Also, you falsely told your parents that they needed to sign some papers for the same reason and thereby obtained their signatures on the mortgage. You presented the documents to them in such a way that they had no opportunity to read them. In any event, your mother was then aged 75 years and suffering from short term memory loss, whilst your father was aged 82 years and no doubt they both trusted you to look after their interests. Finally, you forged the signature of a solicitor friend of yours on the required independent certificate of witness of execution of mortgage which you provided to the mortgagee. The $175,000 was obtained on or about 22 April 2004.
10 Count 7 is the third deficiency in your trust account charge. On 25 June 2004 a cheque was drawn on your firm's trust account in the sum of $2,220.60. The amount, which was described in the relevant ledger and on the cheque butt as being for "FCS Repairs and Inspections", was debited to the Estate of Gladys EM Potter ("the Estate of Potter"), Mrs Potter having died on 29 May 2004. It was not, however, paid to the Estate of Potter or as directed by the executors of that estate. Instead, the cheque was made payable to Julian M Abrahams for some legal costs which another of your clients had incurred but which you recognised were your responsibility. A file note which appears to be dated 18 June 2004 purportedly recorded a telephone conversation you had with Mr Gunnerson in which he requested this payment as a further advance from Mrs Potter, pursuant to the loan agreement the subject of count 2.
11 Count 8 is another deficiency in your trust account charge. On 30 June 2004 a cheque was drawn on your firm's trust account in the sum of $1,800.99. The amount, which was described in the relevant ledger and on the cheque butt as being for "Reimb. of Funds" and "Reimbursement" respectively, was debited to the Estate of Potter. It was not, however, paid to the Estate of Potter or as directed by the executors of that estate. Instead, the cheque was made payable to Kim Cricket, the daughter of Melva June Grant and the executrix of her mother's estate. The funds needed to be taken from the Estate of Potter because of the previous defalcation in respect of the Estate of Grant, the subject of count 4. Again, the file note dated 18 June 2004 purportedly recorded Mr Gunnerson requesting this payment as a further advance from Mrs Potter, pursuant to the loan agreement the subject of count 2.
12 Counts 9 and 10 are yet further deficiencies in your trust account charges. On 30 June 2004 two cheques were drawn on your firm's trust account in the sum of $694.00 and $290.64. The first amount, which was described in the relevant ledger as being for payment of an insurance premium to "AAMI", was debited to the Estate of Potter. The second amount, which was described in the relevant ledger as being for payment of an insurance premium to "Over 50", was also debited to the Estate of Potter. Neither payment was, however, paid at the direction of the executors of the Estate of Potter. Instead, the payments were made on behalf of the Estate of Grant. The funds were needed because of the previous defalcation in respect of the Estate of Grant, the subject of count 4. Again, the file note dated 18 June 2004 purportedly recorded Mr Gunnerson requesting the payment of $694.00 as a further advance on his loan from Mrs Potter, pursuant to the loan agreement the subject of count 2.
13 The total loss suffered by your clients as a result of the ten offences was $275,071.78. Over 60% of that amount related to count 6, the dishonest mortgaging of your parents' unit, and over 90% of that amount related to count 6 and count 3, the dishonest advance of $79,000 to the fictitious Matthew Gunnerson. Thus, the remaining seven offences together resulted in a loss of only $21,071.78. (Count 2 did not result in any financial loss.) Even though the amounts were in some cases very small, the breach of trust on your part was still significant. I was told that none of the clients remain out of pocket as they have been reimbursed by the Legal Practitioners' Fidelity Fund ("the Fidelity Fund").
14 Mr Lasry QC, who appeared on your behalf, submitted that, although there was significant culpability involved in the creation of false documents, particularly in relation to the mortgage, and that this conduct involved some degree of planning and calculation, the offending demonstrated more a spontaneous and simplistic reaction to an urgent crisis rather than a carefully planned crime. As the difficulties arose, you attempted to plug a hole, and then the next hole, and so on, becoming more and more desperate. Whilst I do not disagree with this submission, I consider that the degree of planning and calculation should not be understated. The creation of the fictitious borrower Matthew Gunnerson was assisted by the making of false file notes of conversations allegedly held with Mr Gunnerson and Mrs Potter and the making of false correspondence to Mr Gunnerson and Mrs Potter and even false correspondence from Mr Gunnerson. Moreover, the borrowing of the $175,000 against the security of your parents' unit must have involved considerable planning and calculation.
15 On the other hand, I take into account that you did attempt to repay some of the money wrongfully taken from your clients. On 17 November 2004 the sum of $10,650.00 was credited to the Estate of Potter account. This money, which came from a surrendered life insurance policy, was dressed up as a payment by Mr Gunnerson.
16 I turn then to your personal circumstances. You are now 47 years of age, having been born on 21 July 1958. You were the third of four brothers. All three of your brothers are qualified medical practitioners and, in addition, one was also an athlete who competed at the Montreal Olympic Games. Mr Lasry explained in the course of a well presented and persuasive plea that he only mentioned these matters because of their relevance to the fact that you had formed the view that you had failed to meet the expectations of your family by not matching the achievements of your siblings. Nevertheless, you were in the top five percent of students at Marcellin College, the school which you attended. You obtained a Bachelor of Laws from the University of Melbourne and were admitted to practice in August 1981. You have been married to Jane Fincham, a teacher, for 24 years and you have one son aged 14 years.
17 You worked as an employee solicitor for approximately 11 years until on 1 December 1992 you went into partnership with Mr Peter Nanscawen. The firm had three offices, one in the city, another at Moonee Ponds and the third at Laverton on a part time basis. Nine staff, including one employee solicitor, were employed by the firm. Your area of practice was mainly in the commercial and conveyancing area. The partnership was dissolved in March 2005.
18 It would seem that the transition from employee solicitor to self-employed partner contained the seeds of your subsequent downfall. The last tax return filed by you for a significant number of years was your last return as an employee. It was said that this was done in 1994 for the financial year ended 30 June 1993 or 1994, although this does not appear to match other information. Nevertheless, despite the urgings of your personal accountant no tax return was filed by you for nine years. The Tax Office did not chase up the missing returns because it was unaware of your new status as a partner apparently because the partnership was also not filing tax returns. It was not until the Tax Office began a concentrated campaign against the legal profession that you succumbed to your personal accountant's badgering and lodged the nine outstanding returns in two batches in the second half of 2003. The modest nature of your earnings from legal practice is demonstrated by the fact that about $106,000 of the amount claimed by the Tax Office was for the tax outstanding over the seven years from 1994 to 2000, whereas $98,000 was for interest and penalties. Another $36,000 in back tax was claimed for the 2001 and 2002 financial years with another $4,000 in interest and penalties.
19 The explanation for the failure to lodge tax returns on time was said to be that you were suffering from a major depressive illness and could not cope with the pressures of professional life. That pressure was no doubt magnified as each year went by. Other illustrations of what was said to be your inability to cope with the demands of life as a partner in a small practice were your errors and delays in managing files which resulted in you taking funds from clients to pay to other clients to avoid disclosure of your mistakes (such as the conduct the subject of counts 4, 5 and 7) and that you carried around huge volumes of unopened mail because it was easier to ignore it rather than to deal with it.
20 Following a complaint from the executors of the Estate of Potter, investigations were commenced by the Law institute of Victoria into your firm's trust account. By January 2005 the investigator was in your office examining documents and you realised that some or all of your actions would soon be discovered. You began accumulating pain killing drugs and making other preparations. On 28 February 2005 you were informed that certain documentation in relation to the investigation could be collected from the Law Institute. Although you commenced to drive to the city you were physically unable to complete the journey. You rang and gave an excuse for not collecting the documents that day. On the next day, 1 March 2005, you attempted to take your own life in the Wombat State Forest. I was told that it was only through your wife's intuition on reading a suicide note left by you at the city office and the consequential intervention of a police officer that the attempt was not successful. You were taken to the Ballarat Base Hospital and then the Melbourne Clinic.
21 On 8 March 2005 you voluntarily surrendered your practising certificate. You then made a complete disclosure both to the Law Institute and later to the police. In March of this year, the relevant arm of the Victorian Civil and Administrative Tribunal ("VCAT") disqualified you from holding a practising certificate for a period of five years and ordered that for a further period of five years you can only hold an employee certificate with no access to a trust account. You were ordered to pay costs of $6,180, with a stay of six months. Mr Lasry told me that you do not intend to seek to practise as a lawyer in the future.
22 Although you have an income protection policy which is currently providing you with an income, as part of your recommended medical treatment you have obtained employment at a call centre. I was told that you really enjoy this work. It is heavily structured and supervised and you find satisfaction in helping people with their problems, so long as there is no conflict.
23 Not surprisingly, your financial situation is now poor. The family home, which was in your wife's name and in respect of which she made the mortgage payments from her salary, has been sold. However, after payment of the mortgage, your share of the firm's overdraft, the costs of the VCAT hearing and other expenses, a sum of about $280,000 is all that is left. Your family now live in rented accommodation and your son no longer attends a private school.
24 On your behalf, Mr Lasry told me that you wished to repay your debt to the Fidelity Fund but were caught between the desire to put matters right in that regard and the need to provide for your wife and son. Mr Lasry said that an immediate payment of $80,000 was to be offered to the Fidelity Fund with further payments to be made over time, if at all possible. I note that the remaining $200,000, after payment of the promised $80,000, would represent roughly a half share of the net proceeds of the former home after payment of the mortgage. That is now your wife's sole asset. I accept that you are genuine in your desire to do everything possible, within the constraints imposed by other demands, to ensure that the debt owed to the Fidelity Fund is eventually repaid.
25 Turning to the broader sentencing considerations, s.188(1)(a) of the Legal Practice Act 1996 provides that the maximum penalty for having a deficiency in your trust account is 15 years' imprisonment and s.82(1) and s.83(1)(b) of the Crimes Act 1958 provide that the maximum penalty for the respective offences of dishonestly obtaining a financial advantage by deception and of dishonestly producing an accounting document knowing it to be false with a view to gain for yourself is 10 years' imprisonment.
26 In R v Howse Flatman J said: