R v Howse [2002] VSC 197

Supreme Court of Victoria|2002-05-24|Before: FLATMAN J.

CRIMINAL LAW - Sentence - Deficiency in Trust Account - Theft - False Accounting - Delay in prosecution - Chronic Depressive Disorder

Peter John Howse, you have pleaded guilty to two counts of deficiency in a trust account, six counts of theft and one count of false accounting under s.42(1) of the Legal Profession Practice Act 1958 and and (1)(a) of the .

I have been provided with a comprehensive statement of the material facts in this matter prepared by the Crown and agreed to by the defence. Nevertheless, it is appropriate I think to set out in broad terms the circumstances behind this presentment in this matter.

The presentment spans a period from November 1994 until March of 1996. At all material times you were a solicitor and the holder of a practising certificate pursuant to the provisions of s.100 Legal Profession Practice Act 1958. You were the holder of a full practising certificate from 26 September 1978 to 28 May 1996. You are no longer the holder of a current Victorian Practising Certificate under the Legal Practice Act 1996 (Victoria).

On 15 April 1996, Deputy Chief Inspector Graham Delaney (now deceased) from the Law Institute of Victoria attended at your Wantirna practice as a result of a written complaint made to the Law Institute by Mr Bruce McGinley. At that time, you admitted to Mr Delaney that there was deficiency in the McGinley trust account and you also admitted that there was probably a greater deficiency than that which related solely to the McGinley matter.

You also admitted that there were problems in relation to dealings with clients called Ruscitti and you were not able to offer Mr Delaney a sufficient or satisfactory explanation for these deficiencies.

You consented to the appointment of a receiver under the relevant provisions of the Legal Profession Practice Act 1954 (Victoria) by order of Mr Justice Beach on 16 April 1996. You agreed to be interviewed by the police and five interviews were then conducted. As a result of the interviews and following the examination of the trust records of your practice, the following offences were revealed which constitute the counts on this presentment. I turn now to the presentment before the Court.

In October 1994, Mr Ruscitti engaged you to act for him in relation to some criminal charges that he was facing. All moneys paid to you were to be deposited into the trust account and were to be used for the defence in those proceedings. In October 1994 Mr Ruscitti's wife gave you a total amount of money $91,900. This was made up of three cheques being, one cheque for $10,000, another cheque for an amount of $24,400 and yet another cheque for the amount of $57,500. The second two cheques were not honoured immediately and because of bank error were incorrectly deposited into your office account instead of your trust account. When you became aware of this you transferred $10,000 into the trust account but retained the advantage of the balance in your office account. That gave rise to a deficiency of some $71,900.

Some moneys ultimately did get disbursed as part of Mr Ruscitti's defence and the records show transfer reimbursements of the sum of $15,000 and $3,000 which left a deficiency of sum $53,900. Your explanation in relation to this was:

"..other than it started as a bank error and I wasn't in a position to fix it."

You said there was insufficient funds in the office account and at that time you had a barrister trying to bankrupt you and the Commonwealth Bank trying to bankrupt you, so funds had to be drawn to pay legal people.

Count 2 similarly relates to the same Ruscitti account. A cheque was provided by Mr Ruscitti's daughter on 10 October 1994 for the sum of $49,149.80. These funds were deposited into the trust account. In January of 1995, the daughter had a falling out with her father and requested the funds provided by her back from you. You provided her with a cheque for the sum of $49,000 and that was taken from the trust account on 14 February 1995. At this time there were not sufficient funds in the trust account to cover that $49,000. Your excuse in relation to that was that you knew it was wrong to repay the $49,000 to Ms Ruscitti when there was insufficient moneys in the Ruscitti trust account, and you knew that it was just adding to the problem.

It was put that there is overlap between Counts 1 and 2 and that there would be no thefts constituting the foundation of Count 2 without the deficiency alleged in Count 1. It was put by your Counsel that there was work done in relation to the Ruscitti matter and a bill of costs indicates that much work was done on that file and that there were quite a number of disbursements incurred. As the Crown pointed out, the bill of costs has never been sent to the client and it has never been costed as such.; but the Crown concedes that the client was defended and costs and disbursement were incurred . These matters are set out in Exhibit 2.

Count 3 relates to a deficiency in the trust account of $25,000 between the period of 7 March 1995 and 3 May 1995. Mrs Ruscitti received a cheque for $10,000 payable to herself and endorsed that cheque to make it payable to you. That was deposited on 7 March 1995 into the office account. It was anticipated that it was trust money to be used for the defence of Mr Ruscitti. Your reason for it being put into the office account instead of the trust account was because:

"Either I was in need of monies to pay creditors or, alternatively, I rendered an account for the work I had done."

You also said you were receiving pressure from the bank in that they were going to commence dishonouring your cheques and that you were digging yourself into a deeper hole.

In May of 1995, Mrs Ruscitti gave her husband a $15,000 cheque to hand deliver to you. Again, the money was supposed to be placed into a trust account for the defence of Mr Ruscitti. Again, that money was just deposited into the office account. As to your explanation, you indicated,

"only to bring my office account basically into line because of the pressure from the bank. I couldn't afford them to be bouncing cheques".

The theft that constituted Count 4 occurred between the period of 20 April 1995 through to 29 March 1996 and the sum involved was $10,700. On 20 April, a Mr King attended at your office and gave you a $1,000 cheque. You gave him a receipt and the money was to be used in the reduction of the debt that Mr King had incurred in relation to another solicitor's firm, Barker Gosling, and also the Child Support Agency. The money was in fact deposited into your office account. You received a series of deposits over this period of time that were put into your office account and you rendered a bill of costs to Mr King for the sum of $891.50. It was conceded by the Crown that you were entitled to those costs. The net amount that was deposited into the office account was $10,700. Mr King ultimately lodged a claim for his loss with the Legal Practice Board and was awarded $9,395.53 plus costs, making a total pay out to him of $11,452.99.

Count 5 relates to a count of false accounting. On examination of your trust account, a cheque was made payable to a Mr P. Marshall for the sum of $30,412. The cheque stub in relation to that indicates that the cheque was payable to the ANZ Statutory Deposit, in effect, being for the Law Institute a deposit for the sum of $30,412. Your account records falsely record a payment to Mr Marshall as a deposit held on trust with the Law Institute of Victoria. The sum of $30,412 was paid by you to Mr Marshall in respect to entitlements under the estate of S. Schumacher in or about April of 1995.

Count 6 involved the circumstances where a Mr McGinley came to you because he had received an income tax assessment notice from the Australian Taxation Office for back taxes and penalties that he owed. He engaged you to act for him to negotiate payment with the Australian Taxation Office. He gave you $15,000 to organise to reduce his tax liability and then to arrange the payment of any outstanding taxes to the Australian Tax Office by instalments.

On 25 May 1995, you withdrew from trust a cheque for $5,000 which was then deposited into your office account. It was recorded as coming from the trust ledger of Mr McGinley. There was no bill of costs on the file that would have warranted the withdrawal of the $5,000 on 25 May 1995 in respect of Mr McGinley. On 29 May 1995, a cheque was withdrawn from the McGinley trust ledger for the sum of $4,334 with the narration being the Commissioner of Taxation. The cheque butt recorded it as being paid to the Commissioner, but the cheque was paid to a company called Harrow Cove Pty Ltd and was deposited into their cheque account. Harrow Cove was a property company used for property development and you had done some work for them and this transaction related to some settlement moneys that were owed to Harrow Cove. In June 1995 , the sum of $3,000 was withdrawn from the McGinley trust ledger also for costs and this amount was banked into the office account.

As Count 9 is linked with Count 6, I turn now to Count 9. When the McGinleys discovered what had occurred by being informed by the Australian Taxation Office that there had not been a reduction of $15,000 in their debt, they went to see you and they requested the payment of the $15,000. On 18 March 1996 you repaid Mr McGinley the amount of $15,000 from the trust account. There was not sufficient funds in the McGinley trust account to meet that cheque and there was a deficiency of $12,334. This was in fact the same sum referred to in Count 6.

Turning to Count 7, it is common ground that this is the most significant count on the presentment. It relates to the theft of $92,000. In August 1995, you acted for people known as Kenneth and Elsa Wines. You had clients, Deborah and Marty Faragher who sought a loan of $92,000 as a mortgage on their home in Boronia. The term of the loan was to be for two years at an interest rate of 12%, with monthly repayments of $920. The Wines agreed to loan the money to the Faraghers. Ultimately, however, the Faraghers were able to secure their funds through another means and the loan did not proceed. The Wines, however, were never informed of this and presented a cheque at your office for the sum of $92,000, thinking at that stage that the Faraghers were the borrowers of the money. This $92,000 was falsely recorded as a deposit for the benefit of the Faraghers in the records of the accused. It should have been recorded that it was for the benefit of the Wines.

In early September 1995, the Wines received an epitome of mortgage from you purporting to be a mortgage between them and the Faraghers. That was a false document. The Wines received eight monthly payments of $920 and believed that they were monthly interest payments from the purported mortgage. Five of those payments were made from your office account. In relation to this you said you intended to use the money to try and survive in business and hoped over a two year period things might fall into place and that you would be able to repay it. I note that the Wines lodged a claim for their loss with the Legal Practice Board and that they were awarded a total sum, including costs and interest, of $107,475.30.

The remaining count, Count 8, relates to an offence between 8 November 1995 and 27 November 1995. This concerns the theft of $3,612.00 from a Mr Wayne Leo Meyers. You received monies from a third party on behalf of Mr Meyers and paid that into your office account. I note that there were unbilled costs assessed by the Law Institute of Victoria costing service of $1,104.00 and Mr Meyers has been awarded $4,332.15 from the Legal Practice Board.

During your interviews with the police you indicated that you might not have thought what you were doing was wrong at the time, but it obviously was. You said that at the time that these offences occurred, you were suicidal and that your financial situation was disastrous.

I have been provided with a comprehensive chronology of your history from the date of your birth in January 1954 until today. This is constituted by Exhibit 3. After a successful school career, which involved some high achievements in sporting activities, you commenced the Articled Clerk's course at RMIT in 1973. You were first married in February 1975 but that marriage lasted only a short time. In September 1978 you completed articles with Rennick & Gaynor and you were admitted to practice. In May of 1983 you married your current wife, Nonie Jean. The chronology indicates an active contribution by you to community service. You have been on the committee of the Knox Club and secretary of that club from 1980 to 1981, and president from 1981 to 1983. This club provided a venue for Lions, Apex and Rotary Club meetings. From the early 1990s you worked doing pro-bono work for the Bayswater Legal Service and you did this until your practice was placed in receivership in April 1996.

Your financial affairs deteriorated to such a stage by February 1992 that your house was sold and the family moved to rented accommodation in Wantirna South. By 31 January 1993 there had been a dissolution of your partnership with a Mr Adrian Abrahams and you then commenced work as a sole practitioner. During this period of time your domestic situation was not a happy one. Your deteriorating financial circumstances were exacerbated when you purchased the rented accommodation in which you were then living in at 90 Amersham Drive, Wantirna. You lived there from late 1994 to early 1996 after which time you have continued to live in rented accommodation.

Your current circumstances are that you have now been employed for some 12 or 13 months by a firm of accountants. You are working an average of 20 hours a week and the type of work done by you varies. It has been described as menial work, doing tasks such as deliveries, checking mail and lodging documents. The work does not involve any responsibility in terms of legal work or advice work.

I have received and read a number of psychological and psychiatric reports. These include a report from Dr Timothy Blashky, dated 18 February 2002; Dr Robert Millard, dated 23 December 1998; Dr John Munro, dated 16 February 2002; Professor Graham Burrows, dated 6 October 2000; and a one page document from Professor Burrows dated 6 May 2002. I have also received and read a report by Mr Ian Joblin, psychologist, dated 11 August 2000, and a further report prepared by him dated 1 May 2002. I have also received a report prepared by Dr Lester Walton, consultant psychiatrist, dated 7 May 2002.

Dr Blashky first saw you on 21 February 1996 and then saw you regularly as a treating psychiatrist until January 1997. He took the view that you had been depressed for some years prior to your consulting him. He said that when he saw you in 1996,

"your thought process was in such a poor state that there was no way you could have functioned as a solicitor or indeed think things through in a logical way".

Dr Blashky then referred you on to a Dr Millard because of a perceived conflict of interest in relation to his treatment of your wife. Dr Millard reports that he formed the view that you were suffering from a major affective disorder, depressive type, and that you were at risk of suicide. Treatment was instituted in the form of various anti-depressant medications.

Subsequently, you were again referred on to a Dr John Munro, consultant psychiatrist, who began treating you on 25 January 1999. Dr Munro concluded that you had symptoms from the early 1990s even before you sought medical help consistent with the development of a depressive illness.

This opinion was confirmed by Professor Burrows who reviewed your psychiatric history in a report dated 6 October 2000. He said,

"From the history I have obtained, I would believe he has had significant problems prior to the date of the offences, which obviously contributed to poor judgment. He obviously made inappropriate decisions and these are the result of his major affective disorder and depression."

He again confirmed that opinion in a report dated 6 May 2002 when he said,

"I believe that Mr Howse has suffered from depression since the late 1980s and this has had a major effect on his ability previously to work in the legal profession.

Further reports from Ian Joblin dated 11 August 2000 and 1 May 2002 respectively confirmed the psychological diagnosis as well as confirming that your psychological state had been dysfunctional for some considerable time, probably beginning in the late 1980s and continuing into the 1990s.

Finally, the report from Dr Lester Walton acknowledged the unanimity of psychiatric opinion that you have suffered from a chronic major depressive disorder. He acknowledged the condition seemed to have emerged towards the end of the 1980s and has proved resistant to treatment. I heard evidence in this Court from Professor Burrows and Dr Munro confirming the general analysis of your condition and its entrenched state.

I have been provided with a number of impressive character references and I have heard detailed character evidence from the following witnesses, namely, Thomas Allan Laughlin, Andrew Peter Spinks, Michael Geoffrey Jacobs and Michael John Lefebvre.

Turning to the broader sentencing considerations, the maximum penalties in respect of these offences at the relevant times are as follows; pursuant to s.42 Legal Profession Practice Act the penalty for deficiency in a trust account is a maximum of seven years; the penalty for theft is a maximum of ten years, and the penalty for false accounting carries with it a maximum of seven and a half years.

The community is entitled to expect high standards of integrity and responsibility from the legal profession. It is perhaps well expressed in Cole, Unreported 10 May 1974:

"Defalcations by persons in a position of trust have to be regarded by the courts as much more serious than other types of defalcations. In this regard the solicitor stands in a particular position. He is an officer of this court, he is held out by it as a fit and proper person to practise his profession, to receive his clients' money and to be the recipient of their justified financial trust and confidence. It is not possible for the courts to regard lightly the defaulting solicitor whose actions tend to undermine the security of ordinary people and the fabric of a profession on which and on whose integrity the public are to such an extent dependent. This is particularly the type of case in which the court is entitled to express on behalf of the community, its disapproval of a particular type of breach of trust involved."

It is quite clear from the material, and readily conceded by the Crown, that these offences were not committed by you out of greed, but rather, arose out of you finding yourself in disorganised financial circumstances both privately and within your office. I accept the proposition that these series of transactions actually started by accident in the sense that the wrong money was paid into the wrong account, but that thereafter you availed yourself of the consequences of that accident and, as you put it yourself, kept digging yourself into a deeper hole. I am however troubled to some extent in the sense that some of your activities in the course of these transactions could only be classed objectively as acting out of self-interest, and I refer particularly to Count 7. The victims in that count were elderly people who had placed great trust in you. This breach of trust has occasioned for them a significant loss of confidence in the legal profession. I have also read the Victim Impact Statement from Dennis King who expresses a sense of grievance.

I turn now to your individual circumstances, namely, your co-operation with the police and your plea of guilty. You immediately co-operated with Chief Inspector Delaney of the Law Institute of Victoria following his attendance at your office in April 1996. You co-operated with the police in the course of understanding and explaining your accounts in 1998. You co-operated again with the police during five Records-of-Interview in 1999. You pleaded guilty at the earliest opportunity on 21 January of this year and you pleaded guilty effectively to the charges that form the content of this presentment. It has been submitted that you suffer from a very high level of shame and remorse and that this has been confirmed by the psychiatric, psychological and lay evidence that I have had put before me. Given your erstwhile good character and personality, I accept that you are genuinely remorseful.

It was put that you have no prior convictions or subsequent convictions. Although I accept that has marginal broad relevance, it is of little weight when we are dealing with a breach of trust by a solicitor who is an officer of the Court. It was also put that you suffer because you lose your right to practise your profession. Again, whilst that is of relevance in the broader scope, it is of less significance when the offence itself strikes at a breach of trust by a solicitor.

I also note that you are prepared to consent to payment to the Legal Practice Board of the sum of $109,446.13 by way of compensation together with costs agreed at in the sum of $1500.00.

Mr Holdenson submitted that much weight is to be given in mitigation to the delay in this case as a mitigating factor. Whilst it is recognised that anxiety and uncertainty for a defendant awaiting trial is punishment in itself, each case still depends on the nature of the criminality, the investigation and its own facts. Investigations into white collar crimes are complex and lengthy, and this is particularly so in relation to the examination of solicitors' trust accounts. The investigating police officer has to be sure that at the end of his/her investigations he/she has covered the appropriate criminality both from the perspective of victims, the Law Institute and the community at large.

This is not necessarily an easy task when the investigators are relying on records that need to be interpreted by the makers of the record as well as the investigator. It is not uncommon for these kinds of investigations to take considerable time, but it is also in the interests of the community and the legal profession that they be done thoroughly. In my view, it will nearly always be an inevitable consequence of this kind of crime that there will be a delay between the time of the commission of the offence/offences and the time of presenting an accused at court. Having said that, it must be acknowledged that in the course of the history of this matter you have been particularly co-operative with the police, attending and explaining files right from the outset. In my view, you should be given considerable weight for that co-operation and I am prepared to allow some weight for the anxiety that you would have experienced awaiting trial.

The most significant factor in relation to your individual circumstances in my opinion is the fact that you were suffering from a significant mental disorder well prior to the commission of these offences. The evidence before me is overwhelming that you were suffering an ongoing and increasing depressive disorder which affected your judgment, your ability to make decisions and your capacity to cope as a solicitor.

Brennan J. in Channon (1978) 20 ALR 1, at pages 4-5 said the following on the relevance of psychiatric abnormality which is equally relevant to your circumstances:

"Psychiatric abnormality falling short of insanity is frequently found to be a cause of, or a factor contributing to, criminal conduct. The sentencing of an offender in cases of that kind is inevitably difficult. The difficulty arises in part because the factors which affect the sentence give differing significance to an offender's psychiatric abnormality. An abnormality may reduce the moral culpability of the offender and the deliberation to which attended his criminal conduct, yet it may mark him as a more intractable subject for reform than one who is not so affected, or even as one who is so likely to offend again that he should be removed from society for a lengthy or indeterminate period. The abnormality may seem, on one view, to lead towards a lenient sentence, and to another to a sentence which is severe."

In your case, the circumstances suggest that you are no risk to the community today given that you are undergoing intensive treatment and that you are participating in employment that involves no opportunity for further offending.

Mental disorder at the time of the offence can affect the sentencing discretion in the following ways. It may reduce the moral culpability of the offender to the extent that it warrants a lesser penalty. It is also relevant to the question of general deterrence because the mentally disordered offender is not considered to be an appropriate medium for making an example to others. See Mooney, Unreported 21 June 1978; Fraser, Unreported 15 February 1980; Kaye (1986) 22 A Crim R 366.

Your history is well documented by treating doctors and the evidence was overwhelming that you suffered from a major chronic depressive disorder at the time of these offences. It must be understood that there is a difference between someone who is depressed and an individual who has a chronic major depressive illness extending over a long period of time and which has been resistant to available treatment. You are someone who falls into the second category and, not surprisingly given the evidence, this was not challenged by the Crown. I am satisfied that there is a significant causal connection between your condition and these offences.

In the end, I must balance the principles of sentencing enunciated in s.5 of the Sentencing Act. Bearing in mind the breach of trust and the need for the courts to be vigilant to ensure that the public have confidence in the integrity and responsibility of the legal profession, I consider that a sentence of imprisonment must nevertheless be imposed, but having regard to all those factors involving your individual circumstances I am satisfied that the appropriate course to adopt would be to suspend the service of that sentence in its entirety.

Before I make such an order I am bound to explain certain things to you. Firstly, the purpose and effect of a wholly suspended sentence is to impose a sentence of imprisonment on you, but that that sentence is not to be served by you unless you breach the order. A breach occurs if you commit another offence punishable by imprisonment during the period of suspension. Punishable means liable to be punished whether or not it was punished by imprisonment. If you commit such an offence it is very likely that you would then have to serve the full period of the sentence that has been suspended.

I have arrived at the view that the appropriate sentences to be imposed upon you are as follows:

You are sentenced to be imprisoned for a period of 12 months

You are sentenced to be imprisoned for a period of 12 months.

You are sentenced to be imprisoned for a period of 3 months

You are sentenced to be imprisoned for a period of 3 months.

* The whole of the sentence imposed on Count 5, namely three months; and

* Three months of the sentence imposed on Count 6.

are to be served cumulatively upon the sentence imposed on Count 7, making a Total Effective Sentence of three years imprisonment. Accordingly, you are sentenced to imprisonment for a period of three years and I direct that the service of the entirety of that sentence be suspended for a period of three years.

I am prepared to make the orders sought by consent in this matter pursuant to s.86 Sentencing Act 1991.

I order that Peter John Howse pay the Legal Practice Board of Victoria the sum of $109,446.13 by way of compensation pursuant to s. 86 Sentencing Act .1991.

Further I order that the costs of the Legal Practice Board, of and incidental to this application, be fixed in the sum of $1,500.00 and be paid by Peter John Howse.

Profession Practice Act 1958

At a glance

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Before

Source

Judgment (72 paragraphs)

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Legislation Cited (2)

Cases Cited (1)