Taylor v Law Society of New South Wales

Supreme Court of NSW|2017-06-08|Before: Fullerton J

Self-represented (Plaintiff) Solicitor for Law Society of NSW (Defendant) File Number(s): 2016/281873

Judgment

HER HONOUR: By summons filed on 20 September 2016 the plaintiff appeals under s 100(1) of the Legal Profession Uniform Law (NSW) ("the Uniform Law") from a decision of the Council of the Law Society of New South Wales ("the Council") of 18 August 2016 refusing to issue her with a practising certificate for the year ending 30 June 2017, the Council being of the opinion that she was not a fit and proper person to hold a practising certificate pursuant to s 45(2) of the Uniform Law.
The Uniform Law is a schedule to an Act of the Victorian Parliament which is applied as a law of New South Wales by the Legal Profession Uniform Law Application Act 2014 (NSW). The Uniform Law came into operation on 1 July 2015. It governed the Council's decision to refuse to issue the plaintiff with an Australian practising certificate. The consequence of that decision is that the plaintiff is a "disqualified person" for the purposes of the Uniform Law.

The applicable provisions of the Uniform Law

Part 3.3 of the Uniform Law provides for the grant and renewal of Australian practising certificates. Section 42 sets out the objects of that Part which include providing a system for the grant and renewal of Australian practising certificates to eligible and suitable persons who are admitted to the Australian legal profession in any jurisdiction. These objects are consistent with those in s 3 of the Uniform Law. They include ensuring lawyers maintain high ethical and professional standards in the provision of legal services in order to enhance the protection of the clients of law practices and the protection of the public generally.
Section 45 of the Uniform Law confers the power to grant and renew practising certificates. Section 45(2) provides that the Council must neither grant nor renew a practising certificate if it considers an applicant is not a fit and proper person.
Rule 13(1) of the Legal Profession Uniform General Rules 2015 (NSW) sets out various matters the Council may have regard to in considering whether an applicant is a fit and proper person to hold an Australian practising certificate.
At the time of the Council's decision, and currently, those matters include whether the plaintiff (as an applicant for the grant of a practising certificate): 1. is of good fame and character (Rule 13(1)(a)); 2. is subject to an unresolved complaint or investigation (Rule 13(1)(f)(i)); 3. has had the right to engage in legal practice suspended (Rule 13(1)(i)); 4. has contravened a law about trust money or trust accounts (Rule 13(1)(j)); 5. has had a manager appointed in relation to any legal practice in which she was engaged (Rule 13(1)(k)); 6. has provided incorrect or misleading information under an Australian law relating to the legal profession (Rule 13(1)(n)); 7. has contravened an Australian law relating to the legal profession (Rule 13(1)(p)); and 8. any other matter that is related to matters referred to in the rule (Rule 13(1)(u)).
The conduct of the plaintiff which grounded the Council's decision to refuse to grant her a practising certificate was revealed following an external investigation into her law practice in June 2015 undertaken pursuant to s 268 of the Legal Profession Act 2004 (NSW) (since repealed).
In his report of 23 June 2015, the investigator, Gavin Connor, was satisfied that the plaintiff had misappropriated trust monies in breach of various provisions of the repealed Act in force as at June 2015 and contrary to the Regulations made under that Act. Mr Connor also reported that the trust account records which he examined needed to be reconstructed before confidence in them could be restored and, further, that he was unable to say with certainty that the money the plaintiff claimed to have repaid constituted restitution of the funds. Mr Connor's report was tendered as part of the plaintiff's case in these proceedings.
The plaintiff objected to the Council's tender of a report of Jean Sayer, an investigator appointed by the Council on 18 August 2016 under s 163 of the Uniform Law, to further investigate the affairs of the plaintiff's practice. The report was an annexure to Ms Sayer's affidavit of 15 December 2016. Objection was also taken to Ms Sayer's affidavit of 1 June 2017. In the course of the hearing I heard argument on the question of the admissibility of her evidence.
The plaintiff's counsel submitted that Ms Sayer's report was commissioned by the Council contrary to s 25 of Schedule 4 of the Uniform Law and that it was not admissible in these proceedings for that reason.
That section provides: 25 Investigations under this Law of prior matters (1) An investigation may be commenced under this Law on or after the commencement day in relation to matters (including acts and omissions) occurring before that day, for the purpose of - (a) monitoring compliance by a law practice or person with the provisions of the old legislation (or of regulations under the old legislation) relating to trust money and trust accounts; or (b) determining whether or not a law practice or person has contravened any of those provisions; or (c) detecting or preventing defaults, fraud or defalcation in relation to a law practice; or (d) investigating the affairs or specified affairs of a law practice - so long as the same matters had not been, or had not commenced to be, investigated before that day under Chapter 3 of the old legislation. (2) This clause does not authorise an investigation to be commenced after the commencement day in relation to a matter if an investigation of the relevant kind could not have been commenced under the old legislation in relation to the matter had the old legislation not been repealed.
While it would not have been open to the Council to commence an investigation under the Uniform Law into the same matter that was the subject of an investigation under Chapter 3 of the repealed Act, on my construction of s 25(1)(d) it did not prevent the Council from continuing an investigation into the affairs of the plaintiff's law practice in circumstances where the investigation under the repealed Act left a number of matters to be further investigated as was made clear in Mr Connor's report. In addition, since these proceedings are a hearing de novo into the question whether the plaintiff should be granted a practising certificate, a proceeding in which the Council is entitled to lead evidence on the question of the plaintiff's current fitness (as to which see [24]-[25] below), I was satisfied that both of Ms Sayer's affidavits (including her report) were relevant to the issues raised in these proceedings including, in particular, whether I am satisfied that in all the circumstances the plaintiff is currently a fit and proper person to hold a practising certificate.
I will review Ms Sayer's evidence later. Suffice to say that upon the admission of Ms Sayer's affidavits into evidence, the plaintiff took no issue with her stated conclusion that between 28 December 2012 and 17 April 2015 the plaintiff misappropriated trust monies totalling $141,002.57, or that during that period the plaintiff reimbursed the trust account in a total amount of $77,408.08, with the balance of the deficit being repaid after that date.
Additionally, the plaintiff took no issue with Ms Sayer's findings that on examination of the banking records of the practice all misappropriated trust monies were transferred by the plaintiff into the practice's general account and dispersed from that account.
The plaintiff did not bring a case in reply.

Relevant sections of the repealed legislation

Part 3.1 of the repealed Act governed the manner in which law practices were required to deal with trust monies including, in s 242 of that Act, "to ensure trust money is held by law practices in a way that protects the interests of persons for or on whose behalf money is held, both inside and outside this jurisdiction".
Part 3.1 also provided how trust monies were to be dealt with by law practices and offences where trust monies were dealt with contrary to that Part. It is the Council's case that the plaintiff's conduct in dealing with trust monies between 28 December 2012 and 17 April 2015 contravened various of these provisions, including s 255 which provided sanctions for holding, disbursing and accounting for trust money; s 260 for intermixing money; and s 262 where there is a deficiency in a trust account.
On 25 June 2015 the Manager of Professional Standards of the Law Society forwarded a copy of the Connor report to the plaintiff advising her that the Council would be asked to consider passing various resolutions concerning her right to continue to practice and inviting her response.
In a letter dated 29 June 2015, the plaintiff acknowledged that in her operation of the trust account of the law practice between 2013 and 2015 she had seriously breached her professional obligations but denied making any attempt to conceal her repeated and deliberate misuse of client funds. She claimed that she had been transparent in her dealings with the trust account (in the sense that the misappropriations were revealed in the bank statements) and that the unauthorised withdrawals were disclosed in trust account declarations filed with the Law Society and to the external auditors. In that same correspondence she said that she was under significant psychological and physical stress when she used client funds to meet what she claimed was a shortfall in the cash flow she needed to operate the law practice, and that she had no intention of permanently depriving her clients of those funds.
The plaintiff also cited her current and future commitments to her clients which she believed justified retaining her practising certificate in order to fulfil their legitimate expectations that she would be in a position to continue to deliver legal services. She also asserted that continuing in practice would give her the opportunity to consolidate what she claimed was the financial and operational health of her practice.
On 30 June 2015 the Council passed resolutions, inter alia, immediately suspending the plaintiff's 2014/2015 practising certificate pursuant to s 548 of the repealed Act and appointing a manager to the law practice. The stated grounds for that decision included what the Council regarded as the extreme seriousness of the plaintiff's admitted misappropriation of trust funds, together with her wilful breach of various trust account requirements, both of which, in the Council's view, being incompatible with the inherent requirements of practice of an Australian legal practitioner.
The plaintiff did not appeal that decision to this Court in the mechanism provided for in s 459 of the repealed Act and made no representations to the Legal Services Commissioner or to the Council concerning the decision to suspend her practising certificate as provided for in s 548(6) of that Act.

The nature of these proceedings and their determination

Section 100 of the Uniform Law confers a right of appeal from (or to seek a review of a decision made by) the Council in relation to practising certificates, including a decision to refuse to grant an Australian practising certificate.
Section 100 replaces s 108 of the repealed Act which conferred a right of appeal against similar decisions under that Act. As with the appeal under the repealed Act (see Roulstone v New South Wales Bar Association [2015] NSWSC 1749 at [3] and Montenegro v Law Society (NSW) [2015] NSWSC 867 at [2]) an appeal under s 100 is, a hearing de novo: 1. sub-section 100(2) provides that "an appeal or review under this section may be made to review the merits of the decision concerned"; 2. sub-section 100(3) provides that the Court may make any order it considers appropriate; and 3. sub-section 100(6) allows for fresh evidence, or evidence in addition to what was considered by Council.
The plaintiff's counsel sought to persuade me that the application to set aside the Council's decision must succeed, inter alia because of the inadequacy of the Council's reasons. That approach misconceives the nature of these proceedings. They are not proceedings for judicial review of an administrative decision. They are proceedings, convened as a de novo hearing, which concerns the question whether I am satisfied, on the evidence before me, that the plaintiff is currently a fit and proper person to hold a conditional practising certificate. The plaintiff bears the onus of establishing that she is currently entitled to such a finding, not that the Council was in error in refusing her a practising certificate in August 2016. If she discharges that onus, it would follow that the Council's decision would be set aside and an order made that she be granted a conditional practising certificate.
The Council submitted that the effect of s 45(2) of the Uniform Law dictates that if the plaintiff fails to discharge that onus the summons should be dismissed with costs.

The fit and proper person test

In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33; Mason CJ said at [63] of the concept of a person being "fit and proper": The question whether a person is fit and proper is one of value judgment. In that process the seriousness or otherwise of particular conduct is a matter for evaluation by the decision maker. So too is the weight, if any, to be given to matters favouring the person whose fitness and propriety are under consideration.
In the same case Toohey and Gaudron JJ said at [36]: The expression "fit and proper person", standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of "fit and proper" cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
The determination as to whether a person is fit and proper in any given context provides a wide scope for discretionary judgment including broad bases for rejection (see Commissioner for ACT Revenue v Alphaone Pty Ltd (1994) 49 FCR 576; [1994] FCA 1074 at [23], per Northrop, Miles and French JJ).

Solicitors and trust money

The "fit and proper person" test, whether it is applied to practitioners who seek a right to practice under s 45 of the Uniform Law or to a person who seeks to regain a right to practice as a solicitor after having misappropriated trust monies or misconducted themselves in other ways, cannot be divorced from the community's legitimate expectation that a legal practitioner is a person whose honesty is beyond question and someone in whom they can confidently place great faith and trust, including when handling money on their behalf.
In Kumar v Legal Services Commissioner [2015] NSWCA 161, Leeming JA (with whom Basten JA and Sackville AJA) agreed, stated at [61]: … Lest there be any doubt about it, even a temporary use by Mr Kumar of his client's funds without prior approval amounts to serious and deliberate dishonesty. That is precisely the sort of conduct which is antithetical to the trust and confidence which is required by a solicitor with custody of his or her clients' money.
Consistently with the extract of the decision of the High Court in Australian Broadcasting Tribunal v Bond, the question whether the plaintiff is currently a fit and proper person falls to be decided referable to what the evidence reveals about a range of matters, including whether improper conduct has occurred (as to which there is no dispute in these proceedings); what motivated that course of conduct; whether there is likely to be a repetition of the misconduct or whether it can be assumed that it will not recur such that the community can have confidence that it will not be repeated in the course of the plaintiff discharging her duties and obligations as a legal practitioner.
While I accept that past disentitling or disreputable conduct does not lead inevitably to an adverse finding in respect of a person's current fitness to practice, the past conduct in a particular case may be so serious that despite restitution, contrition and the person's proven rehabilitation, the onus of proving current fitness is not discharged.
On the issue of contrition, I note the observations of Mahoney JA (Meagher JA concurring in a separate judgment, Kirby P dissenting in the result) in Dawson v Law Society of New South Wales [1989] NSWCA 58 at 13 where his Honour said: … Repentance is relevant, at least in the ordinary case, because it assists the conclusion that the applicant has left his previous standards or values and adopted more appropriate ones. Without that, his conduct in the future is unlikely to be acceptable.
One of the issues that arises on the evidence in this case is the extent to which the Court can accept the plaintiff's assertions that her past misconduct will not be repeated (or that there is no risk of any repetition of that conduct) in circumstances where, over the course of successive years between 2012 and 2015, when she was confronted with having misused clients' funds she repeatedly claimed she would desist from that conduct only to repeat it (sometimes within weeks) when she perceived a need for funds to meet her private or professional needs.
On any view of the authorities of this Court to which I was referred, a solicitor's improper dealings with trust monies is regarded as an extremely serious matter involving, as it necessarily does, a gross breach of trust and a grave abdication of the solicitor's legal responsibilities and obligations. Unsurprisingly, such conduct usually leads to a finding that the solicitor is not a fit and proper person to continue to practice. Where a person seeks to be reinstated to practice after a period of disqualification, as is the case here, and when reviewing the circumstances contextual to the misuse of trust funds, one of the questions that inevitably arises in applying the "fit and proper person test" is whether, with the effluxion of time, the Court can be confident that there will be no repetition of the misconduct.

The plaintiff's practice as a legal practitioner

The plaintiff was admitted to practice on 15 December 2000. On 27 August 2007 she commenced practice as the principal solicitor of Erica B Taylor Pty Limited. From 17 July 2009 the practice traded as "Lexicon Legal". A statutory trust account was opened with the Castle Hill Branch of the ANZ Bank on 27 July 2010 ("the trust account").
In December 2012, the plaintiff entered into a three-year lease for commercial premises at Suite 305, 4 Columbia Court, Baulkham Hills and employed a part-time secretary and a part-time paralegal.
She gave evidence that she had little experience in private practice and when she did she worked as a junior lawyer. She did not prepare a business, financial or marketing plan and relied heavily on what she described as "the income from one client" which she received at a contractor's rate to fund the practice.
The plaintiff gave evidence that she quickly realised that she had overcommitted herself financially but felt she had no other option but to seek to maintain the practice as a sole practitioner and to meet her financial obligations as best she could, including, it must necessarily follow, by accessing client funds for her own purposes. She also gave evidence that it was at this time that she and her husband made the decision that he would resign from his work in the family business to care for the two children of the marriage. She said she believed she could generate enough income from her existing client base to sustain the business and to provide for her family whilst also devoting time to enlarging her client base.

December 2012 - the first unauthorised withdrawal from the trust account

The plaintiff first misappropriated monies from the trust account on 28 December 2012 when she withdrew $1,000. She said that despite having increased her overdraft facility to allow her to enter into the lease over the premises at Baulkham Hills, additional funds were not available for other purposes prior to the Christmas break. On 7 January 2013 $1,000 was reinstated to the trust account.

February 2013 to 13 August 2013- further unauthorised withdrawals from the trust account

In the period 15 February 2013 to 2 August 2013, the plaintiff made at least fourteen unauthorised withdrawals from the trust account totalling $26,032.40. In the same period she deposited $2,500.00 into the trust account to partially rectify the deficit in trust monies.
In July 2013 the plaintiff completed Parts A and B of the Law Practice Confirmation and Trust Money Statement ("Parts A and B"). Pursuant to ss 272-278 of the repealed Act and clause 91 of the Legal Profession Regulation 2005 (since repealed) a law practice was obliged to submit completed Parts A and B to the Law Society each year in respect of the 12-month period ending 31 March in respect of any monies held on trust in that period. This was done electronically. The law practice was also obliged to engage an external examiner to inspect the trust account records. That person was, in turn, obliged to submit an External Examination Report to the Law Society.
The plaintiff retained Hamish Dawson, a chartered accountant and authorised external examiner, to inspect the trust account records of the law practice.
On 8 August 2013 the plaintiff deposited $23,532.40 to the trust account to rectify the deficit in trust monies caused by her unauthorised withdrawals in the period February 2013 to 2 August 2013. She did so conscious of the pending inspection by Mr Dawson.
The plaintiff gave evidence that these monies were partly borrowed from her uncle. She said she told her uncle that she had taken money from the trust account and he agreed to assist her by loaning her $20,000. She said in cross-examination that the loan was a short-term loan and that she repaid it from her overdraft. No evidence was called from the plaintiff's uncle to confirm that she disclosed her improper dealings with the trust account to him.
Standing alone, the absence of supporting evidence of this kind (and supporting evidence of other "loans" she claimed she received from various sources over the course of her improper dealings with client funds) may not have had any significant bearing on whether the plaintiff has discharged the onus of establishing, in these proceedings, that she is a fit and proper person to be issued with a practising certificate. However, for reasons which I will later expand upon, having given close consideration to the plaintiff's evidence generally, and in particular the explanations she has given both to the Court and to others for her misconduct, I am left with some concerns as to whether those aspects of her evidence which concerned her financial circumstances, in particular her claim that she was in such desperate need of funds that she was compelled to use the trust account funds to meet her financial commitments, was the sole explanation for her misappropriation, as distinct from the use of client funds at other times being simply opportunistic.
On 13 August 2013, Mr Dawson attended on the plaintiff at the law practice to inspect the trust account. He gave evidence that at the outset of their meeting the plaintiff disclosed having made a number of unauthorised withdrawals totalling "about $20,000" which she told him was reflected in the bank statements but not in the trust account records. She described the trust account records as being "in a bit of a mess". She told him the funds she had taken had been repaid.
According to Mr Dawson, the plaintiff said the following: I am sorry. I am very embarrassed and ashamed about the situation. I have not been well. I have been suffering from anxiety and depression and I am struggling to cope with managing the finances of my practice since I moved into this office. I know that is not an excuse for what I have done.
Mr Dawson deposed to a further conversation with the plaintiff to the following effect: Mr Dawson: Your records are very poorly maintained. You have not complied with your obligations to complete trial balances each month, maintain client ledgers and issue receipts and statements to clients. Plaintiff: I know. I had been using SILQ which I found to be a good system, but then I had some issues with an incorrect entry which threw my balances out of whack. I didn't know how to reverse the entry to fix the issue. I should have contacted SILQ but I switched over to a manual system using excel spreadsheets. The records are a mess. Mr Dawson: I can see that you have restored the moneys that you withdrew against the trust account. I will help you tidy up the records. You need to keep on top of the records and not make any withdrawals that are not authorised by clients.
Parts A and B, which had been completed by the plaintiff, and the External Examiner's Report prepared by Mr Dawson were submitted to the Law Society that day.
In Part B the plaintiff stated that as at 31 March 2013 there was a difference between the "reconciled authorised ADI Balance, cash book and list of trust ledger accounts and their balance", which she claimed was the result of "errors in posting transactions and use of account".
The plaintiff did not disclose to the Law Society that the reason for the differences was because she had been misappropriating trust monies. In cross-examination, she accepted that in lodging Part B in that form she was being deliberately untruthful. In his External Examiner's Report Mr Dawson did not disclose the fact that the plaintiff had been misappropriating monies from the trust account. He accepted this in cross-examination.
In her evidence in the proceedings, consistently with her explanation to the Council for her misconduct in the various submissions she has furnished between June 2015 and August 2016, the plaintiff claimed that whilst she knew that using the trust account for her own purposes was wrong she was in "survival mode", being overwhelmed by her private and professional financial circumstances and her professional and family commitments and that she was in a state of anxiety and depression and not acting or thinking rationally. In her submission to the Council in March 2016 she said as follows: 30. As a result of the increased pressures I was experiencing, namely a larger practice; sole family financial responsibility; a son who was hospitalized; the pressures of work and making payments to the ATO and the bank; as well as knowing I had breached my professional obligations, I again started to experience symptoms of depression. I felt I had lost control of all aspects of my life and found it very difficult to do anything other than go through the motions with respect to my practice. I was physically and mentally exhausted. I began to feel completely overwhelmed and worried that I was not going to be able to manage all of these responsibilities at once and I felt guilty about my unprofessional actions. I was afraid that it would all come crashing down. 31. I started having very distressing thoughts, which at times became all consuming. I did not share how I was feeling with Matthew or any of my family, nor did I disclose to Matthew the financial situation I found myself in. 32. I did however seek the assistance of my doctor and psychologist again. I continued my medication for depression and saw my psychologist on a few occasions after this relapse.
She went on to explain that she believed that by making good the deficiency in the trust account with the loan from her uncle she would rectify the situation before Mr Dawson conducted his examination and furnished his report to the Law Society.
In cross-examination she agreed that this approach entailed a rational thought process. It seems to me that it also entails some planning and a deliberate, even contrived use of Mr Dawson as the external examiner to assist her to avoid revealing the true position to the Law Society.

16 August 2013 to 10 July 2014 - further unauthorised withdrawals from the trust account

Notwithstanding Mr Dawson's admonition to the plaintiff not to make any unauthorised withdrawals from the trust account (and her promise to him that she would not do it again), she continued to misappropriate trust monies.
In the period 16 August 2013 to 17 June 2014, she made at least 27 unauthorised withdrawals totalling $38,948.59, the majority of which were paid into her office general account with $10,450 identified as a payment to her personal account.
In the period 27 May 2014 to 3 July 2014, $25,935.09 was deposited into the trust account, the major source being payments from the office account, thereby partially rectifying the trust account deficit. She gave evidence that of that amount $8,931.75 was from a second tier lender, which she said had the effect of increasing her liabilities and further compounding her cash flow problems.
In her March 2016 submission to the Council she said that in March 2014 she stopped taking her antidepressant medication and in August 2014 she "started to experience more severe symptoms of depression as a result of life events". She went on to say: 39. … at that time I was about to turn 39 (the age of my father when he died) and my eldest son was going to turn 8 years old (the age I was when my father died) in the following June. I found it very difficult to cope in all aspects of my life, both personally and professionally. I chose to manage my mental health issues by simply ignoring them. I did not want to recommence taking anti-depressants, nor did I want to speak to my doctors because I was so ashamed of my behaviour with respect to the trust account. I now realise that was a serious error of judgment on my part.
In or around June 2014 the plaintiff completed Parts A and B for the 12-month period ending 31 March 2014 after which she contacted Mr Dawson to arrange for him to conduct a further external examination of the trust account. On 9 July 2014 the plaintiff caused the deficit in the trust account to be "set off" against four invoices totalling $4,090.70 and on 10 July 2014 (presumably before or during Mr Dawson's attendance that day) she deposited $8,931.75 into the trust account, apparently to address the deficit in trust monies caused by the her unauthorised withdrawals in the period 16 August 2013 to 17 June 2014.
When Mr Dawson attended to inspect the trust account records the plaintiff openly disclosed to him that she had continued to misappropriate client monies over the preceding twelve months. She told him that she was struggling to keep up with her overheads in running the practice having made a number of financial commitments in setting up the practice that she could not reverse. She told Mr Dawson that the $34,000 she had withdrawn had been repaid. For reasons that are less than clear, beyond admonishing the plaintiff and suggesting she obtain advice to better manage her practice Mr Dawson again took no action. Despite the trust account records being poorly maintained, Mr Dawson managed to satisfy himself that the misappropriated monies had been repaid.
Parts A and B, completed by the plaintiff, and Mr Dawson's External Examiner's Report were submitted to the Law Society on 10 July 2014.
In Part B, the plaintiff indicated that as at 31 March 2014 there was a difference between the "reconciled authorised ADI Balance, cash book and list of trust ledger accounts and their balance" and that the reason for the difference was "Office transactions made out of wrong account". Again, the plaintiff failed to disclose that the reason for the differences was because she had been misappropriating trust monies. She admitted in cross-examination that the information she furnished to the Law Society was untruthful.
In his External Examiner's Report, Mr Dawson disclosed that the plaintiff had been misappropriating monies from the trust account. He reported as follows: Although the amount of transactions does not amount to using a full computer system. The Solicitor is currently using excel which in my opinion is unacceptable. It does not comply with the regulations. All 12 Bank Reconciliations are incorrect. They do not balance. All 12 Trial Balances do not balance. Client funds have been withdrawn to fund the business during the year. I believe that all funds have since been replaced and the trust account balances as at the date of audit. The trust account has not been maintained properly. Bookkeeping has not been very good. There are no dates of completion of any of the reports. The trust ledgers have been overstated in the trial balance and ledger cards, hence total client funds to not amount to the Bank Balance throughout the whole of that year. In the records she has maintained the balances of the ledgers of what they should be had she not drawn against them. I understand that the practitioner has some long term health issues and this is a major factor in her lax bookkeeping. At all times during the audit she was honest and upfront and we quickly identified the problems. She showed me that she has access to a trust accounting computing system and we agreed that she should start from the 1st August this year and begin recording trust funds in this system.
In cross-examination the plaintiff sought to explain her reasoning in moving to rectify the deficiency in the trust account before the arrival of Mr Dawson in July 2014 as follows: Q. Why not leave the trust account in deficit at the time he conducted his examination in July 2014? A. I think I thought at the time that ‑ well, I knew at the time I needed to get the funds back into the account and I was, as in 2013, I was doing that. Because, I had spent in particular in 2014, I had spent a lot of time ruminating over what I had done and how I was going to fix it. I knew that I had to have these external examinations undertaken and I wanted the trust account to be ‑ the deficit to be rectified and the funds to be intact as at the time he attended to undertake his examination. Q. Why did you want to have the trust account attended to and rectified before Mr Dawson conducted his external examination? A. So that he could confirm that any moneys that had been taken by way of unauthorised withdrawals had all been paid back.
The plaintiff went on to explain in her evidence that, as the sole breadwinner for her family, she was "taking each day as it came, paying bills as they came and managing her client matters and her home life". She also said that she was fearful that if she had spoken to her husband about the true state of their financial affairs he would have ended the marriage.

July 2014 to 16 June 2015 - further unauthorised withdrawals from the trust account

Notwithstanding Mr Dawson's further admonitions to the plaintiff and her repeated promise to him that she would not use client funds for her own purposes, again she continued to misappropriate monies from the trust account within weeks of Mr Dawson's departure.
In the period 22 July 2014 to 17 April 2015 there were 37 unauthorised withdrawals totalling $75,021.42. In November 2014 the plaintiff caused the deficit in the trust account to be "set off" against three invoices apparently owing to the practice totalling $3,785.00. On 7 January 2015 and 31 March 2015, she made two deposits totalling $1,730.10, partially rectifying the deficit in trust monies.
In cross-examination she gave the following evidence: Q. Yet you continued to withdraw moneys after you had that conversation with him [Mr Dawson]? A. Yes, at the time I didn't know what to do. I knew that I had to ‑ I had commitments, I had to keep going and I didn't know how to ask for help. I didn't feel I could ‑ I felt and enormous sense of pressure to keep going as I was in terms of having my practice and having the family life that I did and being the bread winner while my husband was at home with the kids and I didn't know how to put my hand up and say I was really struggling to cope at that time. I was going through the motions every day and I was just trying to keep up with all of my commitments. I didn't feel I could turn to anyone as at that date with July 2014 to seek help. In earlier ‑ around April, March/April 2015 that is when I started realising I did need to ask for help to try and get the situation under control. Q. You didn't think the situation was out of control in July 2014? A. I did but I thought I could get it under control and I now realise because of the state I was in mentally that it was not the right thing to do to just think if I keep going it will be okay, I can get this under control. I know now I should have ‑ as soon as I was in a position I had to take money from the trust account or I did take money from the trust account that's when I should have said, you know "This is a problem. I can't operate my business like that" but at the time I was very wrapped up in trying to keep things going. Q. When you thought it was a situation you could get under control, was that because you had a particular plan in mind at the time? A. I would work on many plans. I would spend much of my spare time trying to prepare practice budgets and other ‑ putting other practice management systems in place or developing those systems that would allow me to get the situation under control but my work ‑ days were consumed with the servicing of my clients and notwithstanding my efforts and the work I was doing to create budgets and do things of the like, I didn't implement them. I kept going in this ‑ what I can only call a survival mode of surviving day‑to‑day.
In her submission to the Council in March 2016 she said that in early November 2014 financial pressures began to build once again, compounded by her poor state of mental health. She said the withdrawals from the trust account increased in frequency and included fees that she considered would be owing to her upon the ongoing delivery of legal services to clients, albeit without their instructions. She said at this time she had very little new work coming into the practice after finalising two large client files and she was under enormous financial pressure.
In her submission to the Council she said: 40. The withdrawals from the trust account up to this time [August 2014] affected all client ledgers. I was not making withdrawals against specific client ledgers and allocating false narratives to these withdrawals on client ledgers. Rather, I was making withdrawals from the total pool of money held in the trust account. At various times when clients for whom I held money in trust were issued with a tax invoice by me for fees as well as disbursements for which I had already paid, I would not draw monies from trust in payment of those tax invoices, but rather note payment of the invoice on the trust account ledger as a set-off. The payments of these particular invoices did not actually pass from the trust account to the office account. They were, as Mr Connor states in his report at page 4, a notional form of entry in the cash book and ledger accounts to set-off some of the withdrawals from the trust account.
She went on to say: 48 I felt a deep shame and embarrassment about the continued unauthorised withdrawals and my complete inability to manage my financial situation. I experienced increasing symptoms of stress and anxiety. I became so overwhelmed and worried about my behaviour to the point where I felt completely paralysed. As my financial position worsened, in my mind in became untenable to disclose the situation to Matthew or my family because of the huge amount of disappointment I perceived they would feel if I revealed the true extent of the overall financial position I was facing, and the negative impact this would have on my family. The overwhelming feelings of guilt and worry were once again too much to bear. 49. My stress, anxiety and depression meant that I was unable to eat. I lost approximately 10 kilograms between November 2014 and May 2015. I was also losing sleep, and this affected my ability to concentrate on [sic] focus on the task of both servicing my clients with the diligence and care that I was obliged to, and in rectifying the financial situation I found myself in. My working hours were consumed with client work, primarily for the client that was paying for services at a contractor's rate, and I left myself very little time to manage the business and finances of the practice, in particular invoicing in a timely fashion, taking the time to prepare and review budgets and generating leads for new work. When I did manage to find the time to focus on these aspects of the practice, I was so overwhelmed with stress and anxiety and I did not know where to begin. 50. By this time I had a significant level of debt with my lease, overheads, wages, credit card debt, the increase in the overdraft, my obligations to the second tier financier and my payment arrangement with the ATO. I was totally overwhelmed by this stage and no longer coping. 51. In January 2015, Matthew went back to work. This relieved some of the pressure on me as Matthew's income was sufficient to meet the majority of our household expenses. However, because of the significant debt obligations I had incurred in connection with the practice and its negative cash flow position and the state of my mental health, the withdrawals from the trust account continued.
On 30 March 2015 (again in advance of the annual external examination by Mr Dawson) two further deposits, totalling $62,000.00, were made to the trust account. The plaintiff gave evidence as to the source of these monies: ... In late March 2015 I spoke with two business advisers who were also clients of mine and who were experienced in helping businesses in financial difficulty. I disclosed the full extent of the withdrawals from my trust account and my overall financial position. They were willing to provide financial assistance through one of their corporate entities, which was not a client of mine, financial assistance by way of lending me the funds to rectify the deficit in the trust account and also working capital in returns for shares in my company. Their shareholding would reduce as I repaid monies lent and they created a financial plan to manage the repayment of all debts (including their loan) with a view to the practice becoming profitable. We agreed that the terms of our arrangement would be recorded in a formal document. Shortly thereafter the sum of $62,000.00 was transferred to my trust account in two instalments. One from "Benchstrength" (the entity which was not a client) and the other from "Smoke Alarms Australia" which was a client of mine. At the time we discussed the arrangement I was not aware that some of the funds would come from the entity which was a client. I was also concerned that the two business advisers were the directors of both entities, and were also clients of mine in their personal capacities. At the time of my initial discussions with these advisers I had not considered the implications of this. I was only focussed on rectifying the deficit in the trust account and trying to improve the financial health of the business. Shortly after the sum of $62,000.00 was deposited into my trust account, I returned the funds in two instalments of $50,000.00 and $12,000.00.
Notably, the plaintiff does not give evidence of the date the $62,000.00 was deposited to the trust account. The fact the deposits were made on 30 March 2015 is revealed from the trust account statement. The transfers by which the plaintiff returned the "borrowed" monies occurred on 1 April 2015 and 2 April 2015.
The plaintiff did not call evidence from either Mr Boyd or Mr Redmond (the people she identified in cross-examination as two business advisers who were also her clients) to confirm that the proposed loan arrangement was as she claims, or that she disclosed to them that she had been making unauthorised withdrawals from the trust account. She also gave evidence that Mr Boyd and Mr Redmond, after "[going] through her financials" with her, discussed the steps she could take to generate more income and that they prepared revenue projections to enable her to repay the money that they undertook to advance to her.
The plaintiff gave the following evidence in cross-examination: Q. The financial plan, did it include any steps that you would undertake to manage your finances? A. Well, from memory, our discussions certainly involved that. I can't say without referring back to the document, if the document itself records those discussions, but we certainly had conversations to that effect, yes. Q. What steps did you take after late March 2015 in line with those conversations that you had with Mr Redmond and Mr Boyd? A. Well, after we had our discussions and they advanced the funds to me, shortly after I returned the funds to them. I didn't want to go ahead with that arrangement. I wasn't confident that the future would pan out in such a way that I could achieve the targets that they were looking for from my practice because of my mental health and my general state of mind at the time. I didn't feel I could put in the work to achieve their targets. Q. You ignored their advice? A. No. I didn't ignore their advice. I was honest in my assessment that the amount of work that would have been required to generate the fee income to not only repay the amount that they were proposing to lend me but also, too, to continue to comply with my ongoing financial obligations. I didn't feel that I was mentally or physically capable of being able to perform at that level.
While it is not utterly incredible that the plaintiff would make full disclosure of her dishonesty to Mr Boyd and Mr Redmond but not make a similar disclosure to those from whom she had been taking money, nor utterly incredible that she would make full disclosure to Mr Boyd and Mr Redmond of her situation while keeping the truth from her husband, having not produced any draft agreement recording the terms of the proposed arrangement despite undertaking in cross-examination that she would do so, I am left in some doubt that the arrangements were as she described them in her evidence.
The timing of the receipt of funds from Mr Boyd and Mr Redmond (the monies were paid into the trust account one day prior to the end of the 1 April 2014 to 31 March 2015 reporting period and withdrawn days later) and the plaintiff's evidence about it is, in my view, strongly suggestive of a short-term loan to "balance the books", and not part of any genuinely held long-term plan to seek the business support of Messrs Boyd and Redmond in order to improve the financial viability of the practice. (I note in that regard the hearsay report of a conversation Ms Sayer had with Mr Boyd where he confirmed that the amount of $62,000 was a "short-term loan" to the plaintiff.)
On 11 May 2015, the plaintiff submitted Parts A and B to the Law Society for the 12-month period ending 31 March 2015. In Part B, the plaintiff stated that as at 31 March 2015 there was no difference between the "reconciled authorised ADI Balance, cash book and list of trust ledger accounts and their balance". This statement, even if objectively true, is attributed solely to the deposits totalling $62,988.10 made on 30 and 31 March 2015. As at 29 March 2015, the balance of the trust account was $9,909.28 - a substantial deficiency against trust account ledgers then totalling $72,862.38.
At Question 4 of Part B, the plaintiff falsely answered "No" to the question: "Does the Law Practice have any trust ledger accounts that were overdrawn during the period? It appears someone subsequently handwrote "Yes" next to the answer "No" on a print out of Part B (which was lodged electronically). There was no evidence led from the plaintiff to account for this.
In late May 2015 or early June 2015 (but presumably prior to 12 June 2015) Mr Dawson gave evidence that he received a telephone call from the plaintiff concerning the trust account. He subsequently met with the plaintiff at which time she revealed, at least implicitly, that she had been continuing to misappropriate client funds to manage what she claimed were her "cash flow problems". The plaintiff agreed that she would telephone Mr Dawson to make an appointment for him to undertake the routine annual examination of the trust account.
The plaintiff gave evidence that in late May 2015 she told her sister the extent of her financial predicament and the extent of the unauthorised withdrawals she had made from the trust account. She said her sister agreed to lend her $69,500.00 to rectify the deficit.
On 5 June 2015, $69,500.00 was deposited to the trust account. This deposit substantially balanced the deficit resulting from the withdrawal of $62,000.00 on 1 and 2 April 2015, together with subsequent unauthorised withdrawals totalling $7,500.00 on 7 and 17 April 2015.
There was no evidence from the plaintiff's sister that she was the source of these funds or that she was aware of the plaintiff's dishonesty in using client funds for her own purposes.
On 12 June 2015, the plaintiff received a telephone call from Mr Connor, a Trust Account Inspector for the Law Society, to arrange a routine trust account investigation. An arrangement was made for him to attend the plaintiff's practice on 18 June 2015.
The plaintiff subsequently telephoned Mr Dawson and made arrangements for him to attend her office to conduct the external examination before Mr Connor's scheduled attendance.
On 15 June 2015, in anticipation of Mr Dawson's attendance the following day, the plaintiff prepared records for the trust account for the period July 2014 to May 2015. The records did not reflect the true position in any of the months to which they related, as they did not show the deficiencies in the trust account from the plaintiff's unauthorised withdrawals. In cross-examination, Mr Dawson confirmed that the records were not reflective of the true position and were corrected. At page 2 of External Examiner's Report prepared by him under the heading "Schedule 1: Breaches of Legislation", Mr Dawson recorded: "All bank reconciliations were prepared within the last few days. They were incorrect to begin but I have assisted the practitioner with adjusting them". In cross-examination, Mr Dawson confirmed that he was referring to the incorrect trust records prepared by the plaintiff on 15 June 2015.
As I noted earlier, Mr Dawson's evidence concerning his dealings with the plaintiff is somewhat opaque. While his preparedness to conceal from the Law Society the plaintiff's unauthorised access to trust funds in his initial dealings with her might be explicable on the basis that he considered that she was, as he described it, "out of her depth" insofar as managing the business side of her practice and that this did not impact upon her integrity or her probity, when her misconduct continued over successive years it is difficult to understand why he failed to either withdraw his services or encourage her to make full disclosure to the Law Society, or both. It may be that he was overwhelmed by a genuine concern for the plaintiff's emotional state or mental health. Perhaps he was simply overwhelmed by the way in which the plaintiff presented. Under cross-examination he said that he had a clear recollection that every time he met with the plaintiff it was the same. He explained that to mean: The moment I got there, there were tears, there were confessions, even before I'd sat down. She told me everything … about the discrepancies, taking out trust monies, which I later confirmed by examining things.
The plaintiff relied upon Mr Dawson's evidence in the proceedings as supportive of her case that she was in a troubled emotional state during the period of her misconduct and that she was open and forthcoming in admitting that misconduct to him. While his evidence does support her evidence that she told him that she had some mental health issues, and that when he attended the law practice in each of the successive years 2012 to 2015 she appeared overwrought, I do not regard his evidence as carrying significant weight on the question whether I am persuaded that the plaintiff is currently a fit and proper person. The resolution of that question does however need to take account of the evidence from the plaintiff's treating psychologist, Dr Prabhu and, more generally, my assessment of the circumstances in which the misconduct occurred, including whether I am satisfied the plaintiff has given credible evidence in seeking to offer explanations for it.

17 and 19 June 2015

On 17 June 2015, after receiving assistance from Mr Dawson, the plaintiff prepared a revised version of the trust account records for the period January 2014 to May 2015. These records appear to correctly show the state of the trust account in that period, and the extent to which the monies in the account were deficient each month with an entry attributed to "E Taylor" under the ledgers.
On 18 June 2015, Mr Connor attended on the plaintiff at the law practice. At the outset of their meeting the plaintiff said: Before you start your investigation, I want to make full and frank disclosure about my operation of my trust account. I have made multiple unauthorised withdrawals from the trust account to fund my practice cashflow. I have repaid all of the money that I withdrew from the trust account. I did this earlier this month. I have had issues with the financial management of my practice.
Mr Connor examined the trust account records over 18 and 19 June 2015 and had a number of conversations with the plaintiff concerning them.
On 23 June 2015, he prepared the report to the Law Society dated 23 June 2015 referred to at [9] above.

Investigations by the Council (and as defendant in the proceedings)

The actions taken by the Council consequent upon receipt of Mr Connor's report are referred to briefly in paragraphs [19]-[22] above. In summary, Mr Connor reported to the Law Society the results of his investigation on 23 June 2015 to the net effect that the plaintiff had misappropriated trust account funds and breached various provisions of the repealed Act and Regulations.
I have already noted that Mr Connor made it clear in his report that a reconstruction of the trust accounting records would be necessary in order to ascertain whether the plaintiff's claim that all misappropriated monies had been repaid was the true position. He noted that this was in part because of the unreliability of the trust accounting records and the time constraints to which he was subject which prevented an extensive investigation of the client files so as to reconstruct the plaintiff's accounting treatment of them. What Mr Connor was able to ascertain in the time available to him was what appeared to him to be a number of false entries in the cashbook and ledger accounts for costs and disbursements posted to client ledger accounts made by the plaintiff to "offset the funds [she] had taken without authority". These were later confirmed to be false entries by Ms Sayer in her report of December 2016.
Mr Connor also reported on his conversations with the plaintiff which, in summary, are as follows: She agreed that her operation of the trust bank account was "hand to mouth", that is, when money became available she would withdraw it for personal use and if money was required for settlement of the matter she would put it back. She owed the ATO $63,000 which she was repaying in instalments When asked what caused her to make multiple unauthorised withdrawals from the trust account the plaintiff said she had cash flow problems with her practice and her husband had not worked for two years. She said he had recently returned to work which had taken some of the pressure off. She said her husband did not know about her conduct and that she had suffered from postnatal depression. She said she wanted to be able to keep practice going, that she had "a good practice" with "lots of work". She said she needed "a chance to learn how to manage properly … [having] never had the opportunity to work under an experienced solicitor to see how it's done". She acknowledged having done the wrong thing and offered to give an undertaking to close the trust account.
In her report of December 2016, Ms Sayer reported that upon close inspection of the bank statements relating to the general account operated by the plaintiff she determined that monies deposited to that account included: funds serviced by an overdraft (the balance of which, when the overdraft was discharged by the Manager on 16 March 2016, was $86,634.32); the proceeds of loans from several financiers; monies advanced by several clients; fees paid by clients; monies received from Tetra Pak Marketing Pty Ltd for the period 5 July 2013 to 11 August 2015 in the amount of $212, 875.13; and monies misappropriated from the trust account.
Ms Sayer also reported that it was impossible to establish that the monies transferred to the general account from the trust account related only to the expenses incurred by the practice.
Ms Sayer went on to report that the monies dispersed from the general account covered the following: 1. personal expenditure including domestic expenditures such as food, petrol, restaurants and liquor; 2. motor vehicle expenses, loan repayments, credit card payments and transfers to the account of MB and EB Taylor (the plaintiff's parents-in-law); 3. business expenses such as insurance, equipment, rent, tax, office payments; and 4. repayments to the trust account monies misappropriated when required.
In terms of the operation of the trust account generally, Ms Sayer reported: The solicitor misappropriated trust monies received from her clients which were deposited firstly into her Trust Account and then transferred directly by the bank on her instructions to her General Account … The transfers were described on the bank statements as "ANZ INTERNET BANKING FUNDS TRANSFER" [and bore a same number and notation] … The monies transferred were not recorded in any of the records relating to the Trust Account. In many instances the amounts withdrawn are the only entries on the page of the bank statement concerned on which there are at times nine and ten entries These monies transferred were not posted to any accounts in the trust ledger.
In a further report dated 1 May 2017, annexed to her affidavit of 1 June 2017, and following a more detailed examination of the bank statements relating to the operation of the general account, Ms Sayer provided further information. She noted there was no cashbook or other books of account kept by the plaintiff in relation to the general account and no cashbook has ever been sighted or produced to her. She said the plaintiff had provided the manager appointed to the practice with a form of cashbook compiled on loose leaf pages which Ms Sayer did examine and by reference to which she found many entries made, or purportedly made, were omitted.
Of significance to the present proceedings, as I see it, are the monies deposited to the general account from Tetra Pak Marketing Pty Ltd ("Tetra Pak") (totalling $212,874.23 for the period 5 July 2013 to 11 August 2015) and monies deposited to the same account by the plaintiff's father-in-law using his company Blacktown Timber Pty Ltd (totalling $72,622.45 with deposits paid into the account on a regular basis between 20 September 2013 and 11 September 2015).
Ms Sayer reported that she had not had the opportunity of examining the instruction files relating to the affairs of Tetra Pak except for one file provided to her by the Law Society. Her enquiries did reveal that the plaintiff described herself as a "Legal Consultant" to that company. Ms Sayer emphasised that in the absence of examining the company client files there was no evidence of which she was aware suggesting any impropriety concerning the receipt of the monies from the company paid into the plaintiff's general account. Ms Sayer did observe however: … The one file examined by me dated 2012 shows that while [the plaintiff] was described as a Legal Consultant she did not act as solicitor for the company in the matter and was paid either a retainer or fees regularly by the company which were deposited direct into the General Account. The pass sheets provided to me by the bank commenced from 1 July 2013 up to 29 June 2016. I have found that during the period 5 July 2013 to 11 August 2015 that regular amounts, sometimes only a week apart, were deposited into this account by the company.
The plaintiff gave no evidence expanding upon the nature of her relationship with Tetra Pak or, more importantly, how her evidence that she was beset with cash flow problems in the operation of the practice should be understood when, in addition to client fees, she was also receiving a consulting fee in excess of $200,000 over a significant part of the period during which she was also using client funds as her own because of what she claimed were her desperate financial circumstances.
Of the monies deposited to the general account by the plaintiff's father-in-law, Ms Sayer determined that $21,582 was transferred into the trust account in relation to a property purchase on which it appeared the plaintiff acted as solicitor and which was accounted for as "on account of costs and disbursements" in relation to that purchase (including stamp duty) in the amount of $18,913.14. Ms Sayer also determined the disbursement of the balance of those funds by the plaintiff from the general account (as monies received from Mr David Taylor and Blacktown Timber Pty Ltd) was unaccounted for.
The plaintiff gave no evidence as to the provenance of these monies (that is, whether they were a gift or loan or income of some kind) and gave no evidence concerning the other regular deposits of money to her general account from her parents-in-law.
In the course of her evidence I invited the plaintiff to explain why it was, after Mr Dawson had warned her against any repeat of the behaviour she had admitted to when first dealing with him in 2014, she continued to use client funds over subsequent years rather than seek the guidance of a financial adviser or take other steps to avoid misappropriating client funds. She said: A. Yes. In the 2013 and 2014 I was the sole bread winner for my family. As I say in my affidavit I was in a situation where I was operating in survival mode. I had overcommitted myself financially. I was very unwell mentally and I had what I now realise to be an irrational fear but at the time I had a fear if I had spoken to my husband about what was going on that that would have effectively ended our marriage. On each occasion, in 2013 and 2014, I wanted to get on top of all of this and rectify the deficit in the trust account and then go on to ensure that it didn't happen again. But, I wasn't ‑ I didn't obviously do that and I wasn't ‑ I was, as I say, in survival mode. I would ‑ I was taking each day as it came and paying bills as they came and managing my client matters and managing my home life and I wasn't‑‑ Q. You were managing all of those areas of your professional, family and social life but you weren't managing other people's money honestly, is that a fair way to put it? A. When I say I was managing, I was getting through day‑to‑day. I certainly wasn't coping with all of those aspects of my life at the time. Q. What did your husband do for a living before you and he decided to do a reorganisation of your family domestic commitments? A. He is a timber merchant. He has a family business based out in western Sydney and he's ‑ he's the fifth generation in the family business. Q. But did he take a leave of absence from that business? A. Yes, he did. Q. Was he continuing to draw an income? A. No, he wasn't. Q. Was he a shareholder of the business? A. No, he's not.
My questions did not elicit any explanation for the funds that were regularly deposited into her general account from her father-in-law.
In re-examination the plaintiff gave the following evidence: Q. ... With your affidavits, you have exhibited a large amount of documentary evidence, and you have been taken extensively through that evidence in cross‑examination. For what purpose did you annex all of this material? A. I wanted all of the relevant information to be before the Court. A complete set of the bank statements from the trust account, dating back to when it was opened from 2010, because Mr Connor's report focussed on a short period of, or a lesser period of time, if you like and I wanted to ensure that all of the relevant material relating to the conduct and the unauthorised withdrawals was before the Court. Q. What did you want this material to show? A. Well, to reveal the true position of, of the activities that happened in relation to the account. Q. By those activities, you mean by your activities? A. Yes, that's correct. … Q. You were asked some questions about whether what you had done with regard to the movement of trust moneys was deliberate. Did you have a deliberate plan to take the trust money? A. I didn't have any deliberate strategy to, to take the funds for specific purposes, if you like, in advance. It wasn't, I guess, premeditated. It was a very reactive, I was dealing with the account and my general finances in a very reactive way and sometimes the withdrawals were, I guess, almost frenzied in the way, in the timing and where there were multiple withdrawals in one day. It was a very reactive dealing with not only, well, dealing with my overall practice finances and my personal finances, there was no sort of proactive planning.

The plaintiff's mental health

The plaintiff places considerable reliance on the evidence concerning her mental health both before and during the course of misconduct that grounded the Council's decision in August 2016 to refuse to issue her with a practising certificate as an explanation for that conduct. She gave this evidence: Q. Do you recall that you were asked a question by her Honour, about feeling overwhelmed, and you have said that you did feel overwhelmed. What were the stress factors, or factors in general, that were overwhelming you? A. Well, I was suffering from depression at the time, I had been seeing a psychologist for depression from May 2012, but I think it, you know, it had existed prior to me seeking help. I took on the role of being the sole breadwinner. I had made a plan with my husband, and he had a belief in me that I could, I could set out and achieve what I set out to do. But I also had two young children at home, and I had the stresses of keeping the household afloat. Notwithstanding that my husband was at home with the kids, and caring for them on a daily basis, I'm, I'm still the mum, and you know, we're often there just as the go to for children. When they get sick and that type of thing, and the pressure I was under in making sure my clients were serviced well, and that I, you know, I performed my work to a high standard for them. They were all, it was all enormous pressure on me at the time, and because of my depression, I wasn't able to sort of take a step back, and really look at what I needed to do, to sort of get out of that feeling of being overwhelmed and feeling very helpless, and hopeless.
The plaintiff's evidence was that six weeks after the birth of her first son she suspected she was suffering from depression but that she did not take any steps to seek a diagnosis or treatment. There is no evidence that her concerns about her mental health had any impact on her professional life at that time.
Her second child, who was born in April 2011, was diagnosed with hyaline membrane disease, requiring hospitalisation in a neonatal intensive care unit for seven days and then in a special care unit for a further seven days. The plaintiff described being traumatised by these events but again did not seek professional assistance. She said she was focussed on caring for her family and servicing her clients.
In late April 2012 the plaintiff was diagnosed with postnatal depression and sought treatment from her general practitioner. She was prescribed anti-depressants. She also sought treatment from Dr Prabhu, psychologist.
Dr Prabhu's affidavit was read in the plaintiff's case. She confirmed that she commenced treating the plaintiff in May 2012 for postnatal depression, stress and anxiety and that the plaintiff attended on her on five occasions during 2012. There is no evidence that her compromised mental health had any impact on the discharge of her professional obligations in 2012.
The plaintiff gave evidence that in late 2012 she and her husband decided that she would return to work on a full-time basis and that he would stay home to care for the children. She gave evidence that she believed returning to work would help her with her depression. There was no evidence as to whether she consulted with her medical advisors before taking on the additional obligations of sole practice in December 2012, or that she sought their advice after soon realising, as she claimed in evidence, that she had overcommitted herself financially.
Around May 2013, the plaintiff's youngest son was diagnosed with double pneumonia and hospitalised for a brief period which the plaintiff said "triggered the feelings of trauma and anxiety" she felt when he was born. She gave evidence as follows: These feelings were compounded by the deep shame I felt about my improper dealings with the trust account. My depression worsened and impacted my ability to concentrate and focus at work.
Dr Prabhu confirmed that the plaintiff consulted with her again on two occasions in August 2013. She formed the view at that time that the plaintiff: ... had relapsed [into depression] due to "too much pressure" which included managing her own practice, being the sole breadwinner for her family, worrying about her son's poor health and the responsibilities of managing both her home life and her professional life.
It would appear that the plaintiff did not confide in Dr Prabhu that these stressors were impacting on her professional judgment or that she was misappropriating client funds to manage her financial situation.
The plaintiff gave evidence that she ceased taking antidepressant medication around March 2014 without confirming with her medical advisors that it was safe or appropriate for her to do so. She did not consult Dr Prabhu for twelve months.
In the weeks following March/April 2015, the plaintiff gave evidence that her levels of depression, stress and anxiety increased significantly and she felt a sense of complete helplessness and hopelessness.
Dr Prahbu reported that the plaintiff consulted her again on 9 July 2015, and on a further ten occasions between 26 July 2015 and 21 July 2016, that is, after her misconduct was the subject of Mr Connor's adverse report to the Law Society.
Dr Prabhu said that when the plaintiff attended on her on 9 July 2015 she was inconsolable and affected by work stress, poor work life balance and a high sense of responsibility. Dr Prabhu reported that the plaintiff told her in that session that the conduct which gave rise to her being suspended from practice had commenced in 2013 and ceased in or around April 2015. The plaintiff told Dr Prabhu that she was filled with guilt, shame, remorse and was angry with herself. Dr Prabhu said that the plaintiff expressed on a number of occasions that she knew her behaviour was wrong and in breach of her professional obligations and that this had compounded her depression, stress and anxiety.
Dr Prabhu expressed the ultimate opinion that: ... the plaintiff's depression and anxiety was of such a nature that it had affected her judgment as it was at odds with her work ethic and high sense of responsibility, and that as a result of the depression and anxiety the plaintiff's ability to think clearly and act in a rational and normal capacity had been affected.
In March 2016 Dr Prabhu considered that the plaintiff had good insight into the causes of her behaviour and had recovered well from her depression and anxiety. She went on to conclude that the plaintiff's change in her financial circumstances and in her employment (by which I take her to mean that she was not practising as a lawyer), and the full disclosure of her misconduct to her family, in particular to her husband, coupled with ongoing monitoring treatment to ensure her recovery is permanent, would allow the plaintiff to make decisions and function normally into the future.

The plaintiff's final submissions

On the plaintiff's behalf, it was submitted that her compromised mental health and the stress from which she was suffering as she came to realise that she was unable to meet her financial commitments so overwhelmed her that it resulted in her acting "irrationally" by withdrawing money from her trust account without instructions.
In support of what counsel submitted I would be satisfied was the plaintiff's "irrational" behaviour in her misappropriation of client funds triggered by her poor mental health in 2012 to 2015, attention was drawn to Mr Dawson's evidence as to the parlous state of her record keeping; that she was moving money between her trust account and the general account at random; that she borrowed money from family members and was then too ashamed to involve her family further; that she held an irrational fear that her husband would not support her if she told him about her actions; that she entered into and then rejected a proposal to borrow further funds from third party lenders; that she disclosed her defalcations (to Mr Dawson) but then reverted to the same misconduct time and again; and that she knew what she was doing was not right but that she had the mistaken belief that if she just managed to put the money back into the trust accounts that she would somehow make it alright in the end.
Counsel submitted that the Court would be satisfied that with the restoration of the plaintiff's mental health and the alleviation of the stressors she was confronted with from 2012 to 2015 she has the necessary insight to appreciate that her actions were irrational and ultimately unsustainable.
Counsel submitted that, given the plaintiff's exemplary conduct since her admission to practice in 2008, the Court would be satisfied that she was not a practitioner who would default on her professional obligations without there being some explanation for such aberrant behaviour and that her comprised mental health was the explanation.
On the issue of the plaintiff's prior good character, counsel urged the Court to take into account the evidence that revealed her to be a competent and well regarded solicitor who had for many years since her admission worked in several different areas of the law whilst having applied herself to College of Law's Applied Masters in Law Programme and Practical Legal Training Programme whilst in practice.
The plaintiff also relied upon the affidavits of Messrs Bennett and Flynn, directors and/or managers of a corporate entity who was at the time of the plaintiff's misconduct undertaking a large residential development in Waterloo. The plaintiff had a personal relationship with Mr Flynn for 20 years and on his recommendation she was retained to provide legal services to the corporation as a conveyancer. This included daily contact with Mr Flynn throughout 2013, preparing contracts for sale and signing documents required to arrange construction finance for the development and thereafter providing general commercial advice as the development progressed through to 2015. Neither gave any evidence that they observed the plaintiff to be working under any disability or stress or that to their observation she was acting "irrationally" in her dealings with them.
Each of Messrs Bennett and Flynn commented favourably upon what they believed to be the plaintiff's ethics and honesty and the commitment she gave to them on behalf of the client company. Despite being made aware by the plaintiff of her misconduct and that her practising certificate was suspended, they also expressed their disappointment at not being able continue to engage her as a solicitor for a new development the company was undertaking at Balmain.
After the plaintiff's practising certificate was suspended in June 2015, she obtained work as a paralegal with Malouf Solicitors in Parramatta in October 2015 and, with the consent of Messrs Bennett and Finn, the work that related to the Balmain development was undertaken by that firm of solicitors. I also note that plaintiff has had a continuing involvement with that development albeit as a paralegal under the supervision of a senior solicitor employed by Malouf Solicitors.

The defendant's final submissions

The defendant did not challenge the evidence relied upon by the plaintiff as suggestive of her having experienced difficult personal circumstances when the unauthorised withdrawals occurred. The defendant did not submit that the evidence of Dr Prabhu was of no weight on the question whether the plaintiff has discharged the onus of persuading the Court that she is entitled to the relief that she seeks in these proceedings. Rather, the defendant submitted that those considerations, inclusive of the plaintiff's recovery of her mental health and what the defendant appears to accept as her commendable application to work as a paralegal (a role she performs currently) fail to adequately address the objective gravity of her past misconduct.
The defendant emphasised that the objective gravity of that conduct, including that it was repeated over an extended period of time and that it comprised serious and repeated breaches of provisions of the Legal Profession Act relating to trust monies, only ceased after the intervention of the Law Society. In addition, the defendant emphasised that the plaintiff concealed her misconduct by providing incorrect and misleading information to the Law Society when submitting Parts A and B in 2013, 2014 and 2015. This is borne out by the evidence.
The defendant submitted that the Court would find that a significant factor (as the defendant submitted, the primary causative factor) underlying the plaintiff's wrongful conduct was her inability to manage her practice, in particular the financial aspects of her practice, and that she had no proper appreciation of the financial commitment and discipline required of a solicitor in sole practice.

Conclusions

That the plaintiff was under pressure because she could not meet her financial commitments and that this may have, in turn, been productive of a compromise to her mental health does not, in my view, adequately account for the grave dishonesty inherent in her repeated misappropriation of trust monies.
Rather, I am driven to the conclusion that her conduct was fundamentally dishonest, falling well below the standards of fitness and propriety required of a legal practitioner and that there is no warrant for taking a lenient view of the way she dealt with the trust account despite what the evidence suggests about the mismanagement of the practice's finances and her compromised mental functioning.
The irresistible conclusion is that the plaintiff's admitted misconduct, described in the defendant's submissions, accurately in my view as a "systematic and wilful course of conduct", is demonstrative of a failure by her to maintain the standards of personal honesty and integrity that are required of a solicitor over successive years. In so finding, I reject the plaintiff's submission that I should treat her misconduct as a repetition of the same error and not a consistent course of conduct involving repeated or persistent failures to abide by appropriate standards of honesty (see Council of the Law Society NSW v Webb [2013] NSWCA 423).
While I accept that the plaintiff is contrite, what cannot be overlooked is that this is not a newfound insight. She knew at all times that trust monies were not hers to access. However, and notwithstanding that knowledge, she acted (in my view, at times, in a rational and calculated way) to treat the trust monies as her own or as de facto loan monies she could access at will. Taking the "confess and avoid" approach in her dealings with Mr Dawson had the effect (even if unintended) of allowing her to continue to treat the trust funds as her own when the need arose. In my view, that attitude aggravates the seriousness of her misconduct. That the misappropriated trust monies have been repaid with loans from her family such that there is no pecuniary loss to those clients whose money she accessed does little to mitigate the seriousness of her admitted misconduct.
In determining the plaintiff's current fitness to practice (as to which she bears the onus) I am conscious that the jurisdiction which I am invited to exercise is not punitive but directed to the protection of the public, who are entitled to have their dealings with solicitors conducted with complete confidence in the honesty, integrity and candour of the practitioner. In addition, whilst this proceeding is a hearing de novo into the question of the plaintiff's current fitness, and in that sense she does not bear the heavy burden imposed on a person who is seeking restoration to a right to practise after a formal finding of unfitness and a removal from the roll the of solicitors (see Hilton v Legal Profession Admission Board [2016] NSWSC 1617), on the facts particular to this case, it remains for the plaintiff to satisfy the Court that she should now be issued with a practising certificate with all of the attributes and benefits that status brings, including the right to join other members of the profession in the delivery of the wide reach of the trusted services delivered by the legal profession (see Kotowicz v Law Society of NSW [1986] NSWCA 392).
Another relevant consideration in considering the question of the plaintiff's current fitness is the time that has passed since her misconduct was revealed and reported upon. What is immediately obvious is that the plaintiff's misconduct extended over a longer period (being from December 2012 to June 2015) than the time that has elapsed since her practising certificate was suspended (being from June 2015-July 2017). While that comparator may not be determinative of the extent of an applicant's rehabilitation in every case, and while I accept that the plaintiff has the support of Mr Malouf who has employed her as a paralegal from August 2015 to August 2016 (and currently with the express approval of the Council since September 2016), in this case I am left with a sense of disquiet as to whether the plaintiff has a sufficient and lasting appreciation of the fact and consequences of the wrongfulness of her conduct (including whether she has been as open and frank as she claims to be about the true extent of her financial stress at the time of the misappropriations) to be satisfied of her current fitness to hold an Australian practising certificate.
I accept the public interest is not served by permanently denying a former practitioner the opportunity to establish their fitness to practise by the issue of a practising certificate after a period of suspension for misconduct. In this case, however, I am not satisfied that sufficient time has elapsed to afford the plaintiff that second chance. While it is true that the Court can protect the public from the risk of a repetition of misconduct of the kind that attracted the suspension and then cancellation of the plaintiff's practising certificate, for example, by imposing appropriate conditions inclusive of the limitation on her right to practice, I am of the view that at this time the public is better protected by refusing the plaintiff the relief that she seeks.
The orders I make are as follows: 1. The summons is dismissed. 2. The plaintiff is to pay the defendant's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 July 2017

Legal Profession Act 2004(NSW)

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Judgment (19 paragraphs)

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Cases Cited (11)

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