Terepo v Council of the Law Society of New South Wales

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] In 2014 Ms Terepo was a sole legal practitioner and the principal of a law practice. In about November 2014 she gave her husband access to her law practice's trust account. In November and December her husband made some 37 transfers totalling $12,070.50 from the trust account into the law practice's office account or Ms Terepo's account without authorisation. In December Ms Terepo transferred $850 from the trust account to her personal account without authorisation. In February 2015 her husband made a further transfer of $100 out of the trust account without authorisation. The total number of transactions complained of was 39, involving an amount of $13,020.50. In December 2015 and February 2016 the Law Society sent letters to Ms Terepo requesting information regarding her trust account irregularities, and in May 2016 it served on her a notice under s 371 of the Legal Profession Uniform Law (NSW). Ms Terepo's letters in response did not answer all the questions posed by the Law Society, were vague, and did not provide full information and disclosure. In a judgment of 2 July 2018 the NSW Civil and Administrative Tribunal found, upon the application of the Council of the Law Society of New South Wales, that Ms Terepo was guilty of professional misconduct and of unsatisfactory professional conduct. In a further judgment of 26 April 2019 the Tribunal recommended that Ms Terepo's name be removed from the Roll and the Australian Legal Profession Register. The Law Society applied to this court seeking that the Court implement the Law Society's recommendation. Ms Terepo subsequently appealed to this Court against the two decisions of the Tribunal. The parties presented consent orders to the Court designed to dispose of both proceedings. They acknowledged that in professional disciplinary matters the Court needs to satisfy itself as to the appropriateness of consent orders. The consent orders included a declaration that Ms Terepo was guilty of professional misconduct but did not provide for her name to be removed from the Roll. Instead, they provided for her to be precluded from applying for a new practising certificate unless a stipulated educational condition is satisfied. Further, they provided for the Tribunal's finding of unsatisfactory professional conduct to be left undisturbed. Consistently with the parties' agreed positions, the Court held that the Tribunal exceeded its jurisdiction by finding that Ms Terepo was guilty of reckless indifference when that finding went beyond the allegations put to it by the Law Society: [27]. Walsh v Law Society of New South Wales (1999) 198 CLR 73; [1999] HCA 33, considered and applied. The Court made the proposed consent orders as it was satisfied that they were appropriate: [34]-[35].

JUDGMENT

1. THE COURT: In a judgment of 2 July 2018 the Occupational Division of the Civil and Administrative Tribunal of New South Wales ("the Tribunal") found, on the application of the Council of the Law Society of New South Wales ("the Law Society"), that the present appellant, Ms Sesilia Terepo, a solicitor, was guilty of professional misconduct on three grounds and of unsatisfactory professional conduct on a fourth ground ([2018] NSWCATOD 106) ("the Stage 1 Decision"). In a further judgment of 26 April 2019 the Tribunal recommended that Ms Terepo's name be removed from the Roll kept by the Supreme Court of New South Wales and the Australian Legal Profession Register, and that Ms Terepo pay the Law Society's costs (Council of the Law Society of NSW v Terepo (No 2) [2019] NSWCATOD 60) ("the Stage 2 Decision").
2. The Law Society applied to this Court seeking that the Court implement the Law Society's recommendation by removing Ms Terepo's name from the Roll (see s 23(1) Legal Profession Uniform Law 2014 (NSW) ("the Uniform Law")). Section 23 supplements the Court's inherent jurisdiction (Council of the Law Society of New South Wales v Yoon [2020] NSWCA 141 at [18]).
3. Subsequently Ms Terepo appealed to this Court, out of time, against the two decisions of the Tribunal. The Law Society however accepted Ms Terepo's explanation for her delay and, in light of the strength of her appeal, consented to the order then made by this Court on 16 August 2022 extending the time for Ms Terepo's appeal.
4. Following consideration of the grounds of Ms Terepo's appeal, the Law Society conceded that the Tribunal erred in the respect stated in Ground 1 of the appeal. The Law Society and Ms Terepo then reached agreement as to the orders that they considered that this Court should make. As a result, they presented consent orders to the Court, designed to dispose of both proceedings. In doing so, they acknowledged that, in professional disciplinary matters, even where there is consent by both parties to proposed orders, the Court needs to satisfy itself that it is appropriate for those orders to be made (see Council of the Law Society of New South Wales v Jafari [2020] NSWCA 53 at [3]).
5. After the Court brought various matters to their attention, the parties reformulated the proposed orders. The detail of them as restated is referred to below. It is sufficient at this stage to indicate that they do not provide for Ms Terepo's name to be removed from the Roll but instead provide for an order precluding her from applying for a new practising certificate (she not having held such a certificate for many years) unless a stipulated educational condition is satisfied.

Ms Terepo's background and conduct

1. The following matters may be stated briefly as none are in dispute.
2. In 2014 Ms Terepo was a sole legal practitioner and the principal of LMJ Lawyers. She subsequently ceased, and has not resumed, practice. She presently has seven children and at times assists her husband in his construction business.
3. In about November 2014 Ms Terepo gave her husband access to her law practice's trust account. In the period 3 November 2014 to 1 December 2014, without Ms Terepo's or clients' authority, her husband made some 37 transfers ranging in amounts from $50 to $2000 and totalling $12,070.50 from the trust account into the law practice's office account or Ms Terepo's account. A further amount of $100 was transferred out of the trust account without authority on 2 February 2015.
4. In an affidavit dated 20 October 2021 Ms Terepo stated that in 2014 she was struggling with her mental health and experiencing difficulties with her marriage. She said that in 2014 she made two trips to her home country, Tonga, in the hope that they would help her condition. She said that she was "not thinking straight" at that time and gave her husband "authority to manage all [her] accounts including [her] Trust Account". She continued: "I did not explain to him that the trust money is not office money and he should not use it unless there is an authority from the clients… My husband then started withdrawing monies from the Trust Account thinking that it was also office money. I only found out about these discrepancies when my Trust Account was audited by External Examiner Christian Fox Accountant. When they informed me about the discrepancies, I felt really bad. I had no malice [sic] intention. I had no intention to permanently deprive my clients of their money. I was and still am very sorry for what had happened. I had made sure that my husband paid all the trust money back which he did. The last payment I made was in June 2015 for the sum of $9000."
5. The other transaction which was the subject of the Law Society's subsequent complaint was Ms Terepo's withdrawal on 9 December 2014 from her trust account and transfer to her personal account of an amount of $850. Again, this was not a withdrawal that was authorised by any of her clients. When this transaction and the $100 referred to in [8] above are added to the other transactions referred to in that paragraph, the total number of transactions complained of is 39, involving a total amount of $13,020.50.
6. In her affidavit, Ms Terepo subsequently proffered the following explanation for the transaction: "As for the $850, I admitted withdrawing $850 as I needed to pay something urgently. I am not quite sure what it was for. This happened after I came back from my second trip to Tonga on or about December 2014. I did not have enough money with me. However, I was expecting some money to come into Office [sic] and as soon I [sic] received them, I would pay back the $850 into the trust account. This had already been paid back into the Trust Account".
7. These matters were the subject of the first two grounds on which the Tribunal found Ms Terepo guilty of professional misconduct. The third related to Ms Terepo's failure to comply with a requirement to provide information under s 371 of the Uniform Law. On 9 December 2015 and 29 February 2016 the Law Society sent letters to Ms Terepo requesting information regarding her trust account irregularities, and on 30 May 2016 a section 371 notice was served on her. Ms Terepo provided an undated letter sent by email on 4 November 2015 which responded to the Law Society's complaint; and she provided a further undated letter which was received on 8 July 2016. There was no evidence before the Tribunal of any further correspondence from Ms Terepo dealing with or responding to the requests for information or the s 371 notice. Ms Terepo's letters did not respond to all the questions posed by the Law Society, were vague, and did not provide full information and disclosure.
8. In the letters Ms Terepo however expressed contrition for her conduct and made statements relating to her mental health.

The Law Society's application to the Tribunal

1. The Law Society's application to the Tribunal stated the following grounds warranting an order that Ms Terepo's name be removed from the Roll. The references to files constitute the identification of Grounds 1, 2, 3 and 4. For the sake of clarity (which is lacking in the application) the file references have been emboldened and the word "GROUND" added as appropriate. "[Ms Terepo] is guilty of professional misconduct as set out below: … (1) FILE 41771 [GROUND 1] 1. Misappropriation 2. Breach of Section 255 of the Legal Profession Act, 2004 3. Cause a deficiency in trust funds 4. Breach of Section 264 of the Legal Profession Act, 2004 [5] Breach of Section 263 of the Legal Profession Act, 2004 (2) FILE 41888 [GROUND 2] Breach of Section 255A of the Legal Profession Act, 2004 (3) FILE 42425 [GROUND 3] 1. The respondent lawyer failed to comply with a requirement under Section 371 of the Legal Profession Uniform Law (NSW). 2. The respondent lawyer has failed to assist the Investigator in the investigation of a complaint. [4] FILE 41771 [GROUND 4] and unsatisfactory professional conduct as set out below: … Breach of Clause 66(2) of the Legal Profession Regulation, 2005".
2. As is obvious, the grounds of complaint could and should have been stated much more clearly than they were.
3. As to the legislation applicable to Ms Terepo's conduct and referred to in the Law Society's Grounds:

• Section 255 of the Legal Profession Act 2004 (NSW) relevantly provided: "(1) A law practice must: (a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and (b) disburse the trust money only in accordance with a direction given by the person."
• Section 255A of that Act relevantly prohibited the law practice from withdrawing money from a trust account "otherwise than by cheque or electronic funds transfer".
• Section 263 of that Act relevantly required a practitioner to give written notice to the Law Society of "an irregularity in any of the practice's trust accounts or trust ledger accounts" as soon as it came to the practitioner's attention.
• Section 264(2)(b) of that Act required practices to keep trust records "in a way that at all times disclose[d] the true position in relation to trust money received for or on behalf of any person".
• Section 371 of the Uniform Law relevantly requires that a lawyer who is required to provide information must comply with that requirement.
• Clause 66(2) of the Legal Profession Regulation 2005 ("the Regulation") relevantly provided that any withdrawal of trust money from a general trust account of a law practice by electronic funds transfer was to be effected under the direction of or with the authority of an authorised principal of the law practice.

1. The particulars given in the application indicated that the conduct referred to in paragraphs [8] and [10] above was the subject of the four grounds. The only reference in the application to recklessness was in paragraph 7 (relating to Ground 1) which alleged that by virtue of those transactions "the Solicitor failed to hold trust funds in a general trust account as required by Section 255 of the Legal Profession Act 2004 and was, at least, recklessly careless in that regard".
2. The Tribunal gave the following reasons for its finding that Ms Terepo was guilty of professional misconduct on Grounds 1-3: "(1) The Solicitor, at the very least, was recklessly indifferent to the possibility of monies that had been entrusted to her by clients and placed in the trust account of the Law Practice might be misappropriated, by giving access to the trust account to a person who to her knowledge was not Australian legal practitioner, an associate of the Law Practice, or an employee of the Law Practice. (2) The Solicitor misappropriated an amount of $850 on 9 December 2014. By making that withdrawal without the authority of the persons on whose behalf the money was received into trust, the Solicitor was in breach of section 255 of the 2004 Act (3) In making the withdrawal referred to in (2) by way of cash withdrawal, the Solicitor was in breach of section 255A of the 2004 Act (4) The conduct in (1) to (3) above involved, we find, a substantial failure to maintain a reasonable standard of competence and diligence; is conduct that demonstrates that the Solicitor is not a fit and proper person to engage in legal practice, and is conduct that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency (5) As stated earlier in these reasons, the Solicitor has breached sections 263 and 264 of the 2004 Act; conduct that itself involves a substantial failure to maintain a reasonable standard of competence and diligence, and demonstrates that the Solicitor is not a fit and proper person to engage in legal practice (6) The Solicitor has failed to assist the investigator in the investigation of a complaint and has failed to comply with a Notice served pursuant to section 371 of the Uniform Law. Although the Solicitor has provided certain limited information the specific questions posed by the section 371 Notice have not been the subject of response. No explanation has been offered by the Solicitor for that failure (7) The conduct referred to (6) involves, we find, a substantial failure to maintain a reasonable standard of competence and diligence, demonstrates that the Solicitor is not a fit and proper person to engage in legal practice; further, is additionally professional misconduct pursuant to section 466(1)(d) and 466(6) of the Uniform Law." (Emphasis added.)
3. As to Ground 4, it found that the breach of clause 66(2) of the Regulation was conduct that "… fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer".
4. Ms Terepo did not appear at the hearing of either Stage 1 or Stage 2 of the Tribunal proceedings.

Ms Terepo's appeal

1. Ground 1 of the Amended Notice of Appeal relates to the Tribunal's decision of 2 July 2018 and is expressed in the following terms: "In making the decision, the Tribunal erred in taking into account irrelevant considerations that were not the subject of any relevant allegation in writing by the First Respondent (Council of the Law Society of NSW) Particulars (a) The Tribunal fell into error by making findings that were adverse to the Appellant which were not the subject of any relevant allegation in writing by the First Respondent (Council of the Law Society of NSW)- relevantly, the finding on 2 July 2018 (Stage 1 Decision) at [101(1)] in that the Appellant at the very least, was recklessly indifferent to the possibility that monies that had been entrusted to her by clients and placed in the trust account of the Law Practice might be misappropriated, by giving access to the trust account to a person who to her knowledge was not Australian legal practitioner, an associate of the Law Practice or an employee of the Law Practice. (b) The Tribunal fell into error by taking into account irrelevant consideration being that the allegation of reckless carelessness in the Application for Disciplinary Findings and Orders filed on 6 March 2017 and the Law Society's written submissions filed on 7 August 2017 was confined to Appellant's breach of s 255 of the Legal Profession Act 2004 (LPA 2004) (c) By reason of the above, the Tribunal fell into error in their findings in Stage 1 Decision at [101] (1)] that formed a significant part of their reasoning in support of their findings that the Appellant was guilty of professional misconduct in relation to ground 1 (misappropriation: breach of s 255 LPA 2004; cause a deficiency in trust funds: breach of s 264 LPA 2004; breach of s263 LPA 2004), grounds 2 (breach of s 255A LPA 2004 and ground 3 (failure to comply with a requirement under s 371 of the Legal Profession Uniform Law: failure to assist investigator)".
2. In its written submissions to this Court, the Law Society emphasised the need for disciplinary tribunals to keep within the boundaries of the cases put to them, by referring in particular to the following observations of McHugh, Kirby and Callinan JJ in Walsh v Law Society of New South Wales (1999) 198 CLR 73; [1999] HCA 33: "61 In this scheme of discipline, a number of protections are included for the legal practitioner brought before the Tribunal. Proceedings may only be instituted 'with respect to a complaint' by 'an information laid by the appropriate Council or the Commissioner' in accordance with Pt 10 of the Act. The function of the Tribunal is confined to that of conducting a hearing 'into each allegation particularised in the information'.. The Tribunal has certain powers of amendment to vary the information laid against the legal practitioner, for example, to permit the inclusion of additional allegations where that is justified. For the purpose of a hearing into a question of professional misconduct, the Tribunal 'is to observe the rules of law governing the admission of evidence'. In other hearings, the Tribunal is not so bound but may inform itself of any matter in such manner as it thinks fit. … 66 The provisions of the Act must be complied with. The focus of its attention is the 'complaint against a legal practitioner' expressed in the 'information laid by the appropriate Council or the Commissioner' in accordance with the Act. That complaint, and the information containing it, may be varied and amended. Notwithstanding dismissal of the complaints contained in one information it remains open to the relevant Council or the Commissioner to bring later complaints. But the function of the Tribunal is to determine the complaint. And the function of the Supreme Court, in this aspect of its power and jurisdiction is, and is only, to hear and determine the appeal 'against the Tribunal's determination of a complaint'. To the extent that the Tribunal proceeded beyond that function or the Supreme Court on appeal did likewise, they would be exceeding the jurisdiction conferred by the Act."
3. The Law Society noted that these statements were made in relation to earlier legislation, being the Legal Profession Act 1987 (NSW), but submitted, correctly, that they were equally applicable to the Legal Profession Act 2004 (NSW).
4. Walsh accordingly confirms that if the Tribunal determined a matter outside the complaint made to it (without varying the complaint), it exceeded its jurisdiction.
5. Returning to the present case, the Law Society concurred with Ms Terepo's contention in her Ground 1 (see [21] above) that the Tribunal erred in taking into account an irrelevant consideration on the basis that the Tribunal determined the proceedings against Ms Terepo in a significant respect on the basis of a finding of professional misconduct that was not sought by the Law Society. It referred to the Tribunal's finding in paragraph [101] that: "(1) The Solicitor, at the very least, was recklessly indifferent to the possibility of monies that had been entrusted to her by clients and placed in the trust account of the Law Practice might be misappropriated, by giving access to the trust account to a person who to her knowledge was not Australian legal practitioner, an associate of the Law Practice, or an employee of the Law Practice."
6. The Law Society pointed out that the allegation in its application that Ms Terepo was "recklessly careless" was confined to an allegation of a breach of s 255 (see [14] above) and that the Law Society had not otherwise alleged that Ms Terepo had acted recklessly. The Tribunal's finding that Ms Terepo was "recklessly indifferent" was not so confined but was stated in support of its finding of professional misconduct on Grounds 1, 2 and 3. These Grounds were based on breaches of a number of statutory provisions (see [18] above), not limited to s 255. The Law Society submitted that, as a result, the Tribunal went beyond the jurisdiction conferred by s 138 of the Legal Profession Uniform Law Application Act 2014 (NSW) to "conduct a hearing into each allegation particularised in a disciplinary application made to the Tribunal".
7. The Law Society's submissions correctly reflect the factual position in the proceedings in the Tribunal and the legal consequences of it. Accordingly the Tribunal exceeded its jurisdiction and its relevant orders must be set aside.

The consent orders

1. In light of the above, and the additional observations below, this Court considers it appropriate to make the orders set out at [34] and [35] at the end of this judgment. These orders reflect the terms of the orders proposed by the parties, with some adaptation.
2. Order 1 in [35] appropriately refers only to appeal Ground 1 as Ms Terepo indicated that she did not press her remaining grounds of appeal in the event that Ground 1 succeeded.
3. The finding of professional misconduct in Order 1 below is appropriate and reflects findings of the Tribunal that were within jurisdiction. It also reflects the following observations of Meagher JA (Beazley P and Leeming JA agreeing) in Prothonotary of the Supreme Court of New South Wales v Dimitrious [2015] NSWCA 258 at [21]: "Legal practitioners are expected to act and must act with scrupulous honesty when discharging their obligations generally, and specifically with respect to the receipt and payment of monies on behalf of clients. There is an unqualified expectation that they adhere to those standards. The position was stated plainly by Ipp JA in Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32; Aust Torts Reports 81-730 at [118]: '… The trust and confidence which clients place in their solicitors are a basic element of the administration of justice in this country. Violations by legal practitioners of trust accounts betray that trust and harm public confidence in the legal system. This explains the sacrosanct nature of trust accounts and the acute concern that courts have when practitioners, in breach of their fiduciary obligations, misuse trust moneys for their own benefit.'"
4. The setting aside of Order 1 made by the Tribunal on 26 April 2019, that being the recommendation that Ms Terepo's name be removed from the Roll, is appropriate as it was in part based on the Tribunal's impermissible finding of recklessness. In any event whilst the findings of professional misconduct against Ms Terepo are serious, they are not, in light of the circumstances in which Ms Terepo's conduct occurred, so serious as to warrant an order for the removal of her name from the Roll and, in any case, the Law Society no longer seeks such an order.
5. Order 2 made by the Tribunal on 2 July 2018 will be left unaffected by the orders to be made on this appeal. Order 2 related to Ground 4 of the Law Society's application pursuant to which the Tribunal found Ms Terepo guilty of unsatisfactory professional conduct (see [19] above).
6. In light of the contrition expressed by Ms Terepo and the circumstances applicable when her conduct occurred, it is sufficient that, as contemplated by this Court's orders, her conduct be addressed by a finding of professional misconduct and, in one respect, a finding of unsatisfactory professional conduct, together with a restriction on her ability to apply for a practising certificate.

Orders

1. The Court orders that the Law Society's summons in proceedings 2020/301529, being the proceedings for removal of Ms Terepo's name from the Roll, be dismissed with no order as to costs.
2. In proceedings 2021/00075408, being Ms Terepo's appeal against the Tribunal's orders, the Court makes the following orders: 1. Appeal allowed in relation to Ground 1 of the Amended Notice of Appeal filed on 21 October 2021. 2. Order 1 made by the New South Wales Civil and Administrative Tribunal on 2 July 2018 is set aside and in lieu thereof, the Court declares that the Appellant is guilty of professional misconduct in respect of the following conduct: 1. the Appellant misappropriated the sum of $850 withdrawn in cash on 9 December 2014 (Cash Withdrawal) from the trust account of her former law practice LMJ Lawyers (Law Practice); 2. the Appellant caused a deficiency in the trust account of her Law Practice by the Cash Withdrawal; 3. the Appellant breached s 255 of the Legal Profession Act 2004 by reason of the 39 withdrawals totalling $13,020.50 being made from the trust account of the Law Practice made between 3 November 2014 and 2 February 2015, including the Cash Withdrawal, and disbursing those amounts; 4. the Appellant breached s 255A of the Legal Profession Act 2004 by making the Cash Withdrawal; 5. the Appellant breached s 264 of the Legal Profession Act 2004 in the period 20 February 2014 to 29 June 2015 in that the trust records of the Law Practice were not kept in such a manner as to disclose their true position; 6. the Appellant breached s 263 of the Legal Profession Act 2004 in that she did not, as soon as practicable after becoming aware that there was an irregularity in the trust account of the Law Practice, give written notice of the irregularity to the Law Society; 7. the Appellant failed to comply with the notice under s 371 of the Legal Profession Uniform Law (NSW) served on her on 30 May 2016 by failing to provide the written information and documentation sought in the Notice. 1. Order 1 made by the Tribunal on 26 April 2019 is set aside and in lieu, the Court orders that: 1. The Appellant not be permitted to apply for a new practising certificate unless the following condition is satisfied: The Appellant must, at her own expense, undertake, complete and pass (achieving a pass mark of not less than 70% or equivalent as approved by the Director, Legal Regulation of the Law Society (Director) acting reasonably) the Ethics component of the Practical Legal Training course conducted by the College of Law and the Trust Account component of the Practice Management course conducted by the Law Society of NSW (or such other course(s) as may be approved by the Director acting reasonably). 1. The Appellant is to provide to the Director the original result notification from the provider/s of those courses. 1. Note that the Court makes no order as to the costs of the proceedings in the Court of Appeal.

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: 25 October 2022