The Council of the Law Society of New South Wales v Kernaghan - [2021] NSWCATOD 111 - NSWCATOD 2021 case summary — Zoe

NSWNSWCATOD

The Council of the Law Society of New South Wales v Kernaghan

[2021] NSWCATOD 111

NCAT Occupational|2021-03-25

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Court

NCAT Occupational

Decision date

2021-03-25

Source

Original judgment source is linked above.

Judgment (45 paragraphs)

[1]

NSWCA 423 Council of the Law Society of New South Wales v Wehbe [2018] NSWCATOD 14 Council of the Law Society of New South Wales v Winter [2019] NSWCATOD 2 Council of the Law Society of NSW v Doherty [2010] NSWCA 177 Council of the Law Society of NSW v Pizzinga [2012] NSWADT 211 Council of the Law Society of NSW v Powell [2019] NSWCATOD 24 Council of the Law Society of NSW v Sandroussi [2012] NSWADT 40 Council of the New South Wales Bar Association v Sahade [2007] NSWCA 145 Kyriackou v Martin [2014] VSC 122 Law Society of New South Wales v Hinde [2005] NSWADT 199 Law Society of New South Wales v Ling [2010] NSWADT 48 Law Society of New South Wales v Narayanasamy [2014] NSWCATOD 18 Law Society of New South Wales v Thompson [2018] NSWCATOD 57 Law Society of New South Wales v Treanor [2005] NSWADT 285 Law Society of NSW v Koffel [2010] NSWADT 149 New South Wales Bar Association v Cummins (2001) 52 NSWLR 279 Prothonotary of the Supreme Court of New South Wales v McCaffery [2004] NSWCA 470 Smith's Snack Food Company Limited v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 Texts Cited: None Category: Principal judgment Parties: Council of the Law Society of New South Wales (Applicant) Aaron Noel Kernaghan (Respondent) Representation: Counsel: P Maddigan (Applicant)

[2]

Solicitors: Professional Standards, Law Society of NSW (Applicant) Respondent (Self-Represented) File Number(s): 2020/00028200 Publication restriction: The disclosure of the name of the former client of the Solicitor (referred to in these reasons as Client M) is prohibited pursuant to s 64(1)(a) of the Civil and Administrative Tribunal Act 2013 (NSW).

[3]

Background

The Council of the Law Society of New South Wales (the Law Society) seeks disciplinary findings and orders against the respondent, Aaron Noel Kernaghan (the Solicitor). As the complaints were initiated after July 2015, the applicable legislative regime is the Legal Profession Uniform Law (NSW) (Uniform Law).
On 14 September 2018, the Council of the Law Society commenced proceedings against the Solicitor by filing an Application for Disciplinary Findings and Orders (Initial Application), alleging that the Solicitor was guilty of professional misconduct, on 12 grounds (proceeding 2018/00282368). On 26 June 2019, the Law Society filed an amended Application for Disciplinary Findings and Orders. On 2 October 2019 the Initial Application (as amended) was dismissed by consent. At the time those proceedings were dismissed the Law Society had filed its affidavit evidence, and the Solicitor had filed a Reply (14 December 2018) but had filed no evidence. In its written submissions in the current proceedings, the Law Society said that the Initial Application was dismissed as a result of procedural defects of the nature of those identified in Council of the Law Society of New South Wales v DXW [2019] NSWCATOD 101.
On 28 January 2020, the Law Society commenced these proceedings against the Solicitor by filing an Application for Disciplinary Findings and Orders (the Application) in respect of a number of the same grounds and particulars in the Initial Application (a copy of the Initial Application was also attached). These proceedings have been recommenced by the Law Society pursuant to cl 23(5)(a) of Pt 5 to Sch 9 of the Legal Profession Uniform Law Application Act 2014 (NSW) (Application Act) which provides that: 23 Validations … (5)Any proceedings commenced in a court or tribunal by an authorised delegate or subdelegate that were terminated on a relevant invalidity ground during the relevant period at the instigation of an authorised delegate or subdelegate - (a)may be recommenced under the authority of this clause by the same delegate or subdelegate in the court or tribunal on the basis of the applications and other documents by which those proceedings were last commenced, and (b)any thing done in the terminated proceedings (other than the termination of the proceedings) is taken to have been done in the recommenced proceedings. ….
On 8 April 2020 Deputy President ADCJ Hennessy ordered that the material the Law Society had filed in proceedings 2018/282368 was deemed to have been filed in these proceedings. Directions were made for the Solicitor to file and serve an Amended Reply and any affidavit evidence on which he intended to rely, by 20 May 2020. On 26 May 2020 the Solicitor filed an affidavit sworn 14 March 2019. On 3 June 2020 directions were made for the parties to file and serve written submissions, and the matter was listed for hearing on 26 October 2020.
In his written submissions filed on 12 October 2020 the Solicitor stated that he accepted that the 10 grounds relied upon by the Law Society (grounds 7 and 9 not being pressed) had been made out, and that he sought an opportunity to address the Tribunal on the question of appropriate consequential orders. In response to the Solicitor's change in position, directions were made for the Solicitor to file and serve an Amended Reply. The hearing was vacated, and a hearing dispensed with in relation to the determination of whether the Solicitor had engaged in the conduct the subject of the Application, and the characterisation of that conduct.
On 28 October 2020 the Solicitor filed a Reply to the Application, which he stated "supersedes and replaces any previous reply". In that Reply the Solicitor stated that with respect to each of grounds 1 to 6 inclusive and ground 8 and grounds 10 to 12 inclusive, he "respectfully submit[s]" to the findings of the Tribunal.
On 4 November 2020, the Court of Appeal handed down its decision in Carr v Council of the Law Society of New South Wales [2020] NSWCA 276 (Carr). In written submissions on the consequences of that decision on the issues for determination in these proceedings, the Law Society withdrew Ground 1 of the Application, which was that the Solicitor had dishonestly misappropriated trust monies. The Law Society submitted that the balance of the complaints against the Solicitor were not affected, and that it continued to plead the allegations of fact pleaded in relation to ground 1 of the Application to the extent that they were relevant to the remaining grounds. The Solicitor submitted that the decision in Carr requires the Law Society to discharge its onus with respect to not only the underlying facts that tend to show relevant events occurred, but the relevant intention behind them, and that potentially affected grounds 5 (causing a deficiency in a trust account) and 6 (intermixing trust monies).
On 21 December 2020, as requested by the Tribunal, the Law Society filed an amended Application for Disciplinary Findings and Orders (Amended Application). The Amended Application omitted three grounds that had formed part of the Law Society's previous applications, being Ground 1, and Grounds 7 and 9, and made certain other amendments, discussed as relevant below.
Prior to the decision in Carr, the Tribunal and the parties (by consent) had proceeded on the basis that these proceedings would be determined in two stages, with stage one being determined on the papers. Orders were made dispensing with the need for a hearing for stage one pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act). Following the decision in Carr and the filing of the Amended Application and certain other material filed by the parties, the proceedings were listed for hearing on 25 March 2021 to hear oral submissions from both parties. The Tribunal also extended the date by which the Respondent was to file and serve any Reply to the Amended Application to 5 February 2021. No such Reply was filed by the Respondent.
These reasons relate to stage one of the proceedings and consider the evidence presented and the submissions made in respect of the Amended Application. These reasons record findings of both professional misconduct and unsatisfactory professional conduct. Consideration of the disciplinary and other orders (including any claim for compensation) that ought to be made, consequent upon these findings, will be determined in stage two.

[9]

Evidence

The Law Society's evidence comprised: 1. affidavit of Anne-Marie Foord (Foord), Director, Professional Standards employed by the Law Society, sworn 13 September 2019 (and exhibit AMF1). 2. affidavit of Foord sworn 30 October 2018. 3. affidavit of Lucia Moliterno (Moliterno) sworn 11 September 2018 (and exhibits LM-1 and LM-2, A2, A3 and A4 respectively). Ms Moliterno was appointed by the Law Society to investigate the affairs of the law practices KAPL and the Sole Practice; 4. affidavit of Ronald Dunlop (Dunlop) sworn 31 August 2018 (and its annexures (A) to (C)). Mr Dunlop is a Trust Account Investigator employed by the Law Society. 5. affidavit of a former client of the Solicitor, Ms Watson (Watson) sworn 11 September 2018 (and exhibit JMW-1). 6. affidavit of James Frazer Howell (Howell) sworn 7 September 2018 (and its annexures (A) to (G)). Mr Howell was employed by KAPL as a solicitor during the period 18 February 2011 to 10 March 2016. 7. affidavit of Cheryl Colquhoun (Colquhoun) sworn 19 October 2018 (exhibit CK-1). Ms Colquhoun is a Consultant Psychiatrist who provided expert reports to the Sole Practice. 8. affidavit of Zaky Orya (Orya) sworn 11 September 2018 (and its annexure (A) to (F)) Mr Orya is a solicitor, employed from around 2010 to the end of 2016 by the Office of the Legal Services Commissioner.
On 26 May 2020 the Solicitor filed an affidavit (and its annexure (A) to (K)) sworn and dated 14 March 2019 (Solicitor's Affidavit), being a date before the Initial Application was dismissed by consent. That affidavit was sworn while proceedings 2018/282368 were before the Tribunal, however it was not filed, and accordingly was not included in the order made by ADCJ Hennessy on 8 April 2020. The affidavit was filed, and forms part of the evidence, in the current proceedings.
As noted above, the Solicitor has not filed a Reply to the Amended Application. The Solicitor's written submissions which were filed on 12 October 2020 indicate that he accepts that the grounds relied on by the Law Society "have been made out" and also accepts the matters set out in the written submissions of the Law Society. Subsequent to filing his written submissions, the Solicitor raised, in both written and oral submissions, certain matters by way of clarification to this acceptance. While not the subject of sworn evidence, the Tribunal has referred, where relevant, to those statements and submissions in these reasons.
There were no objections made to the admission of the affidavit evidence of the Law Society or the Solicitor, and no oral evidence.
In addition to the parties' submissions on the decision in Carr, the Law Society has provided written submissions filed on 21 September 2020, and the Solicitor on 12 October 2020.
In the Solicitor's written submissions filed on 12 October 2020, the Solicitor "accepts" that the grounds pleaded by the Law Society have been made out and (excepting certain matters that are discussed in these reasons) "agrees" with the matters set out in the written submissions of the Law Society filed on 21 September 2020 in respect of the (now) nine grounds.
The rules of evidence apply to these proceedings (see cl 20, Sch 5 of the NCAT Act). Accordingly, the Evidence Act 1995 (NSW) (Evidence Act) applies. These are civil proceedings and the civil standard of proof, that is on the balance of probabilities, applies to the making of findings (see s 140(1) of the Evidence Act). The nature of the proceedings, the nature of the subject matter of the proceedings, and the gravity of the matters alleged are matters to be taken into account (see s 140(2) of the Evidence Act).

[12]

Ms Watson

Ms Watson's affidavit evidence was that she engaged the Solicitor to act for her in relation to proceedings, listed for hearing on 9 March 2016. On 3 March 2016 she entered into a costs agreement for an estimated amount of $4,400 for legal services including attendance at the hearing listed for 9 March 2016. On 7 March 2016, Ms Watson paid the amount of $4400 to KAPL into the KAPL Office Account (Watson ex JMW-1, p 20). On 8 March 2016, the matter resolved without a hearing and the Solicitor agreed with Ms Watson during a telephone conversation that the total costs for the legal services provided by the Solicitor would be $900.
Following Ms Watson's payment on 7 March 2016, the KAPL Office Account balance was $5,599.39 (Moliterno ex LM-1, tab E, p 102). The KAPL Office Account became overdrawn on 8 March 2016 (Moliterno LM-1, Tab E p 102).
Ms Watson's affidavit evidence is that in the period March to around July 2016 she sought repayment of the sum of $3,500 she had paid into the KAPL Office Account. On 6 July 2016, she made a complaint to the OLSC in respect of the failure by the Solicitor to provide an itemised bill or repay her the $3500 paid (being the money paid in excess of the $900 agreed with the Solicitor).
Mr Orya's affidavit evidence is that on 26 July 2016, while employed by the OLSC, he telephoned the Solicitor regarding Ms Watson's complaint. The file note annexed to Mr Orya's affidavit (Orya Annexure B) states that the Solicitor informed him that "…he had no issue with returning the $3500 but they have had trouble in contacting Ms Watson….He is happy to return the $3500 but he needs to know the method of payment". Mr Orya stated that he then telephoned Ms Watson, and then had a further telephone conversation with the Solicitor. The file notes (Orya Annexure C and D) record that Ms Watson provided her bank account details for transfer, and that she no longer wanted the itemised invoice; and that in his call back to the Solicitor he confirmed that payment of the $3500 would address Ms Watson's concerns, that he would write confirming the details, and that the Solicitor would have 14 days from the date of the letter to make payment. Mr Orya records that the Solicitor said he was grateful, and "he will comply". As at 13 August 2016 Mr Orya had not received any confirmation from the Solicitor that he had repaid the $3500 (Orya at [7]), and on 15 August 2016 he received an email from Ms Watson stating that she had not received the refund as promised (Orya Annexure F). As at 11 September 2018, the Solicitor had not paid Ms Watson the $3500.
On 13 January 2017, after the matter was referred to the Law Society for further investigation, the Solicitor sent an email to the Law Society attaching a tax invoice addressed to Ms Watson "By Hand or by Email", dated 16 March 2016 (Foord, ex AMF-1, pp 64, 65). Ms Watson denies receiving the tax invoice (Watson at [26] and [30], ex JMW-1 pp 41 to 42 and 47) and no email to Ms Watson attaching the invoice or other evidence of delivery has been produced by the Solicitor.
In his affidavit the Solicitor stated that Ms Watson deposited the funds ahead of the hearing into the KAPL Trust Account. He states (at [8]) that his decision to charge her full price was "justified and within my discretion", and that while he may have agreed to reduce the charge he was wrong to do so, and he was entitled to change his mind.
The Tribunal finds, based on the payment receipt annexed to Ms Watson's affidavit, which was also provided with the Solicitor's affidavit (Annexure C), that the amount of $4,400 was paid in to the KAPL Office Account, and not the KAPL Trust Account, on 7 March 2016. The Tribunal finds, based on the evidence of Ms Moliterno that the amount of $5000 was transferred from the KAPL Office Account to the ATO on 8 March 2016, and that account was then overdrawn (Moliterno LM-1, Tab E p 102).
The Tribunal finds that the amount of $4400 was not transferred to the KAPL Trust Account. The Tribunal further finds the withdrawal on 8 March 2016 from the KAPL Office Account was made without Ms Watson's authority or direction and in circumstances where no invoice had been issued to Ms Watson. The legal services for which the amount of $4,400 was paid included appearance at a hearing on 9 March 2016, and that hearing did not proceed because the matter settled on 8 March 2016.
The Tribunal accepts the evidence of Mr Orya, based on his contemporaneous file notes of conversations with Ms Watson and the Solicitor, that the Solicitor told Mr Orya that he would pay $3,500 to Ms Watson, within 14 days after receipt of confirmation of bank details. The Tribunal finds, based on the evidence of Ms Watson and Mr Orya, that that commitment was not honoured.

[16]

Mr Ciot

On 14 June 2016, Mr Ciot entered into a costs agreement with the Sole Practice for an estimated amount of $1,800 for legal services with $800 due by 5 July 2016 and $1000 "For all work rendered in attending Court for sentencing proceedings" payable by 26 July 2016 (Moliterno ex LM-1, tab UU, p 804). On 15 June 2016, the Solicitor sent a letter to Mr Ciot notifying him that a guilty plea had been entered on 15 June 2016 and that the matter had been "adjourned to 5 July, 2016 at the Wollongong Local Court for mention or sentence" (Moliterno ex LM-1, tab UU, p 804).
On 20 June 2016, $1800 was deposited into the Sole Practice Account (Moliterno ex LM-1, tab UU, p 814). Following the deposit of $1800, the balance of the Sole Practice Account was $20109.70 and by 21 June 2016, the balance of the Sole Practice Account was $9.17 (Moliterno ex LM-1, tab UU, p 814). On 11 July 2016, the Solicitor sent a letter to Mr Ciot advising that his matter had been adjourned to 9 August 2016 for sentence.
There is no record of a tax invoice on the file (Moliterno ex LM-1, p 19).
At [19] and [20] of his affidavit, the Solicitor states that Mr Ciot "not only approved the payment, in response to the invoice, but paid it" and that the "money transferred was approved by Mr Ciot". In his written submissions dated 10 October 2020 at [28], the Solicitor accepts that no invoice could be found, and no invoice was provided to Ms Moliterno.
The Solicitor states at [18] of his affidavit that Mr Ciot was represented over the course of two matters, the second of which "arose on or around 14 June 2016". In respect of the first matter, the Solicitor attached to his written submissions dated 10 October 2020 a copy of a cost disclosure agreement dated 14 September 2015. In respect of the second matter, the Solicitor attached to those written submissions a series of text messages between 24 and 16 August 2016 that, the Solicitor submits, "confirms the subsequent representation".
The material provided by the Solicitor does not show, as the Solicitor submitted, that Mr Ciot owed money from any previous matter and the Tribunal does not accept on the material before it that Mr Ciot owed any such money. The Tribunal finds that no tax invoice was issued to Mr Ciot at the date the money was deposited. As set out in these reasons at [31] above, the evidence before the Tribunal establishes that the Sole Practice did not operate a trust account on 20 June 2016 when Mr Ciot paid $1000 towards legal services that were to be provided at a later date.

[17]

Mr Zlatanovic

On 27 June 2016, Mr Zlatanovic entered into a costs agreement with the Sole Practice for an estimated amount of $5,500 "For all work rendered in the preliminary stages of the matter including Court attendances and review of relevant documents and all work rendered in attending Court for a full day for a defended hearing" (Moliterno ex LM-1, tab DD1, pp 922 to 929).
On 8 July 2016, the Solicitor's assistant sent an email with the subject noted as "Account details for David's matter" to a "Michelle". The email attached a letter that provided the Sole Practice Office Account details. On 11 July 2016, Mr Zlatanovic paid the amount of $5,500 to the Sole Practice Office Account (Moliterno ex LM-1, tab DD1, p 934). Following the deposit of the $5500, the balance of the Sole Practice Office Account was $5783.50. By 13 July 2016, the balance of the Sole Practice Office Account was $321.99 (Moliterno ex LM-1, tab DD1, p 934). On 30 June 2016, the Solicitor sent a letter to Mr Zlatanovic noting that the matter was listed for hearing on 8 August 2016 (Moliterno ex LM-1, tab DD1, p 933). Correspondence dated 16 September 2016 from Legal Aid NSW to the Solicitor recording the transfer of Mr Zlatonovic's matter to the Sole Practice notes a Court date of 5 October 2016 (Moliterno ex LM-1, tab DD1, pp 935 to 938).
There is no record of a tax invoice on the file (Moliterno ex LM-1, p 22).
The Solicitor states at [21] to [22] of his affidavit that Mr Zlatanovic was provided with advice on or around 27 June 2016 and that Mr Zlatanovic was invoiced on an interim basis for work done to that date. At [23], the Solicitor states that "Money transferred was approved by Mr Zlatanovic". In his written submissions dated 10 October 2020 at [28], the Solicitor accepts that no invoice could be found.
The Tribunal finds that no tax invoice was issued to Mr Zlatanovic by 11 July 2016 when the $5500 was deposited. As set out in these reasons at [29] above, the evidence before the Tribunal establishes that the Sole Practice did not operate a trust account at the time Mr Zlatanovic paid $5500 towards legal services that were to be provided at a later date.

[18]

Mr Brookes

On 28 January 2016, KAPL sent a letter enclosing a costs agreement to Mr Brookes for an estimated amount of $1,320 for legal services with $660 payable by 2 February 2016 and $660 payable by 16 February 2016 "For all work rendered in attendance at the Local Court of NSW for a sentence hearing for half a day" (Moliterno ex LM-1, tab O, pp 164 to 172). The cover letter provided the details for the KAPL Trust Account (Moliterno ex LM-1, tab O, p 164). A letter dated 28 January 2016 confirms instructions given by Mr Brookes to enter a plea of guilty on 2 February 2016 (Moliterno ex LM-1, tab O, p 173 to 174). The costs agreement stated that payment was due "immediately upon the completion of the relevant service" and made no reference to appropriation from the KAPL Trust Account.
On 19 February 2016, Mr Brookes paid the amount of $1,320 to the KAPL Trust Account (Moliterno ex LM-1, tab O, p 176). On 20 February 2016, $1,320 was withdrawn from the KAPL Trust Account and transferred to the KAPL Office Account (Moliterno ex LM-1, tab O, pp 176 and 177). The transaction description was recorded as "Wrong Account". Prior to the transfer of the $1320, the KAPL Office Account was overdrawn by $515.18 (Moliterno ex LM-1, tab O, p 177). The KAPL Office Account became overdrawn again on 20 February 2016 and remained overdrawn until 22 February 2016 (Moliterno ex LM-1, tab O, pp 177 and 178).
A letter from KAPL dated 23 February 2016 notified Mr Brookes of the outcome of his sentencing hearing on 23 February 2016 and stated, "We note that we will correspond with you separately regarding our professional fees".
There is no record of a tax invoice on the file (Moliterno ex LM-1, p 6).
The Solicitor states at [11] to [12] of his affidavit that $1320 was billed to Mr Brookes and paid in accordance with the authority of Mr Brookes and that Mr Brookes authorised the payment. In his written submissions dated 10 October 2020, the Solicitor submits, at [20], that he "always caused to be issued an invoice in order to make the transaction" but concedes that the relevant invoices have not been able to be produced.
The Tribunal finds that, at the time the $1320 was transferred to the Office Account, part of the work for which that amount related (the sentencing hearing) had not been carried out. There is no evidence before the Tribunal that, as the Solicitor submits, an invoice was issued to Mr Brookes or other evidence that Mr Brookes had authorised the payment of money before his sentencing hearing. The Tribunal also finds that no tax invoice was issued to Mr Brookes at the time the $1320 was transferred to the KAPL Office Account.

[19]

Mr McCheane

On 8 December 2015, Mr McCheane entered into a costs agreement with KAPL for an estimated amount of $1,650 for legal services with $1000 recorded as "Paid" and $650 "For all work rendered in attendance at the Local Court of New South Wales for a sentence hearing for a half day" payable "Now" (Moliterno ex LM-1, tab Z, pp 340 to 341). The costs agreement provides that payment is "due immediately on completion of the relevant service" and made no reference to appropriation from the KAPL Trust Account.
On 6 January 2016, the amount of $650 was deposited into the KAPL Trust Account (Moliterno ex LM-1, tab Z, p 340 to 341). On 9 January 2016, $650 was withdrawn from the KAPL Trust Account and transferred to the KAPL Office Account (Moliterno ex LM-1, tab Z, p 344). The transaction description was recorded as "Incorrect Deposit". Prior to the deposit of the $650, the balance of the KAPL Office Account was $82.13 (Moliterno ex LM-1, tab Z, p 346). On 12 January 2016, KAPL sent a letter notifying Mr McCheane that the matter had been adjourned to 1 March 2016 for sentencing (Moliterno ex LM-1, tab Z, p 342).
By 1 February 2016, the KAPL Office Account became overdrawn (Moliterno ex LM-1, tab Z, p 349). On 1 March 2016, KAPL sent Mr McCheane a letter advising him of the outcome of his sentencing hearing (Moliterno ex LM-1, tab Z, p 343).
The Solicitor states at [13] to [14] of his affidavit that Mr McCheane owed $650 from a previous invoice from 12 March 2015 and the payment by Mr McCheane of $650 on 6 January 2016 "resulted in clearing that invoice". A copy of the invoice referred to by the Solicitor was not produced by the Solicitor.
There is no record of a tax invoice on the file (Moliterno ex LM-1, p 11).
The Tribunal finds that, at the time the $650 was transferred to the Office Account, the work for which that amount related (the sentencing hearing) had not been carried out. There is no evidence before the Tribunal that, as the Solicitor submits, a prior invoice was issued to Mr McCheane in respect of outstanding amounts or other evidence that Mr McCheane had authorised the payment of money before his sentencing hearing. The Tribunal also finds that no tax invoice was issued to Mr McCheane at the time the $650 was transferred to the KAPL Office Account.

[26]

Section 370 Notice

On 21 June 2016, Mr Dunlop, a trust accounts investigator of the Law Society (Trust Accounts Investigator) sent, by email, to the Solicitor a notice pursuant to s 370 of the Uniform Law (Section 370 Notice) requesting access to the records of KAPL and the Sole Practice including trust records, by 11 July 2016 (Dunlop Annexure A pp 114 to 122). The Solicitor did not comply with the Section 370 Notice by 11 July 2016 (Dunlop Annexure A p 24 at (n)).
On 13 July 2016, the Solicitor replied to the email of 21 June 2016 and stated that the Solicitor "proposed to furnish" the information by 18 July 2016 (Dunlop Annexure A p 123). On 14 July 2016, the Solicitor provided the Trust Accounts Investigator with a medical certificate which stated that the Solicitor would be unfit for work from 11 July 2016 to 16 July 2016 (Dunlop Annexure A pp 124 to 125). The Solicitor advised Ms Moliterno that he had provided materials to the Trust Accounts Investigator in response to the Section 370 Notice (Moliterno ex LM-1, tab H p 120).
The Solicitor did not contact the Trust Accounts Investigator again after 14 July 2016 (Dunlop Annexure C). As at 31 August 2018, the Solicitor had not made any further contact with the Trust Accounts Investigator and had not complied with the Section 370 Notice (Dunlop Annexure A p 5 at [8] and [9(a)]).
The Solicitor states at [50] of his affidavit that "Extensive materials were provided to Ms Moliterno in addressing the requests that she made and that subsumed those of [the Trust Accounts Investigator]". In support of his position, the Solicitor produced a number of documents at Annexure G to his affidavit.
While certain material was provided to Ms Moliterno in respect of her investigations, the issue before the Tribunal for the purposes of this ground is compliance with s 370 of the Uniform Law. On the evidence available to the Tribunal, the Tribunal finds that the Solicitor did not provide a response to the Trust Accounts Investigator in response to the Section 370 Notice.

[27]

Mr Howell - superannuation

As of 10 March 2016, KAPL was indebted to the Deputy Commissioner of Taxation for $80640.97 for unpaid Superannuation Guarantee Charges (Foord ex AMF-1 p 254). Mr Howell states in his affidavit at [7] that during the period of his employment KAPL deposited $2305.09 into his superannuation account (Howell [7]). The ATO provided Mr Howell with a summary document showing that superannuation payments of $26782.75 were outstanding as at 3 March 2017 (Howell [10] and [11] and Annexures F and G).
On 23 June 2014, the Solicitor provided a summary to Mr Howell of Mr Howell's "superannuation details for all your employment with [KAPL]". The total superannuation guarantee charge payable for the period January 2011 to December 2013 was $15,313.52 (Moliterno ex LM-1 tab MM p 682).
On 8 February 2016, the Solicitor sent an email to Mr Howell regarding superannuation payments by KAPL and requested information regarding Mr Howell's superannuation fund (Howell [8] and Annexure C pp 38 to 40). On 9 February 2016, Mr Howell sent an email to the Solicitor regarding information from the ATO that his superannuation had not been paid by KAPL (Howell [9(a)] and Annexure D p 41). On 9 February 2016, the Solicitor replied to Mr Howell's email of the same date indicating that the information from the ATO regarding his superannuation was not correct and that the Solicitor would "check this tomorrow with the ATO" (Howell [9(b) and Annexure E p 42).
The Solicitor states at [64] of his affidavit that compulsory superannuation charges was a matter that he had "attempted to resolve by way of negotiations and discussions with the ATO over the course of several months". At [65] the Solicitor states that those discussions resulted in an agreement to pay instalments that continued up until KAPL was wound up. At [66], the Solicitor states that the total paid to the ATO was "in excess of $130000". At [71] the Solicitor states that he believed the liquidator of KAPL "sought to get back all of the monies paid to the ATO …" including payments in respect of compulsory superannuation charges. At [72] the Solicitor states that he does "not know, nor had any control over, what happened to the [compulsory superannuation charges] component of the funds paid to the ATO thereafter".
The Tribunal finds, on the basis of the evidence of Mr Howell and that provided in the ATO documents relating to KAPL's superannuation guarantee charge, that the Solicitor failed to make superannuation guarantee payments on behalf of KAPL's employee, Mr Howell, or make payments into his nominated superannuation fund.

[28]

Failure to pay company tax, GST and PAYG

In a report to creditors dated 18 May 2016 the liquidator of KAPL states (Moliterno ex LM-1 tab C pp 50 and 51): "I am of the opinion that due care and diligence was not exercised in ensuring financial records were adequately maintained and that [KAPL] was in a position to repay its creditors. It appears that expenses such as … employee superannuation were left unpaid for a significant amount of time while the [Solicitor] attempted to negotiate with the ATO".
The liquidator of KAPL provided extracts of the running balance account and income tax account of KAPL from the ATO Business Portal to the Law Society which indicate: 1. In relation to the running balance account, KAPL was penalised for failing to lodge activity statements on time as follows: 1. On 23 April 2012 for the quarter ending 31 December 2011 (Moliterno ex LM-1 p 222). 2. On 24 May 2013 for the quarters ending 31 March 2011, 30 June 2012, 30 September 2012, 31 December 2012 and 31 March 2013 (Moliterno ex LM-1 pp 223 and 224). 3. On 27 November 2013 for the quarter ending 30 June 2013 (Moliterno ex LM-1 p 224). 4. On 23 October 2014 for the quarters ending 31 March 2014 and 30 June 2014 (Moliterno ex LM-1 p 227). 5. On 30 January 2015 for the quarter ending 30 September 2014 (Moliterno ex LM-1 p 228). 6. On 15 September 2015 for the quarter ending 30 June 2015 (Moliterno ex LM-1 pp 229 and 230). 1. On 29 November 2017, the ATO wrote off $218921.04 which was outstanding on the running balance account (Moliterno ex LM-1 p 233). 2. In relation to the income tax account, KAPL was penalised for failing to lodge tax returns as follows: 1. On 23 January 2013 for the 2010-2011 financial year (this tax return was lodged on 25 September 2015) (Moliterno ex LM-1 p 241). 2. On 28 November 2013 for the 2011-2012 financial year (this tax return was lodged on 25 June 2015) (Moliterno ex LM-1 p 238). 3. On 22 October 2014 for the 2012-2013 financial year (this tax return was lodged on 25 June 2015) (Moliterno ex LM-1 p 238). 4. On 17 March 2015 for the 2013-2014 financial year (this tax return was lodged on 28 January 2016) (Moliterno ex LM-1 p 246). 5. On 20 January 2016 for the 2014-2015 financial year (this tax return was lodged on 20 January 2016) (Moliterno ex LM-1 p 246).
On 18 November 2015, the Deputy Commissioner of Taxation as petitioner made an application to the Supreme Court of NSW in proceedings 2015/00339101 to wind up KAPL as a result of outstanding tax debts (Moliterno ex LM-1, tab C p 43; Dunlop Annexure A pp 129 and 130).
The Solicitor states at [64] of his affidavit that the "question of the financial debt owed to the ATO" was a matter that he had "attempted to resolve by way of negotiations and discussions with the ATO over the course of several months". At [65] the Solicitor states that those discussions resulted in an agreement to pay instalments that continued up until KAPL was wound up. At [66], the Solicitor states that the total paid to the ATO was "in excess of $130000". On 14 March 2016, the Solicitor sent an email to the Law Society (Kernaghan Annexure F p 38) that indicates (and we summarise and paraphrase): 1. KAPL defaulted on the payment plan with the ATO by one day only and this default led to the ATO applying for KAPL to be wound up. 2. The consolidated debt concern arose as a result of a bookkeeper "who ran out on me and left me to discover that while BAS was being prepared by me, it wasn't being filed".
In an email dated 22 December 2015 from its legal representatives, the ATO's acceptance of the Solicitor's payment proposal was contingent on the payment of $75000 in December 2015 and required KAPL to have paid $200000 by the end of February 2016 (Kernaghan Annexure K). Information available from the ATO Business Portal shows that KAPL did not pay the $75000 by December 2015 and by the end of February 2016 had paid $154000 (Ford ex AMF-1 pp 231, 246 and 248).
The Tribunal accepts the reports and financial information produced by the liquidator of KAPL and the ATO and finds that the Solicitor failed to ensure that KAPL made payment of company tax, GST and PAYG to the ATO.

[29]

Expert fee

By letter dated 22 March 2017, the Sole Practice engaged Dr Colquhoun, a forensic psychiatrist, to carry out work, including provision of an expert report (Expert Report) in certain proceedings (Colquhoun [4] and ex CKC-1 p 1). On 2 April 2017, the forensic psychiatrist sent the Sole Practice the Expert Report and an invoice in respect of the Expert Report in the amount of $2,000. The invoice requested payment within 28 days.
Dr Colquhoun followed up the payment of the invoice in an email dated 3 May 2017 (Colquhoun [6] and ex CKC-1 p 5). The email was copied to an employee of Legal Aid NSW. The employee of Legal Aid NSW replied to Dr Colquhoun indicating that Legal Aid NSW had approved payment for the Expert Report on 28 March 2017 (Colquhoun [6] and ex CKC-1 pp 2 to 4). On 10 May 2017, the Solicitor emailed Dr Colquhoun regarding the invoice and stated that he "await[s] payment of it from Legal Aid so I can then send to you".
Dr Colquhoun raised the non-payment of the invoice again in an email dated 3 July 2017 (Colquhoun [6] and ex CKC-1 p 16). The employee of Legal Aid replied by email dated 4 July 2017 stating that he "can confirm that Mr Kernaghan claimed the fee to pay your invoice on 8 May 2017".
On 8 August 2017, the Expert made a complaint to the OLSC. The complaint was referred by the OLSC to the Law Society on 28 August 2017 (Foord ex AMF-1 pp 133 and 134). By way of letter dated 6 March 2018 to the Law Society, the Solicitor stated: "The invoice was issued by Dr … Colquhoun and dated 2 April 2017. My records then show that payment being made to the Doctor on 2 June 2017. A copy of the invoice and receipt of payment are reproduced below".
The payment receipt provided by the Solicitor in his letter dated 6 March 2018 to the Law Society shows a payment of $2000 was made from the Sole Practice Office Account to a personal savings account in the Solicitor's name (Moliterno ex LM-1 p 18 and Tab RR p 767).
As at 19 October 2018, the Solicitor had not paid the invoice for the Expert Report (Colquhoun [23]).

[31]

Ground 2 - Breach of undertaking to OLSC

As outlined above, a number of grounds initially pleaded by the Law Society are not pressed. Accordingly, the first matter for consideration is Ground 2 of the Amended Application.
The Council contends that the Solicitor gave an undertaking to the OLSC and is guilty of professional misconduct on the basis that he failed to comply with the undertaking. The Solicitor's Outline of Submissions state that "[t]his ground has been admitted" and that the law cited by the Law Society is agreed.
The Solicitor accepts that during a telephone call with the OLSC on 26 July 2016, he agreed to repay the amount of $3,500 to Ms Watson by 12 August 2016. In a letter dated 8 December 2017 the Solicitor accepts that, in so doing, he made an undertaking to the OLSC and that he did not comply with that undertaking (Foord ex AMF-1 pp 194; 199 to 200).
The Solicitor's letter of 8 December 2017 to the Law Society states that he had "extenuating personal circumstances" and "directed that a payment be made to Ms Watson … and believed that had occurred". No evidence or further material has been provided to the Tribunal in respect of the Solicitor's direction for the money to be paid.
As outlined at [31] of these reasons, a liquidator was appointed to liquidate KAPL on the petition of the ATO on 10 March 2016. The Solicitor states at [9] of his affidavit that he was under a "significant amount of pressure and ongoing issues regarding the winding up of [KAPL]". The Tribunal accepts that the winding up of KAPL combined with the demands of operating a legal practice would place significant pressure on the Solicitor at that time. However, in our view, this does not address why the money had not been repaid to Ms Watson as at 11 September 2018 in circumstances where the Solicitor accepted in December 2017 that he made an undertaking to the OLSC to pay the money.
The Law Society referred the Tribunal to Council of the Law Society of NSW v Powell [2019] NSWCATOD 24. The Law Society submitted that the failure to honour an undertaking fits within the long-accepted definitions of common law professional misconduct (see Law Society of New South Wales v Hinde [2005] NSWADT 199 at [4], Law Society of New South Wales v Treanor [2005] NSWADT 285 at [38] and Law Society of NSW v Ling [2010] NSWADT 48 at [48].
The undertaking in this matter was to pay Ms Watson an amount of money by a particular date. There is no issue for the Tribunal to consider as to whether the Solicitor, as principal of the relevant practice, was lawfully able to comply with the terms of the undertaking (and the parties have not raised any such issue).
Failure to honour an undertaking constitutes a breach of Rule 6.1 of the Legal Profession Uniform Law Australian Solicitors Conduct Rules 2015: A solicitor who has given an undertaking in the course of legal practice must honour that undertaking and ensure the timely and effective performance of the undertaking, unless released by the recipient or by a court of competent jurisdiction.
In Council of the Law Society of NSW v Powell [2019] NSWCATOD 24 at [20] - [21] the Tribunal stated: "… the legal profession is an honourable one and legal practitioners are expected by the community, by fellow practitioners, and by the relevant regulatory authorities to behave honourably always. It is an everyday occurrence in all areas where lawyers practice that legal practitioners provide undertakings to fellow practitioners and to a wide range of commercial and statutory entities both on their own behalf and on behalf of their clients. Other legal practitioners and commercial and statutory entities rely on compliance with those undertakings in their everyday activities. Such reliance is integral to the efficient and effective functioning of a whole range of activities within our community. It is essential that undertakings given by legal practitioners be genuinely provided and that they be honoured. It is for these reasons that prima facie, a breach by a legal practitioner of an undertaking, whether given during legal practice or not, will arguably constitute a most serious matter, and may in relevant circumstances, adversely impact upon the integrity of the profession in the eyes of the public. In addition, a practising certificate constitutes an authority to carry on practice as a legal practitioner. The authority so granted creates a privilege in the hands of the practitioner. Any breach of any condition imposed on the right to practice must also, per se, be a matter to be taken seriously."
In Law Society of New South Wales v Thompson [2018] NSWCATOD 57, the Tribunal remarked at [4] that: [I]t is an egregious wrong for any legal practitioner to fail to honour an undertaking. So much of the litigation and commerce between solicitors depends upon oral and written undertakings being honoured.
In Council of the Law Society of New South Wales v Bunton [2020] NSWCATOD 67 the Tribunal said at [18] that it "may generally be accepted that, in the absence of countervailing considerations, if the undertaking has not been honoured, the practitioner will be guilty of professional misconduct: Council of the Law Society of New South Wales v Lewis [2019] NSWCATOD 100; Law Society of New South Wales v Thompson [2018] NSWCATOD 57; Council of the Law Society of NSW v Marando [2018] NSWCATOD 194".
The Tribunal has previously found that, where the undertaking was given to the OLSC, the non-compliance is particularly serious. In Council of the Law Society of New South Wales v Morgan [2015] NSWCATOD 71 the Tribunal stated at [81]: We agree with the statement in [NSW Bar Association v Howen [2008] NSWADT 148] that non-compliance with an undertaking to a professional association is a more serious matter than non-compliance with an undertaking to a fellow practitioner.
As the former Administrative Decisions Tribunal said in Council of the Law Society of NSW v Sandroussi [2012] NSWADT 40 at [39]: The clients, the public, other members of the profession and the courts are entitled to expect a solicitor to be a person of honesty and integrity and to comply with legal requirements in relation to his Practising Certificate and undertakings given by him to the Law Society.
In our view, breach of the undertaking to the OLSC is a substantial failure by the Solicitor to maintain a reasonable standard of competence and, in the context in which it arose, is also demonstrative of a failure to apply a reasonable level of diligence. We find the Solicitor guilty of professional misconduct.

[33]

Intention as an element of Grounds 4, 5 and 6

In summary, in Carr the Court of Appeal found that the Tribunal had erred in its findings that the respondent to those proceedings had misappropriated trust money. Emmett AJA, with whom McCallum JA agreed, held that there was no misappropriation of any property or money belonging to the client because on deposit of the funds into the respondent's office account, the cash ceased to be the property of the client and became the property of the bankers, being transformed into a debt owed by the bankers to the respondent. White JA held that there was a misappropriation, however that was not dishonest as there was no evidence that the respondent knew that the withdrawals from the office account would reduce the account balance below the amount deposited or create an overdraft.
Following the decision in Carr, the Law Society withdrew its complaint in Ground 1 alleging that the Solicitor had misappropriated trust monies but proceeded with the balance of its complaints on the basis that those complaints are not affected by the decision in Carr.
The Solicitor's further written submissions filed on 19 January 2021 state: The Carr judgement emphasizes the burden the Applicant carries to discharge its full onus with respect to not only the underlying facts that tend to show relevant events occurred, but the relevant intention behind them. To the extent that is so, this potentially affects Grounds 5 (causing a deficiency) and 6 (intermixing of monies) as the Council has presented no evidence capable of establishing the requisite knowledge on the part of the Respondent. For clarity, it continues to be the case that the Respondent, as previously submitted, accepts that the relevant acts took place. The Respondent, recognizing the import of the Carr judgement contends that the Applicant has not provided evidence to demonstrate the knowledge or intention element.
At the hearing, the parties made oral submissions to assist the Tribunal with respect of the matter raised by the Solicitor and in respect of Grounds 4, 5 and 6.
The Law Society submitted that the issue of subjective intention, as raised by the Solicitor, was relevant in Carr because the Court of Appeal was considering a complaint of misappropriation. The Law Society submitted that intention is not an element of Grounds 4, 5 and 6 as a breach of the relevant legislative provisions does not require the Tribunal to be satisfied as to the Solicitor's intention. Rather, the Law Society submitted that Solicitor was, at all relevant times, the principal of the law practice for the purposes of s 34 of the Uniform Law and the conditions of the Solicitor's practising certificate recorded the Solicitor's ongoing responsibility for taking the steps necessary for ensuring that the law practice (and legal practitioners of the practice) comply with the Uniform Law, the Legal Profession Uniform General Rules 2015, (Uniform Rules) and other professional obligations. The Law Society also submitted that there is no suggestion that the relevant acts were carried out by a person on a "frolic of their own".
The Solicitor's oral submissions focussed on s 148 of the Uniform Law which provides that a law practice or Australian legal practitioner (amongst others) must not, without reasonable excuse, "cause" a deficiency in any trust account. The Solicitor drew parallels to the use of the term "cause" in criminal statutory provisions and submitted that the term connotes a degree of intention by an individual, such that intention is an element of the offence. Without further elaborating in detail, the Solicitor raised, as a query, whether (as we understood his submission) ss 138 and 146 of the Uniform Law also connote or require intention as an element of those provisions.
The Law Society was provided with an opportunity to identify any authorities it considered may assist the Tribunal in respect of the oral submissions it made on ss 34, 138, 146 and 148 of the Uniform Law and on the issue of whether intent is an element that must be proved to establish a breach of a provision of the Uniform Law. Some of the authorities provided by the Law Society are considered in the following paragraphs. The Solicitor did not provide any case law for the Tribunal to consider and did not file any material in response to the authorities identified by the Law Society.
In respect of s 138 of the Uniform Law, the Tribunal stated in Council of the Law Society of New South Wales v Davidson [2019] NSWCATOD 105 at [150]: In our view, both grounds have been established to the Briginshaw standard. The obligation under s 138 is not dependent upon the Solicitor's understanding of what is trust money. The Solicitor's misconception of what is trust money, and the Solicitor's actions in the handling of trust money based upon that misconception is so fundamental that it demonstrates a significant level of ignorance of the elementary obligations of a solicitor who takes money on trust from clients. We also find that the Solicitor's conduct caused a deficiency on the trust account in respect of the funds particularised under the ground.
In respect of s 255 of the Legal Profession Act 2004 (Previous Act) which is on terms substantially similar to s 138 of the Uniform Law, the Tribunal, in Council of the Law Society of New South Wales v Terepo [2018] NSWCATOD 106, stated at [72]: Section 4 of the 2004 Act defines "law practice" to mean a law firm or an Australian legal practitioner who is a sole practitioner. The Solicitor at all material times was a sole practitioner. Hence, the statutory obligation imposed upon her was to hold trust money. Unlike the findings that we are required to make of subjective intent when considering a common law misappropriation plea, we find the Solicitor in breach of section 255 in failing to hold trust money deposited into the trust account of the practice exclusively for the persons on whose behalf such monies were received …
In respect of 260 of the Previous Act, which is in terms substantially similar to s 146 of the Uniform Law, in Council of the Law Society of NSW v Pizzinga [2012] NSWADT 211 (Pizzinga), the Tribunal stated at [51] to [53]: 51. The Solicitor claimed not to have intended to breach these provisions. The basis for this claim seems to be that he was not aware of the obligations imposed by them and that, as mentioned earlier, he had been authorised by Mr Greenfield to invest funds held on behalf of the Nightingale estate. 52. It is evident, however, that he intentionally performed the acts that constituted breaches of each of these provisions. In addition, for reasons given earlier, we do not regard the authorisation given to him by Mr Greenfield as permitting him to withdraw the $145,000 for the purpose to which he actually applied this sum. 53. For these reasons, we find that the Solicitor's admitted breaches of sections 255 and 260 of the Act and his breach of section 262(1) were accompanied by an intention to engage in the relevant conduct and that they amounted to professional misconduct under section 498(1)(a).
In our view, while the decision in Pizzinga considered intention with respect to s 260 of the Previous Act, it did so in the context of the Tribunal explaining its decision to find the legal practitioner guilty of professional misconduct rather than unsatisfactory professional conduct.
The Victorian Civil and Administrative Tribunal stated as follows in Victorian Legal Services Commissioner v Voitin (Legal Practice) [2015] VCAT 1775 at [16] with respect to the intermixing of trust moneys contrary to s 3.3.19 of the Legal Profession Act 2004 (VIC): While today's systems are sophisticated, there is always the possibility of inadvertent mistakes such as with incorrect data entry. The prohibition on intermixing continues to be important to prevent both inadvertent and deliberate intermixing.
In respect of s 148 of the Uniform Law, in Council of the Law Society of New South Wales v Diaz [2021] NSWCATOD 9, the Tribunal stated at [37(3)(a)] that there was "no suggestion that the contraventions were the result of anything other than inadvertence and inefficiency" and at [37(3)(c)] with respect to the amount of trust money that were the subject of the complaint that "the amounts involved are so small as to support the inference that they resulted from inadvertence and inefficiency rather than an intent to disadvantage clients". The Tribunal went on to find the legal practitioner guilty of unsatisfactory professional conduct but not professional misconduct.
The Court of Appeal in Carr was considering the elements of the particular complaints brought by the Law Society. The Court of Appeal remarked that that other actions that may have been available to the Law Society but were not pursued as part of its complaints against the legal practitioner. At [125] Emmett AJA (McCallum JA agreeing) stated: …It may well be that the failure, immediately upon becoming aware of the credit to the Office Account, to transfer the sum of $7,900 to the trust account was a breach of trust. However, that has not been alleged by the Law Society. It may well be that, in some sense, the Solicitor should have made clear to the Client that, in paying monies for counsel's fees, the payment should not have been made in cash to the Office Account. Again, that is not a complaint made by the Law Society, notwithstanding the apparent finding by the Tribunal.
Further, at [128] Emmett AJA (McCallum JA agreeing) stated: …The Tribunal found that he should have been diligent to ensure that the Client was appropriately advised in writing before November 2014 that any monetary deposits ought to be made to the trust account and should have given details of the trust account of the Client. However, that was not an allegation made by the Law Society and it was not a basis upon which the Tribunal could find that the appropriation of the sum of $3,127, if that occurred, was effected knowingly by the Solicitor.
The legal meaning of "misappropriation" carries the connotation of a wrongful, dishonest use (see Law Society v Shehadie [2019] NSWCATOD 46 at [35]). In his submissions, the Solicitor referred the Tribunal to sections of the decision in Carr in which the Court of Appeal was considering whether the legal practitioner had misappropriated trust monies. In Council of the Law Society of NSW v Doherty [2010] NSWCA 177 at [41], the Court of Appeal remarked that the meaning of "misappropriation" was stated to be based in "wrongful conversion… ".
In our view and given the particular allegations made by the Law Society in the case as outlined above, the decision in Carr should not, as the Solicitor has submitted, be understood as a broad requirement for evidence of dishonesty in respect of grounds 4, 5 and 6. In the current proceedings, misappropriation is not raised by the Law Society. The Law Society's complaints are grounded in various provisions relevant to the conduct the subject of the complaints, and each of these provisions must be considered according to its terms.
The general principles of statutory construction require interpretation of the ordinary and grammatical sense of the words used having regard to their context in the Uniform Law and the purpose or object underlying the Uniform Law. Gleeson JA with whom the other members of the Court agreed said in Smith's Snack Food Company Limited v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 at [84]: "84 … As the High Court has repeatedly stated, the process of statutory construction begins with a consideration of the text: Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 293 ALR 257 at 268 [39]. This requires a consideration of the ordinary and grammatical meaning of the words of the provision by reference to all the provisions of the statute. Context and legislative purpose are also important: Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16; 297 ALR 190 at [47] per French CJ, Crennan, Keifel, Gageler and Keane JJ, referring to the statement of French CJ and Hayne J in Certain Lloyd's Underwriters Subscribing to Contract No IHOOAAQS v Cross [2012] HCA 56; 293 ALR 412 at 418 [24]."
The terms of ss 138 and 146 do not require or suggest any element of intention is required and, in such circumstances, there does not appear to be any basis to go beyond the ordinary meaning of the provisions.
While s 148 provides that a law practice, an Australian legal practitioner or any other person must not, without reasonable excuse, "cause" a deficiency in any trust account, we do not accept the Solicitor's submission that cause connotes an element of subjective intention. While the Solicitor drew parallels with the term "cause" as may be used in criminal proceedings, these proceedings are civil in nature and parallels as to 'elements', should, in our view, be treated with caution.
The Macquarie Dictionary online (www.macquariedictionary.com.au) includes, relevantly, a meaning of "cause", as a noun, as "that which produces an effect; the thing, person, etc., from which something results" as well as "the ground of any action or result; reason; motive". The Oxford English Dictionary online (www.lexico.com/) includes, relevantly, a meaning of "cause", as a noun, as "[a] person or thing that gives rise to an action, phenomenon, or condition" as well as "[r]easonable grounds for doing, thinking, or feeling something".
In our view, "cause" in the context of the Uniform Law includes something that causes an effect or from which something results. There are no textual or contextual indicators that suggest the term "cause" in s 148 of the Uniform Law must be read to be limited to a meaning that requires evidence of some motive or otherwise requiring evidence of subjective intention as suggested by the Solicitor. The limited case law to which the Tribunal was referred in these proceedings indicates that s 148 of the Uniform Law applies in respect of inadvertent breaches and, therefore, does not support the Solicitor's submissions regarding subjective intention. Further, importing such an element would, in our view, also be inconsistent with s 148 of the Uniform Law, in so far as it applies to a law practice (as well as individual practitioners).
Accordingly, and based on the material and submissions in these proceedings, when considering ss 138, 146 and 148 of the Uniform Law, we consider that the subjective intention of the Solicitor may be relevant to the Tribunal's characterisation of the conduct (and subsequent penalties and orders) but is not an element of the provisions themselves that must be demonstrated by the Law Society.

[40]

Characterisation of conduct in respect of Grounds 3, 4, 5 and 6

The matters raised in Grounds 3, 4, 5 and 6 go to the operation of the Solicitor's trust account and dealing with trust monies. The Tribunal must consider whether the contraventions enliven section 297(1) of the Uniform Law so as to result in a finding of professional misconduct.
Professional misconduct at common law includes conduct in the pursuit of professional activities that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency (see for example, Prothonotary of the Supreme Court of New South Wales v McCaffery [2004] NSWCA 470 at [46] and Council of the New South Wales Bar Association v Sahade [2007] NSWCA 145, at [54], where Basten JA noted the adoption for legal practitioners of the test propounded in Allinson being conduct in the pursuit of professional activities that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency).
In Council of the Law Society of New South Wales v Webb [2013] NSWCA 423 the Court of Appeal considered the term "substantial or consistent failure" in the statutory definition of "professional misconduct": 22. The distinction made by that definition is between conduct which involves a "substantial" failure to reach or maintain the required standard and conduct which involves a "consistent" failure to do so. The former directs attention to the nature and consequences of the failure, which may be sufficiently serious to raise questions as to the lawyer's competence and diligence and thereby warrant the description "substantial". The reference to a "consistent failure" is to ongoing or persisting acts of failing on different occasions to reach or maintain the required standard. The same or similar failures which occur on a series of related occasions and are explained by an overarching error of judgment on the part of the lawyer (which is not itself the or a relevant failure which is the subject of complaint) do not involve a "consistent failure" in the sense in which that expression is used in this definition
In our view, the breaches of ss 137, 138, 146 and 148 of the Uniform Law (Grounds 3, 4, 5 and 6) reach the standard of professional misconduct as defined in s 297(1)(a) of the Uniform Law for the following reasons: 1. The breaches happened on multiple occasions and show the element of consistency of failure which s 297(1)(a) of the Uniform Law contemplates. 2. The Solicitor accepts that he was the principal at all relevant times and that the relevant acts occurred. 3. The Solicitor has provided no evidence or made any relevant submission as to any reason why the acts occurred that can be taken into account by the Tribunal (for example that there was a mistake by the Solicitor or any other relevant factor). 4. There is a practical disadvantage to a client of the Solicitor and the Solicitor has not remedied the disadvantage (Ms Watson finds herself in the position of having to seek compensation through these proceedings and as a result of the Solicitor's breach). 5. In respect of the breaches of s 138 involving Mr Brookes and Mr McCheane, the accounts were marked with a notation that the monies were wrongly deposited into the KAPL Trust Account when the documentary evidence before us shows that the amounts were properly characterised as trust monies.

[41]

Ground 8 - Failure to comply with costs disclosure obligations

Section 174(1) of the Uniform Law requires the Solicitor to provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs.
The Law Society contends that the Solicitor is guilty of professional misconduct because: 1. KAPL failed to provide a costs agreement or information about the rights of the client to Ms Belcher. 2. KAPL issued a costs agreement to Mr Cripps only after Mr Cripps had already been invoiced for work performed by KAPL. 3. The Sole Practice (following the appointment of a liquidator to KAPL) failed to provide costs agreements or information about the rights of the client to Mr Douglas, Client M or Mr Morris.
The Solicitor's written submissions state that he agrees with the Law Society's submissions in respect of this ground. The Solicitor did not make any further submissions regarding Ground 8 at the hearing.
The Law Society submitted the Solicitor's conduct constitutes professional misconduct both within the meaning of s 297(1)(a) of the Uniform Law and pursuant to the common law test on the basis that the failure to provide the cost disclosure had the practical effect that the relevant clients were unaware of their rights under s 174(2)(a) of the Uniform Law and it deprived the clients of information to enable them to make informed decisions about the future conduct of their matters.
The Law Society referred the Tribunal to Kyriackou v Martin [2014] VSC 122 at [35] and submitted that the appointment of a liquidator to a law practice will cause that law practice to terminate any extant retainers with clients. The Law Society submitted that matters in respect of Mr Douglas and Client M were transferred to the Sole Practice without any evidence as to how that transfer occurred, including whether the clients provided their consent to the transfer.
Based on the evidence before us we find that the solicitor breached s 174(1) of the Uniform Law in respect of Ms Belcher, Mr Cripps, Client M and Mr Douglas, but not Mr Morris.
Section 174(4) of the Uniform Law provides for an exception to the usual disclosure requirements if the total legal costs (excluding GST and disbursements) in the matter are not likely to exceed $750 as set out in the Uniform Rules. The Tribunal does not find that the Solicitor breached s 174(1) of the Uniform Law in respect of Mr Morris because the evidence before us indicates that the Solicitor acted on a pro bono basis for Mr Morris. Based on the evidence before us, the exception applies in respect of Mr Morris.
While the Law Society has identified a number of instances in which the Solicitor breached s 174(1), the circumstances of the various breaches differ (and includes a period of significant change between the liquidation of KAPL and the operation of the Sole Practice). We have considered this for the purposes of assessing the consistency of the Solicitor's failures for the purposes of s 297(1)(a) of the Uniform Law.
In addition, it does not appear to us, on the material available, that a practical disadvantage arose for the Solicitor's clients from the Solicitor's failure to comply with s 174(1) of the Uniform Law. Further, there is no suggestion that the contraventions were the result of anything other than inadvertence and inefficiency and, based on the evidence before us, it would appear that poor administrative systems and practices, including file maintenance, may have been a factor.
In our view, the considerations in respect of s 174 of the Uniform Law indicate that the relevant breaches fall short of conduct which would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency, or as defined in s 297 of the Uniform Law. The conduct fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer, and was accordingly unsatisfactory professional conduct, rather than professional misconduct.
Accordingly, we consider that the Solicitor's failures to comply with s 174(1) of the Uniform Law constitutes unsatisfactory professional conduct.

[42]

Ground 10 - Breach of s 370 of the Uniform Law

The Section 370 Notice was issued in respect of the production of or access to documents. The Solicitor was subject to a requirement to produce or give access to documents as specified in the Section 370 Notice.
The Law Society submitted that the Solicitor's conduct constitutes professional misconduct within the meaning of ss 297(1)(a) and 297(1)(b) of the Uniform Law as well as pursuant to the common law test on the basis that the Solicitor was aware that the relevant information had been requested and had been given multiple opportunities to provide the information in response to the Section 370 Notice, but the Solicitor did not comply and has provided no reasons for his failure. Further, the Solicitor's representation to the Trust Accounts Investigator that he had provided the documentation to an external investigator appointed by the Law Society indicates a disregard for his obligation to comply with the Section 370 Notice and "is demonstrative of his unfitness to engage in legal practice".
The Solicitor's written submissions state that he agrees with the Law Society's submissions in respect of this ground. The Solicitor did not make any further submissions regarding Ground 10 at the hearing.
The purpose of the Section 370 Notice was to facilitate an investigation being conducted by the Law Society. The Solicitor admits, and the evidence before us demonstrates, that the respondent received the Section 370 Notice but failed to comply within the requisite time. Failure to comply with such a notice from a regulatory authority is capable of constituting unsatisfactory professional conduct or professional misconduct (see ss 298(h) and 466(6) of the Uniform Law).
In Council of the Law Society of New South Wales v Leslie [2020] NSWCATOD 81, the Tribunal stated, at [106] to [107]: 106. In failing to comply with the s 370 notice, Mr Leslie has failed to co-operate in a significant way with his professional regulator in the performance of its statutory function and has, by that failure, made the regulator's task in discovering what has been done with the funds which ought to be in the Trust Account more difficult than it ought to be. 107. In context, we consider that Mr Leslie's failure to comply with the s 370 notice constitutes professional misconduct. Mr Leslie's failure to comply with the s 370 notice was a substantial failure to maintain the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer.
The material before the Tribunal shows that the Solicitor provided a medical certificate to the Trust Accounts Investigator indicating he was "unfit for work" for between 11 and 16 July 2016. The medical certificate was provided after the date for compliance with the Section 370 Notice. Further, the Solicitor made no attempt to contact the Trust Accounts Investigator thereafter. While it may be that the Solicitor was unwell for a period of days during the period in which he was required to compile the documentation required, a medical certificate addressing the period after he was required to comply is not a satisfactory answer to his failure to respond to the Section 370 Notice in the circumstances, particularly in circumstances where there is no evidence before the Tribunal that the Solicitor took any further steps following the period identified in the medical certificate to comply with the notice.
In his affidavit, the Solicitor deposes that he had issued extensive materials to an external investigator appointed by the Law Society and that he considered that the provision of this material "subsumed" the requirements of the Section 370 Notice. Solicitors have a statutory duty to comply with notices such as the Section 370 Notice and the Solicitor's belief that his compliance is not required because an external investigator also requests possibly similar or duplicate documentation from him is not relevant to his obligation to comply with the Section 370 Notice as issued in respect of particular trust account matters.
The Solicitor has offered no other factors for the Tribunal to consider in mitigation of his failure to comply with a notice issued on 21 June 2016, with which he had not complied as at 31 August 2018. Based on the evidence before us, the production required in compliance with the Section 370 Notice was not particularly unusual or complex and (save the medical certificate noted above) the Solicitor has not raised any issues as to the adequacy of the time within which he was required to comply.
The Solicitor had an obligation to comply with the Section 370 Notice within time and failed to do so. In our view, the material before us shows a fundamental failure by the Solicitor in his duty to the regulatory authority, with which all practitioners are bound to comply. Professional responsibility involves recognising how to balance the various duties owed by practitioners including those owed to their clients, to the public and importantly, to regulatory authorities. In the circumstances we consider that the conduct is a significant failure that constitutes professional misconduct under s 297(1) of the Uniform Law. We find the Solicitor guilty of professional misconduct in respect of the breach of s 370 of the Uniform Law.

[43]

Ground 11 - Failure to comply with fiscal obligations

The Law Society contends that the Solicitor, as principal of KAPL, failed to ensure that KAPL satisfied its fiscal obligations, namely, to pay: 1. Compulsory superannuation contributions on behalf of an employee. 2. Company income tax to the ATO. 3. Good and Services Tax (GST) to the ATO. 4. Pay As You Go withholding tax (PAYG) to the ATO.
The Solicitor accepts the position set out in the Law Society's written submissions.
In respect of Ground 11, the Law Society submitted that the Solicitor's conduct constitutes professional misconduct within the meaning of ss 297(1)(a) and 297(1)(b) of the Uniform Law as well as pursuant to the common law test, on the basis that it is clear from the material in evidence from the ATO that KAPL did not comply with its obligations to make timely payments of company income tax, PAYG, GST and superannuation charges, as well as failing to lodge tax returns in the period 9 December 2010 to 25 June 2015. The Law Society submitted these failures represent a systemic failure that warrants a finding of professional misconduct.
Section 33 of the Uniform Law relevantly provides: Obligations not affected by nature of business structures (1) An Australian legal practitioner must comply with this Law, the Uniform Rules and his or her other professional obligations, regardless of the business structure in which or in connection with which the practitioner provides legal services. (2) A law practice must comply with this Law, the Uniform Rules and its other professional obligations, regardless of the business structure in which or in connection with which the law practice provides legal services.
Broadly speaking, s 34 of the Uniform Law imposes responsibility for compliance with a law practice's obligations on the principal of the law practice.
Section 35 of the Uniform Law provides: 35 Liability of principals (1) If a law practice contravenes, whether by act or omission, any provision of this Law or the Uniform Rules imposing an obligation on the law practice, a principal of the law practice is taken to have contravened the same provision, if - (a) the principal knowingly authorised or permitted the contravention; or (b) the principal was in, or ought reasonably to have been in, a position to influence the conduct of the law practice in relation to its contravention of the provision and failed to take reasonable steps to prevent the contravention by the law practice. (2) A contravention by a principal arising under subsection (1) is capable of constituting unsatisfactory professional conduct or professional misconduct by the principal.
Practitioners carrying out legal practice are under an obligation to ensure that certain statutory fiscal obligations of a law practice, including the payment of company income tax, GST, PAYG and superannuation contributions are met. In Council of the Law Society of New South Wales v Wehbe [2018] NSWCATOD 14 (Wehbe) the Tribunal stated at [133]: The authorities to which we have referred have determined that legal practitioners carrying out legal practice on their own account or in partnership or as legal practitioner directors of an ILP are under an obligation to ensure that certain statutory fiscal liabilities of a practice including the payment of GST, PAYG, income tax and staff superannuation contributions are met. It is plain from the authorities that such an obligation exists alongside and is to be distinguished from any legal liability for debt although in the case of sole practitioners or partnerships the practitioners are subject to both. This obligation is referred to variously as a "civic responsibility" (contrasted with a legal obligation) in Vosnakis (referring to Cummins), "fiscal responsibility" in Bouzanis, "legal and civic duty" in Adams, "fiscal/revenue responsibilities" in Koffel, "financial responsibilities" in Delpopolo and "civic duty" in Andreone (No.1) [2014]. …
The Tribunal in Wehbe at [325] and Council of the Law Society of NSW v Etherington [2016] NSWCATOD 31 at [21] cited the following statement at [48] in Law Society of NSW v Koffel [2010] NSWADT 149 (in which the Tribunal considered the non-payment of superannuation contributions): "… in our opinion, the mere fact of a failure to pay superannuation guarantee contributions on time does not, on itself, constitute professional misconduct. It is the circumstances surrounding the failure, the consequences of the failure, and the actions subsequently taken by the solicitor, that determine whether the conduct constitutes professional misconduct."
While the decision in Wehbe considered the "obligations" as defined in s 133 of the Previous Act, the definition of "professional obligations" in ss 33 and 34 of the Uniform Law is not materially different.
The evidence available to the Tribunal shows that KAPL failed to pay significant amounts of company income tax, running deficit debts and superannuation guarantee charges and had a history of non-compliance with its taxation obligations.
The Solicitor was the principal of KAPL during the periods 15 January 2010 to 30 June 2014 and 7 July 2014 to 10 March 2016.
The evidence of Mr Howell in particular also shows that the Solicitor was aware of his obligation to pay the superannuation payments. The Solicitor has not provided any explanation for KAPL's failure to make the superannuation contributions in respect of that employee.
Pursuant to s 35(1) of the Uniform Law, the principal is taken to have contravened the provisions of the Uniform Law that the law practice contravenes if they knowingly authorised or permitted the contravention or the principal was, or ought to have been, in a position to influence the conduct of the law practice in relation to the contravention and failed to take reasonable steps to prevent the contravention. The Solicitor has provided no response or material as to the management systems that were implemented and maintained to allow and cause the Company to comply with its taxation and superannuation obligations. The Solicitor has offered no explanation as to how these ongoing contraventions occurred while he was principal.
The evidence before us shows the Solicitor entered into payment arrangements with the ATO but, ultimately, did not comply with the terms of the arrangements and significant amounts remain unpaid. While the Solicitor corresponded with his former employee regarding the superannuation contributions and made some payments, the superannuation payments were significantly less than the amounts that should have been made.
As sole director of KAPL, the Solicitor had ultimate control over the allocation of payments to the ATO and for employee superannuation entitlements. In our view, it was the Solicitor's decision not to cause the company to make or otherwise ensure that it made payments to the ATO at times when the Solicitor was also aware of the escalating debt to the ATO. While he made arrangements to address the outstanding amounts, he did not comply with the terms as agreed with the ATO. The Solicitor was also aware of his obligations in respect of the payment of superannuation entitlements as they fell due for payment.
In the circumstances, we find that the Solicitor knowingly authorised or permitted the contravention or as the principal was, or ought to have been, in a position to influence the conduct of the law practice in relation to the contravention and failed to take reasonable steps to prevent the multitude of contraventions.
There is no evidence or material before us that the Solicitor was mistaken as to his obligations to pay (for example, mistakenly believing that he was not required to pay superannuation, see Council of the Law Society of New South Wales v Dalla [2011] NSWADT 130). Rather, the Solicitor accepts that he was obliged to pay the superannuation contributions in respect of his, then, employee and likewise, pay the debts of KAPL to the ATO.
In Law Society of New South Wales v Teys [2018] NSWCATOD 163 the Tribunal set out the following as broad principles: 36. It is appropriate to set out some broad principles relevant to the allegations made against the Respondent, noting that the Respondent properly concedes that he has been guilty of professional misconduct, namely: (1)The statutory definition of professional misconduct is open ended and includes conduct justifying a finding that a practitioner is not a fit and proper person to engage in legal practice (s 497 of the LP Act); (2)The common law concept of professional conduct includes conduct in pursuit of professional activities which would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency (Allinson v General Counsel of Medical Education and Registration [1894] 1 QB 755; Bechara v Legal Services Commissioner [2010] NSWCA 369); (3)Professional misconduct includes grave impropriety affecting the practitioner's professional character indicative of a failure either to understand or to practise the precepts of honesty or fair dealing in relation to the Courts, clients or the public (Kennedy v The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563); (4)A failure to pay monies to the ATO may constitute professional misconduct (New South Wales Bar Association v Hamman [1999] NSWCA 404); and (5)Legal practitioners, including those who are directors of an incorporated legal practice, are under an obligation to ensure that statutory fiscal liabilities of a practice are met. This obligation may be a legal obligation or a "civic responsibility" (Wehbe).
The breaches established in respect of Ground 11 represent a consistent failure by the Solicitor to comply with the fiscal obligations for which he had responsibility. The breaches occurred during a period that covered almost the entire time that KAPL operated as a law practice. In Wehbe, the Tribunal said at [33]: The conduct cannot be viewed as an isolated episode nor was there any evidence before us upon which we could determine that it was atypical or uncharacteristic of Mr Wehbe's normal qualities of character. The non-payment of statutory liabilities arose in the circumstances of the Company having exhausted other avenues of capital or debt funding for the purposes of maintaining the business activities of the law practice … There is no evidence before us as to underlying qualities of character shown by previous or other misconduct or whether Mr Wehbe's conduct after the liquidation of the Company demonstrates that public and professional confidence might be reposed in him to uphold and observe the high standards of moral rectitude required of a legal practitioner.
We consider that the Solicitor's conduct is similar to that in of Wehbe, in so far as the Tribunal noted that the failure to ensure payment of statutory fiscal obligations occurred over a number of years.
Further and in respect of the superannuation payments, a former employee of the solicitor has been disadvantaged through the significant underpayment of superannuation and the Solicitor has not remedied that disadvantage. Mr Howell has been required to pursue his outstanding superannuation entitlements with the ATO and the liquidator (Moliterno ex LM-1 Tab MM pp 667 to 669).
In the circumstances, we consider that the Solicitor's conduct is a significant failure that constitutes professional misconduct under s 297(1) of the Uniform Law.

[44]

Ground 12 - Failure to pay the invoice of an expert

The Law Society contends that the Solicitor is guilty of professional misconduct because he failed to pay the costs of the report prepared by the Expert. The Law Society submitted that the above conduct is not a "mere oversight". The Solicitor accepts the position set out in the Law Society's written submissions.
At the hearing, the Solicitor submitted that there was more than one invoice and that a payment was made to the Expert. While that may be the case, the relevant issue is the failure to pay the invoice dated 2 April 2017 for $2,000. At the hearing, the Solicitor accepted that he was under an obligation to pay the invoice and that it was not paid in a "timely manner".
The day to day conduct of legal practice requires legal practitioners to honour their practice debts to third parties (see Council of the Law Society of New South Wales v Narayanasamy [2014] NSWCATOD 18 (Narayanasamy) at [37]). This is a well-established principle with which the Solicitor ought to have been familiar having been admitted as a solicitor in NSW in 2000 and thereafter either the sole principal or sole practitioner of KAPL and, subsequently, the Sole Practice, since February 2010.
In our view the Solicitor had clear knowledge that he was required to pay the Expert and has neglected to satisfy the relevant debt.
While the invoice remained unpaid to at least 19 October 2018, there is evidence of only the one failure to pay. This can be contrasted to the legal practitioner's failure to pay in respect of multiple invoices as was the case in Narayanasamy.
The Law Society's evidence shows that the receipt on which the Solicitor relied, for a transfer from the Sole Practice Office Account on 2 June 2017, was actually a receipt for a transfer from that account to a personal account of the Solicitor, and not a payment to the Expert. However, there is no evidence to suggest the Solicitor made this transfer and provided the receipt with an intention to deceive the Law Society. It may have been done inadvertently and perhaps due to the Solicitor's poor administrative systems and practices. In any event, the ground relates to the failure to pay for the Expert Report and the relevant issue is whether the Solicitor paid for the Expert Report or not.
During the hearing, the Solicitor submitted that there were a number of invoices for reports relating to the relevant matter and that the Solicitor had paid one or more the invoices issued for these reports. The Solicitor also submitted that it was his belief that Legal Aid NSW would pay the Expert directly.
In our view, the considerations in respect of the failure to pay the invoice of the Expert indicate that the relevant breaches fall short of conduct which would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency and are therefore, adequately and appropriately sanctioned by a finding of unsatisfactory professional conduct, rather than one of professional misconduct.

[45]

Conclusion

The Tribunal has, for the reasons above, found: 1. In respect of the conduct alleged in grounds 2, 3, 4, 5 ,6, 10 and 11 of the Amended Application, the Solicitor is guilty of professional misconduct; and 2. In respect of the conduct alleged in grounds 8 and 12 of the Amended Application, the Solicitor is guilty of unsatisfactory professional conduct.
The Tribunal must now consider what orders should be made in accordance with s 302 of the Uniform Law. The Tribunal makes the following directions: 1. The Law Society is to file and serve evidence and submissions as to the orders sought, on or before 27 August 2021; 2. The respondent Solicitor is to file and serve evidence and submissions in reply, on or before 17 September 2021; 3. The Law Society is to file and serve any further material in reply, on or before 1 October 2021; 4. The parties are to provide, by close of business 10 August 2021, their available dates for a hearing after 1 October 2021, with an estimate of listing time required. Annexure - Relevant legislative provisions
Section 34 of the Uniform Law provide for the responsibilities of principles as follows: 34 Responsibilities of principals (1) Each principal of a law practice is responsible for ensuring that reasonable steps are taken to ensure that - (a) all legal practitioner associates of the law practice comply with their obligations under this Law and the Uniform Rules and their other professional obligations; and (b) the legal services provided by the law practice are provided in accordance with this Law, the Uniform Rules and other professional obligations. (2) A failure to uphold that responsibility is capable of constituting unsatisfactory professional conduct or professional misconduct.
Section 137 of the Uniform Law deals with the depositing of certain trust monies into general trust accounts and, relevantly, provides: 137 Certain trust money to be deposited in general trust account A law practice must deposit trust money (other than cash) into the law practice's general trust account as soon as practicable after receiving it unless - (a) the law practice has a written direction by a person legally entitled to provide it to deal with the money otherwise than by depositing it in the account; or (b) the money is controlled money or transit money; or (c) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person.
Section 138 of the Uniform Law deals with the holding, disbursing and account for trust monies and, relevantly, provides: 138 Holding, disbursing and accounting for trust money in general trust account (1) Except as otherwise provided in this Part, a law practice must - (a) hold trust money deposited in the law practice's general trust account 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. … (2) Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law. (3) The law practice must account for the trust money as required by the Uniform Rules.
Section 146 of the Uniform Law prohibits the mixing of trust money with other money as follows: 146 Intermixing money A law practice must not mix trust money with other money unless authorised to do so by the designated local regulatory authority, and only in accordance with any conditions the designated local regulatory authority imposes in relation to that authorisation.
Section 148 of the Uniform Law provides for deficiencies in trust accounts: 148 Deficiency in trust account A law practice, an Australian legal practitioner or any other person must not, without reasonable excuse, cause - (a) a deficiency in any trust account or trust ledger account; or (b) a failure to pay or deliver any trust money.
Section 153 of the Uniform Law provides as follows as to when, how and where money is received: 153 When, how and where money is received (1) For the purposes of this Law, a law practice receives money when - (a) the law practice obtains possession or control of it directly; or (b) the law practice obtains possession or control of it indirectly as a result of its delivery to an associate of the law practice; or (c) the law practice, or an associate of the law practice (otherwise than in a private and personal capacity), is given a power or authority to deal with the money for or on behalf of another person. (2) For the purposes of this Law, a law practice or associate is taken to have received money if the money is available to the law practice or associate by means of an instrument or other way of authorising an ADI to credit or debit an amount to an account with the ADI, including, for example, an electronic funds transfer, credit card transaction or telegraphic transfer. (3) The Uniform Rules may determine or make provision for determining the jurisdiction in which a law practice receives trust money.
Section 174 of the Uniform Law provides for the disclosure obligations of a law practice and, relevantly, provides: 174 Disclosure obligations of law practice regarding clients (1) Main disclosure requirement A law practice - (a) must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs; and (b) must, when or as soon as practicable after there is any significant change to anything previously disclosed under this subsection, provide the client with information disclosing the change, including information about any significant change to the legal costs that will be payable by the client - together with the information referred to in subsection (2). (2) Additional information to be provided Information provided under - (a) subsection (1)(a) must include information about the client's rights - (i) to negotiate a costs agreement with the law practice; and (ii) to negotiate the billing method (for example, by reference to timing or task); and (iii) to receive a bill from the law practice and to request an itemised bill after receiving a bill that is not itemised or is only partially itemised; and (iv) to seek the assistance of the designated local regulatory authority in the event of a dispute about legal costs; or (b) subsection (1)(b) must include a sufficient and reasonable amount of information about the impact of the change on the legal costs that will be payable to allow the client to make informed decisions about the future conduct of the matter. (3) Client's consent and understanding If a disclosure is made under subsection (1), the law practice must take all reasonable steps to satisfy itself that the client has understood and given consent to the proposed course of action for the conduct of the matter and the proposed costs. (4) Exception for legal costs below lower threshold A disclosure is not required to be made under subsection (1) if the total legal costs in the matter (excluding GST and disbursements) are not likely to exceed the amount specified in the Uniform Rules for the purposes of this subsection (the lower threshold), but the law practice may nevertheless choose to provide the client with the uniform standard disclosure form referred to in subsection (5). (5) Alternative disclosure for legal costs below higher threshold If the total legal costs in a matter (excluding GST and disbursements) are not likely to exceed the amount specified in the Uniform Rules for the purposes of this subsection (the higher threshold), the law practice may, instead of making a disclosure under subsection (1), make a disclosure under this subsection by providing the client with the uniform standard disclosure form prescribed by the Uniform Rules for the purposes of this subsection. (5A) To avoid doubt, the uniform standard disclosure form prescribed by the Uniform Rules for the purposes of subsection (5) may require the disclosure of GST or disbursements or both. (6) Disclosure to be written A disclosure under this section must be made in writing, but the requirement for writing does not affect the law practice's obligations under subsection (3) …
Section 370 of the Uniform Law provides for certain obligations in relation to the examination of trust accounts as follows: 370 Requirements - trust records examinations, trust records investigations and compliance audits (1) For the purpose of carrying out a trust records examination, trust records investigation or compliance audit in relation to a law practice, an investigator may, on production of evidence of his or her appointment for inspection, require the law practice or any person who has or had control of documents relating to the affairs of the law practice to give the investigator either or both of the following - (a) access to the documents relating to the affairs of the law practice the investigator reasonably requires; (b) information relating to the affairs of the law practice the investigator reasonably requires (verified by statutory declaration if the requirement so states). (2) A person who is subject to a requirement under subsection (1) must comply with the requirement.
Part 5.4 of the Uniform Law provides for disciplinary matters. The relevant definitions are: 296 Unsatisfactory professional conduct For the purposes of this Law, unsatisfactory professional conduct includes conduct of a lawyer occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer. 297 Professional misconduct (1) For the purposes of this Law, professional misconduct includes - (a) unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and (b) conduct of a lawyer whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the lawyer is not a fit and proper person to engage in legal practice. (2) For the purpose of deciding whether a lawyer is or is not a fit and proper person to engage in legal practice as referred to in subsection (1)(b), regard may be had to the matters that would be considered if the lawyer were an applicant for admission to the Australian legal profession or for the grant or renewal of an Australian practising certificate and any other relevant matters. 298 Conduct capable of constituting unsatisfactory professional conduct or professional misconduct Without limitation, the following conduct is capable of constituting unsatisfactory professional conduct or professional misconduct - … (b) conduct consisting of a contravention of the Uniform Rules; … *** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 06 August 2021

The Council of the Law Society of New South Wales v Kernaghan

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