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[2008] NSWCA 93
Court of Appeal (NSW)
2013-02-20
Original judgment source is linked above.
INTRODUCTION: 1In this case the Respondent Solicitor, John Lundy, admitted the misconduct alleged against him in a Disciplinary Application filed by the Applicant, the Council of the Law Society of New South Wales ("the Law Society") on 2 November 2012. The Respondent also consented to all the Orders sought by the Law Society against him which were to the following effect: A. That the solicitor be publicly reprimanded. B. That the solicitor be fined. C. That the solicitor not be issued with a practising certificate in New South Wales until such time as he satisfies The Manager, Professional Standards Department by statutory declaration as to the reasons why he is unable to comply with the Notices personally served on him under Section 659 of the Act or completes to a satisfactory standard suitable courses approved by the Law Society of New South Wales in trust accounting, practice management and ethics. D. Pay the costs of the Applicant as agreed or assessed. 2Originally, the Applicant had sought an Order that the Respondent not be issued with a practising certificate until such time as he complied with the Section 659 Notices and completed the courses referred to in the preceding paragraph. However, at the commencement of the proceedings, the Applicant sought to amend that Order on the basis that the Respondent would not be able to satisfy the Order given that he did not hold any of the records the subject of the Notices. 3The Tribunal granted the necessary leave and the proceedings were heard and determined on this basis.
THE CONDUCT DESCRIBED IN THE APPLICATION 4The conduct alleged in the said Application was that John Lundy, whilst practising as a solicitor: A. Failed to give written notice within 14 days of the closure of a general trust account as required by clause 74(5) of the Legal Profession Regulation 2005 ["the Regulation"]. B. Failed to have trust records externally examined for the years ended 30 June 2006, 30 June 2007 and 30 June 2008 as required by section 274(1) of the Legal Profession Act 2004 ["the Act"]. C. Failed to have the trust account records finally externally examined within 60 days of cessation of the practice at 30 June 2009 as required by section 275(3) of the Act. D. Made false declarations. E. Failed to complete: a. the required declaration contained in the practising certificate application relating to the dealing with trust monies for the 12 month period to 30 June 2007; and b. a Part A declaration for the 30 June 2008 accounting year to 31 March 2008. F. Failed to comply with a requirement under section 659 of the Act. 5Particulars relevant to ground A above: A1 During the period 1 July 2000 to 15 December 2004 the Solicitor was employed as a solicitor with the law firm Grinberg Young and Krass and then Grinberg Young Lawyers. A2 On 10 December 2004 the Solicitor opened the Trust Account. Under the prevailing legislation at the time, there was no obligation upon him to notify the Law Society of this event. A3 From 15 August 2005 to 30 June 2009 the Solicitor was the principal of the law firm Lundy Lawyers. A4 After the Solicitor had ceased his employment with Grinberg Young Lawyers but before he established Lundy Lawyers he operated the Trust Account as follows: a. On 1 March 2005 a cheque for $175,000 was deposited into the Trust Account and; b. On 15 March 2005 an amount of $175,000 was debited from the Trust Account with a notation on the bank statement 'To New td". A5 From 1 October 2005 the Solicitor was obliged to operate the Trust Account in accordance with the Act and Regulations. A6 On 24 June 2010 the Solicitor closed the Trust Account. A7 Within 14 days of 24 June 2010 and thereafter the Solicitor failed to notify the Law Society in writing that he had closed the Trust Account. A8 The failure described in paragraph A7 above comprised a breach of clause 74(5) of the Regulations. 6Particulars relevant to Ground B above: B1 The bank statements for the Trust Account for the period: a. 1 April 2005 to 31 March 2006 disclose 33 transactions. b. 1 April 2006 to 31 March 2007 disclose 32 transactions. c. 1 April 2007 to 31 March 2008 disclose 9 transactions. B2 As the operator of the Trust Account, the solicitor was obliged post 1 October 2005 to have the trust records of Lundy Lawyers externally examined in accordance with section 274(1) of the Act. B3 The fulfilment of the obligation described in paragraph B2 above required external examination of trust records by an external examiner appointed in accordance with the Regulations at least once in each of the financial years ending 30 June 2006, 30 June 2007 and 30 June 2008. B4 In breach of section 274(1) of the Act, the Solicitor failed to have the trust records externally examined at all. 7Particulars relevant to Ground C above: C1 The Solicitor did not renew his practising certificate after 30 June 2009. C2 Lundy Lawyers ceased to engage in legal practice in this jurisdiction at midnight on 30 June 2009. C3 The bank statements for the Trust Account for the period 1 April 2008 to 31 Mach 2009 disclose 28 transactions. C4 As the operator of the Trust Account, the Solicitor was obliged post 30 June 2009 to have the trust records of Lundy Lawyers finally examined in accordance with section 275 of the Act. C5 The fulfilment of the obligation described in paragraph C4 above required the Solicitor to: a. appoint an external examiner to examine the trust records; and b. lodge a report of that examination together with a statutory declaration in the prescribed form within 60 days of 30 June 2009, notwithstanding that the Solicitor had not had the trust records previously externally examined. C6 In breach of section 275 of the Act, the Solicitor failed to have the trust records finally externally examined and failed to lodge a related report and statutory declaration within 60 days of 30 June 2009 or at all. 8Particulars relevant to Ground D above: D1 On or about 4 July 2006 the Law Society received a practising certificate renewal application ["the First Application Form'] for the 1 July 2006 to 30 June 007 practising year signed by Mr Lundy an dated 30 June 2006. D2 In the First Application Form Mr Lundy crossed 'No' to the question 'Have you received, held or disbursed any trust money (as defined in s. 243 Legal Profession Act 2004 - see page 6) during the period 1 April 2005 and 30 March 2006?' D3 Mr Lundy also signed a declaration in the First Application Form that 'I declare that the contents of this application are true and correct ...' D4 On 5 July 2006 the Society wrote to Mr Lundy advising he had used the wrong form. That letter enclosed a second application form for Mr Lundy to complete for a practising certificate by an Australian lawyer who does not hold a current practising certificate ['The Second Application Form'] D5 The second Application Form was received by the Law Society Registry on or about 26 July 2006. In the Second Application Form Mr Lundy ticked 'No" to the question: 'Have you received, held or disbursed any trust or controlled money since you last held a practising certificate or in the last 12 month period prior to making this application?' D6 Mr Lundy signed a declaration dated 25 July 2006 on the Second Application Form that 'I declare that the contents of this application are true and correct ....' D7 The Trust Account bank statements for the 1 April 2005 to 31 March 2006 accounting year disclose 33 transactions. D8 The declarations in the 1 July 2006 to 30 June 2007 practising certificate applications (for the accounting year 1 April 2005 to 31 March 2006) signed by Mr Lundy and dated 30 June 2006 and 25 July 2006 are false. 9Particulars relevant to Ground E above: Ea1 By 1 July 2007 the Solicitor had failed to renew his practising certificate for the 1 July 2007 to 30 June 2008 practice year. Therefore, in order to continue to engage in legal practice, the Solicitor was required to complete an application for practising certificate booklet. Ea2 On 10 July 2007 the Law Society Registry received the Solicitor's application for practising certificate booklet for the 1 July 2007 to 30 June 2008 practice year. This application required answers to several questions including some by reference to the 1 April 2006 to 31 March 2007 accounting year. Ea3 Two such questions as described in paragraph Ea1 were: i. 'have you received, held or disbursed any trust or controlled money since you last held a practising certificate or in the last 12 month period to making this application?' ii. 'have you lodged all External Examiners' Reports with the Law Society for any law practices where you have previously held trust or controlled monies?' Ea4 The bank statements for the accounting period 1 April 2006 to 31 March 2007 disclose 32 transactions. The Solicitor was required to answer the question described in paragraph Ea3i above in the affirmative. Ea5 The Solicitor failed to have the trust records externally examined and failed to loge any External Examiners Reports. The Solicitor was required to answer the question described in paragraph Ea3ii above in the negative. Ea6 The Solicitor failed to provide answers to both questions described in paragraph Ea3 above. Eb1 The Law Society practising certificate renewal system for the 1 July 2008 to 30 June 2009 practice year and for the 1 April 2008 to 31 March 2009 accounting year required applicants to complete a separate manual Part A declaration regarding trust money. Eb2 The Solicitor failed to complete the Part A declaration in his application for renewal of practising certificate for the 1 July 2008 to 30 June 2009 practice year. Eb3 As a result of the solicitor's failure to complete a Part A declaration, the Law Society sent him reminder letters dated 3 October 2008 and 9 December 2008 together with the declaration to be completed. Eb4 The Solicitor failed to provide a Part A declaration for the 1 July 2008 to 30 June 2009 practice year. 10Particulars relevant to Ground F above: F1 On 27 January 2011 Mr Garry Napper, Trust Account Inspector for the Law Society, attended the home of the Solicitor and left under the front door an envelope containing a notice pursuant to section 659 of the Act to produce trust account and office account records on or before 10 am on 11 February 2011 ['the 27 January Notice'] F2 There was no compliance with the 27 January Notice. F3 On 12 May 2011 Mr John Wooldridge, process server, attended the home of the Solicitor and personally served him with documents including a notice pursuant to section 659 of the Act to produce trust account and office account records on or before 10 am on 20 May 2011 ['the 12 May Notice']. F4 There was no compliance with the 12 May Notice. F5 On 26 May 2011 Mr Garry Napper attended the home of the Solicitor and personally served him with documents including a notice pursuant to section 659 of the Act to produce trust account and office account records on or before 10 am on 24 June 2011 ['the 26 May Notice']. F6 There was no compliance with the 26 May Notice. F7 As a result of the Solicitor's non-compliance with the notices: a. it is not known whether or not the sum of $175,000 transacted through the Trust Account in March 2005 was trust property. If it was trust property then: i. these transactions took place before the law firm Lundy Lawyers came into existence; and ii. the Solicitor's negative response to the question, 'Have you received, held or disbursed any trust money and/or controlled money during the period 1 April 2004 and 31 March 2005' on his application for renewal of a practising certificate for the practice year 1 July 2005 to 30 June 2006 was false. b. the nature and character of all the Trust Account transactions cannot be ascertained; and c. there is no explanation of the debit balances in the Trust Account bank statements numbered 16 [March 2006, $640.00 Dr] and 32 to 38 [June 2007 to October 2007, $1,778.00 Dr].
The Solicitor's Reply 11The Solicitor filed a Reply dated 15 January 2012 which admitted the essential facts and circumstances of the offences.
The Evidence 12The evidence adduced by the Law Society comprised an Affidavit sworn on 24 October 2012 by Anne-Marie Foord, Manager, Professional Standards Department, Affidavit sworn on 31 October 2012 by Garry Terrence Napper, Trust Account Investigator and Affidavit sworn 19 February 2013 by John Ernest Mitchell, Chief Trust Account Investigator and Supervisor. Ms. Foord's evidence was directed to the investigation of the complaints following the Report of Mr. Napper who carried out the trust account inspection. The evidence of Mr. Mitchell went to the costs of external examinations of trust accounts, the point being made by the Applicant that the Solicitor had gained a benefit from not having to incur this expense. 13The Solicitor filed an Affidavit on 18 January 2013 which had been sworn by him on 14 January 2013. In that document he swears, 'I do not dispute any of the grounds of the application. I do not seek to excuse my conduct for which I am deeply contrite. However, I seek to explain some of the circumstances in the following paragraphs...' He then goes on to state 'shortly after becoming a sole practitioner (in August, 2005) I realised I was ill-equipped for the bookkeeping and administrative tasks involved in working on my own. With the benefit of hindsight, I would not have opened a trust account. It became quickly obvious that I was overwhelmed by the administrative side of the practice. I again stress that I am not seeking to diminish my responsibility to maintain the bookkeeping side of the practice. Around this time and the subsequent four years a number of personal and family issues were weighing upon me heavily. These contributed further to my neglect of my responsibilities to the administrative part of my practice. Again, I should have dealt with matters differently and I accept responsibility for this.' 14In a frank admission at paragraph 8 of his Affidavit the Solicitor states, 'I made false declarations by untruthfully ticking a box claiming that I did not have a trust account for the years 2006, 2007 and 2008. I did this because I had not kept proper accounting records and was embarrassed at the thought of my poor bookkeeping being examined.' 15In addition to his Affidavit evidence, the Respondent made an oral statement to the Tribunal expressing his deep regret at the conduct complained of. The Tribunal was left in no doubt that the expressions of contrition were genuine.
The Tribunal's Conclusions regarding the Respondent's Conduct 16The Tribunal notes that the Respondent admitted his guilt early following the initial letter from the Applicant to the Respondent dated 12 December 2011 formally advising him of the complaints. 17The Tribunal further notes that the offences complained of are not client based nor has any member of the public complained that money is missing. However, as was pointed out by the Applicant, there is an obligation on members of the profession who are entrusted with other people's money to be absolutely transparent in their dealings with such moneys and the Regulations provide the mechanism for the record keeping. 18The Respondent's failure to comply with having his trust records finally externally examined of itself would not have resulted in him being bought before this Tribunal. It is the making of the false declarations to hide his inaction and the failure to comply with the three Notices served pursuant to S. 659 of the Act that elevated his conduct, resulting in the current proceedings being bought against him. 19The common law test of whether a legal practitioner has been guilty of professional misconduct is that promulgated in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, namely conduct which 'would be reasonably regarded as disgraceful or dishonourable' by 'professional brethren of good repute and competency'. 20The onus of proving misconduct lies with the applicant: Stanoevski v Council of the Law Society of New South Wales [2008] NSWCA 93, while the standard of proof to be applied by the Tribunal is the civil standard, on the balance of probabilities. The degree of satisfaction for which the civil standard of proof calls in professional discipline matters may vary according to the gravity of the fact to be proved: see Briginshaw v Briginshaw (1938) 60 CLR 368 and Rejfek v McElroy (1965) 112 CLR 517 at 521. See also Riley Solicitors Manual at 34,145.10. 21The Tribunal is satisfied that the evidence sufficiently establishes the conduct of the Respondent that was alleged and particularised in the Disciplinary Application. Applying the 'Allinson' test, the Tribunal is satisfied to the requisite standard that the Respondent is guilty of professional misconduct.
Penalty 22The Applicant does not seek a 'strike off' order nor would such an order be appropriate in the circumstances. 23However, the penalty must reflect the seriousness of the conduct. The breaches of the Act and Regulation directed towards the protection of client moneys are serious and affect the confidence which the public might otherwise have in the regulation of trust accounts. The making of a false declaration by a legal practitioner is also a serious matter. Having regard to the submissions made by the Applicant, the Tribunal is satisfied that the order for a public reprimand as sought is appropriate in the circumstances. 24The Applicant also seeks orders for a fine and its costs. In regard to the latter, the Respondent consented to an Order for costs in the sum of $4,500.00 to be paid over a set period of time as set out in the Orders below. 25In relation to the imposition of a fine, the Tribunal agrees that it is appropriate in the circumstances, the only question being the quantum of such fine. The Respondent submitted in a letter he wrote to the Society on 12 July 2012, 'My only other submission is in regard to the proposed fine. I am not a wealthy man, I have three children still at school and currently have little in the way of income. (I am engaged in a couple of writing projects which will not bring in money for sometime)'. The Respondent gave oral evidence that he estimated his writing projects would earn him approximately $85,000.00 over a two (2) year period. These facts have been taken into account in relation to the Tribunal's determination as to penalty.
Orders The Tribunal makes the following Orders:
The Council of the Law Society of New South Wales
Lundy
(1938) 60 CLR 368
(1965) 112 CLR 517