The Council of the Law Society of NSW v Doherty [2008] NSWCA 269 | Case summary

REASONS FOR DECISION Background 1 The Respondent is a solicitor, having been admitted on 29 August 1997. On or about 13 September 1999 the Respondent entered into sole practice under the name Lloyd Lancaster, or Lloyd Lancaster Lawyers. 2 During the course of his practice he got to know a Douglas O'Brien and a Chris Sharp. 3 O'Brien operated a company called ECO Tourist Education Cultural Sanctuary Pty Limited ("Eco"). 4 The Respondent (or his wife - it is not completely clear on the documentation - but the Tribunal notes from the ASIC search in evidence that the sole director of this company was Helen Mary Doherty and the company secretary was also Helen Mary Doherty but the sole shareholder was the Respondent) registered a company called Lloyd Lancaster Pty Limited. 5 Sharp and O'Brien became involved in various joint ventures and ultimately a formal Complaint was made to the Legal Services Commissioner by O'Brien. 6 His complaint asserted that the Respondent "was involved in four property purchases that went together into one deal. He was putting up $120,000.00 to become a shareholder and doing the conveyancing and exchanges. He then bounced three cheques for deposits and options. Even though we (and the Tribunal notes the use of the word "we" and this was certainly not supported on the evidence) gave him a bank cheque written out to the Vendor for the full amount, he put this in his trust account, issued another cheque and bounced it; he has also fail(ed) to return this money to its rightful owner Geoffrey Rafter ("Rafter") … (the Respondent) then told us he was pulling out of the deal on 20 October 2006. The next thing we received legal action for the recovery of $40,000.00 in fees that we had never approved and that he was not entitled too (sic). The deal was that he put in $120,000.00 and did conveyancing etc for his shares in the company. He is trying to charge us for the due diligence he did in these matters, to check out the deals himself". 7 O'Brien did not give any evidence, neither did Sharp. 8 There is no need to refer to the details of how these people all got together. Suffice it to say that O'Brien wrote to Sharp 12 September 2006 giving some details of the proposals and these proposals were subsequently reduced to writing. It is not necessary for us to consider whether the various joint venture agreements were strictly in accordance with the "deal" that was apparently negotiated by O'Brien and Sharp, simply for the reason that the joint venture agreements speak for themselves. 9 There were a number of complaints against the Respondent. The most important and most serious complaint was described at the hearing as "the Rafter matter"; it was the issue upon which most time, evidence and argument were directed; and the Tribunal proposes to deal with it first, and later with the other complaints. The Tribunal makes no apology for the detail it has set out in "the Rafter matter"- it was indeed not uncomplicated, itself detailed and the subject of considerable argument. The Tribunal has approached it by firstly, an analysis of the contract documents; secondly, a review of the evidence; and thirdly, an analysis of the submissions of the parties; and finally, the Tribunal's conclusions. The Joint Venture Agreements 10 There were two primary Agreements that were before the Tribunal. In order to consider a contract construction point or the terms of a statute it is always appropriate to start off with the source document itself. The Tribunal will now set out the relevant points of the two joint venture agreements, each in reasonable detail, simply because this type of detail is necessary in order to address the arguments that were agitated, and agitated strongly, before the Tribunal. 11 For ease of reference the Tribunal has allocated names to each of the joint venture agreements (both by way of deeds) as follows: the Agreement 21 September 2006: "the Byron Bay Joint Venture"; and the Agreement 28 September 2006: "the Hill End Joint Venture". 12 Before embarking upon this analysis it is appropriate to observe that firstly, at all relevant times the Respondent was, and practiced as, a solicitor; secondly, it was he who drafted the various joint venture agreements; thirdly, it was he, in particular, who made sure that the fees of his legal firm Lloyd Lancaster Lawyers, were "protected" within the terms of the various joint venture agreements. It was never argued, nor could it be on the facts, that whatever may have happened to the money it was placed in the hands of the Respondent as part of a commercial undertaking or relationship, and it was always conceded, correctly in our view, that the money came into the hands of the Respondent in his role as solicitor acting for the various joint venturers. Byron Bay Joint Venture 13 The Joint Venture Agreement is dated 21 September 2006. The parties thereto were Eco, Lloyd Lancaster Pty Limited and Rafter. 14 The Agreement recites that the parties intend to form three companies for the purposes of firstly, entering into a contract for sale of certain property at Byron Bay (described in the Agreement as "the Haven property"); secondly, entering into an option agreement for a Tourist Caravan Park at Byron Bay; and thirdly, entering into an option agreement for a caravan park at Banora Point. 15 The Agreement also recites that it was proposed to "on-sell the Haven property at the earliest opportunity and obtain a valuation" (precisely what this means is not clear - perhaps it was meant in the reverse, ie obtain a valuation and then on-sell the Haven property. The intent, however, was quite clear: the parties wished to buy the Haven property and on-sell it to make an immediate profit). The Agreement went on to express the intention of developing the Byron Bay Caravan Park and/or to sell the option "should there not be sufficient interest from prospective buyers for individual sites" (again, precisely what this means is not clear - presumably, and doing the best we can, it was intended to enter into an option agreement and then, during the term of the option, develop the property and on-sell the individual sites within the caravan park or on-sell the option right). There is nothing in the Agreement which would indicate the term of the proposed option. Thirdly, it was the expressed intention of the parties to do the same with the Banora Point development. 16 The Agreement firstly established a joint venture "to form three companies to undertake the development and/or sale of" the Haven property, the Byron Bay Caravan Park and the Banora Point Caravan Park. The Byron Bay and Banora Point caravan parks are only to be developed and/or sold "during the option period unless pursuant to Clause 14" - the Tribunal is unable to fathom what precisely this means. There are two Clause 14s: the first relates to variation to the Joint Venture Agreement and the second relates to the appointment of Lloyd Lancaster Lawyers. Consequently, what precisely is to be the duty of the separate companies in relation to these developments is not clear from the Agreement. 17 The Deed goes on (Clause 2) to appoint O'Brien, the Respondent and Rafter as directors as each of the three companies and the directors "irrevocably give a power of attorney to the principal of the legal firm of Lloyd Lancaster Lawyers to enforce the terms of this Joint Venture or otherwise act in the best interests of the Joint Venture partners or the companies". An important provision. 18 Clause 5 sets out the interests of each party in the various companies to be created. Eco gets 40%, Lloyd Lancaster Pty Limited 50% and Rafter 10%. It is important to note these various specified interests. 19 Nextly, Clause 6 provides that Eco "shall arrange the marketing of the properties in respect of the on selling of either the sites or individual sites within the Caravan Parks". What this has to do with the Haven property is not clear, save that Clause 8 provides that the Haven property "shall be placed on the market immediately after the exchange of contract for the purpose of "on-selling" the property at a profit". 20 Clause 7 is an important clause: it requires Lloyd Lancaster Pty Limited to "contribute moneys to fund the following: (i) the deposit on exchange for the Haven property in the sum of $16,000.00; (ii) the Option price on the Tourist Park Caravan Park at Byron Bay in the sum of $40,000.00; and (iii) the Option price for the Banora Point Caravan Park in the sum of $50,000.00; (iv) advertising/marketing to the sum of $20,000.00." 21 Clauses 9 and 10 deal with the "individual sites" within the various caravan parks at Byron Bay and Banora Point. This required the "individual sites" to be "placed on the market for sale immediately after the Option is renewed for a period of one month on a conditional basis" but that if within that period "there has not been enough exchange of Contracts of Sale equivalent in total to the purchase price of the whole of the property plus GST plus an additional sum of $200,000.00 then the property is to be on-sold to the highest offer". Again, what all this means is not clear. Firstly, it is not clear the term of the original option periods. Secondly, it is not clear whether any option would have the right of renewal. Thirdly, the Tribunal does not know what is meant by the phrase "on a conditional basis". Fourthly, it is not clear what would happen if the option was renewed and if there was no "highest offer" or an offer sufficient to cover even costs, save that clause 12 ([24] below) may apply. 22 The next important clause is 11. We set this clause out in full because of the importance attached to it in the argument before us: "11. On the realization of profit from any of the business activities of the Joint Venture including the sale of a property the proceeds shall be applied as follows:- (i) in payment of the real estate agents proper commission arising from the sale (ii) in payment of all proper conveyancing, legal costs and disbursements arising from the sale (iii) in payment of all other expenses reasonably incurred in respect of the sale (iv) in payment of all other legal expenses properly incurred pursuant to the Joint Venture pursuant to the Tax Invoices rendered by Lloyd Lancaster Lawyers in respect of acting on behalf of the Joint Venture or any of the three companies (v) the reimbursement of all monies paid by (Lloyd Lancaster Pty Limited) pursuant to the Joint Venture (vi) reimbursement of the sum of $35,000.00 paid by (Rafter) should (Rafter) make payment of the deposit on the property located at …. Hill End and he has, not at the date of distribution of moneys pursuant to this Deed, received reimbursement for such payment. (vii) thereafter to the respective company which shall distribute such profit to any of the shareholders in accordance with their respective shareholding if called upon by that shareholder in writing". 23 The important sub-clause is (vi). This sub-clause anticipated that Rafter would make a payment of a deposit in respect of the acquisition of a property at Hill End (as to which see later) and that he would be reimbursed but only from the profit on the sale of a property calculated in accordance with clause 11 of the Byron Bay Joint Venture. 24 Clause 12 provides that should "no sale eventuate for any of the properties" then Eco and Rafter would transfer their right, title and interest in any shares they own "in the company associated with the purchase and sale of the Haven Property" to Lloyd Lancaster Pty Limited. It is odd, to say the least, that there appears to be no provision in the Agreement as to what would happen in the event of the caravan park deals not eventuating or otherwise failing under clauses 9 and 10. 25 The next important clause is clause 13 (there are two clauses 13 - this is the second): "All monies in respect of the Joint Venture shall be forwarded to the legal firm Lloyd Lancaster Lawyers who will retain the monies until payment of any disbursements on behalf of any of the companies or until the distribution of profits. All payments made to any third party including the Vendors of the properties which are the subject of the Joint Venture shall be made on behalf of the companies by Lloyd Lancaster Lawyers after approval of the directors". The Tribunal reads this clause as requiring all deposits and other moneys to go through the Respondent's firm and be held in trust and on trust 'until the payment of any disbursements on behalf of any of the companies or until the distribution of profits". There is nothing, so it seems to us, within the terms of this Clause 13, which would entitle the Respondent to deduct any moneys on account of legal costs and disbursements save under this Clause 13, which is limited to disbursements and "distribution of profits", coupled with Clause 17 which provides that the "costs of and incidental to the preparation and execution of this Deed of Agreement and any other legal work undertaken in respect of either the Joint Venture, the Companies or business shall be paid prior to the distribution of any profits"- clearly, this clause, and the deduction of moneys, is dependent upon there being a profit as calculated in accordance with clause 11. 26 Therefore, as we read the Byron Bay Joint Venture, and remembering that it was drafted by the Respondent and presumably also upon the instructions of O'Brien and Rafter, the Respondent was not entitled, at least in accordance with its terms, to the payment of any legal costs at all unless and until there was a "realisation of profit" pursuant to Clause 11. There was good reason for this: the Byron Bay Joint Venture was clearly a speculative deal, both in its terms and in reality, and the Respondent was venturing into commercial waters for which he was clearly unprepared and very inexperienced. It seems extraordinary that the Respondent was prepared (Clause 7) to put up the full amount of the moneys, including the "advertising/marketing" costs, yet Eco had the responsibility for arranging "the marketing of the properties in respect of the on-selling of either the sites or individual sites …." and Rafter had little or no interest at all, other than the return to him of $35,000.00 to be paid by him as a deposit on the Hill End property pursuant to the Hill End Joint Venture, which was later in time chronologically, and some 10% long-term entitlement. 27 It is now necessary to refer to the Hill End Joint Venture. Hill End Joint Venture 28 This Joint Venture Agreement was formed by Deed dated 28 September 2006. The parties this time were somewhat different. The first party was Eco, the second party Lloyd Lancaster Pty Limited and the third party Geoffrey Rafter Developments Pty Limited. This last-mentioned party is significant - for the sake of emphasis we note that it was Rafter himself who was a party to the Byron Bay Joint Venture but it was his company that is a party to the Hill End Joint Venture. Consequently, it will be readily seen that immediately an issue arises on the interpretation to be given to clause 11(vi) of the Byron Bay Joint Venture because under the Hill End Joint Venture we shall see that it is Geoffrey Rafter Developments Pty Limited ("Geoffrey Rafter Developments") which was to make the $35,000.00 payment of the deposit. 29 The Hill End Joint Venture recited that the parties to the joint venture intended to form a company for the purchase of a certain property at Hill End, NSW. It was also intended to enter into a joint venture agreement with a Gligor Petrovski ("Petrovski") to purchase an adjoining property and to also purchase a property known as "Madman's Territory" from a Mr Garry. 30 Clause 1 notes that Lloyd Lancaster Pty Limited had already caused a company Goldfields Hill End Pty Limited to be incorporated on 26 September 2006 for the purposes of purchasing the Hill End property. Under Clause 3 Geoffrey Rafter Developments was "to make available the sum of $35,000.00 for the deposit on exchange in respect of the Contract of Sale for the Hill End property" and (Clause 4) "after exchange" the shares in Goldfields Hill End Pty Limited ("Goldfields") were to be allocated 70% to Eco, 10% to Lloyd Lancaster Pty Limited and 20% to Geoffrey Rafter Developments. 31 Again, there was to be an irrevocable power of attorney granted to Lloyd Lancaster Lawyers; it was intended to "develop the Hill End property" by some sort of subdivision (not clear from the Agreement) and to on-sell the Hill End property should there "not be sufficient interest from prospective buyers for individual sites". 32 It is difficult to work out from the Agreement the time in which it was anticipated that the Hill End property would be subdivided - there is reference to "one month" and whether that means one month from the date of exchange of contracts, or one month from the date of completion, or one month from the date of approval from the local council of any subdivision, or whatever, is not clear. Clause 6 provides that should Goldfields succeed in selling "sufficient individual sites" … "within the specified time of one month and/or there are sufficient funds available to enable the settlement of the purchase of the Hill End property then the parties shall proceed to settlement of the purchase". 33 Clause 7 provided for negotiations to take place with Petrovski with a view to consolidating Petrovski's property with the Hill End property and on the basis "that Gligor Petrovski will contribute the sum of $8 million dollars towards the joint venture" and Goldfields and Petrovski would each receive 50% of the nett profits of the development and subdivision. 34 Simultaneously, and again, it was intended to purchase the property "Madman's Territory" from Mr Garry for $1,290,000.00 and to also consolidate that property with the Hill End property. 35 Clause 9 provided that a "meeting between the directors (of Goldfields) is to take place no later than 14 days prior to the expiry of one month wherein a determination shall be made whether to accept any offers made to the Joint Venture, the company or to the individuals associated with the Joint Venture or its shareholders". Eco, by Clause 10, was to arrange the marketing of the properties and Geoffrey Rafter Developments Pty Limited (by Clause 11) was to contribute the deposit on exchange for the Hill End property in the sum of $35,000.00. 36 Clause 12 provided that individual sites within the Hill End property "be placed on the market for sale immediately after exchange for a period of one month on a conditional basis" and then (and similar to the Byron Bay Joint Venture) if within that period "there has not been enough exchange of Contracts of Sale equivalent in total to the purchase price of the whole of the property plus GST plus an additional sum of $100,000.00 then the property is to be on-sold to the highest bidder". 37 Clause 13 (where first appearing) provided that "on the realization of profit" the proceeds would be applied for the payment of various expenses, commission, legal costs and so on, including "the reimbursement of all monies paid by (Geoffrey Rafter Developments) pursuant to the Joint Venture but only if at the time of such payment (Geoffrey Rafter Developments) has not received any other payment in respect of monies contributed by him to the Joint Venture"; but this is all dependent upon "the realization of profit of any of the business activities of the Joint Venture including the sale of individual sites". 38 Pausing at this point it is plain from Clause 13 that there was to be no reimbursement to Geoffrey Rafter Developments of the $35,000.00 paid by it as deposit on the exchange of contracts for the Hill End property unless and until there was a "realization of profit" within the terms of Clause 13. Similarly, there was to be no payment of "all proper conveyancing, legal costs and disbursements …" and "all other legal expenses properly incurred …" by and to Lloyd Lancaster Lawyers, unless from the "realization of profit" within clause 13. 39 Next, there is a second Clause 13. Again, this is an important clause and we set it out as follows: "13. All monies in respect of this Joint Venture shall be forwarded to the legal firm Lloyd Lancaster Lawyers who will retain the monies until the payment of any disbursements on behalf of any of the companies or until the distribution of profits. All payments made by any third party including the Vendors of the properties which are the subject of this Joint Venture shall be made on behalf of the companies by Lloyd Lancaster Lawyers after approval of the directors". 40 Finally, both joint ventures contained dispute resolution clauses which required disputes between the parties to be referred to an arbitrator appointed by the President for the time being of the Law Society of NSW and pursuant to the Commercial Arbitration Act 1984. 41 We have been to some trouble to set out the relevant terms of the various joint venture agreements because these agreements formed the basis of the commercial arrangements between the various parties involved, were drafted by the Respondent, were contractual legal documents which have not been challenged, are binding between the parties and under which the parties conducted their commercial affairs. The Tribunal is of the respectful opinion, however, that the agreements are sloppily drafted, were probably drafted in a hurry and in circumstances where, on the evidence, the parties wished to move with speed in order to "secure" these various properties and do the somewhat odd deals that were intended. Why someone would have thought that somehow one could subdivide into small lots a property at Hill End and somehow successfully market those lots and make profits is not immediately apparent to us. However, stranger things have happened; but they certainly did not happen in this case. 42 Before proceeding further it is worth making this observation: both Joint Venture Agreements made provision, both in Clause 14, that the Agreements "may be varied but only if the First, Second Director and Third Directors all agree in writing". These directors were in the case of Eco, O'Brien, in the case of Lloyd Lancaster Pty Limited it was the Respondent and in the case of Geoffrey Rafter Developments Pty Limited it was Rafter. One needs to try and interpret the Byron Bay Joint Venture in that fashion simply because, in the case of Rafter his company was not a party such that, perhaps and in order to make it work, the reference to "Third Director" must be a reference to him. 43 In any event, and moving on, there was no variation to the Agreements. We refer again to the irrevocable appointment of the Respondent in both Agreements as power of attorney to all the joint venturers "to enforce the terms of (the) Joint Venture or otherwise act in the best interest of the Joint Venture partners or the companies" in circumstances where, inter alia, the power operates when "a party to this Joint Venture agreement (does) not act in accordance with the provisions specified" in the relevant Agreement. It seems therefore, there having been no variation of the Agreements, that the parties are enjoined to "act in accordance with the provisions specified" in the Agreements and not otherwise. 44 The Respondent asserted, as a lynchpin of his case, that he reached an agreement with Rafter with respect to the deposit moneys on the Hill End property (the details of which we set out below) but did not assert that there was an agreement with O'Brien or Eco, such that (at least so it seems to us) there was an evidentiary hurdle to overcome in that the Agreements made certain quite specific provisions and yet the Respondent asserted that two only of the joint venturers made some sort of side agreement clearly (as we shall see) in breach of the precise terms of the joint venture agreements. Uncontested Facts 45 It is convenient to set out, in chronological order, the various banking activities and, at the same time, make some preliminary comments about them: (a) 22 September 2006: the Respondent drew on his firm's general/office account cheque # 779 in $16,000, being the deposit on the Haven property. This was in accordance with clause 7(i) of the Byron Bay Joint Venture. (b) 25 September 2006: Cheque #779 was presented. (c) 26 September 2006: Cheque #779 was dishonoured. Pausing here, the Respondent's evidence was that he drew the cheque for $16,000 in the belief that he "was receiving moneys into (his) account that day from a loan (he) was obtaining which would cover the cheque. However the funds did not arrive and (the) cheque was unexpected(ly) dishonoured." (d) 26 September 2006: Rafter provides to the Respondent a Bank Cheque in $35,000, intended to be the deposit on the proposed purchase of the Hill End property. This was in accordance with the Hill End Joint Venture, clause 3. The evidence of Rafter was that he regarded Geoffrey Rafter Developments as effectively himself such that when he drew on his own funds the Bank Cheque in $35,000 he regarded that as being in discharge of the obligations of Geoffrey Rafter Developments under the Hill End Joint Venture. In an accounting sense there would have been a loan from Rafter to Geoffrey Rafter Developments. The Bank Cheque was payable to "Vista Capital", being the mortgagee exercising power of sale over the Hill End property. (e) 3 October 2006: The Bank Cheque payable to "Vista Capital" was deposited into the Respondent's Trust Account. There is a dispute between the Respondent and Rafter relating to the circumstances/instructions with respect to this Trust Account deposit, and we shall deal with that below. (f) 5 October 2006: Cheque #224 in $16,000 was drawn by Respondent against his Trust Account (not office/general account) from the $35,000 provided by Rafter. Pausing at this point, it is plain that the Respondent, in contradistinction to his activity 22 September 2006, was not using his own money but rather the money of Rafter. Cheque #224 was debited to the Respondent's Trust Account ledger "Byron Bay Recreational Estate Pty Limited - Property Joint Venture" thus bringing the balance of that ledger to $19,000. (g) 5 October 2006: The Trust Account cheque #224 in $16,000 was drawn payable to "Mrs J Haven" and was the deposit on the purchase of the Haven property (this replaced cheque #779 drawn on the Respondent's general/office account, which had been dishonoured - see (c) above). (h) 14 October 2006: The Respondent drew cheque #826 in $40,000 on his general/office account payable to "Byron Bay Retirement Village Pty Limited", being the option to purchase the Byron Bay Tourist Park Caravan Park. The Respondent says that he "mistakenly drew the cheque upon (his) general account rather than (his) trust account where the necessary money was held." (i) 17 October 2006: Cheque #826 in $40,000 was presented and dishonoured. (j) 17 October 2006: $40,000 was transferred from the Respondent's Trust Account ledger 21000 to the credit of another trust ledger number 21352. The first Trust Account ledger was styled "Lloyd Lancaster (General Account)" and the second styled "Byron Bay Recreational Estate Pty Limited - Property Joint Venture." (k) 18 October 2006: The balance of Trust Account ledger number 21352 ("Byron Bay Recreational Estate Pty Limited - Property Joint Venture"), being $19,000, was paid by internet withdrawal to the Respondent's general/office bank account, and being described as "refund to client" and leaving a "nil" balance in that ledger. It was never explained what was the "refund". (l) 20 October 2006: Respondent's general/office account cheque #829 in $35,000 payable to "Vista Capital" was presented and "dishonoured" on the following day. The purpose of this transaction was for the Hill End vendor's solicitor to hold in escrow pending exchange of contracts - the Hill End purchase never went ahead - the cheque, although entered in the Respondent's records as "dishonoured", was in fact "stopped" by the Respondent. Nothing hangs on this. (m) 23 October 2006: Cheque #836 in $40,000 payable to "Byron Bay Retirement Village Pty Limited" for the option to purchase the Byron Bay Caravan Park was re-presented against the Respondent's general/office account and honoured. Preliminary Observations 46 It is plain from the narrative that the initial cheque #779 in $16,000 was not supported. It is also plain from the Byron Bay Joint Venture that it was the Respondent's company Lloyd Lancaster Pty Ltd that was required to supply the $16,000. Like Rafter, how the Respondent structured his affairs was a matter for him; but one might not unreasonably assume that the $16,000 drawn on the Respondent's general/office account would have been entered , in an accountancy sense, as a loan from the Respondent to Lloyd Lancaster Pty Limited. It is therefore plain that the Respondent and/or Lloyd Lancaster Pty Limited never complied with the requirements of the Byron Bay Joint Venture, clause 7(i), as it will be remembered that clause 7 imposed quite strict obligations on Lloyd Lancaster Pty Limited to pay not insubstantial sums from its own resources, not from the resources of somebody else. 47 Secondly, it is also plain that it was the intention of the parties under the Hill End Joint Venture that Geoffrey Rafter Developments would provide the $35,000 deposit. It is also plain (although one needs to generously interpret clause 7 ) that the purchase of the Hill End property was not to proceed unless and until there was in existence a joint venture agreement with Petrovski, a joint venture agreement with Garry over "Madman's Territory" and some sort of consolidation of the various properties so that (and again reading clause 7) "the Joint Venture parties will thereafter consolidate "Madman's Territory" with (part) of the Hill End property and (somehow) "thereafter develop the consolidated property for resale". So, as it seems to us, there was quite some work to do before one could properly exchange contracts for the purchase of the Hill End property. It is difficult to read the Hill End Joint Venture in any other meaningful way. It seems to us that, by reading together the Recitals and Clauses 5, 6 and 7, the whole Hill End Joint Venture was some sort of package deal. But if we are wrong in that appreciation and that it was truly intended to purchase the Hill End property as a separate and distinct transaction and then worry about the Petrovski and Garry properties later (and we concede that is an interpretation that can be put on Recital(b)) there seems to be no provision regarding what would happen to complete the purchase should the prospective buyers "for individual sites" not eventuate and otherwise the Hill End property could not be on-sold - clause 14, which may have covered this, was crossed out. 48 In any event, clause 1 of the Hill End Joint Venture makes it plain that it is the company "Goldfields Hill End Pty Limited" that was to enter into the contract for the purchase of the Hill End property. So, as it seems to us, the $35,000 Geoffrey Rafter Developments cheque was to travel to the Hill End vendor on the account of Goldfields Hill End Pty Limited. There would therefore need to be a book entry in Goldfields showing a loan advance to Goldfields from Geoffrey Rafter Developments in $35,000. It is also important to remember clause 13 (where secondly appearing) of the Joint Venture which provides that all moneys in respect of it are to be forwarded to the Respondent's legal firm which would "retain the monies until the payment of any disbursements on behalf of any of the companies or until the distribution of profits. All payments made to any third party including the Vendors of the properties which are subject to this Joint Venture shall be made on behalf of the companies by Lloyd Lancaster Lawyers after approval by the directors." 49 It was never really explained, or at all, why Rafter provided a bank cheque payable to "Vista Capital" in the face of the clear contractual obligations in this clause 13. So, to some extent at least, the $35,000 should have been paid into the trust account of Lloyd Lancaster Lawyers and then used for the deposit upon exchange. On the face of the documentation, there being no deposit and no exchange of contracts, the $35,000 should have been returned to Rafter or Geoffrey Rafter Developments - the Hill End Joint Venture never proceeded and, on the evidence, never really got off the ground at all. 50 Cheque #224 in $16,000 was drawn on the Respondent's Trust Account from the $35,000 provided by Rafter. This cheque was the deposit on the Haven property and asserted to be in discharge of the obligations of Lloyd Lancaster Pty Limited (from its own resources) to pay that money. Once that money had, however, been taken out of the Respondent's Trust Account, there was only left remaining $19,000. The Respondent says (and we deal with this in more detail below) that he reached an agreement with Rafter in or to the effect that the $35,000 could be used for all the Joint Venture purposes. But that is not what happened to the balance of $19,000 as it was paid by internet withdrawal to the Respondent's office/general account. 51 The Respondent's Trust Account cash receipts book shows that the Rafter's cheque in $35,000.00 was paid against the account "Byron Bay Recreational Estate Pty Limited" (The Byron Bay Joint Venture vehicle) but, and curiously and unexplained, said to have been received from Rafter "on account of costs and disbursements". Of course, that cannot be the case and was never the case. The withdrawal of the $19,000.00 was against the same file and simply shows a payment to "Lloyd Lancaster" but for no particular purpose. Although the evidence initially showed that the $19,000.00 was described as "refund to client" the Respondent's Cash Payment Book does not have such an entry. The St George Bank statement of account relating to the trust account simply describes it as "Reimbursement Byron Recr". There was nothing put forward in chief, or otherwise, by the Respondent which was supportive of the internet withdrawal as so described. The Asserted Agreement 52 The Respondent asserted that he reached an agreement with Rafter in or to the effect that the $35,000.00 was to be used for all the joint ventures. In his evidence in chief he gives this account of the conversations that he had with Rafter about this issue: 3 October 2006: Doherty: "What do you want me to do with the cheque? Frankly I do not think that Chris (referring to Chris Sharp) has been completely honest with either of us even if Gligor (Petrovski) comes through with an offer, which I seriously doubt, there are still serious concerns over the transaction (referring to the Hill End proposals)". Rafter: "As far as I am concerned the money is for the use of the Joint Venture". Doherty: "I will put it into trust and if Gligor comes through with an offer and the contract is in order then we can look at it again. If not and you still want to be involved in the other properties then we can use it in that". Rafter: "Yes, do that. I find these property deals exciting and want to be involved. It would be good if Gligor makes an offer but when I went to see him with Chris he was rather abrupt and just waved me away so that he could speak to Chris alone. I could not hear what they were saying. I don't know whether Chris is just bullshit or not. Gligor exists but there does not seem to be any progress on the offer". 53 Later, on 4 October 2006, the Respondent asserts this conversation: Sharp: "I spoke with the mortgagee (Visa Capital) and he said that the contracts had not been exchanged yet on Hill End!" Respondent: "We are not going to exchange on a contract with an immediate release of the deposit and no guarantee that we can on-sell". Rafter: "No, we are not going ahead because you have done nothing with Gligor, Chris". Sharp: "We can sort him out later. We need to exchange immediately before we lose the property". Respondent: "We are not going ahead with the Hill End property." Rafter: "I agree with Peter". There was then a further later conversation on that day to the following effect: Rafter: "Chris was a bit upset wasn't he?" Respondent: "Are you sure you want to continue with the other developments?" Rafter: "Of course! It looks like we will be able to on sell the developments. Certainly Rice Developments appear to be very interested. Even if they do not go ahead Chris has another buyer who has made an offer to take the site as it is." And later the Respondent asserted that Rafter also said: "As far as I am concerned the $35,000.00 is for the joint venture … I like being involved in these deals. I find it exciting because you can earn a large sum of money in a short period for doing very little. I want to be involved in the other developments." 54 The Respondent says that he made a number of file notes relating to these conversations. In his evidence in chief he annexes to his affidavit (Exhibit 1) numerous documents including numerous hand-written file notes. However, some of them were in fact typed. The Law Society was very critical of the Respondent and challenged the validity of the typed file notes. The first file note is that typed/dated 3 October 2006 which is said to record a conversation between the Respondent and Rafter. This file note shows, if valid, that Rafter did not want to be committed to the Hill End purchase without the other persons being involved and that he did not "have money to contribute to settlement" (whatever that means); that the Respondent advised "not to proceed with Hill End" and that Rafter "agreed deal off but want to "keep door open" (and) if Deed comes through then we will look at Hill End again"; that Rafter instructed him that the "cheque to be deposited into trust" and that Rafter said "as far as I am concerned money is for use for the joint venture" (and) that "property deals exciting wants to be involved - use money for other properties or Hill End if it does come together". 55 The second typed file note is dated 4 October 2006 which was said to record a meeting between Sharp, O'Brien, Rafter and the Respondent. This is an odd file note in that, at least in part, it asks questions but does not provide answers. For example, in relation to the Hill End proposal, "Sharp was asked why Rafter and (the Respondent) had still not been introduced to the neighbour Gligor (Petrovski) after 4 weeks" - this was never answered. It was then recorded that Rafter and the Respondent "had also not met Ben Zappia who was represented by Sharp to be interested in the purchase of the property". The Respondent then records that he "indicated that he was not willing to let the purchase proceed under the circumstances as securing an agreement with Greg (presumably this is a reference to Petrovski) was essential to viability of project and if agreement could not be proceed then (the Respondent) would be liable to pay the full purchase price on a property since Sharp could not pay for the property" - it is not entirely clear to us what this means in relation to the Hill End proposal. In any event, the next and final notation is "Deal Off". 56 This typed file note sits uncomfortably with the next following document tendered by the Respondent, namely a letter from him to the solicitors for Vista Capital dated 4 October 2006 in which the Respondent notes the advice from those solicitors: "That there are further documents to be added to the contract and we therefore request that such documents be forwarded to us at the earliest opportunity" and requests that the vendor's solicitors "note that despite what may have been represented to you by third parties we are not prepared to release the deposit and require a 70 day settlement". How all this equates to "Deal Off" is not clear. It is also odd that the file note states the client as being "Byron Bay" (although perhaps that relates to some other portions of the file note dealing with Rice Developments). 57 There follows a number of handwritten file notes which, in general terms, seem to support the typed file note 4 October 2006. 58 In oral evidence the Respondent asserted that he did in fact have Rafter's authority to put the $35,000.00 into his trust account. He accepted that he had no written authority from Rafter, denied that the handwritten file notes were other than valid and correctly recorded the content, asserted that he gave the Law Society all of the files and thought the Law Society appointed Inspector would "take into account all the material including the file notes", asserted that he typed the file notes out in Darwin during the following week 8-13 October 2006, agreed that when he sent an account to Rafter he omitted a number of attendances, denied that the typed file notes were concocted, asserted that he had "explicit verbal instructions" from Rafter and agreed that there was nothing in any of the notes pertaining to the use of the $35,000.00 for his costs and disbursements but rather that he regarded his costs and disbursements "as part of the joint ventures". 59 He denied that his contribution to the two joint ventures was to do the legal work and that he would only obtain payment therefore if there was a profit derived from them. He asserted that clause 17 (above at [25]) did not mean that his costs should be derived exclusively out of profits but rather the costs must be paid first before any distribution of profit. 60 He accepted that the $35,000.00 was placed in his trust account and used, as to $16,000.00, as to deposit on the purchase of the Haven property and that $19,000.00 was "used to fund in part another dishonoured cheque in $40,000.00 drawn on my general account". He stated that he treated all this money as Byron Bay Joint Venture money but accepted that he had a personal obligation regarding that joint venture. He accepted also that he did not advise Rafter to obtain legal advice but stated that Rafter was aware that the Respondent's personal cheque in $16,000.00 had been dishonoured. However, he agreed that Rafter was "relying upon me as a solicitor". 61 Rafter's evidence was rather different. He said that the Respondent told him to get the bank cheque payable to Vista Capital, that he handed that cheque to Sharp. He then, and curiously, stated that the business with the Hill End property and the Petrovski property "was something that was all happening quite quickly, so we (Sharp and Rafter) thought it was the best way to get the money to (the Respondent) put it in his trust account and that in two or three days time span we would have decided to go ahead or not". He agreed it made no sense to make the cheque payable to "Vista Capital" simply because, if his evidence was correct, it would be rather odd to place into the Respondent's trust account a bank cheque payable to somebody else. 62 At T. 18.03.09 at 10 Rafter said: "…. like when he told me to get his bank cheque that it was going into his trust account and then it was going from his trust account to their lawyers acting for Vista Capital. And then I asked him, it's in my affidavit, I asked him why's that and he said so the money can be traced at all time, it can never go missing. I said, okay." 63 Rafter was robustly cross-examined, as was the Respondent, both in relation to the joint venture "deals". But the difficulty with the whole case relating to these aspects was that it was plain from the totality of the evidence that all parties were commercially unsophisticated. They had dollars in their eyes, easy money, relying upon less than perfect joint venture agreements and all with rather dodgy transactions. How it could possibly be suggested, commercially, that a property at Hill End could be somehow sub-divided into small lots (described, we think, in argument as "pocket handkerchief size") and somehow sold at a profit, even if the neighbours were not part of it, is not immediately apparent to us. 64 Similarly, the Byron Bay propositions. It all seemed to be moving forward on a hope and prayer that shortly after exchange of contracts, somehow the subdivisions would be approved or be put in place, somehow there would be sufficient sales to enable an almost instant profit or, if not, then (at least as far as we can see) there does not seem to be a great deal of thought, if any, to what was to happen. After all, presumably the Hill End property was to be purchased for at least $350,000.00 (on the assumption that the deposit was 10%) and there is nothing, as far as we can see, in the Hill End Joint Venture that would indicate what is to happen in the event that the property is not on sold or, within one month 'there has not been enough exchange of contracts of sale equivalent in total to the purchase price of the whole of the property plus GST plus an additional sum of $100,000.00 …" when it was anticipated "the property is to be on sold to the highest bidder". What happens if there is no bidder? What happens if there is no bidder and the joint venturers have to complete the purchase? 65 The difficulty confronting the Respondent is firstly, that he has to meet the case put clearly by the Law Society, and uncontested by him, that the course of the financial transactions resulted in moneys initially allocated to the Hill End property being used for the Byron Bay venture and, perhaps more importantly, those moneys being used to satisfy an absolute personal obligation on the Respondent's own company Lloyd Lancaster Developments; and then, and equally as importantly, the transfer of $19,000.00 to the Respondent's office account. The Respondent contends that there was an agreement. He relied upon asserted oral statements and on certain file notes. 66 This Tribunal is not prepared to find that the file notes in issue (as stated above) were concocted or made up. The Tribunal does not need to travel down that path in reaching the conclusions that it does. The starting point is the Hill End Joint Venture contract itself - this makes it plain that Geoffrey Rafter Developments will pay the $35,000.00 for the deposit on exchange of contracts for sale for the purchase of the Hill End property. To do that a bank cheque was obtained by Geoffrey Rafter Developments payable to the vendor/mortgagee exercising power of sale, Vista Capital. The "deal" did not proceed, there was no exchange of contracts and the whole Hill End Venture flopped. The bank cheque was placed into the Respondent's Trust Account. In our view, at this point, the bank cheque should have been returned to Geoffrey Rafter Developments and re- purchased by Rafter's bank. That is plain from the precise terms of the Hill End Joint Venture Agreement simply because the $35,000.00 was quite specifically provided pursuant to that Agreement. 67 The Byron Bay Joint Venture Agreement stands alone as a distinct contractual document. It should have been treated as such by the parties. It is important to remember that the interest of Geoffrey Rafter Developments in the Hill End Joint Venture was not a 20% interest but rather a 20% interest in Goldfields Hill End Pty Limited, but only after exchange of contracts by that company as purchaser. It is also important to remember that the Respondent, not only drafted the Agreement but also made it plain (clause 4) that he would hold the power of attorney "to enforce the terms of this Deed of Agreement for Joint Venture or otherwise act in the best interests of the Joint Venture parties or the company", ie. in relation to the Hill End venture. It seems to us plain that the Respondent had an absolute duty to Geoffrey Rafter Developments to stick closely to the terms of the Hill End Joint Venture Agreement and not to depart from it consistent with his own obligations as created in clause 4. It is also important to remember that clause 14 (where first appearing) states that the Agreement "may be varied but only if (all the directors) agree in writing". There was no variation. There was no agreement in writing. The whole deal just simply fell over. 68 In addition, in our view, there was no entitlement to the Respondent to deduct or appropriate to himself any legal costs in relation to the Hill End Joint Venture. Clause 14 (where secondly appearing) appoints the Respondent's firm as solicitors for the Joint Venture and Goldfields. In clause 16 the various directors 'acknowledge that they will be required to enter into a Costs Agreement (with the Respondent's firm) pursuant to the Legal Profession Act in their capacity as directors of the company to be formed" (it already had been - Goldfields Hill End Pty Limited - clause 1); and clause 17 provided that the "costs of and incidental to the preparation and execution of this Deed of Agreement and any other legal work undertaken in respect of either the Joint Venture, the Companies or business shall be paid prior to the distribution of any profits". It is plain to us that this clause 17 does not entitle the Respondent to take any costs in relation to the Hill End Joint Venture unless and until there are profits. In any event, there was not the slightest jot of evidence that any Costs Agreement had been entered into pursuant to clause 16. 69 That leads us inevitably to the Byron Bay Joint Venture transactions and the purchase of the Haven property. The $35,000.00 was partially used for that purpose. The difficulty confronting the Respondent is that the onus shifts to him to prove the existence of an agreement between himself and Rafter. This Agreement requires Lloyd Lancaster Developments to pay from its own resources $16,000.00 on exchange of the Haven property. It was never suggested, at all or at any time, that Geoffrey Rafter Developments or Rafter lent any money at all to Lloyd Lancaster Developments. Rather, the best the Respondent could say was that Rafter agreed to put the $35,000.00 towards this joint venture. But that, in itself and even if true, does not create a situation whereby the Respondent can allocate to his company part of that $35,000.00. There was no suggestion that Rafter had lent the money to the Respondent's company. Why would Rafter do that? Where was the agreement to lend the money to the Respondent's company? There is not the slightest piece of documentary evidence that would support any contention of the Respondent within the terms of the Byron Bay Joint Venture Agreement. 70 Indeed, there was no documentary evidence at all in support of the Respondent's contention that there was any sort of agreement between himself (or his company) and Rafter (or his company), other than the asserted file notes. There was no confirmation in writing by the Respondent or by Lloyd Lancaster Developments acknowledging the instructions from Rafter; there was no loan agreement between Lloyd Lancaster Developments and Rafter or his company for the $16,000.00 (or the $35,000.00); and the only way (so it seems to us) that the Respondent's evidence could be reasonably believed and consistent with clause 7(1) is some sort of agreement between Rafter and Lloyd Lancaster Pty Limited. None was put in evidence. None was asserted. It was the responsibility of Lloyd Lancaster Pty Limited to come up with the $16,000.00. It was not Rafter's responsibility. Where Lloyd Lancaster Pty Limited got the $16,000.00 from was clearly a matter for it because it was its obligation to contribute those moneys as part of the whole project, thus (no doubt) going towards entitling it to a 50% interest in the projects. 71 It is also worth while remembering the terms of clause 11 (set out above at [22]). Clause 11(vi) provided for the reimbursement of the $35,000.00 "should (Rafter) make payment of the deposit on the (Hill End) property". Clearly that did not happen. And, in any event, it was only to be reimbursed "on the realisation of profit from any of the business activities of the Joint Venture …". 72 That leads us to the $19,000.00. For what purpose was that sum transferred from trust to office? It could not be for legal costs simply because clauses 11(ii) and 11(iv) provided for the payment of those "on the realisation of profit …" and certainly by the time the $19,000.00 was transferred there had been no "realisation of profit". And it certainly could not be in relation to the legal costs of the Hill End venture for the reasons previously specified. Furthermore, and for the same reasons, it could not be in relation to the legal costs of the Byron Bay ventures - these are governed by clauses 14-17 which again appoints the Respondent's firm as solicitors on behalf of the joint venture etc, where the various directors (O'Brien, the Respondent and Rafter) acknowledge that they will be required to enter into a Costs Agreement with …" the Respondent's firm (no such Costs Agreement was entered into) and therefore, for the reasons we have stated above, costs payable to the Respondent were not in fact payable at the time of the $19,000.00 transfer. In any event, no bill of costs was sent to the parties neither could it have been. There was a dispute about legal costs (to which we shall make reference later) but that does not advance the Respondent's case one iota. 73 In fact, the $19,000.00 went towards the $40,000.00 required to be paid by Lloyd Lancaster Pty Ltd pursuant to Clause 7(ii) (see [20] above). So, the whole of Rafter's $35,000.00 went towards meeting the obligations of Lloyd Lancaster Pty Ltd, all without any documentation, loan agreement, book entry, or whatever; and certainly not pursuant to the agreement asserted by the Respondent that he says he reached with Rafter, ie. that it was to be "for the use of the joint venture" as distinct from the use of Lloyd Lancaster Pty Ltd in meeting its obligations under the joint venture. 74 It is also worth noting that there is nothing in either Agreement that created some sort of general money pot, some sort of general pool, into which participants could, or were obliged to, put money for the general use of the joint venture. In any event, the contributions of the participants were clearly defined in the Agreements. For the Respondent to assert otherwise goes against the terms of the Agreements and against his personal duties as attorney pursuant to Clause 2 (Byron Bay) and Clause 4 (Hill End). 75 Consequently, in our view the Respondent has not displaced the clear presumption raised by the unchallenged financial transactions that he was not entitled to appropriate to his own use (or that of his private company) any part of the $35,000.00 and that he was not entitled to appropriate to his own use (by way of transfer trust to office) the balance of that $35,000.00. As such in our opinion the $35,000.00 has been misappropriated by the Respondent for his own use and benefit in the circumstances that we have set out above. 76 Finally, if the Respondent is correct, what was the benefit to Rafter? His only real financial interest was in the Hill End venture. He had no financial input into the Byron Bay activities - he did have an entitlement to a return of his $35,000.00, but only on very restrictive conditions - why would he be inclined to put any money into the Byron Bay ventures when Eco and Lloyd Lancaster Pty Limited had, not only the financial input/obligations but also the running/conduct of the joint venture? Indeed, the whole exercise was speculative even from the point of view of the other parties - for example, clause 11(v) did not entitle Lloyd Lancaster Pty Limited to repayment of any moneys paid pursuant to the joint venture until firstly, there was a profit and secondly the first four sub-paragraphs had been satisfied. The only benefit Rafter had was in clause 11(vii), and thereafter only 10% of the nett profit. Why would Rafter make any monetary contribution at all? One can only speculate, but perhaps the 10% nett profit interest to which Rafter was entitled was perhaps a sop to him for putting in the $35,000.00 to the Hill End venture. The Tribunal is unable to understand any logic behind the Respondent's assertions and is of the opinion that the Respondent's evidence and case on this point made no sense, logically or as a matter of economics. 77 The Tribunal now needs to look at how the parties presented their submissions on what was described in argument as "the Rafter matter". However, the Tribunal has been to some considerable effort above to analyse the evidence above, simply because both parties regarded "the Rafter matter" as the most important matter that required the decision of this Tribunal. Arguments on "the Rafter matter" 78 By its Second Amended Application for Original Decision the Law Society as Applicant sought Orders that the name of the Respondent be removed from the Local Roll of Lawyers and that he pay the costs of the Law Society. A number of allegations were made against the Respondent and, as we have stated above, the most important allegations related to "the Rafter matter" and the various joint ventures. 79 The Law Society pleaded its case against the Respondent in relation to "the Rafter matter" in the following terms: "B. In relation to his client Geoffrey Rafter ("Rafter") the solicitor: 1. Breached Section 255 of the Legal Profession Act 2004; 2. Misappropriated the sum of $35,000.00 belonging to Rafter ("Rafter's funds"); 3. Knowingly misled Rafter in that: 3.1 having applied Rafter's funds to discharge obligations imposed upon the solicitor's company, Lloyd Lancaster Pty Limited, he failed to promptly inform Rafter that he had done so; and 3.2 having so applied Rafter's funds, made statements to Rafter: 3.2.1 on or about 19 October 2006 that he had forwarded to Rafter a cheque by way of refund on Rafter's funds; 3.2.2 on or about 18 October 2006 that he would forward to Rafter another cheque by way of refund of Rafter's funds; 3.2.3 on a date in late October or early November 2006 that he had forwarded to Rafter a cheque by way of refund of Rafter's funds; 3.2.4 on a date in late October or early November 2006 that he would forward to Rafter another cheque by way of refund of Rafter's funds; 3.2.5 on a date in early December 2006 that he would on that day refund Rafter's funds by way of transfer to Rafter's bank account, knowing each of the statements was false. 4. Unreasonably delayed in advising Rafter that he had applied Rafter's funds to discharge obligations imposed upon the solicitor's company Lloyd Lancaster Pty Limited. 5. Failed to account to Rafter in respect of Rafter's funds. 6. Acted in conflict of interest and preferred his own interest to those of his client Rafter". 80 The Law Society particularised the pleadings. There is no need to go through those Particulars - most of them are set out above. However it is important to observe that the Law Society emphasised, in particular, that the two Joint Venture agreements had never been varied; noted that when cheque #779 in $16,000.00 was drawn on the Respondent's general account on 26 September 2009 and was dishonoured it was because the balance of his general account at that date was $406.10; accepted (Particular 14) that the Respondent did in fact obtain Rafter's instructions to deposit into his trust account the $35,000.00 bank cheque payable to "Vista Capital" but stated that "Rafter did not instruct the solicitor to credit to the Byron Bay JVA ledger or to use the money for the purposes of the JVA"; stated that on 5 October 2006, when he drew cheque #224 on his trust account in $16,000.00 (the Haven deposit) he did so "without Rafter's authority"; further stated (Particular 23) that when he made the internet withdrawal on 18 October 2006 by transferring $19,000.00 from trust to his general/office account the Respondent did so "without Rafter's authority and in discharge of financial obligations imposed upon him/ the solicitor's company by the Byron Bay JVA"; noted (Particular 28) that by "letter dated 2 November 2006 the solicitor terminated the joint ventures"; asserted numerous conversations (Particulars 17, 24, 27 and 30) with Rafter in which Rafter enquired about his $35,000.00 and in which the Respondent stated that he would "send you your money back" or "your money is not required and can be returned" or "I drew out a cheque and sent it to you a while ago. I will now have to cancel that cheque and issue you with another one" or "… I have been real busy. I am going to write a cheque now for you … I will do that this afternoon"; and finally (Particular 31) in response to a request from Rafter's solicitors for a "preliminary accounting Rafter became aware for the first time that the solicitor had in fact used his money to fund the Solicitor's/Solicitor's company's own commitments under the Byron Bay JVA". These particulars were clearly supported by the evidence of Rafter. 81 The Tribunal wishes to say at the outset that it was most unimpressed with the evidence of both the Respondent and Rafter. Neither witness, in particular Rafter, seemed to have any grip on what had happened, particularly regarding the details of attendances and conferences and conversations, and seemed totally "laid back" in relation, not only to the various joint venture activities but also their evidence. The Tribunal has therefore adopted the approach that, although it would give the oral evidence appropriate weight, in these circumstances it was more inclined to put greater weight upon the documentary evidence and consider that in the context of the commercial dealings between all the parties and the fact that the Respondent was the solicitor for Rafter and Rafter Developments, at least in relation to the various ventures. It is important, in our view, to bear that latter fact in mind because, by him so acting and by the terms of the Agreements drafted by him, the Respondent placed himself into an unique position and thereby owed a duty to Rafter over and above whatever duties they may have owed to each other under the commercial arrangements. That is not to say that by drafting the Agreements in the way he did the Respondent acted in any way other than properly - after all these Agreements were approved and executed by all the parties and there has been not the slightest suggestion of anything untoward in relation thereto. But the Respondent, as the solicitor for the joint venturers, in our view, owed a special duty to (relevantly) Rafter/Rafter Developments and, having regard to the terms of the contractual documents, had a duty not to prefer his interests or the interests of his company over the interests of Rafter. 82 It is interesting to note that at the hearing no evidence was provided by O'Brien or by Sharp. O'Brien's omission is important because it was he who was the owner/director of Eco. Eco and O'Brien had a very important interest/role to play in the success of the joint ventures and would have been a party to have been consulted about any change in the financing/conduct of the ventures and/or any variation to the commercial arrangements. That is not to say that there was anything that would prohibit Rafter and the Respondent agreeing to some sort of financing by Rafter of the Respondent's company Lloyd Lancaster Pty Limited. But, and this is important, if there was such an arrangement the Respondent had an absolute duty, in our view, to properly document that arrangement and to tender appropriate advice to Rafter. 83 In our opinion, and having regard to the totality of the various ventures, that advice would at least have required Rafter to have been referred to another solicitor - there was clearly a conflict between Rafter and the Respondent in relation to the Byron Bay Joint Venture, on the Respondent's own case (as we have endeavoured to set out above), and any such financial arrangements/advances should have been properly documented, with appropriate due diligence and guarantees. None of that happened. The Tribunal can, but only to some minor degree, understand why this may have been the case - the whole financial/commercial exercise was done on a shoe-string, all parties thinking that there were vast riches waiting for them without doing the hard yards - a quick deal, a purchase, on-sell, and distribution of profits. 84 The Tribunal has been greatly assisted by senior counsel for both parties. As we have stated above, both parties regarded "the Rafter matter" as the most important issue before the Tribunal. The Respondent submitted that "the controversy between Rafter and (the Respondent) is a very narrow one"; the conflict could be reduced to Rafter's assertion that "his money would not be required and that it could and would be returned" yet on the other hand the Respondent's assertion that "Rafter agreed that the money could be used for the purposes of the Byron Bay elements of the joint venture arrangements that existed between them and authorised (the Respondent) to apply the funds accordingly". Reliance was placed upon the typed file notes as compared to Rafter who had "no records of the conversations". It was submitted that Rafter's evidence betrayed weakness in memory and a variety of aspects … (that) his credit was … eroded" and it was submitted that once the $35,000.00 "was held to the account of Byron Bay Recreation Estate Pty Limited, the terms of the Bryon Bay joint venture agreement were engaged …". It was further submitted that Lloyd Lancaster Pty Limited "had obligations to contribute a total of $126,000.00 to various elements of the joint venture if they proceeded (with reference to clause 7) (and it) "was contemplated that the sale of the Haven property would be the immediate source of cash (clause 8)" this was accepted by Rafter in evidence. Accordingly, it was asserted, "it was necessary in all parties' interest to secure the contract for the purchase of Mrs Haven's property by making the deposit payment of $16,000.00 to make good the dishonoured cheque of $16,000.00 which had been provided by (the Respondent) to Mrs Haven's solicitors of 22 September 2006". 85 For the reasons we have endeavoured to set out above, we are unable to understand what interest Rafter had to secure the contract for the Haven property which would have required him to have contributed $16,000.00, particularly with the obligation to pay the $16,000.00 did not rest upon him at all but rather upon Lloyd Lancaster Pty Limited. 86 The Respondent relied upon clause 13 (where second appearing) of the Byron Bay Joint Venture Agreement which required all moneys to be forwarded to the Respondent's firm "in respect of this Joint Venture" and the Respondent's firm would "retain the monies until payment of any disbursements on behalf of any the companies or until distribution of profits". Then there was submitted a bold statement on behalf of the Respondent; "there is no suggestion that O'Brien did not consent to the use of Mr Rafter's money in the manner in which it was applied". O'Brien did not give evidence. But, in our view, it really did not matter whether he consented or otherwise because, whatever way one looks at the transaction, the best spin that can be put upon the $16,000.00 was that it would have constituted an advance/loan by Rafter/Rafter Developments to Lloyd Lancaster Pty Limited. 87 In our respectful opinion, and having regard to the totality of the commercial contracts, the $16,000.00 could not be looked at in any other fashion simply because the primary obligation under the Byron Bay joint venture was for the payment of $16,000.00 to be contributed by Lloyd Lancaster Pty Limited, certainly not by Rafter; and certainly not by Rafter simply putting the $35,000.00 "into the general pot" to be used somehow for the general purposes of the joint venture (whatever that may mean), particularly where the precise financial obligations were spelt in the joint venture and where the Respondent reserved to himself, by way of power of attorney, the absolute obligation to enforce the terms of the joint venture. 88 In contradistinction to this expression of opinion the Respondent submitted that the "scheme of the joint venture was that any funds that were available for application for the purposes of the joint venture would only be accountable at the conclusion of the venture" and reliance was placed upon clause 17 which provided that the "costs of and incidental to the preparation and execution of this Deed of Agreement and any other legal work undertaken in respect of the Joint Venture, the Companies or business shall be paid prior to the distribution of any profits". Thus, so it was submitted, "Once it is concluded that Mr Rafter sanctioned his money being placed at the disposal of Byron Bay Recreational Estate Pty Limited for the purposes of the joint venture, then the Law Society's claims that there has been a dishonest failure to account for the money collapses". Quite frankly, we are unable to follow that logic, primarily for the reasons we have been at pains to set out above. Additional Rafter Evidence 89 It is worthwhile for a moment pausing to consider some of the other evidence that was placed before the Tribunal. Much of this additional evidence went to credit, alternatively to the course of conduct of the Byron Bay joint venture. 90 It is plain from the documentation that contracts for the purchase of the Haven property were exchanged 25 September 2006, the purchase price being $320,000.00 with a 5% ($16,000.00) deposit. The property was "vacant land" and the contract was to be completed "182 days after the contract date". The directors of Byron Bay Recreation Estate Pty Limited (the joint venture vehicle) were the Respondent, O'Brien and Rafter; the shareholders were Lloyd Lancaster Pty Limited as to 5 ordinary shares, Eco as to 4 and Rafter as to 1. 91 There was some evidence that the Haven property was "land locked"; a dispute arose between the shareholders, perhaps because the Haven property had not been on-sold as required in accordance with the Agreement and therefore the joint venturers were obliged to complete the contract. Doing the best that we can on the evidence demand was made on O'Brien and Rafter to contribute respectively $128,000.00 (40% of the balance of purchase money) and $32,000.00 (10% of the balance) "to enable settlement to proceed" but neither party made that contribution and the purchase did not proceed. The vendor Mrs Haven "declined to return the deposit" and proceedings were subsequently commenced in the Supreme Court. There is no need to travel further down that road. 92 However, the importance is that the parties and Sharp all fell out for various reasons, all making allegations one against the other, and (we opine) simply because no proper due diligence was carried out, the whole thing was done "in a rush" and there was no proper marketing or any reasonable attempt to on-sell during the term of the contract before completion. But, whatever may have been the ultimate wash-up, it seems to us that clause 12 (where first appearing) of the Byron Bay Joint Venture seemed to cover this problem - it provided that should "no sale eventuate for any of the properties (including the Haven property) then (Eco and Rafter) shall transfer all their right title and interest in any shares they own in the company associated with the purchase and sale of the Haven property to (Lloyd Lancaster Pty Limited) …" such that it is at least arguable that no demand should have been made at all (simply because there is no requirement in this joint venture for any party to make any monetary contribution other than Lloyd Lancaster Pty Limited in clause 7 or, alternatively, that if a demand was properly made and not answered then clause 12 (where first appearing) operates and Lloyd Lancaster Pty Limited acquires the whole of the interest in the joint venture vehicle (Byron Bay Recreation Estate Pty Limited) and completes the purchase. And if that is correct it only serves to underline the point we were endeavouring to make earlier in or to the effect that Rafter himself had no obligation to make any monetary contribution). 93 Next, the Tribunal wishes to deal with matters arising from the evidence of Rafter and a Mr Colin Cunio, the latter being a former solicitor who for a time in 2007 and 2008 acted for Rafter. 94 Consistent with his instructions Mr Cunio caused a Statement of Claim to be filed on 17 August 2007 in the Supreme Court Equity Division No 4085 of 2007. This document shows the plaintiff being Rafter, the First Defendant being the Respondent, the Second Defendant Eco, the Third Defendant Lloyd Lancaster Pty Limited and the Fourth Defendant Byron Bay Recreation Estate Pty Limited. The originating process is sworn by Rafter in an affidavit 7 August 2007 in which he swears that he believed 'that the allegations of fact in this statement of claim are true". The pleadings assert the Byron Bay Joint Venture, assert that the Respondent "was to receive and disburse all money on behalf of the Joint Venture parties … was retained to act as solicitor for the Joint Venture parties … (that the Respondent) owed a fiduciary duty to act in the best interests of the Joint Venture parties and to provide a full and accurate account of all dealings, transactions, payments, disbursements and receipts in connection with the Joint Venture Agreement"; then asserted (paragraph 11) that "on or about 3 October 2006 (Rafter) contributed the sum of $35,000.00 in connection with the Joint Venture Agreement, and the (Respondent) received the said sum pursuant to the second clause 13 of the Joint Venture Agreement". Pausing at this point that clause 13 (where secondly appearing) provided for all moneys in respect of the joint venture to be forwarded to the Respondent's firm "who will retain the moneys until the payment of any disbursements on behalf of any of the companies or until the distribution of profits". 95 The Statement of Claim goes on to assert that the Respondent "acted as solicitor on behalf of the Joint Venture parties in connection with the acquisition of the properties referred to in the Joint Venture Agreement [we pause to note that the Banora Point property was never acquired] (and) received money for and on behalf of the Joint Venture parties in connection with the acquisition of the properties … (and) paid money for and on behalf of the Joint Venture parties in connection with the acquisition of the properties …". Rafter sought an order that himself and all the defendants "account in common form to each other for their dealings and transactions, payments, disbursements and receipts in relation to (the Byron Bay Joint Venture), an order (the Respondent) account in common form to the "other parties" for his dealings and transactions, payments, disbursements and receipts, and an order that an enquiry be held as to the assets and liabilities of each of the parties … in relation to the matters set out in the Joint Venture Agreement … (and a) "taking of the account and holding of the enquiry … and (an order) that each of the parties hereto pay any amounts found due by them as directed …". 96 This rather odd Statement of Claim was issued by Mr Cunio without him sighting the Hill End Joint Venture Agreement. Thereafter, upon the application of the Respondent, the Supreme Court proceedings "were summarily dismissed with costs on 11 December 2007 in the absence of any appearance on behalf of Mr Rafter" by Mr Cunio. 97 Mr Cunio's evidence was that he did not "make any appropriate entry about it in (his) diary"; but shortly after he spoke with Rafter and stated that he "will get the proceedings reinstated" and that his firm "will wear the costs order" and that the "Court's orders should not affect the outcome of your claim for the return of your $35,000.00". Rafter's response was consistent with the sort of evidence that he gave in the Tribunal: "Okay Mate. That's bad news. Do whatever you have to do". 98 Unfortunately Mr Cunio did not take the matter any further and ultimately the Respondent had his costs assessed and made claim against Rafter. There is no need for us to go into that aspect. 99 Mr Cunio says that the first occasion in which he saw the Hill End Joint Venture Agreement was about 1 April 2008. Unfortunately Mr Cunio made no diary entries. Relevantly, however, he swore that he had a conversation with the Respondent on 3 March 2008 in which the following conversation took place: Cunio: "What happened with Geoff's money, Peter?" Respondent: "He is going to get his money back. I have commenced proceedings against the vendor in one of the Joint Venture matters in the Supreme Court. He will get his money when I get money off the vendor". Cunio: "That's not good enough. That deal had nothing to do with why Geoff gave you $35,000.00". Respondent: "No, I don't agree with you there". 100 It was submitted that the Statement of Claim was evidence in support of the Respondent in that firstly, it was sworn as being true by Rafter himself, secondly, it pleaded Rafter's contribution of $35,000.00 "in connection with the Joint Venture Agreement" and the receipt by the Respondent "pursuant to the second clause 13" of that Agreement and, thirdly, it sought an "account in common form" and an enquiry. It was submitted that the answers given repeatedly by the Respondent and later by Mr Cunio were that the return of the $35,000.00 "was impossible because there were on-going matters with financial consequences concerned with the Haven purchase and the Banora Point option - these matters had to be finalised and expenses assessed before there would be any return of capital to the joint venturers". 101 Although it seems that the way in which the Statement of Claim was drafted tells against Rafter, upon more careful reflection we are of the view that it does not. It was clearly drafted upon the instructions of Rafter but without Mr Cunio seeing a most important document - the Hill End Joint Venture. In any event, it is true that the $35,000.00 was in fact paid by Rafter into the Respondent's Trust Account but there is nothing, so it seems to us, in clause 13 (where second appearing) that would permit the Respondent or Lloyd Lancaster Pty Limited to use those moneys to satisfy the primary obligation of Lloyd Lancaster Pty Limited to pay the $16,000.00 deposit on exchange for the Haven property (clause 7(i)). 102 In our opinion the pleadings in the Statement of Claim, properly considered and reflected upon, are not in such contradiction to Rafter's evidence in this Tribunal as would operate as to somehow bar or negatively affect his evidence, and this opinion is supported by the conversation deposed to by Mr Cunio with the Respondent on 3 March 2008, from which it is plain that Mr Cunio regarded the whole exercise as a return to Rafter of the $35,000.00 without reference to the other activities of the Joint Venture parties. 103 The Respondent submitted through his senior counsel that because Rafter admitted in evidence before this Tribunal that he learned from Sharp that the Haven deposit had been dishonoured (T.17.03.09 at 62/63), a "necessary consequence" was that Rafter "must have known of the obligations of the Byron Bay joint venture to which he actually committed his funds, included a requirement to make good the deposit on the purchase of the Haven property." With respect, we are unable to accept that submission. The obligations on the joint venturers are clearly set out in the Joint Venture Agreement and the obligation to pay the deposit rested upon Lloyd Lancaster Pty Limited. Nothing to do with Rafter. 104 The Respondent has "always maintained that he had express authority from Mr Rafter to place the $35,000.00 cheque in trust and to use it for the purposes of the Byron Bay joint venture activities". We understand that is the primary submission on behalf of the Respondent. For the reasons we have endeavoured to express above, the submission in our view does not accord with the terms of the contract documents neither does in accord with the primary obligation of Lloyd Lancaster Pty Limited to pay the Haven deposit. To simply use the words 'for the purposes of the Byron Bay joint venture activities" does not really advance the matter at all because it fails to address, with precision, the contractual obligations of the parties in a contract to which all the parties agreed, but could not be varied except by unanimous resolution and which was drawn by the Respondent. In our view the Respondent has endeavoured to construct a scenario that somehow makes good the failure of his company to abide by the terms of the contract. 105 It is not in conflict for this Tribunal to express the tentative opinion that the Respondent rather believed that he was entitled to use the $35,000.00. If he so believed then it was a belief not founded on the contract, or on reality. It is plain to us that the Respondent and Rafter were well and truly out of their respective depths, perhaps even "sucked into" dodgy deals with promises of instant profit. The Respondent found himself in more than considerable personal and financial difficulty and has endeavoured to construct a scenario which he believes somehow relieves him from liability to re-pay to Rafter the $35,000.00. It is plain to us that the $35,000.00 is properly repayable by the Respondent to Rafter as Rafter has claimed and on the evidence as led before the Tribunal. 106 The Tribunal now proposes to deal with the submissions of the Law Society with respect to "the Rafter matter". Firstly, the Society made this very telling submission: "given his experience as a solicitor, the Respondent's repeated professions of ignorance of basic professional obligations tell heavily against him … he cannot claim to be a young inexperienced practitioner …". The Tribunal notes that the Respondent is aged 55, was admitted in August 1997, having had an interesting life prior to admission, and had been in practice on his own account since 13 September 1999. 107 The Law Society observed, as we have, that at all times the Respondent acted as a solicitor for Rafter, Rafter's company, the joint venturers and the joint venture companies. He drafted the agreements, had charge of administration of business but, at the relevant times, was apparently insolvent or at least under severe personal financial pressure at the time Rafter paid into his trust account the $35,000.00. It submitted that the Respondent "obtained no written instructions or authority from Mr Rafter, for the appropriation of Mr Rafter's $35,000.00 for a purpose other than that for which Mr Rafter provided it (namely the Hill End deposit)". The Law Society invited the Tribunal to look "with suspicion" at the corroborative file notes and in particular that dated 3 October 2006 which "was not made contemporaneously but was created during the course of the following week whilst the Respondent was in Darwin from a scribbled note which is no longer in existence". 108 In any event, it was submitted that "precisely when the document was typed is not known but by the time it had been prepared the Respondent had used $16,000.00 of Mr Rafter's funds to draw cheque #224 (against) his Trust Account for payment of the deposit on the Haven property". It was submitted that the fact the file note is dated 3 October 2006 but was prepared on a later date "suggests (the Respondent's) records cannot be accepted at face value". But, and importantly, the Society submitted that even "accepted at its highest in favour of the Respondent, (the file note) does not support his assertion that he was authorised by Mr Rafter to expend Mr Rafter's $35,000.00 in payment of amounts ($16,000.00 on 5 October 2006 and $19,000.00 on 18 October 2006) which the Respondent was personally liable to pay [this is not strictly correct - the responsibility was on the Respondent's company], especially that he knew that Mr Rafter relied upon him as a solicitor and he did not advise Mr Rafter to obtain independent legal advice." 109 The Respondent's keeping of records was challenged as suspicious - for example, his characterisation of $35,000.00 "on account of costs and disbursements" in his trust account records. It was submitted that "on any view, the Respondent's use of a bank cheque drawn to another party for a purpose for which it was not drawn, and without written instructions and the fully-informed consent of the client, casts doubt on the Respondent's assertion that he acted with Mr Rafter's authority … (and the) Respondent cannot escape his professional responsibilities by blurring distinctions between the two Joint Venture Agreements he prepared". Indeed, on the evidence, "it was not until about 26 February 2007 that (the Respondent) disclosed to Mr Rafter (or, more accurately Mr Rafter's solicitors) what he had done with Mr Rafter's $35,000.00". 110 Significantly, the chronology (which we have set out above) and was set out in the affidavit of the Law Society Inspector, was not challenged. The Law Society notes (submission 19) that it was not true to assert that Rafter had "an uncontracted-for obligation to contribute further funds for the two failed joint ventures". We agree. 111 There is no doubt that Rafter was not well-served by Mr Cunio at any time. That may have been partly the blame of Rafter in not supplying to Mr Cunio the Hill End Joint Venture Agreement but certainly Mr Cunio's evidence as to his professional activity left a lot to be desired. 112 If it is suggested that the parties conducted themselves in relation to the joint ventures as if they were a single joint venture then we would reject that submission. There are clearly two different Agreements "with different rights and obligations there recorded" and we agree with the Law Society when it submits that Rafter, not being a legally qualified person, was reliant upon the Respondent as a solicitor. It was submitted that it was "not open to Mr Doherty to shift his professional responsibilities away from himself by asserting that a legally-unsophisticated person such as Mr Rafter acquiesced in his conduct". Quite so. 113 In relation to Rafter's Supreme Court proceedings and Mr Cunio we agree with the Law Society's submissions that the "particular legal obligations of the parties (under) the (two) joint venture agreements were simply not known to Mr Cunio nor to counsel briefed by him. That Rafter was not completely aware of what exactly had occurred is hardly surprising. He was entitled to and did rely on the Respondent". It is plain to us, from the totality of the evidence, that Mr Cunio was not aware of the whole of the relationship between Rafter, his company and the other parties to, and the terms of, both joint venture contracts. There is no need for this Tribunal to go through the evidence relating to the costs order and what followed from that, simply because none of that material impinges upon the primary issue relating to the $35,000.00. 114 Finally on "the Rafter matter", it is worthwhile observing that the Respondent has placed into the trust account of Mr Mario Piperides, solicitor, the sum of $35,000.00. This amount arose through "a retention" of $28,789.00 being moneys payable to the Respondent from a former client, plus $6,211.00 paid by way of bank transfer into that trust account. It is not terribly relevant how the money arrived into the trust account of Mr Piperides, although we do refer to this later in this decision because it was one of the issues debated before us, but it is plain that the money remains in that trust account as a sign of good faith by the Respondent who has made it plain that, although he was of the belief that he was entitled to use Rafter's $35,000.00 in the way that he did, if the Tribunal is of a different opinion then that $35,000.00 now held in trust will be used to pay Rafter. Rafter Conclusions 115 The Tribunal is clearly of the opinion: 1. There were two separate and distinct joint venture contracts. 2. The Respondent had an absolute obligation to the joint venturers to ensure that the exact terms of the joint venture contracts were complied with by them and by him. 3. There was nothing in either joint venture contract that would have entitled the Respondent, or his company, to appropriate the $35,000.00 and use that money for the Byron Bay Joint Venture. 4. In order to succeed in his argument the Respondent would have had to have asserted a loan contract/agreement between Lloyd Lancaster Pty Limited and Rafter/Rafter Developments in or to the effect that Rafter/Rafter Developments would lend to Lloyd Lancaster Pty Limited $16,000.00 so that Lloyd Lancaster Pty Limited could make the deposit on the Haven property. No such assertion was made, either in evidence or by way of submission. 5. Any belief that the Respondent may have had relating to his/his company's use of the $35,000.00 or the joint venture use of that money would be a belief not rooted in contract nor in any side agreement. 6. In all the circumstances the Tribunal finds that the Respondent misappropriated to his own use or to the use of his company Lloyd Lancaster Pty Limited the $16,000.00 and misappropriated to his own use or the use of his said company the $19,000.00, both together forming the $35,000.00 being, in turn, the bank cheque provided by Rafter/Rafter Developments and payable to Vista Capital. 7. Although the Tribunal finds much to criticise in the evidence of Rafter, taking into account to the whole of the material before it, the Tribunal is clearly of the view that it prefers the evidence of Rafter to the evidence of the Respondent. The Law Society has clearly discharged its burden of proof such that it was up to the Respondent to displace the clear prima facie conclusion that the $35,000.00 was used by him for purposes other than for which it was entrusted to him. In our view the Respondent clearly fails in that regard. 8. In relation to the Second Amended Application for Original Decision the Tribunal finds: i) the Respondent breached s.255 Legal Profession Act 2004 (which requires a law practice to hold trust money exclusively for the person on whose behalf it is received and to disburse it only in accordance with a direction given by the person). The Tribunal also notes that, although not pleaded, there was a clear breach of s.264(2)(b) and s.264(2)(c). ii) the Respondent misappropriated the sum of $35,000.00 belonging to Geoffrey Rafter. iii) the Respondent knowingly misled Rafter in terms of paragraph B.3.3.1 of the Grounds in the said Second Amended Application (at [79] above). iv) the Respondent unreasonably delayed advising Rafter that he had applied Rafter's funds to discharge obligations imposed upon his company, Lloyd Lancaster Pty Limited. v) the Respondent has failed to account to Rafter in respect of Rafter's funds. vi) the Respondent acted in a conflict of interest and preferred his own interest to those of his client, Rafter. These are serious findings against the Respondent as a legal practitioner. The Tribunal does not make these findings lightly. It has carefully weighed up all the evidence and has been to some trouble to set out in detail above its reasoning behind making these findings. Both parties and their briefed lawyers have put great weight upon "the Rafter matter" and that is why the Tribunal has been to perhaps more than considerable length in dealing with this issue. 116 The Tribunal now wishes to deal with the assertions as pleaded (Particulars B.3.3.2 at [79] above) that various oral statements were made by the Respondent knowing that they were false. These statements are set out above at [52-53], at [79], partially supported by the asserted file notes at [54-58], and refuted by Rafter at [80] whose evidence was partially supported by Curio at [97 and 99]. The Tribunal has thought long and hard about these asserted conversations. In forming its opinion it finds itself in the position of Martin J, at first instance in Bringshaw in that we "concede perhaps in the probabilities arising upon the evidence that there was some preponderance of those for, over those against", a conclusion that the conversations as asserted by Rafter did in fact take place. But that is not the test. For the reasons set out in Briginshaw v. Briginshaw [1938] 66 CLR 336 and re-visited in detail in Law Society v. Jayawardena [2008] NSWADT 187 at [52-58], although we have a view that the conversations asserted by Rafter could well have taken place we are not prepared to find, on the evidence, that they did in fact take place such as to make a professional conduct finding against the Respondent on this ground. The Tribunal repeats its observations at [81], first two sentences. 117 The Tribunal now proposes to deal with the other matters agitated before it by the Law Society. Estate Flower 118 Evidence in this was unchallenged. The Respondent acted for the executor of the above Estate. In August 2005 he caused his company Lloyd Lancaster Pty Limited to borrow from the Estate $35,000.00 pursuant to a document he drafted styled "Deed of Financial Arrangement". On 29 August 2005 the $35,000.00 was transferred by journal entry from the Estate's ledger account in the Respondent's trust account to Lloyd Lancaster Pty Limited. 119 On 31 October 2005 the principal sum of $35,000.00 was repaid into the Estate's ledger trust account. On 10 May 2006 interest was credited. The interest was $1,830.30 rounded up to $2,000.00 by the Respondent. There was no challenge to the Respondent's calculation of interest. 120 The Respondent's company was in technical breach of the Deed because the term of the loan was for a period of two months at an interest rate of 25% per annum and a penalty interest rate of 35% per annum, such that it should have been repaid at latest 30 October 2005, one day earlier than it in fact was. 121 The Respondent was clearly in breach of Rule 12 of the revised Professional Conduct and Practice Rules 1995 in that he assisted an associate (Lloyd Lancaster Pty Limited) to borrow money from a client of the Respondent. 122 The Respondent states that he was not aware of Rule 12. We accept his evidence in that regard. However, he should have been and his conduct is clearly unsatisfactory professional conduct. No complaint has been made against him that all moneys have not been repaid and clearly, on the evidence, he paid more than the appropriate amount of interest. Breach of Section 67(2)(a) 123 On 11 July 2008 in proceedings No 1792 of 2008 in the Federal Magistrates Court of Australia, Sydney Registry, a Creditor's Petition was filed against the Respondent. On 16 July 2008 it was served upon him. 124 Section 67(2)(a) provides that in those circumstances a person who is the holder of a local practicing certificate must notify the appropriate council by written notice within 7 days of (relevantly) being served with a notice of a creditor's petition presented to the Court. The Respondent did not so notify the Law Society Council. The Respondent says that he was not aware of the provisions of Section 67 and was not aware of the requirement of notification. He now is. 125 It transpires that a Sequestration Order was made against him in his absence, which order was subsequently annulled at the Respondent's application on 16 October 2008. 126 We accept the Respondent's evidence in this regard and, at highest, the Respondent's conduct would amount to unsatisfactory professional conduct. Breaches of Sections 14(1) and 15(1) 127 The Law Society asserts that in breach of these Sections the Respondent engaged in legal practice and/or represented that he was entitled to engage in legal practice even though his practicing certificate had been cancelled. 128 The Law Society suspended the Respondent's Practicing Certificate on 19 June 2008. On 11 September 2008 James J. dismissed an appeal brought by the Respondent against that decision. On 20 October 2008 McColl JA. (in the Court of Appeal) made certain orders that permitted the Respondent to act as a "lay associate" in the law practice of Mr Mario Piperides. The Law Society asserted that in a number of aspects the Respondent filed documents in the Kogarah Local Court which asserted that he was the "legal representative of the Judgment Creditor and/or described his occupation as "solicitor"; and signed a letter on the letterhead of Lloyd Lancaster Lawyers in circumstances where he as not instructed to act in the particular matter. 129 The Law Society spent more than considerable time in agitating these matters. Consequently, it is necessary for the Tribunal to examine them in some detail in order to do justice to the arguments presented. 130 The starting point is the decision of James J. dismissing the appeal on 11 September 2008. Although the Respondent lodged an appeal to the Court of Appeal on 3 October 2008, no further stay was granted. However, on 11 September 2008 Mr Mario Piperides agreed to purchase the Respondent's law practice Lloyd Lancaster Lawyers. The purchase price was $1.00 goodwill only. There is no need to go into the details of the sale/purchase contract except to observe that special condition 33 required the Respondent to "prepare a schedule of work in progress which assigns a value for work in progress for each uncompleted file … (and required that) all files would be costed in accordance with the cost agreement with the client or, if not applicable, as a fair proportion of the usual fixed fee charged by the practice for that type of work or at the applicable charge out rate. The purchaser shall bill the client for all work at completion of the matter and will, upon payment by the client remit the work in progress amount to the (Respondent) within seven (7) days …". As we read that special condition it only applied to work in progress, not to bills that had already been sent out prior to the date of purchase. Attached to the contract was a "list of work in progress" which consisted of some 91 personal injury matters and 9 non-personal injury matters. 131 In about May 2007 the Respondent, acting as solicitor for Byron Bay Recreational Estate Pty Limited (the Byron Bay Joint Venture vehicle), instituted proceedings No. 4684 of 2007 in the Equity Division of the NSW Supreme Court. Those proceedings, as we understood it, claimed an order for repayment of the deposit of $16,000.00 paid to Mrs Haven for the purchase of her property pursuant to the contract dated 25 September 2006. As at the date of suspension of the Respondent's Practicing Certificate those proceedings were under case management. 132 As we understood the evidence the Respondent said that he had an arrangement with Mr Piperides that he could continue to act in "my own matters", one of which was the Haven proceedings. However, the difficulty that confronted the Respondent was that a Sequestration Order was made against him on or about 26 September 2008 and that affected his position and duties as a director of the plaintiff company. On or about 16 October 2008 there was a directions hearing in the Haven proceedings and both Mr Piperides and the Respondent attended Court and there were settlement discussions. 133 The Respondent's bankruptcy was annulled 16 October 2008. 134 In the meantime the Respondent had lodged an appeal on 3 October 2008 to the Court of Appeal from the decision of James J in relation to the suspension of his Practicing Certificate. No additional stay was granted but McColl JA expedited the hearing of the appeal, set the appeal down for hearing on 11 December 2008 and made this important order: "Pending the hearing of the appeal permit the Applicant to practice as a lay associate in the law practice of Mr Mario Piperides, being Lloyd Lancaster Lawyers". The case is reported Doherty v. The Law Society of New South Wales [2008] NSWCA 269. 135 It is interesting that at paragraph [14]ff of her judgment McColl JA refers to the argument before James J and the Respondent's submission that he "relied upon the premise that he had been entitled to treat the $35,000 as he did", noted that James J. rejected "the submission that Mr Rafter had directed or authorised the Applicant to apply the $35,000 for the purpose of the Byron Bay project, noted that James J. in his subsequent reasoning 11 September 2008 took into account various aspects of the facts "including that there was only a single payment involved, that the payment, although not of an insubstantial amount, was not an extremely large amount, that the payment was made in the course of a somewhat unusual transaction of a kind which might not be repeated, that Mr Rafter's funds were diverted to a venture in which Mr Rafter did have some interests, and that in the court proceedings brought by Mr Rafter for an accounting the two ventures were treated as being a single venture or at least as being closely connected", but all of this notwithstanding James J "rejected the proposition that he might allow the applicant to continue to practice as a principal. In so doing he adverted to the fact that the findings made in his principal judgment necessarily involved a finding of dishonesty on the applicant's part" (McColl JA at [18]). There has been, indeed, a "finding of dishonesty" (at [18]) but at [35] she was "conscious of the fact that in this case … no finding has yet been made that the applicant has been guilty of professional misconduct". Her Honour then looked at the change of approach by the Respondent, noted (at [37]) that the Respondent proposal's "is not that (he) be permitted to work as a legal practitioner, whether as a principal or an employee, but rather that he be permitted to work as a lay associate in the firm he formerly owned. That would involve duties of a clerical nature, he would not have access to a trust account or, as I understand the proposal, to any client's monies ." Her Honour concluded that it was "appropriate" to make the order that she ultimately did, noting that "making such an order would not involve the applicant exercising his rights to practice as a legal practitioner" (at [38]) but that it would give "the applicant some source of income pending the hearing of the appeal." 136 The real issue before the Tribunal was whether, on the facts, the Respondent breached Her Honour's order and thereby fell foul of Sections 14(1) and 15(1). 137 The first issue relates to the Haven Supreme Court proceedings. The Respondent was of the view that Lloyd Lancaster Lawyers "continued to act in the Haven proceedings". He then wrote a letter 22 October 2008 to the solicitors for Mrs Haven on the letterhead of that firm and signed it on behalf of that firm. The letter was written without the consent of Mr Piperides. The letter referred to the directions hearing 2 October 2008 and stated that prior to that date "the parties came to an agreement in respect of settlement of the matter. Our client would like to formalize that agreement and we therefore invite you to submit your proposed terms of settlement as discussed between our respective counsel". 138 The Respondent says that he "believed that the limited authority that I had to act as a lay associate extended by virtue of my earlier conversations with Mr Piperides to handle "my own matters" as we had discussed … I may have made a mistake in construing our arrangement in relation to "my own matters", but there was no intention on my part to go outside the role and authority granted by the Court to work as a lay associate when I prepared and sent the letter of 27 October 2008 ..". 139 It would seem that at the time the letter was written Lloyd Lancaster Lawyers were still the solicitors on the record. It is also plain that Mr Piperides took prompt steps to remove that firm from the record once it was drawn to his attention. The particular matter was not part of the schedule attached to the contract for sale/purchase. Although it may be that the Respondent exceeded his authority to act as a lay associate in writing the letter in question without the knowledge of the principal of the firm (Mr Piperides), in all the circumstances the Tribunal accepts that there was a genuine mistake by the Respondent and regards the issue as "de minimus". 140 The Law Society also complained that a number of proceedings in the Kogarah Local Court the Respondent filed documents in which he described himself as a solicitor, or the "legal representative" of the judgment creditor. These were all proceedings in that Court consecutively numbered 1335 of 2008 through to 1342 of 2008. 141 To take one example No. 1335/2008, the plaintiff was the Respondent t/as Lloyd Lancaster Lawyers; the affidavit is that of the Respondent personally in which, in paragraph 1, he states "I am the Applicant's solicitor". The affidavit was in support of an application to register a Costs Certificate of a Supreme Court Costs Assessor in which the Assessor had certified that a certain sum of money was due by the defendant to the Respondent for legal costs. The Respondent sought to register the certificate as a Judgment of the Kogarah Local Court and issue a Writ for Levy for Property against the defendant/judgment debtor. 142 It is plain from the facts that the various matters in the Kogarah Local Court arose out of completed matters in which the Respondent was owed costs by former clients. These moneys were due to him outside the terms of the sale/purchase agreement with Mr Piperides. It is also plain that where the Respondent used the words "legal representative" or "solicitor" that was simply as a result of "carelessly using precedents", but bearing in mind that the Costs Certificates were issued in the name of the Costs Claimant "Peter Doherty t/as Lloyd Lancaster Lawyers". The problem that confronted the Respondent was the nature of the Costs Certificates themselves, no doubt properly titled but creating a technical difficulty for the Respondent because he was no longer trading as "Lloyd Lancaster Lawyers" and was no longer a solicitor. 143 The Respondent says that "although my practicing certificate was suspended, I remained on the roll of solicitors. In retrospect, it would have been better to delete that word "solicitor" (or "legal representative") but I was not conscious that I was holding myself out as practicing as a solicitor by use of the word where it appeared in this way on the court documents. I utilised precedents that I had on computer both for the purpose of making these court applications. I attended in each case to make those applications in the capacity as plaintiff and judgment creditor. I was not intending in the use of any of these precedents to suggest or convey that Lloyd Lancaster was acting as my solicitor for the purpose of those proceedings". 144 The Tribunal is clearly of the view that the Respondent made a genuine mistake and did not in any way intend to breach the orders of McColl JA nor be in contravention of sections 14(1) and/or 15(1). The Tribunal is not prepared to make a finding against the Respondent in relation to these matters. Conclusion 145 In the upshot the Tribunal is clearly of the opinion: 1. The Respondent is guilty of professional misconduct in terms of paragraph B of the Second Amended Application for Original Decision (set out above at [79]), with the exception of B.3.3.2. 2. That the Respondent breached Rule 12 Legal Profession Conduct and Practice Rules in the matter of Estate Flower, but in the circumstances the breach was minimal and not with intent and no dispositive order should be made in relation thereto. 3. That the Respondent was in breach of s.67(2)(a) but that in the circumstances the breach was minimal and not with intent and no dispositive order should be made in relation thereto 4. The Respondent did not, in all the circumstances, breach Sections 14(1) and/or 15(1) Legal Profession Act 2004. 146 The parties have agreed that the making of dispositive orders by this Tribunal should await its decision on the facts. Consequently, the Tribunal proposes that these proceedings be brought back at a convenient time before Judicial Member Riordan for directions as to what steps should be taken to determine the dispositive orders having regard to the findings of the Tribunal. Orders 1. The Respondent is guilty of professional misconduct in terms of paragraph B of the Second Amended Application for Original Decision, in that in relation to his client Geoffrey Rafter ("Rafter") the solicitor: a. Breached Section 255 of the Legal Profession Act 2004; b. Misappropriated the sum of $35,000.00 belonging to Rafter ("Rafter's funds"); c. Knowingly misled Rafter in that: c.1 having applied Rafter's funds to discharge obligations imposed upon the solicitor's company, Lloyd Lancaster Pty Limited, he failed to promptly inform Rafter that he had done so; and d. Unreasonably delayed in advising Rafter that he had applied Rafter's funds to discharge obligations imposed upon the solicitor's company Lloyd Lancaster Pty Limited. e. Failed to account to Rafter in respect of Rafter's funds. f. Acted in conflict of interest and preferred his own interest to those of his client Rafter". 2. That the Respondent breached Rule 12 Legal Profession Conduct and Practice Rules in the matter of Estate Flower, but in the circumstances the breach was minimal and not with intent and no dispositive order should be made in relation thereto. 3. That the Respondent was in breach of s. 67(2)(a) but that in the circumstances the breach was minimal and not with intent and no dispositive order should be made in relation thereto 4. The Respondent did not, in all the circumstances, breach Sections 14(1) and/or 15(1) Legal Profession Act 2004. 5. The proceedings be listed before Judicial Member Riordan at a convenient time for directions as to what steps should be taken to determine the dispositive orders having regard to the findings of the Tribunal; alternatively, should the parties agree as to such directions leave is granted to file proposed consent orders for determination by Riordan J.M. in chambers

The Council of the Law Society of NSW v Doherty

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Judgment (9 paragraphs)

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Cited By (6)