REASONS FOR DECISION
The Application
1 By Application for Original Decision filed 31 May 2007 the Law Society alleged that the Respondent solicitor was guilty of professional misconduct in that he had misappropriated trust funds and wilfully breached Legal Profession Act 2004, Section 255.
2 By Amended Application filed 20 January 2008 the Law Society asserted the same charges, but added a wilful breach of Section 254 and provided different Particulars. At the outset of the hearing Particulars B and D were not pressed.
3 In his Reply to the Amended Application the Respondent also challenged Particulars F and G such that the parties effectively conducted the hearing on the basis of the assertion of misappropriation. It was not challenged that at the date of the appointment of the Receiver there was a deficiency in the Respondent's trust account of $20,175.00.
4 In his Reply to the Amended Application the Respondent opposed the orders sought by the Law Society, asserted that he had not misappropriated trust funds or wilfully breached Section 255, asserted that at the relevant time he was suffering from a psychiatric (or psychological) condition such that his judgment was impaired to such an extent so as to preclude his conduct from being categorised as being professional misconduct and, in any event, and in a complete answer to the Amended Application, asserted that there were sufficient moneys due to the Respondent by his primary client AAMI, "being the client on whose behalf the monies were held in trust, such that the Respondent had an entitlement to withdraw the monies from the trust account in accordance with regulation 88(4) of the Legal Profession Regulation 2005 … (and in the alternative) the Respondent believed that there were sufficient monies owing to the Respondent by AAMI being the client on whose behalf the monies were held in trust, such that no deficiency would arise in the trust account".
5 There was also a short argument relating to Section 254 and fees owed to counsel and unpaid.
6 As the Tribunal pointed out at the hearing, the assertions relating to psychiatric or psychological problems could not be properly raised unless and until the Tribunal was satisfied that there had in fact been a misappropriation - after all, if there was no misappropriation (as asserted by the Respondent) then it was irrelevant as to what his psychiatric or psychological condition may have been at the relevant times. The hearing proceeded on the basis that the Law Society would seek to prove its assertions on the misappropriation issue and then the Respondent would answer those assertions; thereafter evidence would be led as the Respondent saw fit in relation to his psychiatric or psychological condition. There was no objection to that course of action being adopted.
Background
7 It is convenient before embarking upon an analysis of the factual activities relating to the trust account to firstly refer to the various factual matters that beset the Respondent. This is not to reverse the way in which the hearing was conducted; but rather to set the scene for the various arguments that were advanced.
8 The Respondent commenced practice on his own account trading as "Kay & Associates" during July 2002. His primary client was AAMI, which instructed him "in claims to recover losses occasioned by AAMI and its insured drivers in relation to motor vehicle accidents (and) in relation to matters where AAMI had refused to indemnify an insured because of fraud or some other breach of the terms of the insurance policy".
9 On 22 June 2003 the Respondent had met up with a number of other people who had returned to his apartment in the city. There they imbibed certain alcoholic drinks and cocaine. One of the persons attacked the Respondent with a knife, striking the Respondent in the right temple area between his right ear and right eye. Somehow the Respondent managed to escape from his apartment, stopped his assailant from pursuing him by holding the front door shut, ultimately managed to escape via the lift and ended up at the local fire station and ultimately was conveyed by ambulance to St Vincents Public Hospital.
10 There is no need for this Tribunal to go any further into the details nor the hospital/medical treatment. Suffice it to say, notwithstanding some questions put to him in the course of the hearing, the Tribunal expresses the respectful opinion that the Respondent is "lucky" to be alive - in one medical report his injuries were described as "very serious and life-threatening" - and the Tribunal also has no hesitation in expressing the opinion (upon which we shall expand below) that the Respondent has, as a consequence, suffered depression and psychiatric or psychological injuries.
11 The Respondent has told us that he finds it difficult to talk about the assault and we believe him. In deference we do not think it appropriate to expand further. There was no serious argument about the truth of the various medical/hospital reports that were placed in evidence.
The Trust Account Transactions
12 The Respondent's practicing certificate was suspended 21 March 2006 and on 23 March 2006 the Supreme Court appointed a Receiver for his law practice. At the date of that appointment there was a deficiency in his trust account in $20,175.00 made up as follows:
28.12.05 Internet transfer to the Respondent's
general/office account $6,300.00
07.02.06 Internet transfer to general/office
account $2,700.00
08.02.06 Internet transfer to general/office
account $200.00
08.02.06 Internet transfer to general/office
account $4,200.00
21.02.06 Internet transfer to general/
office account $2,200.00
02.03.06 Trust account cheque
deposited to general/office
account $3,200.00
6.10.04 Fees received for payment to
Counsel, deposited to general/
office account and not paid $1,375.00
Total trust deficiency: $20,175.00
13 There were a number of unsatisfactory trust account transactions pleaded against the Respondent and not denied by him. There is need for the Tribunal to trawl through the allegations as pleaded against the Respondent in the Amended Application. Suffice it to say that the Respondent did not dispute that the various internet transfers recited above at [12] did in fact take place. In addition, he did not dispute that the fees received for payment to counsel had in fact been deposited into his general/office and not paid.
14 Pausing at this point and dealing shortly with the fees due to counsel, the Tribunal accepts the explanation of the Respondent in or to the effect that his "failure to remit the money was not done intentionally but rather it was an error that was not rectified in a timely manner … the (Respondent believed) that the error may have been brought to my attention by (one of his employees) at some stage and that a letter may have been drafted to (the barrister) which … if sent would have resulted in a cheque being drawn to (the barrister) for the $1,375.00. Unfortunately, it appears that the draft letter was never finally settled by (the Respondent) and the cheque was not drawn prior to the appointment (of the Receiver)". The particular file in question was apparently not under the direct control of the Respondent but rather one of his employees. There was a clear breach of S.254, simply because the moneys were trust moneys and were paid to the Respondent by the client for the purpose of meeting the fees of briefed counsel, and therefore should not have been paid into the general/office account, but were rather charged with the trust to pay them to counsel. In the circumstances the Respondent's conduct is, we think, at highest, unsatisfactory professional conduct.
15 The real issue before the Tribunal was the various transactions, the trust to general/office transfers. In relation to these ([12] above) the Law Society led evidence from its Investigator, Mr Livermore, who had a conversation with the Respondent on 16 March 2006 in or to the following effect:
Respondent: "I have made unauthorised transactions from the trust account. They are business transactions".
Investigator: "What do you mean business transactions?"
Respondent: "They were transactions to pay the sub-lease of the rent of my premises at Loftus Street and the rent of my residential premises in Rushcutters Bay. I also own a property in Leichhardt. I can pay back the money next week. The amount is $19,800.00".
Investigator: "You should aim to get the money back into trust immediately".
Respondent: "I will".
16 At that conference the Respondent identified, by underlining various transactions in a document from the National Australia Bank styled "National Internet Banking", being a transaction history relating to the trust account, the various impugned transactions. The transactions underlined by the Respondent where those transactions set out above at [12], namely $6,300.00, $2,700.00, $200.00, $4,200.00, $2,200.00 and $3,200.00 - these were the same transactions as identified by the Receiver. There was no real challenge at all to the deposed conversation, nor to the underlining, nor to the identification of the various transactions.
Respondent's Evidence
17 The Respondent tendered a bundle of Account Ledger Statements, each dealing with an AAMI matter. In each of those Statements there is an item "Fees billed" to which is attached a dollar amount, plus a GST amount applied to fees and a further GST amount applied to incurred disbursements. There is no need to go through each of those Statements - suffice it to say that the Statements disclosed that in each case there was an amount outstanding from AAMI to the Respondent in relation to outstanding legal costs, disbursements and GST. These Statements were printed out on the day of the appointment of the Receiver, Ms Sayer. The total disclosed outstanding and due to the Respondent was in the order of $24,279.48. It was put to her that the Statements disclosed that bills had been rendered in the various amounts as stated in the Statements. Ms Sayer's evidence was firstly, that no bills of costs had been rendered in order to justify the various internet transfers and the drawing of the cheque as set out in detail at [12] above and secondly, that although the Statements showed the words "Fees billed" she did not sight any bills in support of the various entries. Indeed, no supporting bills/memoranda of costs were ever produced in support of the various entries. The Respondent asserted that the Law Society had seized all his files such that he had no access to them to extract any bills of costs that he had sent out in accordance with the entries on the various statements, his evidence being that he did in fact send out such bills. There is, of course, a very clear answer to that evidence/submission: there was nothing, absolutely nothing, to stop the Respondent from calling upon the Law Society and/or the Receiver to produce the various files the subject of each individual statement, alternatively, or in addition, to have inspected those files prior to the hearing and copied the bills of costs asserted to have been sent. There was not the slightest jot of evidence that any such call or inspection was made or carried out or asked for. And there was no evidence to the effect that any of the fees said to have been outstanding and subject to the asserted bills of costs had ever been paid.
Respondent's Evidence
18 The Respondent gave evidence in support of the submissions/facts set out in the last preceding paragraph. His assertion was that AAMI owed to him, at all relevant times, moneys in excess of the moneys that he withdrew from trust - "as a result of the volume Kay & Associates was doing for AAMI there was always substantial money owing to Kay & Associates by AAMI". He gave evidence of "the usual procedure" upon receiving instructions from his client - relevantly "once the matter was completed any monies that were recovered from the third party would be remitted to AAMI and a tax invoice would then be prepared for the firm's costs and disbursements … I would usually check the tax invoices before they were sent and make any adjustments that I thought were appropriate … subsequently AAMI would pay the tax invoices … (and) when monies were received by Kay & Associates in respect of a settlement or a judgment debt obtained in relation to an AAMI matter, on behalf of AAMI, the monies would usually be dealt with in one of the following two ways:
a) where the cheque was made payable to AAMI it would be forwarded to AAMI; or
b) where the cheque was made payable to the third party insured, it would be banked into the trust account and when cleared a cheque drawn and sent to AAMI".
19 The Respondent did not deny the various transactions asserted by the Law Society, did not deny (but could not remember) the conversation he had with Mr Livermore, and accepted that he had instructed his solicitor to write a letter 10 August 2006 in which he admitted breaching sections 255 and 264 Legal Profession Act 2005 and that he "misappropriated trust monies". Indeed, it is plain from the terms of the letter that the trust account deficiency as asserted of $20,175.00 was the moneys he accepted as being misappropriated. This letter is dated 10 August 2006 and in its third last paragraph the Respondent through his solicitor accepts the fact that the matter will end up before this Tribunal "for determination, at which time (the Respondent) intends to make formal submissions on penalty. There are a number of considerations relevant to penalty which we wish only to flag at this time, including our client's serious health problems at the time the breaches occurred". Of course, when the matter came before the Tribunal for hearing, it turned out to be not so much a matter for argument on penalty but rather, or in addition, an argument that there were in fact "sufficient monies due to the Respondent by AAMI … such that the respondent had an entitlement to withdraw the monies from (his) trust account in accordance with Regulation 88(4) of the Legal Profession Regulations 2005 ..", alternatively that he believed there were such sufficient moneys.
Tribunal's Conclusions on the Facts
20 Counsel for the Respondent made very detailed and thorough submissions, for which the Tribunal is grateful. The primary submission is that "at the time that the impugned withdrawals from the trust account to the general account took place … there were sufficient monies owed by AAMI to Kay & Associates to enable the transfers to occur in compliance with the requirements of Section 261 and Regulation 88(4)".
21 Section 261(1)(b) entitles a law practice to "withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by this Act and the regulations are complied with". Regulation 88 relevantly sets out the procedure for withdrawing from trust money legal costs due to the law practice. The procedure set out in Regulation 88 needs to be followed. Importantly, Regulation 88(4)(a) entitles the law practice to withdraw trust money for legal costs if the practice has given the person a bill relating to the money, and if the person has not objected to the withdrawal of the money within 7 days after being given the bill or the person has objected within 7 days after being the bill but has not applied for a review of the legal costs under the Act within 60 days of being given the bill, or the money otherwise becomes legally payable.
22 The strength of this submission depends upon the acceptance of the Respondent's evidence that his law practice had in fact given AAMI bills in accordance with the various Statements (reference [17]) above and that the moneys at the relevant times outstanding were not less than the moneys withdrawn by the practice from the trust account. It was submitted that Regulation 84 did not require trust moneys to be applied on a ledger by ledger basis but rather on a client basis. Indeed, it was submitted there was nothing in either the Act nor the Regulations that required Regulation 88 to be applied on a ledger by ledger basis. In these circumstances it was submitted that in "absence of any contrary indication the statute must be applied according to its ordinary and literal meaning, which does not require Regulation 88 to be applied on a ledger by ledger basis and as such it is submitted that a law practice may withdraw money held in a general trust account of the practice for a person for payment to be practice's account for legal costs owing to the practice if the practice has given the person a bill relating to the money and the person has not objected to withdrawal of the money within 7 days after being given the bill". In the circumstances it was effectively submitted that this is what in fact had occurred in the impugned transactions, this being the evidence of the Respondent.
23 In all the circumstances the Tribunal does not accept that evidence. The fact that a printed accounting form has written upon it the words "Fees billed" and next to those words a dollar amount does not, in our view, constitute sufficient evidence that a bill of costs was rendered pursuant to the regulatory requirements pertaining to bills that would entitle those bills to fall within Regulation 88. It is important to remember that bills of costs relating to trust money need to have entered upon them an appropriate Notice to the client (see s.333) - there was not the slightest jot of evidence as to the content of any bill asserted to have been rendered nor the terms of any statutory notice. In addition, there was no evidence at all that any of the bills alleged to have been rendered were in fact ever paid - yet another reason for not accepting that the entry of the words "Fees billed" must result in a conclusion that a bill of costs was in fact sent out.
24 So, on a factual basis, the Tribunal is unable to conclude that bills of costs were in fact sent out by the Respondent in sufficient sums that would have supported his submission.
25 The second difficulty is this: the Tribunal is clearly of the opinion that a trust account is not a general pot from which outstanding costs can be withdrawn. Each deposit is separately charged with its own trust(s). In order fall within the procedures of Regulation 88(4) it is plain, in our respectful opinion, that the words "trust money" where appearing therein relate to the trust money that is affected by the bill of costs. Thus, each deposit of trust money for the particular ledger account is charged with whatever trusts apply to that money and cannot be appropriated towards a solicitor's legal costs unless and until a bill of costs is rendered in respect of that particular ledger account. It does not matter how many separate deposits are made against that account provided that money may not be withdrawn for legal costs until the Regulation 88(4) procedure is complied with with respect to that ledger account. In our view Regulation 88(4) cannot be read in any other way.
26 Although it is true that a solicitor may exercise a lien against trust moneys, the existence of that lien depends upon satisfaction of the regulatory requirements. And this equally applies to trust transfer journal entries from one client matter to another same client matter - ultimately, the lien against those moneys can only be created by satisfaction/compliance of the regulatory requirements for the render of a bill of costs.
Further Conclusions
27 The Tribunal is clearly of the opinion that the Law Society has satisfied and discharged the burden of proof to the relevant standard and that, absent what follows, there has in fact been a misappropriation by the Respondent of $20,175.00 as asserted and pleaded.
28 Having reached that point the Tribunal rejects paragraphs 4 and 5 of the Respondent's Reply to an Amended Application; such that the Respondent now needs to rely upon paragraphs 2 and 3 thereof.
Psychiatric/Psychological Impairment
29 It will be remembered that the Respondent has pleaded that at the relevant times of the impugned transactions he "was suffering from a psychiatric/psychological condition such that his judgment was impaired to such an extent so as to preclude his conduct from being categorised as professional misconduct". It was submitted by senior counsel for the Law Society that in order to avoid a finding of professional misconduct at common law and under sections 255 and 254 the Respondent must demonstrate by admissible medical evidence that, because of mental illness and incapacity to form an intent, his conduct was thereby excused - in other words, by admissible evidence the Respondent needs to displace the inference that his conduct was conscious, deliberate and wrongful. It was also submitted that the Tribunal did not itself have jurisdiction because, it was said, the Tribunal is a statutory Tribunal and if there was an issue of mental disability which would result in a conclusion that the Respondent was unable to form the relevant mental ability then the Tribunal had no jurisdiction and must refer the matter to the Supreme Court for determination. In other words, if the Tribunal was satisfied that the Respondent was not of sufficiently sound mind to possess the requisite intent then that issue was for the Supreme Court.
30 It seems to us that before one gets to that point it is necessary for the Tribunal to consider the medical evidence that is placed before it in order to determine whether in fact there is sufficient evidence to displace the presumption of professional misconduct such as would require the Tribunal to send the matter on to the Supreme Court for determination of the issue of whether or not the Respondent was fit to practice.
31 The Law Society took very strenuous objection to the evidence to be led by the Respondent, it itself not leading any medical/psychiatric/psychological evidence but instead asserting that whatever evidence was led by the Respondent did not amount to a prima facie case.
32 There were three aspects of evidence led by the Respondent on these issues:
a) his own evidence;
b) a report of Dr Norman Rose, a Consultant Psychiatrist, dated 30 October 2006; and
c) a report 30 August 2007, and oral evidence of, Dr Masood Khan, a Consultant Psychiatrist.
The Tribunal proposes to deal with each of these individually.
33 The Respondent gave evidence, both by affidavit and orally. There is absolutely no doubt in our mind that the assault that took place on him on 22 June 2003 had a serious psychological effect upon him. He says that he had "been informed and believe(d) that the assault has caused me some serious mental health problems"; that he "had seen various medical practitioners and other health care (professionals) in relation to the impact that I believe that the assault has had upon me"; that he had "not returned to employment since the appointment (of the Receiver) and that he (was) currently certified by my treating doctor as being unfit for work as a result of the effects that the assault has had upon me". Orally he stated that he was "an angry man"; that at the time of the various impugned transactions he "was completely confused, not sure of what (he) was thinking at the time"; that he was "nearly murdered in 2003"; that his "whole life was confused at the time"; and he was certainly quite upset in giving oral evidence.
34 There is no doubt in our mind that the Respondent has suffered, and continues to suffer, as a result of the assault. It is a most distressing circumstance - indeed, a most distressing case.
35 The second important evidence relied upon was that of a report by Dr Norman Rose. This was a report dated 30 October 2006 prepared by Dr Rose for the Respondent's insurer in relation to income protection. In our opinion the Respondent was quite entitled to lead this as part of the evidence on this aspect. The report states, inter alia, that the Respondent, after the assault, and being a person "reluctant to accept feelings of vulnerability or show his feelings to others", because of this "he attempted to work regularly and … did not cease work until early (2006)"; "did not think he had difficulties and thought to feel anything negative would be a weakness. However, he could not speak to anybody about the stabbing and he was avoiding movies about crime and violence. He has been morose and depressed since the stabbing and … he has been pushing people away … he became sloppy at work and was not his normal self. He became withdrawn from friends … (he) attempted to cope with his anxiety and depression (by) binge drinking … he was arrested no less than three times by the police … (he) has been living with his mother since February (of 2006) because he felt he could not look after himself. He was severely depressed by then; he was hardly eating and did not care if he lived or died. He was crying, but only when he was alone because he was too ashamed to be crying in public … (he) has not had adequate psychiatric treatment … (he) feels depressed most of the time and feels he has nothing to look forward to. He feels guilty about the way his life has turned out. He stated that he constantly thinks of death and his mother complains that he is always talking of death to her … (he) stated that at times he feels like crying. He has lost interest in virtually everything. He has a constant fear of people with knives in their hands and he as to walk away when his mother is using a knife to prepare food in the kitchen … (he) stated that is memory and concentration are poor and he could not possibly recall legal material. In any case he has lost all interest in legal matters, just as he has lost interest in everything else". Later Dr Rose observed that the Respondent "was withdrawn, with the presence of emotional denial. He appeared relatively morose … (his) intelligence was intact. His mood was normal in range, however, he was clinically depressed and pre-occupied. His thought processes were slightly slowed, indicating the presence of mild psychomotor retardation".
36 Dr Rose concluded that the attack on 22 June 2003 "was a vicious, life threatening one"… (the Respondent) found this experience very frightening and thought that he would die … he has developed quite severe depression, of such magnitude that I would have no hesitation in diagnosing a Major Depressive Episode. Clearly (the Respondent) was not coping very well with his legal work before he ceased work earlier this year. The final straw appears to have been the legal difficulties in association with his alcohol-related driving offences … after his practicing certificate has been suspended he was hardly in a position to carry out legal work because of lethargy, loss of interest, poor concentration and general cognitive difficulties arising out of his two psychiatric conditions".
37 There is no need to refer further to Dr Rose's very detailed report, except to observe that Dr Rose concluded that it was clear that for several years before suspension of his practicing certificate the Respondent "was functioning very poorly in his work and I consider that there would have been grounds for his cessation of work prior to March 2006 … (and that by March 2006) because of his depression he would have been unable to concentrate adequately and he would have lost all interest in dealing with legal information and processing it on behalf of clients". There was no doubt in the doctor's mind that the Respondent had suffered from both a Major Depressive Episode and Post Traumatic Stress Disorder.
38 The report was prepared for a quite specific purpose. There is absolutely no doubt in our mind that what Dr Rose says is quite correct. The difficulty is that there is nothing in this report which deals with, either by inference or directly, the various transactions as pleaded and proved by the Law Society. There is nothing in the report, as detailed as it is but prepared for a different purpose, which would support a conclusion at the various dates of the various transactions the Respondent was 'suffering from a psychiatric/ psychological condition such that his judgment was impaired (in relation to those particular transactions) to such an extent so as to preclude his conduct from being categorised as professional misconduct". In other words, there is nothing in the report that would indicate whether or not at the time of those particular transactions the Respondent knew what he was doing, knew that what he was doing was wrong or, alternatively, did not know what he was doing.
39 The Law Society objected strenuously to the Report going into evidence. However, it is clear to us that it is a relevant document and its content is relevant to the issue debated; but it does not go far enough to satisfy the Tribunal that the defence is made out. However, it being relevant it seems to us that it is something the Tribunal can consider in conjunction with other evidence that the Respondent wished to tender.
40 That evidence was that of Dr Masood Khan, also a consultant psychiatrist.
41 His evidence in chief was that on 14 February 2007 he "conducted a psychological examination" of the Respondent and prepared a psychological report. His report is dated 30 August 2007. In it he referred to the assault, noted that the Respondent's "behaviour generally changed since the attack … that (the Respondent) also noted that his life was gradually deteriorating … (that he) consulted (another) psychiatrist … who suggested that he take antidepressant medications … (that he) later consulted another psychiatrist … who also suggested that he take antidepressant medications (and yet in both cases "he did not do so") and (we infer that the reason was) he was not aware of his mental condition and was in denial for a period of 2 years. But that when his legal practice collapsed he admitted himself to (hospital) for a period of 4 weeks and was treated with psychotherapy (and where it) was also recommended (he) take antidepressant medications which he did not do .. (but soon) after his apartment was repossessed by the bank … he realised he was in severe financial trouble (which resulted in increased binge drinking and) an altercation with the police and his symptoms of depression escalated". Dr Khan noted that the Respondent had been in treatment with him since February 2007. There had been a gradual recovery but the Respondent had "two diagnoses, one major depression and two, PTSD (Post Traumatic Stress Disorder). Both these conditions are ongoing requiring significant time to recover … (the Respondent) requires on-going treatment in the form of medication, that is antidepressants, that he is now taking. He also requires treatment with on-going psychotherapy which he is receiving by consulting me on a weekly basis … (his general prognosis) is difficult to predict. He is responding to the antidepressant medications which he is currently taking. He may require to continue taking antidepressant medication for a further period of 5 years. He is also responding to treatment of psychotherapy and beginning to become more effective in his coping capacity. In my opinion, with ongoing treatment it is likely that (the Respondent) will recover fully from his current symptoms in due time and possibly be able to work as a solicitor once again … (at) the time when his life in general and his practice collapsed (the Respondent) was severely affected due to the symptoms of PTSD, major depression and increasing alcoholism. He was generally in denial and unaware of his condition and was non-compliant with the treatment, hoping to get better without seeking proper treatment. These issues are now brought to his notice and he is at present compliant with his treatment and hence the general prognosis is positive".
42 The Law Society made the point, which was not challenged, that the report of Dr Khan was prepared for a quite specific purpose, namely in support of a submission to the effect that the Respondent would not be able to deal with the Law Society's application until at least August 2008.
43 Dr Khan was called and gave oral evidence. Unfortunately, he did not have with him his clinical notes. That notwithstanding, his evidence was quite acceptable, at least as far as it went. It is plain from that evidence that the Respondent suffered from major depression so much so that he "did not care whether he lived or died" that he was engaging in "avoidance behaviour", was "not thinking right" and was "not totally well". He agreed that his report 30 August 2007 was prepared for the quite specific purpose of obtaining an adjournment and not prepared for any other purpose. His professional opinion was that by early 2006 the Respondent was unable to run and manage his practice. However, the real question related to the various transactions: Dr Khan's view was that the Respondent understood how his bank accounts worked, understood the difference between trust and general/office account and understood the procedures for transferring trust money. Importantly, he understood that the transactions were unauthorised; understood the nature and quality of his conduct; and understood the consequences. Thus, when he made the admissions to the Law Society Inspector he understood what those transactions related to. Although Dr Khan expressed the opinion that the responses of the Respondent were "fear-based" (made in order to avoid getting into further trouble), he had a clear understanding of the consequences of his conduct.
Tribunal's Conclusions on Medical Issue
44 The Tribunal has more than considerable sympathy and understanding for the Respondent as a result of what happened to him. It was a most dreadful event and has had the most dreadful consequences for the Respondent, which we have endeavoured to set out above. A very sad case.
45 However, that is not the question that the Tribunal has to ask itself. The question is: did the Respondent, at the time of the impugned transactions, know what he was doing and understood the consequences of what he was doing? We have framed the question in that way to avoid any suggestion that we have applied the criminal rules relating to insanity (otherwise known as the M'Naghten Rules), in case it is thought that we would fall into error in that regard. However, it is plain to this Tribunal that the Respondent, in relation to the various impugned transactions, did in fact know the nature and quality of his acts, knew the consequences thereof and those conclusions seem to us to firstly, not require this Tribunal to send the matter off to the Supreme Court, and secondly, enable this Tribunal to deal with the whole of the application as placed before us, including the making of dispositive orders.
46 In these circumstances it is clear that the Respondent has misappropriated the sum of $20,175.00 on the facts as set out above and has clearly breached Section 255. Although not pleaded against the Respondent the facts as pleaded and found against him clearly show a breach of Section 261(1)(b) and Legal Profession Regulation 2005, cl.88(3) and (4). In this latter regard it was never suggested that the various impugned transactions were supported by actual bills of costs but rather that bills (not produced) were sent out that would have amounted to, or exceeded, the various amounts that were transferred. But without evidence, properly led, of compliance with cl.88 then it is plain that the various transfers were totally unsupported. By way of aside, it is odd, to say the least, that the Respondent could give such didactic evidence that bills of costs were actually sent out in accordance with the fee Statements referred to in [17] above and yet swore that he was completely confused and not sure what he was thinking at the time of the various transactions.
47 The Tribunal finds that the Respondent has misappropriated trust funds and breached Section 255. He is guilty of professional misconduct. He knew what he was doing and understood the consequences of what he was doing. The Tribunal also finds the Respondent guilty of unsatisfactory professional conduct in relation to the non-payment of counsel's fees. The Tribunal also finds that the Respondent not fit to practice having regard to his current mental state and the psychiatric evidence that has been tendered. The Respondent is not a fit and proper person to remain on the roll.
Role of the Tribunal
48 At the commencement of the hearing the Law Society, through its senior counsel, submitted that there was an important jurisdictional issue that confronted this Tribunal. It arose in this fashion: in order to avoid a finding of professional misconduct at common law and arising out of breaches of section 255, 264 and other relevant sections and regulations, the Respondent must demonstrate, by admissible medical evidence, that because of mental illness or incapacity to form the appropriate intent, it would not be appropriate for the Tribunal to make a finding of professional misconduct which, in its terms, requires the Tribunal to find that the Respondent had the requisite intent. It was submitted that the Respondent needs to displace the clear inference that his conduct was conscious, deliberate and wrongful and that, if the Tribunal is so satisfied then it does not have jurisdiction but rather needs to refer the proceedings to the Supreme Court.
49 The reason for this is that having found there to be no professional misconduct because the Respondent's mental condition "was such as to prevent it being held against him as his conduct was dishonourable and disgraceful" (see Robinson below) then whether the Tribunal could then make a finding that in any event the Respondent was not a fit and proper person to remain on the roll was a matter, not for the Tribunal but rather for the Supreme Court.
50 The reason for this submission is simple: if the Respondent was found to have been not guilty of professional misconduct because he lacked the relevant mental intent, then this Tribunal was deprived of statutory jurisdiction and the only Court that could determine fitness to practice in the circumstances where no professional misconduct has been found could only be the Supreme Court exercising its inherent jurisdiction. The reason for this is also simple: Legal Profession Act Section 562 deprives the Tribunal of any sort of inherent jurisdiction simply because it is only able to make dispositive orders if the Tribunal is "satisfied that the practitioner has engaged in unsatisfactory professional conduct or professional misconduct" and not otherwise. If the relevant mental intent is lacking because there was a "degree of impaired judgment" within Robinson then there must be a finding of no unsatisfactory professional conduct or professional misconduct.
51 The Law Society relied upon Robinson v. Law Society of NSW (Court of Appeal No. 9 of 1976, Judgment 17 June 1977). The facts in that case were remarkably similar to those now before this Tribunal. There the solicitor "first disclaimed responsibility for his conduct in making unauthorised drawings because of his mental condition during the relevant period. He then explained in some detail that he had at the time believed himself to be entitled to make withdrawals because he had sufficient money due to him in the trust account to cover the cheques he drew". The Investigator concluded, on the material provided, that of the deficiency in the trust account in $20,026.00, "$12,700.00 could be regarded as justifiable as costs and disbursements to which the (solicitor) was entitled. This reduced the nett deficit to $7,326.00". The Statutory Committee and the Court of Appeal accepted "that the deficit of $7,326.00 was not justifiable on any basis of actual entitlement, the central issue for consideration is the (solicitor's) mental condition during the relevant period".
52 The Court of Appeal formed an opinion on this aspect at variance with that of the Statutory Committee. The Court said that the solicitor's "defence to the charge of professional misconduct was that, at the time that he drew all of the cheques in question, he believed that he was entitled to the moneys they represented. It was clear enough that this belief was not based upon reasonable grounds … (the solicitor) contended that, unreasonable though the belief may have been, it originated from his mental condition at the time. Such a defence, whilst relied upon to negative professional misconduct, was clearly such as to raise grave considerations as to whether (the solicitor) was fit and proper to remain on the roll. In the protection of the public interest, wrongful drawing of trust funds, whether due to deliberate fraud, to reckless indifference, or to defect of reason on the part of the solicitor is equally to be guarded against".
53 The Court went on to note that there was "powerful medical evidence to support the likelihood of (the solicitor having the belief that he was entitled to withdraw the trust moneys) and (the solicitor) relied upon that medical evidence to negate a finding that he was wilfully misconducting himself". The Court found that "the medical evidence did establish a degree of impaired judgment to such an extent as … to preclude the (solicitor's) conduct being categorised as "professional misconduct" within the full import of those words…(his) mental condition was such as to prevent it being held against him that his conduct was dishonourable and disgraceful". Consequently, the Court found that the findings of the Statutory Committee of professional misconduct should be set aside such that there were in fact no findings of professional misconduct. The solicitor has "succeeded in overturning the finding of professional misconduct, with all the elements of moral turpitude inherent in such a finding. Sadly, however, the basis of his success is that his prima facie wrongful conduct is to be explained by his mental condition … (this) of necessity imports concern as to whether he is a fit and proper person to be restored to the roll of solicitors".
54 Having reached that point the court observed that it had "an inherent responsibility in this area" such that, without a finding of professional misconduct the Statutory Committee (in that case) [and this Tribunal], being creatures of statute, do not have that inherent jurisdiction, absent a finding of professional misconduct or unsatisfactory professional conduct to find that, for whatever reason, a practitioner is not a fit and proper person to remain on the roll.
55 The Law Society has also made reference to Kirumba v. Walton [1990] NSWCA 107; Legal Practitioner's Conduct Board v. Ardalich [2005] SASC 478; In the matter of a Practitioner [1960] SASC 178; Re B (a solicitor) [1986] VR 695; Re the Legal Practitioner's Act 1981; The Law Society of South Australia v Murphy [1999] SASC 83; and Legal Practitioners Conduct Board v Trueman [2003] SASC 58. The gravamen of all those cases, so it seems to us, is consistent with the views expressed by this Tribunal. In addition, it is plain therefrom that the burden of proof in asserting that the Respondent did not know what he was doing, or did not know that what he was doing was wrong, rested upon the Respondent once the Law Society established that the conduct amounted to professional misconduct.
56 However, there is one comment that this Tribunal would seek to make: in Ardalich the Full Court of the Supreme Court of South Australia made these two observations: at [43] "the practitioner's mental state, serious though it was, could not deflect the Tribunal from a finding that the charges of unprofessional conduct were made out once the objective facts were proved or admitted. What would otherwise amount to unprofessional conduct does not cease to be such, by reason of the existence of a mental illness on the part of the practitioner, which had the potential to establish a mental impairment defence under (Pt. 8A of the South Australian Criminal Law Consolidation Act 1935); and at [45] "mental illness of a practitioner which may cause or contribute towards his commission of acts constituting unprofessional conduct cannot excuse the conduct, but may be a mitigating circumstance in considering what disciplinary orders should be made". With respect to those observations the Tribunal is not of the opinion that that is the law in this State. The law in this State is that as set out in Robinson above. There is no need for this Tribunal to venture further into this field - suffice it to say that it understands the law to be that where the impugned conduct is made out to the relevant standard then the burden shifts to the Respondent practitioner to demonstrate, by admissible evidence, that the practitioner's judgment was impaired to a degree that it could not be said that his/her conduct was conscious, deliberate and wrongful; in other words, that he/she did not know what he/she was doing or did not know that what he/she was doing was wrong. If that is proven then the practitioner's conduct cannot be regarded as intentional such that there can be no finding of unsatisfactory professional conduct or professional misconduct. The Tribunal, having made that finding, is then deprived of statutory jurisdiction and ought to refer the matter to the Supreme Court for determination of the practitioner's fitness to practice, which is peculiarly within the inherent jurisdiction of the Supreme Court.
57 In the case now before the Tribunal there is no requirement for such a reference, simply because of the conclusions that the Tribunal has reached as set out above.
Orders:
1. The name of John Richard Doveton Kay be removed from the local roll of practitioners.
2. That John Richard Doveton Kay pay the costs of the Law Society, as assessed or as agreed.
3. The Tribunal certifies for senior counsel.