Yorke v Lucas

1 The proceedings were taken by the Council of the Bar Association ("the Bar Association") against Richard Mitry ("the Barrister") after the Barrister was charged in 1996 with an offence under the Corporations Law in that between 7 August 1990 and 30 November 1990 at Sydney in the State of New South Wales, the Barrister was knowingly concerned in Christopher James Donlan("Donlan"), an officer of Red Anchor Resources Limited ("Red Anchor"), being in default, in that Donlan was knowingly concerned in the contravention of Section 128(1)(a)(i)(A) of the Companies (NSW) Code ("the Code") by Red Anchor in that Red Anchor did, in a manner not expressly provided by the Code, give financial assistance in connection with the acquisition by Selmit Pacific Property Holdings Pty Limited ("Selmit"), of shares in Red Anchor contrary to Section 129(5) of the Companies (NSW) Code and Section 38(1) of the Companies and Securities (Interpretation and Miscellaneous Provisions)(NSW) Code ("the offence"). 2 The Barrister pleaded guilty on 20 June 1996 before Magistrate Molan in the Local Court and was sentenced to 400 hours of community service. On the same day, the Barrister lodged an Appeal against the sentence to the District Court and on 14 August 1996, Judge Phelan quashed the order for community service and ordered the Barrister pay a fine of $2,500.00. In the proceedings before the Local Court, the Barrister was represented by Ms McSpedden of Counsel and in the District Court by Mr J Foord QC. 3 This is not the first occasion that these proceedings have been before the Tribunal. Mr Garling SC for the Bar Association told the Tribunal that there had been a determination by a differently constituted Tribunal some years ago; that there was an unsuccessful appeal to the Appeal Division of the Administrative Decisions Tribunal and then a successful appeal by the Barrister to the Court of Appeal. The Tribunal was asked not to have any regard to those decisions, and, accordingly, in coming to our conclusion on the question of professional misconduct, our only knowledge of those prior proceedings was what we had been told by Mr Garling SC. After a determination had been made by the Tribunal that the Barrister was guilty of professional misconduct, the Bar Association tendered the decision of the Court of Appeal on the question of penalty. 4 In these proceedings, the Bar Association relies on the original Information filed on 27 June 1997. It seeks a finding that the Barrister engaged in professional misconduct and, in doing so, relies upon the conviction recorded in the Local Court and confirmed in the District Court. The Tribunal understands that, since the proceedings before the previous Tribunal, the Information has been substantially amended and a number of matters relied on by the Bar Association in those earlier Tribunal proceedings have not been pressed in these proceedings. 5 By his Reply to the Information, ("the Reply") the Barrister denied that his conduct amounted to professional misconduct for the following reasons: (a) He did not know that the funds used to finance a purchase of shares in Red Anchor by a company controlled by him were in fact Red Anchor's funds until two weeks after the event and did not know that this use of Red Anchor's funds to purchase shares in itself was a breach of the Corporations Law (if committed) until two-and-a-half years later. (b) That at the time the events took place, he was suffering from a cognitive impairment "of intensity sufficient to cause him to have difficulties with concentration, with the marshalling and balancing of information and in taking of steps required to reach rational decisions" as set out in a report of Dr Jonathon Phillips dated 8 December 1997. (c) As a consequence of stresses then existing, he developed a major depressive illness for which he did not seek medical assistance until 1994. (d) That, in any event, the Barrister was wrongly advised to enter a plea of guilty and to make admissions in relation to the offence and was inadequately represented "at a certain point of the proceedings previously referred to and was unable to properly advance matters in defence of his position and/or to present appropriate evidence in defence of his position." 6 The basis of the Barrister's present denial of guilt with respect to the offence with which he was charged and pleaded guilty in the District Court is the assertion that, despite the principle of Yorke v Lucas (1983-1984) 158 CLR 661, he was not aware, until some two weeks after the event, of the fact that the moneys were Red Anchor monies and not Donlan's personal moneys. 7 By reason of the Reply, it became necessary for the Tribunal to examine what had occurred in 1990. Evidence was led by the Bar Association of those events. In summary, in or about April 1990, Red Anchor issued a Prospectus with a view to raising capital of $1.6 million. As part of the statutory requirements, Red Anchor needed 350 subscribers who would each subscribe to a minimum of 2,000 shares. Further, those subscribers had to come from a sufficient range of investors to satisfy the requirements of the Stock Exchange. Initially, the Listing Committee of the Stock Exchange refused the application because there was not a sufficient spread of shareholders. 8 At all material times, the principal officer of Red Anchor involved in the offence was Donlan who, in addition to being a company officer, was also a lawyer and well known to the Barrister. 9 In April 1990, the Barrister was a director and shareholder in three companies namely Selmit, a company that owned real estate within the Central Business District of Sydney subject to a mortgage to the Banque Nationale de Paris ("BNP"), Tamsulu Pty Limited ("Tamsulu") and Valdese Pty Ltd ("Valdese"). The latter two companies were effectively controlled solely by the Barrister. 10 In August 1990, Donlan approached the Barrister and asked him to apply for $330,000.00 of shares and options in Red Anchor. At the time, the Barrister did not have $330,000.00, but nevertheless, drew three cheques from Selmit totalling $330,000.00 and gave those cheques to Donlan. The cheques were not met on presentation by BNP. The Barrister spoke with the manager of the BNP and sought an overdraft. His request was declined. 11 In order to overcome the problem, Donlan suggested that he would arrange for finance to assist the Barrister to purchase the shares. He asked whether the Barrister had any other companies and then arranged for Red Anchor to advance $165,000.00 to Tamsulu and a further $165,000.00 to Valdese. As both of those companies had overdrafts, cheques were endorsed by the Barrister to Selmit and were not banked into the accounts of Tamsulu and Valdese. The proceeds of those advances were then used to purchase Selmit's shares in Red Anchor In evidence, the Barrister said that he was not aware that the monies advanced to Tamsulu and Valdese came from Red Anchor until approximately two weeks later. However, at the time that the company approved or resolved to allot shares and options to Selmit (within the two-week period), the Barrister was asked by Donlan to execute an investment agreement which called for repayment to Red Anchor of the monies advanced to Tamsulu and Valdese within 30 days. 12 On 3 October 1990, Selmit was asked by Red Anchor to complete the formalities of the share application which had previously been signed on behalf of Selmit by the Barrister. In November 1990, the Barrister received a letter from Red Anchor's auditor asking him to certify that transactions involving Valdese and Tamsulu were lawful. Although the Barrister contends in evidence that the letter from the auditor was vague or uncertain it is a finding of the Tribunal that the letter was absolutely clear and, in fact, pointed the Barrister to Sections 230 and 129 of the Companies Code. In his evidence, the Barrister said he did not turn his mind to what was being sought by the auditors and, relying on assurances from Donlan, simply responded to the auditors by a handwritten note on 8 November 1990. At best, that response can be characterised as being careless and, at the worst, deceitful. 13 The Barrister gave evidence in these proceedings. He was extensively cross examined by Mr Garling SC about what occurred in 1990. In cross examination, the Barrister conceded that in August 1990, Selmit had a fully-drawn loan account of $770,000.00 secured against its real estate holdings and no current overdraft. However, it became apparent from documents tendered to the Tribunal, that the BNP had allowed Selmit to overdraw its trading account by some $30,000.00 and had not at that time required the company to formalise an overdraft or repay monies into the trading account. However, it is equally clear from the evidence that when the Barrister drew the $330,000.00 on the Selmit account in favour of Red Anchor, he was aware, or became aware shortly after drawing those cheques, that they would not be met on presentation. In evidence, the Barrister said he thought that there was a possibility that BNP would honour the cheques but he did not put it any higher than that. In cross examination, the Barrister conceded that he had had discussions with Mr Cox from BNP and that at some stage, he advised BNP that funds would be deposited to cover the cheques when they were represented. On or about 14 December 1990, the Barrister received the two cheques from Donlan made payable to Tamsulu and Valdese. These cheques were deposited to Selmit's account to cover the cheques that had been drawn on or about 29 August. 14 On 10 June 1993, the Barrister gave a record of interview to the Australian Securities Commission ("ASIC"), which formed part of the evidence in these proceedings, but was not the subject of cross examination.. It is clearly apparent from that record of interview, signed by the Barrister as correct, that he did not dispute at that time his knowledge of the facts nor, specifically, that the funds used to purchase the shares in Red Anchor were in fact Red Anchor's funds. To the contrary, the Barrister said that the people at Red Anchor had said to him: "Look, we might be able to make some loans to you just for a couple of weeks so that - to cover those cheques and you can hold those shares and we will arrange the sale of the shares immediately on float. So you won't be exposed for too long. This was the way it was being put to me" and "They said that they would give me 330,000 odd and that was going to be the cost of the subscription by Selmit for the shares and I said, fair enough, but when they - they said what we would like to do is to give you two cheques because apparently you needed shareholder approval if it went over $300,000 and they said, but we will give you two cheques and they said have you got any other companies that we can lend the money to". There was a further series of questions to the Barrister and his answers: Q: I gathered from this document that the spirit of it was that Red Anchor Resources was placing money on deposit with Tamsulu? A: Right. Q: For investment purposes. Is that correct? A: Well, it doesn't really reflect the - I don't know when that document was signed but it doesn't really reflect the way everything was done. As far as I was concerned, they had to give me two cheques which I just countersigned and put in to Selmit … Q: Was that, and is it true to say that understanding was that the $165,000 paid by Red Anchor Resources to Tamsulu was for the purpose of covering the debt of Selmit to the Bank Nationale de Paris in order that the bank would pay the Selmit cheque? A: Yes. I told them as I told you, that the bank is not going to pass those cheques and they said we will arrange the loans to cover them 15 The Barrister was also cross examined extensively by Mr Garling SC about the loan agreements entered into by Valdese and Tamsulu. He agreed that those documents were false in describing "Valdese in September 1990 as a securities trader specialising in share trading" . It was put to the Barrister that the cheques provided to Valdese and Tamsulu by Donlan were cashed prior to the execution of those false documents. This was denied but the Barrister did concede in cross examination that, by 7 November 1990, he was aware that the cheques provided to him by Donlan had come from Red Anchor and he was therefore clearly on notice that Red Anchor had financed Selmit to purchase shares in Red Anchor. He knew that the monies advanced had not been used by Tamsulu or Valdese and he knew that the loan agreements were a sham and false. 16 It is apparent from evidence given by the Barrister, and the Tribunal accepts that he did not turn his mind to the effect of monies being advanced by Red Anchor to Selmit to enable the purchase of Red Anchor shares. He admitted before this Tribunal that he had been unaware that such a transaction was contrary to the Corporations Law. Nevertheless, he had his suspicions. In cross examination he was asked by Mr Garling SC at page 39 line 46: Q: You knew that Donlan was not doing everything properly, didn't you? A: At the time that he came to my place with these two agreements it was the first time that I - caused me to suspect anything. Q: But you still went along with him, didn't you? A: Well, I asked him if the Board approved and asked him all the questions that I thought I should ask. Clearly, the Barrister did not ask all the questions that he should have asked. He now agrees that, in retrospect, he should have asked Donlan more questions about these transactions. He says that, at the time, he had no idea that his actions were in breach of the Corporations Law or that people could have been harmed by them. It was only after he was interviewed by officers from ASIC that he became aware of the possible harm that could have been done to other shareholders. He now says that he deeply regrets his actions and feels ashamed. 17 In addition to his reliance on his lack of knowledge at the time, the Barrister also says that he was, although unaware at the time, suffering from a depressive illness. Two of his younger siblings had committed suicide within a month of each other. One of them was a sister who had worked for him in his practice as a barrister and with whom he had a very close relationship. He did not, however, seek any treatment until 1994 and it was not until he saw Dr Phillips, principally for the purpose of preparing a report for sentence in the Local Court proceedings, that he became aware that he had been suffering from a depressive illness. 18 The problem with the Barrister's reliance on his postulated mental state in 1990, is that nothing was done by him until, at the earliest, 1994 and even then, no reliance was placed by him on that illness until he appeared in Court in 1996. He did not seek to rely on any illness when interviewed by officers from ASIC and, although the events involving the death of his siblings were tragic, the Tribunal is not satisfied that the Barrister was suffering from an illness sufficient to excuse his actions in 1990. 19 The Barrister says that, in entering a plea of guilty in the Local Court in June 1996, he did so relying on advice from Counsel. He now says, with the benefit of hindsight, together with the knowledge of the depression he was suffering and his lack of knowledge of all the facts and circumstances which constituted the offence, that he should have, if properly advised, pleaded not guilty. On this point, the Barrister was cross examined extensively by Mr Garling SC. He was given the opportunity in cross examination and in response to questions from members of the Tribunal to specify what matters he would have required to be disputed or changed in the Statement of Facts alleged against him and tendered to the Magistrate. The matters the Barrister raised in evidence as having been an error in the Statement of Facts were, in the Tribunal's view, insignificant and could not have changed the outcome of the case against him had it gone to trial. Accordingly, the Tribunal is satisfied in respect of the advice given to the Barrister by his Counsel before the Local Court, that the advice was proper and that the Barrister accepted the advice in entering the plea of guilty. 20 In the District Court proceedings, the Barrister was represented by Mr Foord QC. It is clear from the transcript that Mr Foord QC's submissions were directed to having the application overturned under Section 556A of the Crimes Act. The Barrister apparently accepted advice from Mr Foord QC that he should change his plea of not guilty (as he had lodged an All Grounds Appeal on his conviction in the Local Court) to one of guilty and change the appeal from an All Grounds Appeal to a Severity Appeal. He accepted that advice and, again ,the Tribunal is of the view that the advice he received from Mr Foord QC was proper and correct. 21 The Tribunal does not agree with the submission of Mr Hodgekiss that the Barrister should have pleaded not guilty and would have been found not guilty. It is the view of the Tribunal that, based on the evidence which has been placed before us, the only possible outcome of the proceedings against the Barrister was that he would have been found guilty of the offence with which he was charged. Ignorance of the law is no excuse. The Barrister knew the material facts which constituted the offence and, at best, his behaviour at the time could only be said to be reckless. Any chance that the Barrister may have had to excuse his behaviour was lost when he received the letter from the auditors of Red Anchor which specifically brought to his attention the provisions of Section 129 of the Corporations Law in October or November of 1990. The Barrister's handwritten response to that letter was either reckless or dishonest. At that time, he should have turned his mind to the question of Section 129 before replying to the auditor. He did not do so. The Tribunal is satisfied, in accordance with the proposition of Yorke v Lukas, that the Barrister had knowledge of the essential matters which go to make up the offence although at that time he may not have known that the matters amounted to a crime. 22 Finally, there was a submission on behalf of the Barrister that, even if his conduct was unlawful, it could not be professional misconduct as it occurred outside his practice as a barrister. The Tribunal does not accept that submission. At the time of these events, the Barrister was in practice as a barrister. He used his barrister's letterhead when replying to the auditor, which clearly would have given the reply a status it might not otherwise have had on plain paper. 23 On the basis of the evidence, which includes contemporaneous documents and the Barrister's oral evidence, it is apparent and the Tribunal finds, that the Barrister was aware of the relevant facts. The Tribunal accepts that the Barrister did not know that the arrangement constituted an offence but that is no sufficient excuse. Further, the Barrister's conduct, his contravention and lack of knowledge of the law and his failure to do something as basic as check on the provisions drawn to his attention in the accountant's letter before replying to it, represent, conduct that would justify a finding that the Barrister is not a fit and proper person to remain on the roll of legal practitioners. 24 The submissions on behalf of the Barrister that he did not intentionally participate in the offence and did not have knowledge of the essential facts are rejected by the Tribunal. Even if the Tribunal were to accept that initially the Barrister did not know the source of the funds provided to Valdese and Tamsulu, it was plainly apparent when he signed the Loan Agreements where the money had come from and he should have turned his mind to the matters specifically raised by the auditors in November 1990 which would have made it clear that what had happened constituted an offence. Accordingly, the Tribunal does not have any doubt that the Barrister had knowledge of the essential facts and was therefore an intentional participant. 25 The Tribunal is aware of the test in Briginshaw v Briginshaw [1938] 60 CLR 336. The Tribunal is satisfied, in accordance with that test, on the basis of the evidence before it, that the Barrister was properly convicted of the offence with which he was charged and that it was appropriate for him to enter pleas of guilty before the Local Court and the District Court. The Tribunal is further satisfied that the conduct in relation to events between August and November 1990 was conduct as a barrister and that it constituted professional misconduct. Penalty 26 The finding of professional misconduct does not, however, necessarily mean that the Barrister is unfit to practice and have his name removed from the roll (New South Wales Bar Association v Murphy [2002] NSWCA 138. 27 The Barrister did not initially address evidence as to his character and fitness. The Tribunal gave him leave to file additional evidence on the question of his fitness to practice and/or remain on the roll of legal practitioners. 28 On that issue, the Barrister tendered an Affidavit of 16 May 2002 which was in essence a curriculum vitae. He also tendered an Affidavit by Terrence Michael Healey, a Barrister and references from Geoffrey Hill of Southern Cross Financial Services (Aust) Pty Limited and Mayer Dabbagh of NFS & Accounting Pty Limited. The Barrister and Mr Hill gave evidence before the Tribunal on 14 June 2002. 29 Mr Hill gave evidence that he had known the Barrister socially for some 30 years and had some business dealings with him over the last 12 months, but mainly through his son. He was not aware of the criminal charges against the Barrister arising from the events of 1990 nor was he aware that there had been a conviction, although he knew that the Barrister had paid a fine. He had never retained the Barrister as a barrister and did not appear to be aware, although he has been a company director for some 30 years, that it was an offence for companies to finance the purchase of their own shares. 30 The Barrister gave evidence that he had not practiced since 1998, did not intend to practice as a solicitor and intended to practice primarily in criminal courts if readmitted to practice. He was currently a facilitator providing advice and introductions in the business community. He has not been providing legal advice. He also gave evidence about other outstanding complaints against him and was cross examined about those complaints by Mr Garling SC. The Barrister also revealed that he had been made bankrupt (not for the non-payment of his taxation obligations); the Australian Taxation Office was a small creditor in an otherwise very large bankruptcy of over $2 million. 31 On behalf of the Bar Association, Mr Garling SC submitted that the appropriate order was an order removing the Barrister's name from the roll of legal practitioners. He described the original offence and the conduct in 1990 as one of dishonesty and deception by being involved in a scheme which was clothed to disguise its true intent. He noted the observation of Phelan DCJ that the offence was serious and could cause great disadvantage to the investing public. He submitted that there was a lack of probity in the Barrister's actions both in 1990 and subsequent to the offence. He further submitted that the Tribunal should not be satisfied that the Barrister understood the seriousness of his conduct and that, accordingly, we should not be satisfied that he is presently fit to practice although he may be able to satisfy some other body in the future that he is then fit to practice. 32 On behalf of the Barrister, Mr Hodgekiss reminded the Tribunal that the conduct occurred in 1990, at a time when the Barrister was under stress and suffering from depression. He referred the Tribunal to the case of Ziems and the Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279, a case well known to the Tribunal, in support of his submission that criminal conduct of itself is not a sufficient reason to strike off the practitioner and that circumstances surrounding the conviction have to be taken into account. In particular, Mr Hodgekiss relied on the statement of Kitto J in Ziems supra at 299: "The conviction is of an offence the seriousness of which no-one could doubt. But the reason for regarding it has serious is not, I think, a reason which goes to the propriety of the Barristers continuing as a member of his profession. The conviction relates to an isolated occasion, and, considered by itself as it must be on this appeal, it does not warrant any conclusion as to the mans general behaviour or inherent qualities ….. it is not a conviction of a premeditated crime. It does not indicate a tendency to vice or violence, or any lack of probity. It has neither connections with nor significance for any professional function. Such a conviction is not inconsistent with the previous possession of a deserved high reputation …." 33 Mr Garling SC referred the members of the Tribunal to the decision of the Court of Appeal in Richard Mitry v Council of the New South Wales Bar Association [2001] NSWCA 273. The Tribunal was specifically referred to paragraphs 84, 85, 86 and 87 in relation to the findings and penalty imposed by the Tribunal at first instance. The Court of Appeal concluded that it was open to the Tribunal to make findings of professional misconduct and in the exercise of its discretion, to conclude that an Order that the Barrister be struck off was appropriate in the circumstances of the case. 34 However, the Information before this Tribunal is not the same Information relied upon by the Bar Association in those earlier proceedings. The Tribunal does not therefore feel it is bound by any decision reached by a previous Tribunal or any comments on the findings of that Tribunal made in the Court of Appeal. 35 The Tribunal's role is primarily to ensure the protection of the public and to consider the Barrister's current fitness to practice. After taking into account all of the circumstances of the case and the evidence before the Tribunal, we are not of the view that this is an appropriate matter in which to order the name of the Barrister to be removed from the roll of legal practitioners. The Tribunal is however concerned with the lack of knowledge displayed by the practitioner in this case. Further, the Tribunal notes that the Barrister has not practiced as either a solicitor or a barrister since 1998. 36 Accordingly the Tribunal believes that it is in the interests of the public for there to be some restrictions on the Barrister's right to resume practice. 37 Other penalties that are available to the Tribunal have been considered. In view of the fact that the Barrister has not practiced since 1998, the Tribunal is not of the view that a suspension is necessary or warranted. Given the evidence before us of the Barrister's financial position and the concession made by his Counsel that he must pay the costs of these proceedings, the Tribunal is not of the view that a fine is appropriate in these circumstances.38 The Tribunal makes the following Orders: (i) The Barrister is to be publicly reprimanded. (ii) The Bar Association shall not issue an unrestricted practicing certificate to the Barrister until he has satisfactorily completed the Bar Association Reading Program and the Bar Practice Course. (iii) The Barrister is to complete, over the next two years, a minimum of twenty hours in each year of continuing legal education in courses recommended by the Bar Association and satisfy the Bar Association that he has attended those courses. (iv) The Barrister is to pay the costs of the Bar Association of these proceedings as agreed or assessed. (v) Liberty to apply in respect of costs. Decision revised 13 October 2004: Order 5 added to orders pursuant to s. 87 of the Administrative Decisions Tribunal Act 1997

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.