Berger v Council of the Law Society of New South Wales

[2013] NSWCA 278

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Berger v Council of the Law Society of New South Wales [2013] NSWCA 278

Hearing dates:

26 August 2013

Decision date:

28 August 2013

Before:

Barrett JA

Decision:

(1)Upon

(a)the applicant Victor Berger by his counsel again giving to the Court the undertakings given before Schmidt J on 9 July 2013 so as to be operative up to and including 8 October 2013; and

(b)the following conditions (which shall likewise be operative up to and including 8 October 2013), namely:

(i)that the applicant shall not act under any power of attorney or as an executor;

(ii)that the applicant shall not deduct any amount from his practice's trust account on account of his legal fees unless he has provided two working days' notice together with supporting material to the Law Society of New South Wales and to any external accountant of his practice;

(iii)that the applicant will deposit all proceeds of sale of any property, or any other funds that come within his control for the benefit of a client, into his practice's trust account;

(iv)that the applicant will not accept any payment from any client on account of his legal fees unless either the payment originates from funds held in his practice trust account and is paid out in a manner that complies with condition (ii) or is a direct payment of legal fees in respect of an invoice and the payer is his client;

(v)that at or before 5pm on each Friday (commencing on Friday 30 August 2013) the applicant will notify the Law Society of New South Wales of the balance of the trust account of his practice and the amounts outstanding to the benefit of each of his clients; and

(vi)that the applicant will not practise as a solicitor otherwise than under the supervision of Aaron Tibor Morgenstern, solicitor,

order that the suspension of the applicant's practising certificate by resolution passed by the Council of the Law Society of New South Wales on 1 July 2013 be stayed up to and including 8 October 2013.

(2)Grant liberty to the Law Society of New South Wales to apply on 24 hours notice for an order terminating or varying the stay.

(3)Order that the costs of the stay application determined by me be costs in the appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

LEGAL PRACTITIONERS - solicitor's practising certificate suspended by resolution of the Council of the Law Society - alleged misappropriation of funds - appeal to the Supreme Court against the Law Society's decision dismissed - further appeal to the Court of Appeal pending - that appeal to be heard in the relatively near future - stay of the suspension in force since start of Supreme Court proceedings but about to expire - whether the stay should be extended until the hearing of the appeal.

Legislation Cited:

Legal Profession Act 2004, s 548

Cases Cited:

Berger v Council of the Law Society of NSW [2013] NSWSC 1080
Doherty v The Law Society of New South Wales [2008] NSWCA 269
New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83], [91]
Robb v Law Society of the Australian Capital Territory (Federal Court of Australia, 21 June 1996, unreported)

Category:

Interlocutory applications

Parties:

Victor Berger (Applicant)
Council of the Law Society of New South Wales (Respondent)

Representation:

Counsel:
I E Davidson SC/PD Reynolds (Applicant)
Ms J S Gleeson SC (Respondent)
Solicitors:
Remington & Co (Applicant)
Law Society of New South Wales (Defendant)

File Number(s):

CA 2013/253352

Judgment

1. BARRETT JA: Victor Berger ("the applicant") is a solicitor of 44 years standing. On 1 July 2013, the Council of the Law Society of New South Wales (the "Law Society") resolved pursuant to s 548 of the Legal Profession Act 2004 to suspend his practising certificate.

1. The applicant took immediate steps to appeal to the Supreme Court against the decision of the Law Society. On 9 July 2013, Schmidt J granted a stay of the suspension until further order, at the same time noting certain undertakings given by the applicant to the Court.

1. The hearing of the appeal to the Supreme Court was expedited. On 14 August 2013, Beech-Jones J dismissed the appeal but continued for a short period the stay that had been granted by Schmidt J. The following day, 15 August 2013, Beech-Jones J continued the stay up to and including today, 28 August 2013.

1. On 20 August 2013, the applicant filed in this Court a notice of appeal in respect of the principal orders made by Beech-Jones J. The substantive relief sought on appeal is an order setting aside the Law Society's suspension decision of 1 July 2013.

1. The appeal to this Court is listed for hearing on 8 October 2013. The Law Society says that leave to appeal is required but is apparently content for any question of leave to be dealt with at the same time as the appeal.

1. I am now dealing with the applicant's application, by notice of motion filed on 20 August 2013, for a stay which will allow the applicant the benefit of his practising certificate in unsuspended form pending hearing of the appeal to this Court. The Law Society opposes the grant of any such stay. The application is supported by an affidavit of the applicant and a number of exhibits thereto.

1. The Law Society's action in suspending the practising certificate followed its own complaint that the applicant had "misappropriated trust funds". There was a resolution of the Council recording its opinion that he had "misappropriated client trust funds". The Law Society's interest arose after a complaint made to it by one of the applicant's partners. The applicant was, at material times, one of three partners in a city firm.

1. The primary judge examined the circumstances of six payments investigated by the Law Society. Four were payments from the firm's trust account. The other two were payments from the balance of settlement moneys under a conveyancing transaction in which the applicant, as a member of the firm, had acted for the elderly vendor.

1. In four cases, moneys were paid to the firm (in three of them by transfer from the trust account to the office account). In one case, the payment was to the applicant's son-in-law. In the remaining case, which involved $154,000, the payment was to the applicant personally, his partners taking the view that they did not want the firm to receive it.

1. The moneys were said, in each case, to be for or on account of costs and disbursements for work done by the applicant, as a member of the firm, although sometimes in circumstances where costs disclosure and rendering of accounts had apparently not been duly undertaken.

1. The emphasis before the primary judge was on the payment of $154,000 which was diverted from the proceeds of settlement on the basis of the applicant's assessment of amounts the vendor owed for past services. The vendor client was an elderly lady. The applicant held her power of attorney and was one of two executors named in her will. The client died after exchange of contracts and before completion. There is an issue whether he purported to act under the power of attorney knowing that it had been revoked by the death of the donor.

1. On any view of matters, the payment of $154,000 was, at the very least, irregular. The primary judge took a very serious view of it. I quote from paragraph [118] of the primary judge's judgment (Berger v Council of the Law Society of NSW [2013] NSWSC 1080):

"I have already rejected Mr Berger's evidence as to the belief he held when causing this payment to be made. I am satisfied to the requisite standard that in causing that payment to be made Mr Berger knew that his conduct was seriously improper. He knew that no proper fee disclosure had been made and no form of relevant consent, agreement or even acquiescence had been obtained from any person to authorise the payment. He knew that the lack of express objection or complaint from Jan or Robert Domabyl [respectively, the former husband and the son of the client] in response to his invoices did not justify the payment that was made. He completed the sale relying on the power of attorney knowing that his authority to do so had lapsed and did so for the purpose of, inter alia, obtaining a personal benefit. For the reasons I have already explained I do not consider it necessary to determine whether this finding as to his state of mind attracts the label "dishonesty" in any of the senses described above. The critical question is whether the finding I have made as to his knowledge warrants upholding the decision to suspend Mr Berger's practising certificate. I will address that matter after considering the balance of the payments."

1. The applicant says that a more benign interpretation of the facts is warranted. The Law Society disagrees. Its opinion is that the conduct was seriously derelict.

1. There was substantial debate before the primary judge as to whether the conduct of the applicant was dishonest. The finding in relation to the $154,000 payment (at [110]) was that the applicant "knew of the serious impropriety of the payment" which, the judge found, had been arranged by the applicant against the express wishes of his partners whose view it was that he should simply write off what he considered to be owing for past services to the particular client. There was, it appears, bad blood between the partners at the time. The firm was dissolved shortly before the applicant's practising certificate was suspended. On the eve of the dissolution, the applicant paid $205,258.86 into the firm's trust account, by reference to the matters that by then had become the subject of investigation.

1. The grounds of appeal advanced by the applicant are extensive. They go to a number of findings of fact and, importantly, the applicant's state of mind and the lack of findings by the judge of dishonesty whether "objective" or "subjective".

1. It cannot, I think, be said that the appeal is devoid of prospects of success. At the same time, however, it is clear that some degree of blameworthiness attaches to the applicant's conduct, even if he held a genuine subjective view that the moneys concerned truly represented fees that had been earned. The real issue is as to the point at which the conduct stands on the scale of impropriety relevant to the value judgment about what is necessary or appropriate to protect the public.

1. I approach the stay application on the footing that arguable grounds of appeal exist but that it is by no means obvious that these are strong grounds.

1. Also relevant is the point that the immediate question concerning suspension of the practising certificate (by way of emergency measure of a preliminary kind) represents, of its nature, an early stage of a potentially much more far-reaching inquiry as to the applicant's future as a legal practitioner.

1. The overriding question on this stay application goes to the requirements of the interests of justice, with the protection of the public as a matter entitled to significant weight. This is made clear by the decision of this Court in New South Wales Bar Association v Stevens [2003] NSWCA 95; (2003) 52 ATR 605 at [83], [91]. In both that case and Doherty v The Law Society of New South Wales [2008] NSWCA 269, reference was made to the following statement by Finn J in Robb v Law Society of the Australian Capital Territory (Federal Court of Australia, 21 June 1996, unreported):

"There is a variety of factors of which account can or should properly be taken when considering a stay in such cases. Among these are (i) the seriousness of the misconduct found; (ii) the likely prejudice to public confidence both in the integrity of the disciplinary processes themselves and in the reputation of the profession if the practitioner is granted a stay; (iii) the means available to mitigate the prejudice alleged; and (iv) the expedition with which the appeal can be heard."

1. In the present case, the conduct must be regarded as potentially serious. This is so whatever may be the answer to the question of dishonesty and whether or not the applicant had a genuine belief that he was entitled to act as he did. Against that, however, stands the fact he paid $205,258.86 into the trust account as referred to above, so that there has been no loss in respect of the identified transactions.

1. The effect of a stay on public confidence must, I think, be judged in company with the means of mitigating any prejudice to public confidence. That leads to a consideration of the means available.

1. The applicant gave to the court, upon the grant of the stay ordered by Schmidt J on 9 July 2013, undertakings as follows:

"(a) That he will retain, until the final disposition of these proceedings or such further or other period ordered by the Court or agreed with the Defendant, at his expense, an accountant acceptable to the Law Society of New South Wales, and will ensure that such accountant furnish to the Law Society of New South Wales no later than 21 August, 21 November, 21 March and 21 May of each year that this undertaking is on foot a report in which the accountant:

(i) Confirms substantial compliance by the Plaintiff with all statutory and regulatory requirements governing the conduct of trust accounts in respect of the preceding financial quarter;

(ii) Details any apparent contraventions of or departures from any such statutory or regulatory requirements in respect of the preceding financial quarter.

(b) That he will take all reasonable steps to apply within a reasonable time for the assessment of his costs in respect of all work done for Ms Hilda Domabyl and her late estate with the co-executor of Ms Domabyl's late estate (Mr Michael Green) and the beneficiaries of her late estate being notified of and joined to the said application.

(c) That he will undergo a course in Trust Accounting, and in Ethics, that is approved by the Society that commences either within 28 days or, if such a course is unavailable prior to that date, the first course thereafter.

(d) The he will, until the final disposition of these proceedings or such further or other period ordered by the Court or agreed with the Defendant, participate in the Senior Solicitors Program and accept mentoring by a senior solicitor nominated by the Law Society and to confer frequently and co-operate with that senior solicitor in the conduct of his program. The costs of his participation in this program will be borne by the Plaintiff."

1. The further stay granted by Beech-Jones J on 15 August 2013 was granted on the following conditions:

"(1) That the plaintiff, during that period, not act under any power of attorney or as an executor.

(2) That the plaintiff will not deduct any amount from his practice's trust account on account of his legal fees unless he has provided two working days' notice together with supporting material to the Law Society and to any external accountant of his practice.

(3) That the plaintiff will deposit all proceeds of sale of any property, or any other funds that come within his control for the benefit of a client, into his practice's trust account.

(4) That the plaintiff will not accept any payment from any client on account of his legal fees unless either the payment originates from funds held in his practice trust account and is paid out in a manner that complies with condition (2) or is a direct payment of legal fees in respect of an invoice and the payer is his client.

(5) That on or before 5pm on 16 August 2013 the plaintiff will notify the Law Society of the balance of the trust account of his firm and the amounts outstanding to the benefit of each of his clients.

(6) That on or before 21 August 2013 the plaintiff will notify his clients of the outcome of the principal proceedings."

1. Evidence before this Court shows that the applicant has addressed himself diligently to these undertakings and conditions. I need not go into details, save to note that a course of instruction referred to in undertaking (c) was not available at the College of Law within the specified period of 28 days but arrangements have now been made to take that course.

1. As regards monitoring of the applicant's conduct, there is a problem in that, following the dissolution of the partnership, the applicant is a sole practitioner who works alone except for a small support staff, including a solicitor holding a restricted practising certificate only. The checks and balances that can operate in a partnership context are therefore absent in this case.

1. It is not for the Court to superintend adherence to undertakings given to it or compliance with conditions on which its orders are made. Nor is that a function of the Law Society. It may be that it was with these considerations in mind that counsel for the applicant not only informed the Court that he had instructions to offer anew undertakings (a) to (d) given before Schmidt J but also acknowledged the possibility that the Court might, as a condition of a stay, require that the applicant work only under the supervision of a solicitor with an unrestricted practising certificate. The Court was informed that the applicant's cousin, Mr A T Morgenstern, is willing to undertake such supervision. He will no doubt be alive to the special responsibility of every solicitor in any case where there are grounds for suspicion of misconduct by another solicitor with respect to moneys under that other solicitor's control.

1. That leaves the final matter referred to by Finn J, that is, the time at which the appeal can be heard. As I have said, hearing is fixed for 8 October 2013, that is, some six weeks hence.

1. Not without some hesitation, I have decided that, upon undertakings and conditions, a stay should be granted until the conclusion of the day appointed for the hearing of the appeal, but with liberty to the Law Society to apply on very short notice for an order varying or terminating the stay. The Bench hearing the appeal will be in a position to re-visit the question of stay once it has heard full argument. In exercising the discretion in that way, I do not lose sight of the gravity that the Law Society properly attaches to the conduct as found by the primary judge. But I am influenced by the solicitor's acceptance of the restrictions arising from the earlier undertakings and orders and the fact that the regime accompanying the stay will provide appropriate oversight during what is a relatively short interim period.

1. Upon the hearing of the present motion, counsel for the applicant, on his client's express instructions, again offered to the Court the several undertakings of 9 July 2013 on the basis that they would be operative for the duration of any stay I might order.

1. The orders of the Court are as follows:

(1)   Upon

(a)   the applicant Victor Berger by his counsel again giving to the Court the undertakings given before Schmidt J on 9 July 2013 so as to be operative up to and including 8 October 2013; and

(b)   the following conditions (which shall likewise be operative up to and including 8 October 2013), namely:

(i)   that the applicant shall not act under any power of attorney or as an executor;

(ii)   that the applicant shall not deduct any amount from his practice's trust account on account of his legal fees unless he has provided two working days' notice together with supporting material to the Law Society of New South Wales and to any external accountant of his practice;

(iii)   that the applicant will deposit all proceeds of sale of any property, or any other funds that come within his control for the benefit of a client, into his practice's trust account;

(iv)   that the applicant will not accept any payment from any client on account of his legal fees unless either the payment originates from funds held in his practice trust account and is paid out in a manner that complies with condition (ii) or is a direct payment of legal fees in respect of an invoice and the payer is his client;

(v)   that at or before 5pm on each Friday (commencing on Friday 30 August 2013) the applicant will notify the Law Society of New South Wales of the balance of the trust account of his practice and the amounts outstanding to the benefit of each of his clients; and

(vi)   that the applicant will not practise as a solicitor otherwise than under the supervision of Aaron Tibor Morgenstern, solicitor,

order that the suspension of the applicant's practising certificate by resolution passed by the Council of the Law Society of New South Wales on 1 July 2013 be stayed up to and including 8 October 2013.

(2)   Grant liberty to the Law Society of New South Wales to apply on 24 hours notice for an order terminating or varying the stay.

(3)   Order that the costs of the stay application determined by me be costs in the appeal.

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