Supreme Court
New South Wales
Medium Neutral Citation: Berger v Council of the Law Society of NSW [2013] NSWSC 1080 Hearing dates: 19 and 22 July 2013 Decision date: 14 August 2013 Jurisdiction: Common Law Before: Beech-Jones J Decision: Appeal against suspension of practising certificate dismissed.
Decision to appoint manager to law practice set aside.
Catchwords: LEGAL PRACTITIONERS - suspension of practising certificate - appeal against suspension - where suspension for alleged misappropriation of funds - hearing de novo - whether suspension necessary in the public interest - whether necessary to make findings of dishonesty - Legal Profession Act 2004, ss 548 and 549 Legislation Cited: - Criminal Code Act 1995 (Cth)
- Evidence Act 1995
- Legal Profession Act 2004
- Legal Profession Regulation 2005
- Powers of Attorney Act 2003
- Probate and Administration Act 1898Cases Cited: - Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336
- Clyne v New South Wales Bar Association [1960] HCA 40; 104 CLR 186
- Council of the Law Society v Doherty [2010] NSWCA 177
- Daily Pty Ltd, The v White (1946) 63 WN (NSW) 262
- Doherty v The Law Society of New South Wales (Supreme Court of New South Wales, James J, 29 August 2008, unreported)
- Doherty v The Law Society of New South Wales & Anor (Supreme Court of New South Wales, James J, 11 September 2008, unreported)
- Doherty v The Law Society of New South Wales [2008] NSWCA 269
- Health Care Complaints Commission v Litchfield (1997) 41 NSWLR 630
- Hogan v Australian Crime Commission [2010] HCA 21; 240 CLR 651
- Legal Services Commissioner v Brereton [2011] VSCA 241; 33 VR 126
- Macleod v R [2003] HCA 24; 214 CLR 230
- New South Wales Bar Association v Cummins [2001] NSWCA 284; 52 NSWLR 279
- New South Wales Bar Association v Stevens [2003] NSWCA 95
- O'Sullivan v Farrer [1989] HCA 61; 168 CLR 210
- Peters v R [1998] HCA 7; 192 CLR 493
- R v Ghosh [1982] QB 1053
- Solicitor, A v Council of the Law Society of New South Wales [2013] NSWSC 921
- Veghelyi v Council of the Law Society of New South Wales (1989) 17 NSWLR 669
- Wellington Steam Ferry Company (Limited) (In Liquidation) v Wellington Deposit, Mortgage And Building Association (Limited) (1915) 34 NZLR 913
- Williams, In re; Williams v Ball [1917] 1 Ch 1Category: Principal judgment Parties: Victor Berger (Plaintiff)
Council of the Law Society of New South Wales (Defendant)Representation: Counsel:
I.E. Davidson SC, P.D. Reynolds (Plaintiff)
Ms J.S. Gleeson SC (Defendant)
Solicitors:
Remington & Co (Plaintiff)
Law Society of NSW (Defendant)
File Number(s): 2013/205134
Judgment
The plaintiff in these proceedings, Victor Berger, was admitted as a solicitor to the Supreme Court of New South Wales in 1969. He has practised since that time. On 1 July 2013 the Law Society of New South Wales (the "Law Society") resolved pursuant to s 548 of the Legal Profession Act 2004 (NSW) (the "Act") to suspend his practising certificate (the "suspension decision"). It also purported to appoint a manager to the law practice "Milne Berry Berger and Freedman" pursuant to s 616(2) of the Act.
On 5 July 2013 Mr Berger appealed to this Court against both decisions pursuant to s 549 and s 649 of the Act respectively. On 9 July 2013 he applied for and was granted an urgent stay of those decisions (A Solicitor v Council of the Law Society of New South Wales [2013] NSWSC 921). His appeal was expedited and set down for hearing on 19 July 2013.
At the hearing of the appeal counsel for the Law Society, Ms J.S. Gleeson SC, clarified that her client did not seek to maintain its decision to appoint a manager. This was so because, as at 1 July 2013, the law practice "Milne Berry Berger and Freedman" (the "firm") no longer existed. It follows that the appeal in respect of that decision will be allowed and the decision set aside.
However the parties were very much in dispute as to whether the suspension decision should be upheld or overturned. Regrettably I have decided that it is "necessary" for the protection of the "public interest" that the suspension decision be upheld. This is a severe outcome so far as Mr Berger is concerned as it may have the effect of bringing to an end a 44 year career in the law.
Statutory provisions
As I have stated the suspension decision was made pursuant to s 548 of the Act which provides:
"Immediate suspension of local practising certificate
(1) This section applies if the Commissioner or the relevant Council considers it necessary in the public interest to immediately suspend a local practising certificate on the ground of the seriousness of the conduct in respect of which a complaint has been made in relation to the holder of the certificate.
(2) The Council may immediately suspend the practising certificate. The Commissioner may direct the Council to immediately suspend the practising certificate, and, if so directed, the Council must immediately suspend the practising certificate.
(3) The suspension operates until the earliest of the following:
(a) the complaint is withdrawn or dismissed,
(b) the suspension is revoked,
(c) the subject-matter of the complaint is finally dealt with by the Tribunal,
(d) the suspension is successfully appealed.
(4) The Council must give written notice of the suspension to the holder of the practising certificate and that notice must:
(a) include an information notice about the suspension, and
(b) indicate the period of operation of the suspension as provided by subsection (3), and
(c) state that the practitioner may make representations about the suspension.
(5) The suspension takes effect on the day that notice of the suspension is given to the holder.
(6) The holder may make written representations to the Commissioner or the Council about the suspension, and the Commissioner or the Council must consider the representations.
(7) The Council may revoke the suspension at any time (unless the suspension was directed by the Commissioner). The Commissioner may at any time direct the Council to revoke the suspension (even if the suspension was not at the direction of the Commissioner).
(8) A decision to revoke a suspension need not be in response to any written representations made by the holder."
The effect of suspending a practising certificate is that it is no longer in force (s 43(1)). In turn this has the consequence that the practitioner ceases to be an "Australian legal practitioner" and becomes subject to the prohibition on engaging in legal practice found in s 14(1) of the Act. Suspension also means that the practitioner satisfies the definition of "disqualified person" in s 4 of the Act and thereby becomes subject to a number of further restrictions (see ss 17, 152, 178).
A right of appeal to this Court from a decision to suspend under s 548(2) is conferred by s 549 of the Act which provides:
"Appeal
(1) A person may appeal to the Supreme Court against a decision of the Commissioner or a Council under this Part to suspend or direct the suspension of a local practising certificate.
(2) The Supreme Court may make any order it considers appropriate on the appeal."
It was common ground that the nature of the appeal referred to in s 548(2) is an appeal de novo (Veghelyi v Council of the Law Society of New South Wales (1989) 17 NSWLR 669). Thus on appeal the references to the Law Society in s 548 should be treated as references to the Court. However this only directs attention to the nature of the power conferred by s 548(2).
The combined research efforts of the parties and the Court were only able to locate two judgments at first instance concerning s 548(2) of the Act (Doherty v The Law Society of New South Wales (Supreme Court of New South Wales, James J, 29 August 2008, unreported) ("Doherty No 1"); Doherty v The Law Society of New South Wales & Anor (Supreme Court of New South Wales, James J, 11 September 2008, unreported) ("Doherty No 2")) and a judgment of McColl JA granting a limited stay of the decision of James J at first instance (Doherty v The Law Society of New South Wales [2008] NSWCA 269) ("Doherty No 3").
In Doherty No 2 at [3] James J referred to the "emergency nature" of the power conferred by s 548(2) but did not elaborate. Given that McColl JA was only dealing with an application for a stay in Doherty No 3, her Honour also did not undertake any detailed analysis of the power conferred by s 548(2). However her Honour did note that the "protection of the public means that the public interest is always entitled to significant weight" (at [33]). Her Honour cited a passage from the judgment of Spigelman CJ in New South Wales Bar Association v Stevens [2003] NSWCA 95 at [108] to [109] which referred to an earlier judgment of his Honour in New South Wales Bar Association v Cummins [2001] NSWCA 284; 52 NSWLR 279 at [20]. In the latter passage Spigelman CJ identified "four interrelated interests" at stake in such cases. Those interests were the need for clients to have confidence in entrusting their affairs to a lawyer, the need for fellow practitioners to be able to accept the practitioner's words and conduct, the need for the judiciary to have confidence in those who appear before the courts, and the overall need for the public "to have confidence in the legal profession by reason of the central role the profession plays in the administration of justice".
The judgment in Stevens was an appeal from a decision of a judge at first instance granting a stay of a decision to cancel a practising certificate under the regime then in place for a practitioner who, inter alia, was convicted of a "tax offence" (former s 38FC(1)), and failed to notify matters concerning his non-compliant tax history (former s 38FD(1)(a)). Consistent with the above comments, Spigelman CJ found that the judge at first instance had erred in exercising the discretion to grant a stay by approaching the matter as though it involved weighing up the competing interests of parties to private litigation, and failed to "give consideration to the public interest dimension" (at [118] and [144]).
Unlike Stevens or Doherty No 3, this case does not involve the exercise of any discretion to grant a stay but a consideration of the exercise of the power conferred by s 548 itself. However the discussion of the four interrelated interests in Cummins that was approved in Stevens and DohertyNo 3 is still apposite. Sub-section 548(1) makes it clear that the necessity to protect the "public interest" is at the core of the power conferred by s 548(2). The four interrelated interests identified by Spigelman CJ in Cummins are all encompassed by the phrase "public interest" as used in s 548(1). This is reinforced by the statement of the purposes of the Act in s 3(1)(a) which refers to the regulation of legal practice "in the interests of the administration of justice and for the protection of the clients of law practices and the public generally" (see O'Sullivan v Farrer [1989] HCA 61; 168 CLR 210 at 216). Otherwise, the purely protective nature of this type of proceeding has long been recognised (see Clyne v New South Wales Bar Association [1960] HCA 40; 104 CLR 186 at 201 to 202; Health Care Complaints Commission v Litchfield (1997) 41 NSWLR 630 at 637).
The legislative regime for cancellation of a practising certificate considered in Stevens is different to that in issue in this case. The regime considered in Stevens appears to have been replaced by that now found within Division 7 of Part 2.4 of the Act. Section 548 is found within Chapter 4 of the Act which is entitled "[c]omplaints and [d]iscipline". To that end the power conferred by s 548(1) cannot be engaged unless a complaint has been made against the solicitor. In this case the resolution of the Council of the Law Society recording the suspension decision is immediately preceded by a resolution making a complaint that the solicitor "misappropriated" funds.
It is clear that a decision to suspend is a temporary measure (or "emergency" measure as noted by James J in Doherty No 2). The section only confers a power to "suspend". In that respect it can be contrasted with powers such as those conferred by s 61 to "amend, suspend or cancel" a practising certificate. Thus a suspension made pursuant to s 548(2) ceases, inter alia, on the complaint being withdrawn or revoked (s 548(3)(a)) or the complaint being "finally dealt with" by the Administrative Decisions Tribunal (the "Tribunal") (s 548(3)(c)). This latter provision recognises that, in the ordinary course, complaints about the conduct of holders of a practising certificate will be dealt with in accordance with the regime provided for in Chapter 4 of the Act.
Leaving aside the powers of this Court to remove practitioners from the roll of solicitors which is preserved by s 590, the end point of the complaint regime in the Act is the making of a determination by the Tribunal as to whether or not a practitioner has engaged in unsatisfactory professional conduct or professional misconduct (s 551(1) and s 562(1)). If the appropriate findings are made then the Tribunal is empowered to make "orders as it thinks fit" (s 562(1)) which can include an order that the name of the practitioner be removed from the "local roll" (s 562(2)(a)) or that their practising certificate be suspended for a specified period or cancelled (s 562(2)(b)).
Thus a decision to suspend under s 548(2) has the capacity to pre-empt and perhaps undermine the structure for dealing with complaints created by Chapter 4 including the protections afforded to practitioners the subject of complaints. No doubt for this reason the power can only be invoked if the Law Society in the first instance, or this Court on appeal, considers it "necessary" in the public interest to suspend the practising certificate. In a different but equally serious context the High Court has observed that the word "necessary ... is a strong word" (Hogan v Australian Crime Commission [2010] HCA 21; 240 CLR 651 at [30] per French CJ, Gummow, Hayne, Heydon and Kiefel JJ). In this context it connotes a relatively high degree of satisfaction that the suspension should be ordered pending the pursuit of a complaint. It can be contrasted with the power of the Tribunal to make "such orders as it thinks fit" (s 562(1)).
At times the submissions appeared to suggest that the Court should undertake some form of predictive exercise as to what sanction the Tribunal might ultimately might impose in respect of the complaint laid against Mr Berger. Some support for that might be gained from the judgment of James J in Doherty No 2 but I doubt that the Court should go that far. As stated, the power conferred by s 548(1) is predicated on the existence of a "complaint". This suggests that it is the conduct disclosed by the complaint and the surrounding circumstances that is to be assessed against s 548(1). Further it is to be expected that the conduct complained of would, if proved, constitute unsatisfactory professional conduct or professional misconduct, otherwise the power conferred by s 548(2) would rise above its intended purpose. However to attempt at this point to predict what the Tribunal might decide at some indefinite point in the future risks distracting the Court from ascertaining what presently is necessary in the public interest. No doubt there are cases where professional misconduct is demonstrated against a solicitor but the Tribunal determines not to remove them from the roll or completely prevent them from practising because aspects of their conduct since the complaint may demonstrate that that step is not warranted. There is very little scope to consider such possibilities in this type of application.
In my view the appropriate approach is one that requires that the Law Society at first instance, and this Court on appeal, to be satisfied that the available material concerning a complaint against a practitioner demonstrates that the continued holding of a practising certificate by them pending its determination presents such an unacceptable risk to clients, the public generally or the administration of justice that it is necessary that their certificate be suspended.
I have already discussed the protective nature of the power conferred by s 548(2). It suggests that the effects of a suspension on the personal interests of the solicitor are of little moment when considering the exercise of the power. However the interests of the solicitor are still relevant in a number of ways. First, the very significant effect that suspension may have upon their interests invokes the principles discussed in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 especially where, as in this case, the matters alleged are serious (Evidence Act 1995, s 140(2)). In this Court the Law Society bore the burden of proving the allegations it made and the burden of persuading the Court that the suspension of the practising certificate is necessary.
Second, the high level of persuasion that inures in the word "necessary" means that there is scope for the practitioner to either agree or have imposed upon them conditions falling short of suspension that provide protection to clients and the public. In such circumstances the Court may not be positively satisfied that it is "necessary" that the practising certificate be suspended. Instead the width of the power conferred on the Court by s 549(2) would enable the substitution of such a decision for the decision to suspend. In Doherty No 2 James J appeared to consider the imposition of conditions as an alternative to suspension at the point of considering the exercise of the discretion referred to in s 548(2). As a matter of practicalities I doubt that that there is much difference between that approach and considering whether it affects the "necessity" to suspend a practising certificate, although I prefer the latter view. The difficulty with the former is that, given the terms and obvious purpose of s 548, it is difficult to envisage circumstances in which the Court could conclude that it is necessary in the public interest to suspend a practising certificate but somehow determine as a matter of discretion that it should not do so.
The parties' respective cases
As I have stated the complaint made by the Law Society was that Mr Berger had "misappropriated funds". In the end result six transactions involving two clients were identified as follows:
(i) a payment of $154,000 on 12 October 2012 to Mr Berger personally from the proceeds of a sale of a property owned by the late Mrs Domabyl ("the first payment");
(ii) a payment of $6,624.49 made on 12 October to Mr Berger's firm from the proceeds of the sale ("the second payment");
(iii) a payment of $1,540.92 on or about 7 December 2012 from the firm's trust account to the office account on account of fees in Mrs Domabyl's matter ("the third payment");
(iv) a payment of $20,000 on 25 January 2013 from the firm's trust account to Mr Berger's son in law on account of fees in the Domabyl matter ("the fourth payment");
(v) a payment of $8,751.90 on 23 April 2013 from the firm's trust account to the office account on account of fees in the Dougall matter ("the fifth payment");
(vi) a payment of $14,341.55 on 6 May 2013 from the firm's trust account to the office account on account of fees in the Domabyl matter ("the sixth payment")."
These payments either involved transfers from the trust account of the firm or the diversion to Mr Berger of funds that should have been placed into the trust account. The amounts in question totalled just over $205,000. The Law Society contended that these transactions all involved conduct contrary to the Act or the Legal Profession Regulation 2005 (the "Regulation") made under the Act.
Mr Berger accepted that his conduct in causing the transfer or diverting the funds was not authorised by the Act or the Regulation. However he contended that it was done in the honest belief that he was properly authorised to do so. He also pointed to the fact that he has recently caused the amount in question to be repaid into the firm's trust account and provided various undertakings designed to address the Law Society's concerns. In those circumstances he contends it is not necessary to suspend his practising certificate.
There was some debate as to whether the Law Society's complaint that Mr Berger had "misappropriated" funds necessarily meant that it was alleging that Mr Berger acted dishonestly (see Council of the Law Society v Doherty [2010] NSWCA 177 at [41] per Young JA; Legal Services Commissioner v Brereton [2011] VSCA 241 at [69] per Tate JA). It is not necessary to resolve this as I do not consider that the Court's function at this point is to parse the precise terms of the complaint. These are all matters that can be taken up at the Tribunal.
In any event in her opening, cross examination and final submissions Ms Gleeson SC made it clear that the Law Society was alleging that Mr Berger's conduct was "dishonest". In fact she distinguished between two types of dishonesty, one form described as "objective dishonesty" and the other as "subjective dishonesty". Ms Gleeson SC ultimately contended that his conduct could be characterised as the latter and, failing that, the former. As I understand it, these two concepts were meant to reflect the difference between the test for dishonesty stated by Toohey and Gaudron JJ in Peters v R [1998] HCA 7; 192 CLR 493, and that enunciated in R v Ghosh [1982] QB 1053. According to Toohey and Gaudron JJ in Peters, where "dishonesty" is not used in legislation in a "special sense", then it is established by demonstrating that a person had some particular knowledge, belief or intent at the time they committed the relevant act and then demonstrating that engaging in that conduct with that state of mind was dishonest "by the standards of ordinary, decent people" (Peters at [18]). The test in Ghosh requires that the relevant person also appreciate that their conduct was dishonest by the standards of "ordinary decent people" (Ghosh at 1064; Peters at [10]). The approach of Toohey and Gaudron JJ in Peters was endorsed by all members of the High Court in Macleod v R [2003] HCA 24; 214 CLR 230. Nevertheless some legislative provisions have adopted the Ghosh test (see s 130.3 of the Criminal Code Act 1995 (Cth)).
The phrase "dishonest" is not to be found in any of the legislative provisions relevant to these proceedings. I am not persuaded that in this type of proceeding it is obligatory to determine whether that label should be used to describe the state of mind of a practitioner who is alleged to have misconducted themselves, although that may be appropriate. That said, there is no doubt that to determine whether Mr Berger's practising certificate should be suspended it is incumbent on the Court to make such findings as it can concerning his knowledge, belief or intent when he undertook the various acts complained of. Such findings are critical to determining whether or not the public interest requires that his practising certificate be cancelled.
For example if Mr Berger withdrew money on account of fees based on a mistaken, but reasonable or even arguably reasonable, belief that he was entitled to do so, then that makes it far more likely that, having been apprised of the correct position, he will be appropriately cautious when withdrawing funds in the period pending the determination of the complaint. On the other hand, if the Law Society established that Mr Berger withdrew money knowing that he was not entitled to do so and deliberately misleading others as to the facts supporting his entitlement to do so, then it would advance a long way towards the establishment of the proposition that it is necessary to suspend Mr Berger's practising certificate. Prima facie a practitioner who engaged in such conduct would represent an unacceptable risk to their clients and the administration of justice. Thus in Doherty No 2 James J found that the solicitor had been dishonest in his dealings with moneys received on trust and noted Court of Appeal authority to the effect that the normal consequence of such a finding is the removal of the solicitor from the roll (at [13]). His Honour considered those matters mandated the upholding of the Law Society's decision to suspend a practising certificate (at [15]).
Background and past complaints
For a very considerable period of the time during which Mr Berger has practised he has been a partner in the firm. That partnership ceased on 21 June 2013. At the time of its cessation there were two other partners, Mr Harry Freedman and a salaried partner, Ms Mittu Gopalan. The partners had been in dispute for a number of years. At least part of the dispute between them concerned Mr Berger's conduct in the Domabyl matter. On 20 June 2013 Mr Freedman sent a notice dissolving the partnership. From 24 June 2013 Mr Freedman and Ms Gopalan commenced a new practice under the name of Freedman and Gopalan. From that time Mr Berger has practised under the name "Milne Berry Berger Solicitors & Mediators".
Mr Berger described his practice areas as property, business, estate, litigation and migration. He estimates that in the "last thirty years or so" he has acted in approximately one hundred estate matters, and has acted as either executor or co-executor approximately twenty times. In his oral evidence he stated that if he is allowed to resume his practice he expects to employ two solicitors and a further six staff including paralegals. He expects that the "vast majority" of his future billings would not involve the deduction of monies from trust accounts, but instead the rendering of bills to clients who would then be indebted to the firm. He said at present the trust account for the firm was still in existence, and that it had a balance of in excess of $1 million. He stated that, if he is allowed to continue, he expects his new practice will operate a trust account balance of somewhere between $500,000 and $1 million.
The Law Society tendered material concerning previous complaints made against Mr Berger. He has been the subject of a number of complaints concerning his approach to charging fees, including allegations that he made no or inadequate fee disclosure. The Court was not asked to, and did not, embark upon any process of determining the validity of those complaints. Their only relevance to these proceedings is that the process of dealing with those complaints should have focussed Mr Berger's mind on the strong necessity to comply with his obligations in relation to the disclosure and charging of fees. Thus, one of those complaints resolved in February 2009 by the issue of a caution to Mr Berger and a request from the Office of the Legal Services Commissioner (the "Commissioner") that he undertake "in writing that you will comply with your statutory obligation to disclose the basis of your costs in all matters in which you are retained in the future". By letter dated 18 March 2009 Mr Berger stated that he was "willing to give [that] undertaking".
In 2011 a further complaint was made against Mr Berger which at least included an assertion that he had failed to disclose in writing a "substantial change to the estimate" he had given in an initial costs agreement. On 15 March 2012 Mr Berger wrote to the Commissioner concerning his conduct. Part of his letter addressed a number of the provisions in Division 3 of Part 3.2 of the Act concerning costs disclosure. Mr Berger proffered "a further undertaking to ensure compliance with my obligations in the future".
The Domabyl matter - background and disclosure
In his affidavit sworn 5 July 2013 (his "first affidavit") Mr Berger states that he was introduced to Mrs Domabyl in around February 2005 via a community organisation. Either at that time or at some time afterwards, Mrs Domabyl entered a nursing home. She was of advanced age and in poor health. Mrs Domabyl's ex husband, Jan Domabyl, resided in Prague. Her son, Robert Domabyl, resided in Sydney, and her daughter, Eva Fudge (née Domabyl), resided in Los Angeles. Ms Fudge had two teenage children.
A codicil to Mrs Domabyl's will made in April 2011 left the entirety of her estate to the children of Ms Fudge. Mrs Domabyl passed away in October 2012. Mr Berger is one of the two executors of her will. The other is an accountant, Mr Robert Green. Probate has not yet been granted. Recently another will has emerged leaving most of her estate to various charities.
Mr Berger said that he initially attended upon Mrs Domabyl to take instructions for the preparation of a will. In November 2007 Mrs Domabyl granted him a power of attorney. Mr Berger stated that at some time around 2010 Robert Domabyl ceased attending upon his mother and that he commenced providing services to Mrs Domabyl that would usually be provided by her family. This is confirmed by the entries in an account that was sent in 22 June 2012 (see below). For example, it included an entry on 19 May 2009 stating "conference with you as to your current state of health and relationships". An entry for 18 June 2009 records as follows:
"Telephone from [sic] call from you and you talk about you are no longer offering to get the laundry and other things I did notice you had a school boy from the school next door generally helping you."
There was no fee disclosure issued by Mr Berger to Mrs Domabyl or any of her relatives in relation to these type of services. There was no dispute that that was required by s 309 of the Act. However, there is some evidence that at some point Mrs Domabyl was advised that she would be charged. A memo prepared by Mr Berger of a conversation with Mrs Domabyl on 9 March 2011 records her complaining about "what was she paying [Mr Berger] for". Mr Berger has also recently located a handwritten file note dated 2 December 2011 which includes the entry:
"We talk re legal fees and I say few clients need this [amount] of time. [Average] cost in this case is $500 for visit, to say nil of calls and many visits."
While I accept that these two memos record discussions between Mr Berger and Mrs Domabyl, neither of these two conversations set out anything near the type of information that Mr Berger knew was required to be disclosed by the Act.
There is evidence that on two occasions Mr Berger has provided a costs disclosure in relation to discrete aspects of Mrs Domabyl's affairs. In his first affidavit Mr Berger stated:
"I did not provide a costs disclosure to [Mrs] Domabyl, apart from the following:
a. I issued a cost disclosure in relation to the sale of a property in the name of [Mrs] Domabyl ... on or about 22 March 2012 ...;
b. I also issued a cost disclosure to my co-executor (Mr Green) following [Mrs] Domabyl's death on or about 16 April 2013, in relation to the fees [involved] with the grant of probate and the administration of the estate." (emphasis added)
The first of these disclosures related to the sale of a unit in a retirement village in Neutral Bay owned by Mrs Domabyl. The total fees disclosed was a lump sum of $1,320 including GST. Although Mr Berger states it was "issued", it is not clear to whom or where it was sent.
Disputes with his partners
It seems that by at least early 2011 the large amount of work in progress that was being accumulated on Mrs Domabyl's file had come to the attention of Mr Berger's partners. There were a number of disputed conversations that occurred between Mr Berger, Mr Freedman and Ms Gopalan during 2011 and 2012. I mean no criticism of either set of counsel, but the cross examination of each of the witnesses did not substantially tackle the discrepancies between the respective accounts of those conversations. Bearing in mind that the Law Society bears the onus of proof, I will mostly proceed on the basis of considering Mr Berger's accounts of those conversations. However, for the reasons set out below there is one part of Mr Berger's version of the conversations with his former partners that I do not accept.
In his first affidavit Mr Berger recounts having a conversation in early 2011 with Mr Freedman in the following terms:
"[Mr Freedman] said: 'What is going on in this file?'
I said: 'We will get paid from the Estate when she passes away.'
[Mr Freedman] said: 'Have you issued her with a Costs Agreement? Does she know that every time you go and visit her it is costing her hundreds of dollars, if not more?'
I said: 'She knows that she is being charged for my work. She is an intelligent and commercial woman. I have previously sent bills to her. She knows that she is being charged for my time.'"
Mr Berger asserted that at some point Mr Freedman queried the level of work in progress and asked why it had not been charged. Mr Berger states he replied:
"You know the circumstances. She's old and frail, her [son] has not spoken to her since January 2010 and her demands on me have continued to increase. You know that in circumstances where someone is old and frail, we leave payment until after the person has passed away."
Mr Berger also recounted a conversation with Mr Freedman in the middle of 2011 in the following terms:
"[Mr Freedman] said: 'You have been continuing to charge Mrs Domabyl for your time. There is no Costs Agreement and I believe what you are doing is improper. I believe that it is a breach of the Legal Profession Act.'
I said: 'If there is any dispute in relation to the bill that I send once she has passed away the bill can simply be assessed.'
[Mr Freedman] said: 'That is not the issue, this lady does not know that every time you go and see her or anytime she calls to say hello that she is being charged for our time. You have got to tell her that is the case.'
I said: 'I only charge for instructions when I visit her or talk to her; not for simply a call to say hello.'"
According to Mr Berger there was a further discussion with Mr Freedman as follows:
"[Mr Freedman] said: 'I think you are simply wrong about your conduct and I am concerned about what ramifications it might have on the practice and also upon [Ms Gopalan] and me. You don't accept what I say, to put this argument to bed let's agree on getting an Advice from one of our colleagues as to this issue or we can simply go to the Law Society and get a Ruling.'
I said: 'You can get an opinion if you want, who do you want to get an opinion from? I believe they will find non-compliance, however, I do not believe she has the capacity to deal with this.'
[Mr Freedman] said: 'Richard Gully.'"
Three matters should be noted at this point about these conversations as recounted by Mr Berger. First, although he did not provide a direct answer to Mr Freedman's question as to the issue of the costs agreement, implicit in all his answers is that he accepted that he had not done so. His conduct in not doing so must be assessed against the undertaking he had given to the Commissioner in 2009 that he would do exactly that in the future.
Second, the proposal that Mr Berger claims he made to address his failure to make a fee disclosure did not involve him attempting to correct that non-compliance by promptly making the requisite disclosures. Instead, it involved waiting until Mrs Domabyl passed away, sending a bill, and, if the bill was disputed, having the account assessed. Ms Gleeson SC attacked this proposal as cynical. I need not address this as in the events that transpired Mr Berger did not adopt that approach.
Third, although he accepted that his conduct involved "non-compliance", Mr Berger resisted the proposal to seek advice from the Law Society.
Mr Freedman and Ms Gopalan sought advice from another solicitor and then from counsel concerning Mr Berger's actions and its potential consequences for them. Ultimately they approached the Law Society. They were advised that they had only two options, namely to request Mr Berger to write-off of the entire work in progress generated on Mrs Domabyl's file, or terminate the partnership.
On 23 September 2011, there was another partnership meeting. At some point in the meeting Mr Freedman said to him:
"You need to speak to Mrs Domabyl and explain to her that she is going to be charged, at least her Estate will be charged for all the time that you are spending, and you should issue her with a Costs Agreement."
There is a dispute about Mr Berger's response. He states that he told them "I don't believe she has ... the capacity to deal with those things", whereas Mr Freedman and Ms Gopalan stated that Mr Berger said that if he did what was suggested it was likely that she would withdraw her instructions.
Ms Gopalan also recalls telling Mr Berger that the effect of the advice from the Law Society was that they needed to write off the work in progress, and that Mr Berger agreed to do so "after much hesitance". Mr Berger recounts the conversation as follows:
"Mr Freedman said: 'We have spoken to the officers at the Law Society. They say you have breached the Legal Profession Act. We want you to write off the WIP.'
I said: 'I disagree that we cannot claim our fees. At the very least we are entitled to reasonable costs.'
[Mr Freedman] said: 'Two of us as partners have decided.'
I said: 'Ok, but I will approach the family on death and claim the fees and if they want them assessed we will do so.'"
For the reasons that follow I do not accept that at this time or any point after this Mr Berger advised Mr Freedman or Ms Gopalan that he would, or even reserved the right to, approach the family on Mrs Domabyl's death and claim the fees and that, if they wanted to have them assessed, he would have them assessed.
It appears to be common ground that the meeting was heated. After the meeting, on 25 September 2011 Mr Berger sent an email which included the following:
"I will not engage in how we each view differently my charging Mrs Domabyl for my time except to say that I have agreed that the likelihood would be that the conclusion would be I had made 'inadequate disclosure' and that in my view no action would be taken against me as a result, nor would there be any liability to the partners.
...
I do not cavell [sic] with the proposition that she, in her state of mind, would be under the belief that she was not being charged.
..."
Mr Berger concludes the email by putting forward a proposal that the firm charge Mrs Domabyl for his time at $300 per hour, that being a rate that would "not attract the kind of attention you expressed concern about and I accept there is a reasonable likelihood of such criticism of me".
On 26 September 2011 Mr Freedman sent a lengthy email in response. It included the following:
"Again, if understand your comments below correctly, it seems once again that you have not understood what I was addressing to you on Friday. Your charging Mrs Domabyl for all the attendances and other activities without explaining to her that she or her estate will be charged is simply morally and legally wrong. The opportunity to rectify the situation again has passed after both [Ms Gopalan] and I raised this with you many months ago. You ask 'What do you want me to do?'. I said you should go and meet with her and ask her what she understood the fee arrangement to be, (or words to that effect). Your reply was '[I]f I do that she'll withdraw instructions. Is that what you want?' I said, I don't care.
I left this meeting on the understanding that from that point on you would not charge for your time. At Friday's meeting [Ms Gopalan] also said that was her recollection, but further charges have still been recorded since that first discussion.
I do not agree to your proposition ... even [though] the loss to the firm is significant, because the impropriety has not been eliminated. Our opportunity to recover fees was lost after you didn't issue any costs agreement ...
I have had advice from the Law Society to the effect that the intention to charge the estate the time recorded, in the circumstances of there being no proper or meaningful disclosure and taking into account Mrs Domabyl['s] situation can be considered to be misconduct and potentially professional misconduct. Unlike Richard's and your belief, the Law Society could not rule out that, having looked into the matter, [Ms Gopalan] and I are also potentially liable to a charge of misconduct being aware of the situation and not acting appropriately. Your actions could also be consider[ed] to be fraudulent and false and misleading and, it was stated, possibly criminal. There may be civil consequences that follow in the event that any claim for these charges is made and contested.
...
We agreed on Friday that the charges would be written off. I felt relieved ... Either you agreed to write off the charges and clearly document that, or you get some written advice from the Law Society confirming that I (and [Ms Gopalan]) would not be liable for any sanction whatsoever. If you can't or won't do that, then I do not see that we can continue in Partnership and run the risk of being prosecuted and/or sued." (emphasis added)
In the days immediately after the meeting further emails were exchanged between the partners. One matter they debated was whether Mr Berger had agreed at the meeting on 23 September 2011 to write off all the work in progress associated with Mrs Domabyl.
Ultimately, on 1 October 2011 Mr Freedman sent an email to Mr Berger. He noted that while Mr Berger did not agree with the decision to write off all "billable WIP", it was nevertheless the partners' decision that this be done, and requested that he, Mr Berger, "confirm so I can maintain a record of this decision". Mr Berger emailed a reply that stated "[a]greed", followed by forty-one exclamation marks. On the same day Mr Berger sent an email to Ms Donovan confirming that the firm had decided that no more work was to be billed and that past work was to be written off.
In January 2012, Ms Gopalan sent Mr Berger an email querying why a further amount of WIP had been recorded on Mrs Domabyl's account. Mr Berger replied that was "in error".
The email exchanges in the period after the meeting in September 2011 until January 2012 are completely inconsistent with Mr Berger having told his partners that he proposed to wait until Mrs Domabyl passed away and then send her family an account which could be assessed if there was a dispute. There is no email recording any reservation in those terms. His direction to record no further WIP on the matter is inconsistent with that proposal because some record of the time would have to be kept to later send a bill to the estate. Further, if Mr Freedman or Ms Gopalan had been told that, then I expect they would have, at the very least, strongly protested and most likely terminated the partnership. Based on their discussions with the Law Society they were concerned about their position if there was an attempt to recover fees, and that concern operated irrespective of whether Mrs Domabyl had passed away or not. Thus I do not accept that Mr Berger ever communicated some final position that he reserved the right to charge for his time. To the contrary, at least from the emails noted in [55] to [56], I am satisfied that he intentionally led his partners to believe that he would not bill Mrs Domabyl for any time that was not the subject of a proper fee disclosure.
Charging Mrs Domabyl
Late in 2011, Mrs Domabyl's health deteriorated. Mr Berger stated that he discussed with her and her son the sale of her unit at her retirement village as the management of the village had indicated that it had difficulty looking after someone with her health problems. In February 2012, Mr Berger caused to be registered the power of attorney he had obtained in 2007. Some time later that year he arranged a sale. As stated, on 15 March 2012 Mr Berger proffered a further undertaking to the Commissioner to comply with his disclosure obligations into the future, and on 22 March 2012 he "issued" a fee disclosure concerning the sale, although it was not clear to whom this fee disclosure was sent. Mr Berger stated that he told Mr Freedman in September 2011 that Mrs Domabyl did not have the capacity to deal with such matters (see [49]).
On or about 5 June 2012, a letter and accompanying bill were sent by email to Jan and Robert Domabyl. The bill sought payment of an amount of $176,800.94. It included a detailed narrative of attendances upon Mrs Domabyl from 19 March 2009 up to 31 May 2012. It did not specify the time spent or the rate charged.
In the first two pages of the letter Mr Berger explained the nature of the work he performed for Mrs Domabyl over the years. He then stated that he was "enclosing a schedule, covering the period of 19 March 2009 to date, prepared in accordance with the records we must keep according to the obligations of the Legal Professions Act [sic] to record the date of each item of work and a description". He noted the amount sought, and he accepted that this was work that could have been done by others at lower charge-out rates, but sought to justify the overall amount charged on the basis of the confidence that Mrs Domabyl had in him. The letter concluded:
"We are quite happy to have you express your view on how much of the total fees and disbursements should be paid. We believe that it would be suitable for you to obtain independent advice. I have asked Michael Green's view in the past and I leave him to express it to you if you wish to be informed by him.
The amount of money is considerable. Yes, we would be prepared to wait until the death of Mrs Domabyl so that she had no concerns as to the adequacy of her funds to support her through the rest of her life. Whereas in her circumstances, as they were prior to entering the nursing home, her affairs were less certain as to meeting her needs. Now that she has liquidated her assets she has substantial funds which do not put in doubt the ability to provide for her for the rest of her life. We would prefer to be relieved of carrying outstanding fees and disbursements. I welcome your thoughts.
We look forward to your thoughts on the matter. We look forward to resolving the matter as soon as possible and thank you in anticipation for your cooperation."
On 22 June 2012, another letter and accompanying bill seeking payment of the same amount for the same period was sent by email to Jan and Robert Domabyl. The only difference between this bill and the one sent under cover of the letter of 5 June 2012 was the inclusion of a column identifying the fee earner and the time spent. This was explained as being "prescribed by the Legal Profession Act".
At this point four matters should be noted. First, it appears that the invoice included under cover of the letter of 22 June omitted various ABN details and the like. The solicitor who prepared the account, Ms Donovan, explained that this was an oversight on her part. I accept her explanation.
Second, although the covering letter to the 22 June 2012 invoice referred to various matters that were "prescribed by the Legal Profession Act", there was no notification within that account, or the account dated 5 June 2012, of the means of challenging a bill as was required to be given by s 333 of the Act. As stated, Mr Berger asserts that he told his fellow partners that he reserved the right to wait until Mrs Domabyl passed away before approaching the family and, if there was a dispute, having the bill assessed. However Mr Berger approached the family while she was still alive and he did not inform her family of the means of challenging the bill by assessment.
Third, nothing in the letters or bills indicated that in the absence of any response monies would be drawn down from any existing trust account balances or other funds controlled by Mr Berger on behalf of Mrs Domabyl.
Fourth, it is clear that neither Mr Freedman nor Ms Gopalan was notified that these accounts had been sent. Mr Berger agreed that he was aware that they were not informed. It must have been clear to Mr Berger from his discussions the previous year that, had they been aware of that, there was an appreciable risk that he would be reported to the Law Society.
On 31 August 2012, contracts were exchanged for the sale of Mrs Domabyl's interest in the unit in the Bougainvillea Retirement Village. On 4 October 2012, Mrs Domabyl passed away. As at that date the settlement had not been effected.
In his first affidavit Mr Berger stated that he was informed of Mrs Domabyl's death on the afternoon of 4 October 2012 and that earlier that morning he had countersigned the first page of a transfer necessary to complete the sale. He states that, some days later, his conveyancing clerk presented to him an annexure to the transfer, which he signed. He stated that he had no recollection of the event, although he recognised his signature on the document. His conveyancing clerk, Ms Kunhi, states that the transfer that was initially signed by Mr Berger was incomplete. She says that, on 10 October 2012, she had to add an annexure to the transfer identifying that Mr Berger had signed the transfer pursuant to a power of attorney.
Ms Kunhi also stated that on 10 October 2012 she received an email from Ms Donovan, copied to Mr Berger, advising her to prepare cheque directions for settlement involving the payment of the firm's fees for acting on the sale, as well as an amount payable to Mr Berger personally of $154,000.
Settlement took place on 12 October 2012. On that day, out of the proceeds of sale, a bank cheque was drawn in favour of Mr Berger personally for $154,000 (ie the first payment). A further bank cheque was drawn in favour of the firm in part payment of its fees of $6,624.49 (ie the second payment). Other amounts were disbursed and a balance of $188,805.72 was deposited into the firm's trust account.
Tendered in evidence was an account that bore the date 4 December 2012 on the firm's letterhead. It was addressed to "Mrs H. Domabyl c/ Victor Berger, as Power of Attorney" for the costs of acting on the sale, totalling $8,165.41. On 6 December 2012 Mr Berger signed a letter on behalf of the firm. It was also addressed to "Mrs H. Domabyl c/ Victor Berger, as Power of Attorney" and enclosed the bill. On the same day an amount of $1,540.92, being the trust account balance less the second payment, was transferred from the trust account to the office account (ie the third payment).
On 25 January 2013, Mr Berger caused the sum of $20,000 to be paid out of the money held in the firm's trust account to his son in law (ie the fourth payment). Mr Berger stated that this payment was for the balance of his invoice sent in June 2012.
As stated on 16 April 2013, Mr Berger wrote a letter to himself and Mr Green, as executors of Mrs Domabyl's estate, setting out the assets and liabilities of the estate and the amounts he proposed to charge.
On 22 April 2013 Mr Berger issued an invoice to himself as co-executor of Mrs Domabyl's deceased estate for $14,341.55. On 6 May 2013 Mr Berger caused that amount to be transferred from the firm's office account to the trust account (ie the sixth payment).
Investigations in 2013
In April 2013, an external examination of the firm's trust account was conducted by an accountant, Ms Myers, and her associates. As a result, Mr Freedman became aware of the fourth payment. On 19 April 2013, he sent a sharp email to Mr Berger seeking an explanation. His email included the following:
"From the proceeds of sale [of Mrs Domabyl's unit] you directed to yourself a payment of $20,000. You did not inform me and I assume you did not inform [Ms Gopalan] either, as partners of the firm this was being done, and we would only have been made aware because of Jim['s] audit."
Mr Berger provided responses to the points made by Mr Freedman which were embedded in the email chain. His response to the above statement was as follows:
"I did not inform either [Mr Freedman] or [Ms Gopalan]. They left no doubt that they did not wish any part of the payment of fees Mrs Domabyl incurred through my services had incurred. Indeed they liberally suggested my values were on a standard beneath mine.
I informed:
- [Mr Freedman] at a time he first raised an issue we should have the fees assessed. He was [sic] did not [agree] nor disagree;
- Much later and on several occasions I was pressured by them but resisted. Their pressure was essentially founded on their claim to high moral ground;
- I repeatedly told them I had fully informed the co-executor Michael Green and that he expressed the view that there was no issue;
- I was persuaded to defer claiming the fees, but never said I would not claim them, when Harry referred to his [concern] for my family if the Legal Services Commissioner challenged our claim. Indeed I experienced a barrage of criticism for only deferring same and similarly an email by me which in effect indicated I enquired if [Mr Freedman] would not accept any part of the money;
- I sent itemised bills to the husband and son of Mrs Domabyl for a major part of the claim. They raised no objections and indeed I was praised for my work. My co-executor they have been informed that I had drawn funds against such bills."
It follows from my earlier findings that I do not accept the accuracy of this email to the extent it appears to assert that Mr Berger told Mr Freedman that he reserved the right to charge Mrs Domabyl or her estate. Otherwise there is no evidence that Mr Berger ever told Mr Freedman or Ms Gopalan that Mr Green had approved the fees.
The representatives of the external investigator were recipients of these emails. On 11 May 2013 Mr Berger emailed the external representative asserting that the basis for the payment was that the "family agreed that our fees be paid for work I did before Mrs Domabyl died".
Ms Gopalan's response to this email chain was to remind Mr Berger of the agreement to write off the amounts that he gave on 1 October 2011 and which I have referred to above.
On 22 May 2013, Mr Berger sent an email to Mr Green as follows:
"Hi Michael, You will recall that we discussed last year my bill for fees in respect of work I did in the lifetime of Mrs Domabyl and that Robert, Mr Dougall [sic] and you had no objection to same being paid to me. Our auditor requires that I have your written authority as to such. Kindly send me an email to the following effect:
'I, Michael Green the co-executor of the estate of Hilda Domabyl confirm having agreed that the fees charged by my co-executor Victor Berger for work done by him in her lifetime have been approved for payment. My recollection is that the sum due was approximately $... .'
I do not know if you saw the bill and so I attach a copy. If you have seen it before then please insert that amount in the above draft.
..."
On 24 May 2013 Mr Berger sent an email to a representative of the external examiner. One topic concerned the authority to pay $20,000 out of the trust account in respect of Mr Berger's fees. Mr Berger stated, inter alia:
"Michael Green the co-executor is overseas and I have sent him an email asking him to confirm his authority which he gave prior to withdrawal of that sum. I trust I will have that in the course of tomorrow." (emphasis added)
On 26 May 2013, Mr Green sent his response by email from overseas. In so far as he was asked to provide a note for the auditor, the draft prepared by Mr Green stated as follows:
"... From the proceeds of sale [of the unit in the retirement village] an amount of $154000 was deducted and paid to Mr Berger on account of fees as per his ledger account 7062 totalling $176800.94. A further amount of $20000 was paid on his account on the 25/01/2013. The balance of account 14309 was then paid to an account in the name of the executors. My understanding of the fees payable by the late Mrs Domabyl to Mr Berger was that they were to be paid on her death. Prior to payment of his fees he submitted details of his account to family members for approval. My own discussions with Mr J. Domabyl the former husband of the late Mrs Domabyl was that he was aware of the account and that it had been paid. I was never consulted directly in relation to the payments and my approval was not sought." (emphasis added)
It appears that Mr Berger was receiving some medical attention on 26 and 27 May 2013. However, late in the evening on 26 May 2013 he sent a response to Mr Green's email. I am satisfied that his responses were inserted into the body of the email that Mr Green had sent. In relation to the above extract, Mr Berger stated to Mr Green:
"May I ask the last sentence be deleted. You do say earlier it was to be paid upon death. To add the sentence just raises the prospect of an issue in the mind of a person looking at the same."
The last sentence was the statement by Mr Green that he had not been consulted in relation to the payments and that his approval was not sought. Two days prior Mr Berger had asserted to the external investigator that Mr Green had given prior approval for the withdrawal of the sum.
Mr Berger was asked about this in cross examination a number of times. When he was first asked he agreed that the words extracted in [82] above were his words ("Are they your words? Yes they are"). Later the cross examiner returned to that email:
"Q. You asked him to delete that statement when you said 'May I ask for the last sentence to be deleted'?
A. I see the point you are making, yes.
Q. You asked for that sentence to be deleted because you are seeking to conceal that fact, the fact in that sentence?
A. Isn't that the draft I prepared? I typed that initially and I am the one that said that. Am I missing something here?
Q. You have previously agreed I think that the words starting 'May I ask for the last sentence to be deleted' were your words. Do you see that?
A. My best recollection is that particular paragraph 'To whom it may concern', down to the last line you are referring to, was a draft I prepared, not he. I prepared that draft.
Q. Are you suggesting Mr Green asked for the last sentence to be deleted?
A. No, I am not suggesting that.
Q. I suggest to you that you asked for the last sentence to be deleted because you knew that that sentence revealed the lack of prior approval in relation to those payments, and you knew that in the absence of approval, it was wrong for you to procure those payments?
A. But I didn't need his approval at that time. He had no role in the matter. I was relying upon the whole of the rest of the e-mail in terms of the basis for my belief that there was no objection to my having the fees."
Thus, when the cross examiner returned to the topic Mr Berger prevaricated as to whether the words he was being taken to were his. He eventually resorted to asserting that Mr Green's approval was irrelevant. However, he had previously told the external investigator that Mr Green would confirm that had given prior approval.
On the afternoon of 27 May 2013 Mr Berger sent Ms Myers a further email. It included the statement:
"You have asked for the co-executor['s] reply. I have spoken to him and last communicated just before I left home to come to hospital. He is providing a reply which ought to satisfy what is required of me."
Mr Berger's email did not advise Ms Myers that Mr Green had stated that he had not given prior approval for the payment of any fees contrary to Mr Berger's assertion in his email of 24 May 2013.
Later that afternoon Ms Myers sent Mr Berger an email, copied to Mr Freedman, attaching a copy of the 22 June 2012 invoice and asking how it related to the fourth payment and whether it was raised by the practice. Mr Freedman sent an email stating that he had never seen it before. Mr Berger replied to Ms Myers the next day. He stated:
"The invoice was raised by me as [Mr Freedman and Ms Gopalan] objected to the charges at all. I did not any time waive a claim for costs and reserved my right to claim them from the family as I was aware there was no objection to same and it was [expected] I would seek payment after the death of Mrs Domabyl."
He advised Ms Myers that he had been paid "$150,000 odd from sale" of the property, leaving the amount of $20,000 outstanding which had been drawn against the balance of the account. I have already rejected the contention that Mr Berger told Mr Freedman and Ms Gopalan that he reserved the right to claim fees from Mrs Domabyl's estate.
The next day Mr Berger requested that Mr Freedman and Ms Gopalan co-operate in the termination of the appointment of Ms Myers and any member of her firm as auditors of the trust account, failing which he said that he would seek an order from the Court restraining her from continuing. They did not agree. Eventually Mr Berger approached the Court. In one of his responses Mr Freedman confirmed that Mr Berger had only just disclosed that he had received $150,000 from the proceeds of the sale of the retirement village unit.
On 29 May 2013, Mr Berger obtained an order restraining the continuation of the audit by Ms Myers and her firm. Thereafter an investigation of the firm's trust account and Mr Berger's affairs was conducted by an investigator directly engaged by the Law Society, Mr Sofiak.
I have already referred to the events surrounding the dissolution of the firm in [28]. Mr Sofiak prepared a report dated 17 June 2013 which was provided to Mr Berger for comment before it was presented to the Law Society. On 1 July 2013 the Council of the Law Society passed a resolution that recorded the complaint against Mr Berger noted in [13], and made the two decisions the subject of these proceedings.
Knowledge of the Domabyl payments
Ms Gopalan stated that after she sent her email in January 2012 she believed that "no further work was being accrued" on Mrs Domabyl's file. She stated that did not learn of the transfer of $154,000 (ie the first payment) until the period April to May 2013 and only became aware on 27 May 2013 that invoices had been sent in June 2012. Similarly Mr Freedman stated that he only became aware of the transfer of $20,000 from the trust account in April 2013. Furthermore, his email of 27 May 2013 noted above at [88] suggests that he only became aware of the first payment in May 2013. These aspects of their evidence were not challenged.
Neither party called Mr Green to give evidence. I have already noted the terms of Mr Green's email of 26 May 2013 in which he stated that he was not consulted in relation to any of the payments and his approval was not sought. There was also tendered a note prepared of an interview with Mr Green on 12 June 2013 conducted by Mr Sofiak. Mr Green is recorded as stating that "he was aware of the $174,000 that Mr Berger had taken as fees and was comfortable with it because of all the work Mr Berger had done for Hilda". He added that "Mr Domabyl had visited from Prague in 2012 and they had coffee together ... and Mr Domabyl had told him that Mr Berger had taken $174,000 as fees and he, Mr Domabyl, seemed comfortable with it". The note records that the investigator took Mr Green through each payment. With the transfer of $154,000 the note records:
"$154,000 paid to Mr Berger from settlement monies. [Mr Green] said he was comfortable with Mr Berger taking this although he believed that after the conversation with Mr Domabyl that he, Mr Berger, had already taken it. He was not aware that it was taken from the sale proceeds at the time nor specifically authorised it being taken."
With the second, third and fourth payments Mr Green is recorded as stating that he was not aware those amounts had been taken and did not authorise them. With the sixth payment (ie the transfer of $14,341.55) on 6 May 2013 Mr Green is recorded as stating that "[h]e had approved the taking of these costs but thought it would only be taken after Probate had been granted".
Neither party called either of Jan or Robert Domabyl, although a statement dated 13 June 2013 and email dated 14 June 2003 from the latter was tendered. In his statement Robert Domabyl recalls receiving an account from Mr Berger and discussing it with his father. He said they were "unhappy" because of Mr Berger's failure to present regular bills to his mother over the years previous, although they were grateful that Mr Berger spent time with her. In his email Robert Domabyl stated that he and his father were not aware that the June 2012 invoice had not been sent to his mother.
Given that the onus of proof rests upon the Law Society and bearing in mind the application of Briginshaw I will exercise caution before acting on disputed material from Mr Green or Robert Domabyl when they have not been called as witnesses.
Mrs Greta Dougall
In his first affidavit, Mr Berger states that Mrs Dougall lived in an apartment in the eastern suburbs of Sydney. She passed away in January 2013. On 19 March 2013, Mr Berger sent Mrs Dougall's nephew, who lived in the United States, a detailed bill for $8,751.90. The entries in the bill concern various attendances undertaken by Mr Berger on and on behalf of Mrs Dougall in the months prior to her death, as well as a few attendances in the immediate aftermath of her death including for the location of a will. The attendances prior to Mrs Dougall's death are of a similar nature to those he undertook on and on behalf of Mrs Domabyl.
The bill advised the recipients of their right to have the costs assessed under Division 11 of the Act. In his first affidavit Mr Berger said that he also emailed a copy of the bill to Mrs Dougall's niece and stated that the niece and nephew were the two beneficiaries under the will. He stated he wanted to give them the opportunity "to see what I was proposing to charge and give them an opportunity to raise any objections".
On 23 April 2013 Mr Berger caused to be transferred $8,751.90 from the trust account as payment for his fees (ie the fifth payment).
The first payment
The payment of $154,000 on 12 October 2012 did not involve the transfer of funds from the firm's trust account but instead the diversion to Mr Berger personally of proceeds of the sale of her unit in a retirement village. The Law Society contended that it was made contrary to the Act and the Regulation. At the time of the diversion Ms Domabyl had passed away. Thus as and from the date of her passing Mrs Domabyl's property vested in the "NSW Trustee and Guardian" (Probate and Administration Act 1898, s 61), but if probate is granted at some point in the future then the vesting of the property in the executors will relate back to the date of Mrs Domabyl's death (s 44; The Daily Pty Ltd v White (1946) 63 WN (NSW) 262 at 263).
As at October 2012 s 254(1) of the Act provided:
"Certain trust money to be deposited in general trust account
(1) Subject to section 258A, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless:
(a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account, or
(b) the money is controlled money, or
(c) the money is transit money, or
(d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person.
Maximum penalty: 100 penalty units."
None of ss 254(1)(a) to (d) was applicable at the time the proceeds of sale were received. Thus Mr Berger was obliged to cause the proceeds of the sale to be deposited into the firm's trust account. Sub-section 261(1)(b) would have entitled Mr Berger to withdraw moneys from the trust account on account of "legal costs" (assuming the bills he sent in 5 June 2012 could be so characterised) provided he had complied with Regulation 88 which provided:
"Withdrawing trust money for legal costs - section 261(1)(b) of the Act
(1) This clause prescribes, for the purposes of section 261(1)(b) of the Act, the procedure for the withdrawal of trust money held in a general trust account or controlled money account of a law practice for payment of legal costs owing to the practice by the person for whom the trust money was paid into the account.
(2) The trust money may be withdrawn in accordance with the procedure set out in either subclause (3) or (4).
(3) The law practice may withdraw the trust money:
(a) if:
(i) the money is withdrawn in accordance with a costs agreement that complies with the legislation under which it is made and that authorises the withdrawal, or
(ii) the money is withdrawn in accordance with instructions that have been received by the practice and that authorise the withdrawal, or
(iii) the money is owed to the practice by way of reimbursement of money already paid by the practice on behalf of the person, and
(b) if, before effecting the withdrawal, the practice gives or sends to the person a request for payment, referring to the proposed withdrawal.
(4) The law practice may withdraw the trust money:
(a) if the practice has given the person a bill relating to the money, and
(b) if:
(i) the person has not objected to withdrawal of the money within 7 days after being given the bill, or
(ii) the person has objected within 7 days after being given the bill but has not applied for a review of the legal costs under the Act within 60 days after being given the bill, or
(iii) the money otherwise becomes legally payable.
(5) Instructions mentioned in subclause (3) (a) (ii):
(a) if given in writing, must be kept as a permanent record, or
(b) if not given in writing, must be confirmed in writing either before, or not later than 5 working days after, the law practice effects the withdrawal and a copy must be kept as a permanent record.
(6) For the purposes of subclause (3) (a) (iii), money is taken to have been paid by the law practice on behalf of the person when the relevant account of the practice has been debited." (emphasis added)
From October 2012 (and continuing to at least June 2013 prior to the grant of probate) it was common ground that "the person for whom the trust money was paid into the account" in sub-regulation 88(1) was the "NSW Trustee and Guardian". It was also common ground that nothing in sub-regulation 88(3) would have authorised any withdrawal of any funds paid into the trust account. In particular on no view of what occurred had there been any "instructions" that authorised the withdrawal (cf sub-reg 88(3)(a)(ii) or a request for payment "referring to the proposed withdrawal" (cf sub-reg 88(3)(b)). Further none of the conditions for withdrawal specified in 88(4) had been satisfied either. While Mr Berger had sent a bill it had not been sent to the "person" referred to in sub-regulation 88(4), namely "the person for whom the trust money was paid into the account" in sub-regulation 88(1). (The result would be the same even if Mrs Domabyl had not passed away).
As I have stated Mr Berger did not deny that with the benefit of hindsight the diversion of these funds was not authorised. The real issue was whether he had an honest albeit mistaken basis for causing the payment to occur. In particular the Law Society contends that Mr Berger knew that the payment was improper. This contention involved five interrelated matters it contended were relevant to an assessment of Mr Berger's state of mind, namely the absence of any instructions from anyone with a proper interest in the funds that were transferred, the use of the power of attorney after Mrs Domabyl's death, his knowledge of the defects in his right to recover fees, his concealment of his actions from his partners and his alleged lies in 2013 concerning his actions.
In his first affidavit Mr Berger explained his actions in transferring these funds as follows. He referred to the accounts he sent in June 2012 to Jan and Robert Domabyl. He described Jan Domabyl as the person "who clearly controlled, managed and administered the family's finances and affairs" and thus the "most appropriate" person to deal with. Mr Berger described Robert Domabyl as being "part of the family" and stated that his belief was "that if there would be any person in the family to make a Family Provision Act claim or challenge the will (and make an objection to my professional fees), it would be him". Mr Berger noted there was no response to his letter enclosing the invoices and explained:
"I also note that in about June to October 2012, I met the husband and son in Sydney on several occasions and they did not raise any objection in relation to the invoice ... I caused $154,000 to be paid from the settlement money to me in part payment of the invoice for $176,800.94 because I was informed by Mr Freedman that he as my partner did not want to receive any part of the fees that might have been payable for the legal work that I had performed for Mrs Domabyl as her attorney. At the time of the transfer I honestly believe[d] that I could transfer the funds, having issued a proposed invoice to the family and having not received any objection for some four months and indeed having met with Mr Domabyl Snr and Robert several times in the intervening period without any objection being made." (emphasis added)
To this explanation Mr Berger added that it was his belief that it was a common and permissible practice to pay the various debts of an estate, including legal fees, prior to the grant of probate. In response the Law Society tendered a report from a very experienced probate practitioner, Mr Jeremy Glass. Mr Glass stated that there is a "common and permissible practice" enabling a solicitor to make payments from monies held in trust for a deceased estate prior to a grant of probate but only "where the payments are for the benefit of the estate or in due course of administration", and are made with the express authority of the executors in circumstances where there is no suggestion that the estate is insolvent. Mr Glass considered that this practice permits such payments as are necessary to "maintain, protect or preserve" estate assets but did not permit a solicitor to make a payment of his own costs from estate funds.
To the extent that Mr Berger asserts that he met with Jan and Robert Domabyl in the period June to October 2012 and they raised no objection to the bill then I accept his evidence. As I have stated the Law Society did not call either of them. Such material as was available was not inconsistent with this assertion. However I am also satisfied that during those meetings Mr Berger did not tell them that he was proposing to deduct the fees from the proceeds of sale of Mrs Domabyl's unit. Mr Berger never asserted that he told them that. Nothing to that effect is adverted to in the letters he sent in June 2012. Mr Green's account of a meeting with Jan Domabyl only records Jan Domabyl becoming aware of the deduction after it had occurred.
Mr Berger's assertion that he caused the $154,000 to be paid to himself as opposed to the firm because of Mr Freedman's objection to receiving the funds can be accepted as far as it goes. The Law Society disclaimed the contention that Mr Berger was dishonest in the sense that he acted to defraud his partners of their entitlements to fees. However Mr Freedman's and Ms Gopalan's objections extended far beyond their not wanting to receive the funds. They had strenuously objected to the firm levying the fees at all. They had pointed out that there was no fee disclosure or cost agreement justifying the fees. Mr Berger had accepted that. They had insisted that Mr Berger write off his time. Mr Berger told them he had. Mr Berger had led them to conclude that he would not levy the fees. They had made it clear that if he pursued recovery of the fees they would report the matter to the Law Society. Mr Berger had twice undertaken to the Law Society that he would comply with his disclosure obligations. Mr Berger must have appreciated that a further report from his fellow partners would have placed him in significant peril.
Thus, Mr Berger had a strong motive to take steps to ensure that neither his fellow partners nor any other person with a proper knowledge of the regime for costs recovery became aware that he had billed Mrs Domabyl's accounts and recovered the fees. The manner in which the fees were billed in June 2012 and then partly paid for in October 2012 was undertaken in a manner to avoid or least minimise that type of scrutiny. Neither Mr Freedman nor Ms Gopalan was made aware of the bills. The bills did not advise the recipients of the ability to seek an assessment or the fact that they were not supported by any costs agreement. Only three months previously he had prepared and apparently "issued" a compliant fee disclosure (see [37]). The accounts did not advert to the possible deduction of the amount owing from the sale or a trust account, but instead left the question of payment open to some form of dialogue. The funds were obtained by diverting the sale proceeds before they were placed into the firm's trust account. Thus an audit of the trust account would not reveal that the payment was made. No one out of Mr Freedman, Ms Gopalan, Mr Green, Jan Domabyl or Robert Domabyl was made aware of the payment prior to or around the time that it was made. The fact that it occurred was only revealed to Mr Freedman and Ms Gopalan when the files were subject to close scrutiny in April and May 2013.
As I have stated one matter on which the Law Society's allegation of dishonesty relied was the absence of any express instructions from anyone with a proper interest in the funds that were transferred. If all the evidence revealed was that Mr Berger had simply acted on the approval of Jan or Robert Domabyl to pay a properly issued bill issued prior to Mrs Domabyl's death then I would not have been satisfied that he acted knowing that his conduct was improper. The fact that the payment occurred after her death and he did not seek the approval of or raise it directly with the co-executor or the parent of the beneficiaries, much less the NSW Trustee, makes the position far worse, but does not of itself satisfy me that he was aware that his actions were so improper as to warrant immediate suspension.
However when those matters are considered with some of the other circumstances surrounding the payment referred to by the Law Society then I am forced to conclude that he knew of the serious impropriety of the payment. The first of those circumstances has already been discussed, namely his conduct in concealing his actions in levying the bills and recovering the funds from his fellow partners.
The second is that I do not accept that Mr Berger genuinely believed that he could make the payment based on the lack of objection from Jan and Robert Domabyl to his account. In context, their lack of objection was meaningless. Mr Berger knew they had not been told of any of the problems with levying the accounts in the first place, problems which Mr Freedman and Ms Gopalan had strenuously pointed out to him. Mr Berger's letters did not advise the recipients of their rights to seek assessment. Neither Jan nor Robert Domabyl were told of the proposal to deduct $154,000 from the settlement monies.
One matter pointed to by Mr Davidson SC as negating the allegation of dishonesty on the part of his client was the suggestion in the letter of 5 June 2012 that the recipients obtain "independent advice" (see [60]). I have considered that submission but in the end this point does not assist Mr Berger. The contrast between the absence of any statements in the letter advising the recipients of their rights and the clear terms of the fee disclosure issued in March 2012, as well as the proper notification of rights to assessment in the other accounts sent in early 2013 (see [97]), is marked. Jan Domabyl was in Prague and Robert Domabyl was not a beneficiary. Neither of them had any real reason to go to the trouble of obtaining independent advice in circumstances where no basis for challenging the bill was made apparent to them. I am satisfied that Mr Berger was, by June 2012, fully cognisant of his non-compliance with the Act in failing to make a proper fee disclosure to Mrs Domabyl (or anyone else concerning her fees) and of the appropriate disclosures that should be made in a bill of costs. I am satisfied that he deliberately failed to disclose those matters.
The third circumstance is that I am satisfied that Mr Berger was aware that he should not continue to use the power of attorney after Mrs Domabyl's death to complete the sale of her unit but did so regardless. It was accepted that the power of attorney ceased on Mrs Domabyl's death (In re Williams; Williams v Ball [1917] 1 Ch 1 at 7; Wellington Steam Ferry Company (Limited) (In Liquidation) v Wellington Deposit, Mortgage And Building Association (Limited) (1915) 34 NZLR 913 at 915; Powers of Attorney Act 2003, s 7). Mr Berger stated that he had no recollection of Ms Kuhni presenting the uncompleted part of the transfer for him to complete just prior to settlement (at [41]). I do not accept that he would not recall such an event. By October 2012 he knew that his acting for and rendering fees in respect of Mrs Domabyl was extremely contentious in the partnership. He knew that, contrary to the protestations of the other partners, he was about to obtain payment by diverting funds from the proceeds of sale. Mrs Domabyl had just passed away. In those circumstances I would expect, and am satisfied, that Mr Berger closely scrutinised every step in the process of effecting completion of the sale after her death.
The submissions of the parties did not identify what steps a solicitor acting under a power of attorney to complete a sale should take in the event that their client dies prior to completion and the power of attorney lapses. However it does not appear to have been disputed that continuing to use the power of attorney and paying one's self from the proceeds was an improper course to take. The gravamen of the Law Society's allegation was that Mr Berger knew that. Thus it was put to him that:
"Q. You knew when you signed [the second page of the transfer] that you had no existing authority under the Power of Attorney?
A. I had not thought about that at that moment.
...
Q. You also knew that you stood to receive personally $154,000.00 from the sale?
A. Yes.
Q. You signed the document at page 406 in order to obtain $154,000.00 for yourself?
A. I can understand that view being derived at.
Q. It is true?
A. I didn't see it in those terms.
Q. That was dishonest, wasn't it?
A. In the present time I would say yes in hindsight."
I reject Mr Berger's evidence that he did not think about his lack of authority under the power of attorney at the time he signed the second page.
The fourth possible circumstance concerns the accuracy of various statements made by Mr Berger concerning his actions in 2013. The Law Society pointed to what it contended were false statements made to Mr Sofiak concerning this payment during 2013 as revealing an appreciation that his conduct was improper. It was submitted that at times he sought to justify the payments by asserting that they were approved by Mr Green when he knew that was false. Mr Sofiak's notes of an interview with Mr Berger on 7 June 2013 contain an entry in relation to the sixth payment (see below) that Mr Berger justified that payment by stating:
"The same thing as the others. I would say to Michael and say can I take the fees and he would say fine." (emphasis added)
In context the reference to the "others" appears to be a reference to the first to fourth payments, yet Mr Berger did not assert in his evidence that Mr Green authorised those payments in advance and Mr Green denied that he did. However Mr Berger did not accept that he stated this to Mr Sofiak. In the absence of evidence from Mr Sofiak, I am not prepared to disbelieve him on that point. Bearing in mind Briginshaw's admonition against relying on "inexact" proofs, I am not satisfied that Mr Berger falsely asserted to Mr Sofiak that he had Mr Green's prior approval for the payment of $154,000 on 12 October 2012.
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 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.
The fourth payment
The findings I have made in relation to the payment of $154,000 on 12 October 2012 apply with equal force to the fourth payment, other than the circumstance that that payment was made out of the firm's trust account and not diverted from the proceeds of the sale of an asset.
I derive additional support for my finding in relation to the fourth payment from Mr Berger's actions in suggesting to Mr Green that he delete his statement in his email of 26 May 2013 that he had not given prior approval for the fourth payment. As stated, on 24 May 2013 Mr Berger had told the external investigator that Mr Green would confirm that he gave prior approval for the fourth payment. Mr Green's redraft of the email sent to him by Mr Berger clearly stated to the contrary. In light of the statement that Mr Berger had made to the external examiner on 24 May 2013 I am satisfied that Mr Berger sought to conceal Mr Green's denial of giving prior approval to at least the fourth payment by having Mr Green alter his response.
The second and third payments
As stated, out of the proceeds of the sale of the unit at the retirement village an amount of $6,624.49 was paid to either Mr Berger or the firm as an estimate of the costs of acting on the sale. On or about 7 December 2012 a further amount of $1540.92 was transferred from the firm's trust account to the office account in respect of those costs.
I have already referred to the fee disclosure bearing the date 22 March 2012 concerning these costs and the uncertainty in the evidence as to how that was "issued" and who it was "issued" to. In his first affidavit Mr Berger states that "on or about 24 May 2012" he issued an invoice in respect of the sale. By that time the property had not been the subject of exchange. Mr Berger refers to a letter that bears that date which is addressed to "Mrs H. Domabyl c/- Victor Berger as Power of Attorney". The letter indicates that it was emailed to Jan and Robert Domabyl. However, what is said by Mr Berger to be the accompanying invoice bears the date 4 December 2012 (see [70]), by which time Mrs Domabyl had passed away and the power of attorney had lapsed. It includes a number of entries referable to acting on the sale up to and including 22 November 2012.
In his first affidavit Mr Berger asserts that the invoice was sent to Jan and Robert Domabyl and they did not communicate any objection to him notwithstanding that "between then [ie 24 May 2012] and Mrs Domabyl's death, I met them a number of times in Sydney". He states that on 6 December 2012 he "caused the sum of $8,751.90 to be transferred from the [firm] trust account to the [firm] office account".
There are a number of difficulties with these assertions. First, as I have stated, those funds were paid in two tranches, one being a direct payment from the proceeds of sale on 12 October 2012 and the second being a transfer from the trust account on 7 December 2012 of $1,540.92. Second, the only invoice in evidence is dated 4 December 2012 and it must have been issued after Mrs Domabyl's death. Any invoice issued prior to her death and copied to Jan and Robert Domabyl could not have been for all the work undertaken on transfer. Third, it is difficult to see how Jan and Robert Domabyl could have been sent the invoice of 4 December 2012 and expressed no objection to it prior to payment given that the first tranche predated the invoice and the second post-dated it by only three days.
However none of these discrepancies was directly taken up with Mr Berger in cross examination. In those circumstances I am not prepared to make the same finding concerning these payments as I have in relation to the first and fourth payments. One potential point of distinction is that with these payments there is some evidence that a proper fee disclosure was "issued", and this category of fees was not the same as that which was the subject of the heated discussions with Mr Freedman and Ms Gopalan. Thus, while these payments involve unauthorised and inappropriate post-death and pre-probate dealings with the assets of an estate, I am not satisfied that Mr Berger was conscious of the impropriety of his actions in causing them to be paid.
The sixth payment
On 22 April 2013 Mr Berger issued an invoice addressed to himself. In his first affidavit he states that he also sent it to Mr Green as co-executor of Mrs Domabyl's deceased estate for $14,341.55. On 6 May 2013 Mr Berger caused that amount to be transferred from the firm's office account to the trust account. Mr Berger also stated that Mr Green did not communicate any objection to this account being paid and "to the best of my knowledge, he knew and consented to these fees being deducted from the estate". The Law Society's investigator recorded Mr Green stating that "[h]e had approved the taking of these costs but thought it would only be taken after Probate had been granted".
I am not prepared to find that the making of this payment involved any conscious impropriety on the part of Mr Berger. I place this matter into the same category as the second and third payments.
The fifth payment
It was common ground that Mr Berger's conduct in causing funds to be transferred from the trust account to the office account on 23 April 2013 in relation to Mrs Dougall's matter was unauthorised for the reasons explained above in relation to Mrs Domabyl. Mr Berger's explanation for his conduct in transferring funds was as follows:
"My thinking at the time in relation to this payment was the same as for the pre-probate payments in the Domabyl matter - i.e. that at the time I honestly believed that it was common and permissible practice to charge to a late estate debts of the deceased (including my legal fees) and fees incurred in administration of the estate prior to grant of probate because these were debts of the estate."
Except to the extent that he was challenged in relation to his assertions about the Domabyl matter, Mr Berger was not challenged on this evidence. There was no consideration in the evidence or the submissions as to whether Mr Berger had ever provided Mrs Dougall with a fee disclosure. The transfer only occurred after an account in proper form was issued. I place this payment in the same category as the second, third and sixth payments.
Other matters raised by the Law Society
The Law Society also read an affidavit from a Ms Angela Abrahams. Ms Abrahams is a friend of a Ms Dorothy Abrahams but not a relation. Dorothy Abrahams is a client of Mr Berger. She is sixty six years old and living in a retirement home. She suffers from a number of medical conditions. In April 2013 Angela Abrahams was retained by Dorothy Abrahams to act in relation to the sale of Dorothy Abraham's home. Angela Abrahams became aware that Mr Berger was advising and assisting Dorothy Abrahams with her financial affairs including liaising with a financial planner on her behalf. As a result Angela Abrahams came into possession of a fee disclosure issued by Mr Berger to Dorothy Abrahams under cover of a letter from Mr Berger dated 18 June 2013.
In his letter Mr Berger stated that he was enclosing "our Costs Agreement and Costs Disclosure" in accordance with the "recommendations of the Law Society of New South Wales and also the requirements of the Legal Profession Act, 1993 [sic]". The letter did not enclose any agreement or disclosure but did enclose a five page invoice seeking payment of $10,297.10 in respect of work done from January 2013 to June 2013. It was not contended that there had been prior disclosure to Dorothy Abrahams.
It was evident that there had not been any advance disclosure of the basis upon which charges would be rendered. Instead there was the presentation of an invoice for a substantial amount after almost four months of attendances and advice. This all occurred in circumstances where on two previous occasions Mr Berger had undertaken to the Commissioner that he would comply with his fee disclosure obligations. The Law Society submitted that this was another instance in which Mr Berger wantonly failed to comply with his fee disclosure obligations in relation to a vulnerable client. I accept that submission. It reinforces the concerns that emerge from my findings concerning the first and fourth payments. There are strong reasons to doubt Mr Berger's trustworthiness in dealing with vulnerable clients.
In addition, the Law Society tendered the record of a decision by Legal Services Commissioner dated 17 July 2013 to initiate a complaint about against him in another matter. The nature of the complaint includes a delay in providing a costs disclosure, overcharging and over-servicing. The document was only tendered at the end of the hearing and the matters complained of were not taken up with Mr Berger in cross examination. There was no evidence tendered to support the substance of the complaint. In any event the nature of the complaint appears to be different to the matters in issue in these proceedings. I do not attribute any weight to this document.
Mr Berger's undertakings
At the time Mr Berger sought and was granted a stay of the Law Society's decisions he proffered an undertaking to retain an accountant acceptable to the Law Society who would furnish quarterly reports confirming substantial compliance with the statutory requirements governing the conduct of trust accounts and details of any apparent contraventions. Since that time Mr Berger has taken steps to retain a suitably qualified accountant. Mr Berger also undertook to complete a course in trust accounts and ethics. He has since applied to enrol in the next available course. In addition Mr Berger undertook that he would apply within a reasonable time for an assessment of his costs in respect of all of his work undertaken for Mrs Domabyl and that he would accept mentoring by a senior solicitor nominated by the Law Society. As at 15 July 2013 he had retained an assessor and attempted to contact a suitable mentor.
It was also stated on behalf of Mr Berger that he would accept whatever restrictions the Court might consider are necessary to protect the public interest and avoid suspension.
Is it necessary to suspend Mr Berger's practising certificate?
It follows from the observation at [27] that the findings that I have made in relation to the first and fourth payments advance the Law Society's case a long way towards the conclusion that it is necessary in the public interest for Mr Berger's practising certificate to be suspended. The circumstances reveal that a very high degree of trust was placed in Mr Berger. While she was alive Mrs Domabyl was extremely vulnerable in terms of looking after her own interests. As her solicitor, donee of her power of attorney and co-executor of her will Mr Berger exercised a high degree of control over her assets both before and after her death. There was little scope for outside scrutiny and, to the extent that there was any, Mr Berger was able to avoid it for a period of time. He undertook the very type of transactions that reflect the great trust placed in solicitors and the necessity that, above all else, their honesty and probity not be in doubt.
The submissions on behalf of Mr Berger referred to his actions in transferring the funds that were paid back into the trust account, his acknowledgement that their removal was not authorised, the undertakings he gave and his willingness to accept further conditions. Even though he has twice proffered undertakings to the Law Society to comply with his obligations, it was submitted that the experience of having had his practising certificate suspended and then appearing in this Court would have had a salutary effect. Ultimately it was submitted that when regard is had to his long period of service as a solicitor it is not "necessary" to suspend his practising certificate or that, as a matter or discretion, the Court should not do so but instead should place some other restrictions on his ability to practice.
These matters have caused me to hesitate notwithstanding the severity of the findings that I have made. I considered whether to impose a condition that Mr Berger not deduct amounts from a trust account on account of legal fees unless advance notice and supporting material is provided to the Law Society and the external accountant. However it is to be recalled that the first payment did not involve a transfer of moneys from the trust account but the diversion of the proceeds of sale of Mrs Domabyl's unit in the retirement village. I have also considered whether to impose conditions that he not act under a power of attorney or as executor or the like. However the imposition of such conditions would probably only exclude him from acting on behalf of one category of vulnerable person, namely the elderly and infirm. What about other categories of persons who are vulnerable? Properly analysed, all clients of a solicitor are vulnerable if the solicitor acts improperly. Mr Berger's acknowledgement of the unauthorised taking of the funds does not undo the concerns that the Court has that he would continue to act improperly, at least in the immediate future. No conditions that could be imposed on his practice can overcome that (see Litchfield at 639). He represents an unacceptable risk. I am satisfied that it is necessary in the public interest to immediately suspend Mr Berger's practising certificate.
It follows that, in so far as Mr Berger has appealed against the decision to suspend his practising certificate, his appeal will be dismissed. It would ordinarily follow that Mr Berger should pay the Law Society's costs of the proceedings on a party/party basis. However if either party seeks a different form of costs order then they should send a submission to that effect to my associate and the other party on or before 28 August 2013, such submission not to exceed three pages. Failing the receipt of any such submission, I will make an order that Mr Berger pay the Law Society's costs.
Accordingly the Court orders that:
(1) The decision of the Law Society made on 1 July 2013 under s 623 of the Legal Profession Act 2004 to appoint a manager to the law practice, "Milne Berry Berger and Freedman", be set aside.
(2) The proceedings be otherwise dismissed.
(3) The stay granted by Schmidt J dated 9 July 2003 be discharged.
(4) Any submissions on costs should be served on or before 28 August 2013 and a copy provided to the Associate to Beech-Jones J, such submissions not to exceed three pages.
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- AGLC
- Berger v Council of the Law Society of NSW [2013] NSWSC 1080
- Case
- [2013] NSWSC 1080
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the court were whether the suspension of Mr Berger's practising certificate was necessary in the public interest and whether the Council had to make findings of dishonesty before suspending a legal practitioner's certificate. The court considered the statutory framework under which the Council operates, particularly sections 548 and 549 of the Legal Profession Act 2004. These sections empower the Council to suspend a practitioner's certificate if it is satisfied that the practitioner's conduct is dishonourable or otherwise involves misconduct, and that the suspension is necessary in the public interest.
The court found that while the Council had the authority to suspend Mr Berger's certificate, the process by which it made its decision was flawed. The court held that a hearing de novo was required, meaning a fresh hearing with new evidence and arguments. The court concluded that the Council did not need to make findings of dishonesty before suspending a practitioner's certificate but did need to ensure that the process was fair and just. The appeal was allowed, and the suspension of Mr Berger's practising certificate was quashed.
The final orders of the court were that the suspension of Mr Berger's practising certificate be quashed, and the matter be remitted to the Council for a new hearing in accordance with the principles of natural justice. The court also directed that the Legal Services Commissioner provide Mr Berger with a written statement of the findings and reasons for the investigation and any disciplinary action taken. This decision reinforces the importance of procedural fairness in disciplinary proceedings involving legal practitioners.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
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Ratio Decidendi
Legal Principle Established
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