Carr v Council of the Law Society of New South Wales

Case •

[2020] NSWCA 276

•

04 November 2020

Court of Appeal


Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: Carr v Council of the Law Society of New South Wales [2020] NSWCA 276
Hearing dates: 30 June 2020
Date of orders: 4 November 2020
Decision date: 04 November 2020
Before: White JA at [1];
McCallum JA at [43];
Emmett AJA at [44]
Decision:

Order that:

1.   The appeal be allowed.

2.   The orders made by the Civil and Administrative Tribunal of New South Wales on 14 January 2020 be set aside.

3.   In lieu of the Tribunal’s orders, order that the application for disciplinary findings and orders filed on 17 October 2018 be dismissed and that the Law Society of New South Wales pay the Appellant’s costs of the proceedings before the Tribunal.

4.   The Law Society pay the Appellants’ costs of the appeal.

Catchwords:

PROFESSIONS AND TRADES — Lawyers — Complaints and discipline — Misappropriation of trust monies — Requirements for dishonesty — Irregular deposits of trust monies into office account — Deposits made without solicitor’s knowledge — Whether overdraft in office account constitutes misappropriation

PROFESSIONS AND TRADES — Lawyers — Complaints and discipline — Attempts to mislead — Requisite element of intention

PROFESSIONS AND TRADES — Lawyers — Complaints and discipline — Unconditional undertakings — Whether undertaking breached where performance would be unlawful

Legislation Cited:

Evidence Act 1995 (NSW) ss 44, 59

Legal Profession Act 2004 (NSW) ss 243, 255

Legal Profession Uniform Law (NSW) s 297

New South Wales Professional Conduct and Practice Rules 2013 (NSW)

Cases Cited:

Brady v Stapleton (1952) 88 CLR 322

Brereton v Legal Services Commissioner [2010] VSC 378

Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

In re Hallett’s Estate (1880) 13 Ch D 696

Kyle v Legal Practitioners’ Complaints Committee (1999) 21 WAR 56; [1999] WASCA 115

Legal Services Commissioner v Brereton (2011) 33 VR 126; [2011] VSCA 241

Peart v Bushell (1827) 2 Sim 38; 57 ER 705

Peters v The Queen (1998) 192 CLR 493; [1998] HCA 7

Re A Solicitor [1966] 1 WLR 1604; [1966] 3 All ER 52

Re French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008

Re Global Finance Group Pty Ltd (In Liq) (2002) 26 WAR 385; [2002] WASC 63

The Council of the Law Society of NSW v Doherty [2010] NSWCA 177

Udall v Capri Lighting Ltd (In Liquidation) [1988] QB 907

United Mining and Finance Corporation Ltd v Becher [1910] 2 KB 296

Wade v Licardy (1993) 33 NSWLR 1

Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 1 AC 669

Texts Cited:

Cordery on Solicitors (5th ed, 1953)

Cordery on the Law Relating to Solicitors (7th ed, 1981, Butterworths)

Halsbury's Laws of England (4th ed, 1983)

Jowett’s Dictionary of English Law (4th ed, 2015, Thomson Reuters)

Category:Principal judgment
Parties: Malcolm Douglas Carr (Appellant)
Council of the Law Society of New South Wales (Respondent)
Representation:

Counsel:
K P Hanscombe QC with D Meyerowitz-Katz (Appellant)
P A Maddigan with T L Y Wong (Respondent)

Solicitors:
Metro Lawyers (Appellant)
Law Society of New South Wales (Respondent)
File Number(s): 2020/94657
Publication restriction: Nil
 Decision under appeal 
Court or tribunal:
Civil and Administrative Tribunal of New South Wales
Jurisdiction:
Occupational Division
Citation:

[2020] NSWCATOD 5

Date of Decision:
14 January 2020
Before:
P Moran, Senior Member
M Sindler, Senior Member
B Thomson, General Member
File Number(s):
2018/316912

HEADNOTE

[This headnote is not to be read as part of the judgment]

The Council of the Law Society of New South Wales (the Council) brought proceedings against the appellant (the Solicitor) for professional misconduct and unsatisfactory professional conduct alleging that he had misappropriated trust money, attempted to mislead a solicitor and breached an unconditional undertaking.

On 3 November 2014, the Solicitor followed instructions to discharge a client’s trust account by transferring the remaining balance to the client. The client then, on 26 November, deposited $7,900 into the Solicitor’s office account in respect of counsel’s fees. Two days later, the Solicitor paid to counsel $5,000 in advance, leaving $2,900 in the account. The client deposited a further $3,127 into the account on 19 December in respect of filing fees. It was common ground that both deposits were trust money.

The Council alleged that the Solicitor misappropriated the $2,900 by using it for transactions on the office account between 28 November 2014 and 18 December 2014 when the account became overdrawn by $160.72. Similarly, it alleged that the Solicitor misappropriated the $3,127 by using it for transactions between 19 December 2014 and 29 January 2015 when the account was overdrawn by $12,231.67.

The Civil and Administrative Tribunal of New South Wales (the Tribunal) found that the Solicitor was aware of the $2,900 by no later than 28 November 2014 when he made the payment to counsel and was either aware or ought to have been aware of the $3,127 on 19 December 2014. It held that the Solicitor utilised those funds between December 2014 and January 2015 and that his known lack of entitlement rendered his knowledge, belief or intent dishonest.

In March 2015, the client engaged Mr Maait as his solicitor, leading to discussions between Mr Maait and the Solicitor about the client’s files and trust monies. The Council alleged that the Solicitor attempted to mislead Mr Maait when, on 17 March 2015, he wrote to Mr Maait stating that he held no funds in trust for the client. The Tribunal concluded that the Solicitor ought to have appreciated and checked that there remained $2,900 still held on trust and was satisfied that the Solicitor misled Mr Maait into believing that no funds were owing to the client.

On 17 March 2020, Mr Maait then sent to the Solicitor two deposit receipts indicating the client’s deposits to the office account. The next day, the Solicitor and Mr Maait had two telephone conversations in which the Solicitor said he would transfer the $2,900 to Mr Maait and that the $3,127 was for a filing fee. The Solicitor gave written confirmation that he would transfer the $2,900. The Solicitor deposed that he asked Mr Maait on the telephone to provide his trust account details in writing and a signed transfer authorisation. However, Mr Maait’s file note of the conversations did not mention that request. The Tribunal found the Solicitor’s words constituted an unconditional undertaking and that “the weight of the evidence” established that the conditions deposed to by the Solicitor were not discussed.

The principal issues before the Court were:

  1. Whether the Solicitor breached an unconditional undertaking to transfer $2,900;

  2. Whether the Solicitor attempted to mislead another solicitor by representing that he held no funds on trust for a previous client;

  3. Whether the Solicitor misappropriated $3,127 of client trust money; and

  4. Whether the Solicitor misappropriated $2,900 of client trust money.

The Court, allowing the appeal (White JA at [42], McCallum JA at [43], Emmett AJA at [129]), held:

As to issue (i)

Per Emmett AJA, McCallum JA agreeing at [43]

  1. It was not open to the Tribunal to be satisfied that the conditions and qualifications of the undertaking deposed to by the Solicitor were not discussed with Mr Maait: [99]-[112]

Per White JA and Emmett AJA, McCallum JA agreeing at [43]

  1. The Tribunal erred by allowing cross-examination of the Solicitor about Mr Maait’s file note which had only been admitted for the limited purpose of establishing jurisdiction, not as to the truth of its contents: [8], [111]

  2. Irrespective of how the undertaking was expressed, the Tribunal erred in finding a failure to transfer the $2,900 constituted a breach as it would have been unlawful for the Solicitor transfer client money without written authorisation: [12]-[20], [118]-[119]

As to issue (ii)

Per White JA and Emmett AJA, McCallum JA agreeing at [43]

  1. An attempt to mislead entails an element of deliberate conduct on the part of the Solicitor. The Tribunal erred as it found that the Solicitor ought to have known his statement was misleading and that Mr Maait was misled, neither of which established the requisite element of intention: [2]-[6], [120]-[123]

As to issue (iii)

Per Emmett AJA, White and McCallum JJA agreeing at [24] and [43]

  1. The Tribunal had no basis to conclude that the Solicitor was aware of the $3,127 deposit between December 2014 and January 2015 against his unchallenged evidence that he was not aware of it until 17 March 2015: [24], [127]-[128]

As to issue (iv)

Per Emmett AJA, McCallum JA agreeing at [43]

  1. It was not alleged that the Solicitor’s dealings with the $2,900 constituted a breach of trust. There was no misappropriation of any property of or any money belonging to the client because upon deposit, the money ceased to be the client’s property and became the property of the Solicitor’s bankers, being transformed into a debt owed by the bankers to the Solicitor: [124]-[126]

Per White JA

  1. There was a misappropriation because the client had a charge over the debt securing their entitlement to repayment, thus, reducing the account below $2,900 reduced the value of charge and by reducing the account into overdraft the right to trace, to which the charge is ancillary, would be lost. The Solicitor also benefited as the client’s funds delayed his account being overdrawn, reducing his interest expenses: [25]-[35]

  2. However, the misappropriation was not dishonest as there was no evidence that the Solicitor knew that the withdrawals would reduce the account balance below $2,900 or create an overdraft: [36]-[42]

Judgment

  1. WHITE JA: The circumstances giving rise to this appeal are set out in the reasons for judgment of Emmett AJA. These reasons assume a familiarity with his Honour’s reasons. I shall use his Honour’s abbreviations.

  2. Ground 1(a) of the Law Society’s Application for Disciplinary Findings and Orders was that the Solicitor attempted to mislead the Client’s new solicitor, Norris Somers Maait Lawyers, by advising on 17 March 2015 that no funds owing to the Client were held in the Solicitor’s trust account to meet costs and/or counsel fees when in fact such moneys were held. As Emmett AJA says (at [120]) the allegation that the Solicitor attempted to mislead Mr Maait necessarily entailed an allegation of deliberate conduct by the Solicitor. In its written submissions before the Tribunal the Law Society contented itself with a submission that the Solicitor made a false and misleading statement to Mr Maait in his letter of 17 March 2015 (quoted by Emmett AJA at [56]) in saying that:

“We are holding no funds in trust because [the Client] directed us to transfer the balance of all moneys held in trust to him, which we did.”

  1. On the other hand, counsel for the Solicitor submitted before the Tribunal that because the allegation was that the Solicitor attempted to mislead Mr Maait, the relevant question was what was the Solicitor’s intention in making the representation. Counsel submitted that the Law Society was required to establish that when the letter of 17 March 2015 was sent the Solicitor turned his mind to whether he held moneys on trust for the Client, knew that he did hold moneys on trust for the Client, and notwithstanding that knowledge, deliberately misrepresented to Mr Maait that he held no moneys on trust for the Client with the intention of misleading Mr Maait. The Solicitor’s evidence was that he did not intend to mislead Mr Maait and that he was intending to refer to prior instructions from the Client to release all the moneys held in trust which he directed a staff member to do. The Solicitor accepted that the $7,900 paid into his office account of which he was aware, ought to have been transferred to his trust account. He submitted that his failure to do so did not give rise to an inference that he intended to mislead Mr Maait. Rather, he acted defensively to accusations made by Mr Maait in Mr Maait’s facsimile of 16 March 2015 (quoted by Emmett AJA at [55]).

  2. The Tribunal did not grapple with the Solicitor’s submission, except to note that he denied any intention to mislead Mr Maait. The Tribunal found:

“23    We accept the Law Society's submissions and find Ground 1(a) established. Accordingly, we find Mr Carr guilty of unsatisfactory professional conduct.

24 The 17 March 2015 facsimile was not confined to monies being held in the Solicitor's trust account; rather ‘what funds were being held on trust’. The Solicitor was aware that the $7,900 had been received and either appreciated at the time of becoming aware of its receipt, or ought to have appreciated, that whilst the money was not deposited into a trust account it was nevertheless trust money as defined in s 243 of the 2004 Act. The Solicitor concedes that he had asked his client for ‘… funds in trust for counsel’. He ought to have appreciated and checked before sending the 17 March email, that there remained $2,900 held on trust of the $7,900 paid.

25    The Tribunal is satisfied, to the requisite Briginshaw standard, that by informing Mr Maait in his facsimile letter of 17 March 2015 that he was at that point holding no funds in trust, the Solicitor misled Mr Maait into believing that no funds owing to Mr Nenadic were held on trust by the Solicitor to meet costs and/or counsel fees when in fact such monies were held.”

  1. The Tribunal’s finding that the Solicitor misled Mr Maait into believing that no funds owing to the Client were held on trust by the Solicitor to meet costs and/or counsel fees, when in fact such moneys were held, was not a finding that the Solicitor attempted to mislead Mr Maait. The acceptance of the Law Society’s submission did not amount to such a finding as the Law Society had not addressed the relevant question. It follows that the appeal in relation to ground 1(a) must be upheld. The more difficult question is whether it should follow that the charge should be dismissed, or whether the matter should be remitted to the Tribunal, differently constituted, for redetermination.

  2. I agree with Emmett AJA that in the absence of any submission by the Law Society to the Tribunal of intention to mislead (and in the absence of a finding of such an intention) the matter should not be remitted to the Tribunal for a rehearing of the charge. It would not be just for the Law Society to be given the opportunity on a rehearing to address matters it failed to address before the Tribunal.

  3. Ground 2 of the Law Society’s application was that the Solicitor failed to comply with an undertaking given to the Client’s new solicitor to transfer $2,900, being moneys held in trust for the Client. The undertaking relied upon was contained in the letter of 18 March 2015 (quoted by Emmett AJA at [63]). The words relied upon were:

“I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00.”

  1. Before the Tribunal the Solicitor relied upon his uncontradicted evidence of his telephone conversation with Mr Maait that preceded the sending of the facsimile letter of 18 March 2015 in which the Solicitor said that he asked Mr Maait to send his trust account details and a written authority from the Client, and Mr Maait said he would do so. The Tribunal relied upon Mr Maait’s file note of the conversation. But that file note had not been admitted as evidence of the truth of its contents. The Solicitor was cross-examined on Mr Maait’s file note over objection by the Solicitor’s counsel. The objection to the cross-examination ought to have been upheld for the reasons given by Emmett AJA.

  2. The Tribunal found:

“66    We accept the Law Society's submissions that the Solicitor's facsimile letter of 18 March 2015 contained an unqualified undertaking that the Solicitor would transfer the remaining $2,900 that had been held on Mr Nenadic's behalf to Mr Maait. Whilst the facsimile did not use the word ‘undertaking’, the use of that word is not, we find, essential in determining the issue of whether or not what was given was an undertaking. The words used were clear and unequivocal. They were chosen by the Solicitor himself. Mr Maait did not ask the Solicitor to agree on a formulation of words of Mr Maait's choosing. The Solicitor authored the facsimile letter. As the facsimile was forwarded within a short period of time after the two earlier telephone conversations referred to in the evidence, and as the facsimile purported to confirm what was stated in those telephone conversations, if the qualifications that the Solicitor contends were discussed with Mr Maait, namely the provision of the trust account details and the client's authority, it is significant that those qualifications were not recorded in the Solicitor's letter.

67    As a solicitor of many years[’] experience it must have been obvious that what was being discussed with Mr Maait, and what was the subject of the facsimile, were very serious and pressing matters given the necessity for Mr Maait to familiarise himself with the files that had been delivered, ascertain the position in relation to whether counsel had been paid, whether counsel was preparing submissions, and as to the filing of the Appeal. Knowing the level of urgency and importance involved (or in circumstances where the Solicitor ought to have realised such urgency and importance) he ought to have appreciated that, by giving the unconditional Undertakings that we find he gave by his 18 March 2015 facsimile, his fellow practitioner Mr Maait would have expected an immediate honouring of it or, if the Solicitor was unable to honour the Undertaking, that he would have received a further communication from the Solicitor asking to be relieved from compliance with and - instead – specifying in writing that the transfer of the monies could not take place until Mr Maait forwarded his trust account details and the written authority.

...

71    Whilst the Solicitor submits that the 18 March email ought be read in conjunction with, and in light of, the two earlier telephone conversations we find, firstly, that what was said in the facsimile letter of 18 March 2015 itself constituted an unconditional and unequivocal undertaking to transfer the $2,900 to Mr Maait's trust account. Secondly, we do not accept that the qualifications or conditions that the Solicitor described at [120] of his affidavit [Exhibit R1] occurred. The weight of the evidence, in particular the contemporaneous 18 March 2015 letter by which the earlier telephone conversations were purportedly confirmed, the failure on the Solicitor's part to record the qualifications or conditions subsequent to his 18 March facsimile; and in the face of Mr Maait's March, April and May letters leads us to be comfortably satisfied to the Briginshaw standard that the conditions and qualifications deposed to by the Solicitor were not the subject of discussion with Mr Maait.”

  1. The Tribunal’s rejection of the Solicitor’s evidence as to his conversation with Mr Maait on 18 March 2015 in para [71] of the Tribunal’s reasons was not expressed to be based upon an acceptance of the contents of Mr Maait’s file note. But it is clear that the particular matters referred to in para [71] were not the only matters that the Tribunal took into account in assessing the “weight of the evidence”.

  2. On appeal, the Solicitor submitted that the Tribunal ought to have found that the “undertaking” in the letter of 18 March 2015 was qualified by the matters the Solicitor deposed to having been said in the telephone conversation that preceded the sending of the letter. That would require a finding that the Tribunal should have accepted the Solicitor’s evidence. It does not follow from the fact that one of the grounds upon which it can be inferred the Tribunal relied in rejecting the Solicitor’s evidence was wrong, that the Tribunal could not properly have rejected that evidence, including for the more “particular” grounds referred to in para [71] of the Tribunal’s reasons.

  1. The Solicitor submitted that to be liable to disciplinary proceedings for failure to comply with an undertaking, the undertaking must be capable of being performed ab initio, citing Wade v Licardy (1993) 33 NSWLR 1 per Bryson J at 7-8. Bryson J was considering the summary jurisdiction of the Court, in clear cases, and as part of its inherent powers, to compel compliance by solicitors with undertakings or to order payment of compensation where enforcement of the undertaking is not possible. His Honour said (at 7-8):

“The existence of such a jurisdiction in England is strongly borne out by case law, and there are recent significant cases.

Re A Solicitor [1966] 1 WLR 1604; [1966] 3 All ER 52 per Pennycuick J at 1607-1608; 55 cited the following passage from Cordery on Solicitors, 5th ed (1953) at 159 and it would appear that his Lordship approved of it:

‘Whether an undertaking given by a solicitor to the court, his client or a third party may be enforced against him personally depends upon the facts of each case, but the undertaking must be a personal undertaking and given by the solicitor professionally, ie, as a solicitor; it must be clear in its terms; the whole of the undertaking must be before the court; and the undertaking must be one which is capable of being performed ab initio … In enforcing undertakings the court is not guided by considerations of contract, but aims at securing honesty of conduct in its officers.’”

  1. The authority relied upon for the above statement in the 5th edition of Cordery on Solicitors was Peart v Bushell (1827) 2 Sim 38; 57 ER 705.

  2. In Udall v Capri Lighting Ltd (In Liquidation) [1988] QB 907, Balcombe LJ (with whom Neill LJ agreed) said of the statement in question in Cordery (at 918):

“(7)    Where it is inappropriate for the court to make an order requiring the solicitor to perform his undertaking, e.g. on the grounds of impossibility, the court may exercise the power referred to in paragraph (3) above and order the solicitor to compensate a person who has suffered loss in consequence of his failure to implement his undertaking: see John Fox v. Bannister, King & Rigbeys. It is stated in the text books (see Cordery on the Law Relating to Solicitors, 7th ed. (1981), p. 122; Halsbury's Laws of England, 4th ed., vol. 44 (1983), para. 255, pp. 193–194) that the court will not enforce an undertaking which is incapable of being performed ab initio. If this statement means no more than that the court will make no order in vain, then I would not quarrel with it. If, however, it is intended to suggest that the court will not order compensation for breach of an undertaking which is ab initio incapable of performance, then it is difficult to understand the principle on which it is based and I doubt whether it is an accurate statement of the law. It appears to depend on the authority of Peart v. Bushell, 2 Sim. 38 , and I agree with the criticism of that case made by Hamilton J. in United Mining and Finance Corporation Ltd. v. Becher [1910] 2 K.B. 296, 306. However, the point does not arise in the present case and I need not consider it further.”

  1. Peart v Bushell said nothing more than that an undertaking which was impossible to perform would not be enforced. The Vice Chancellor left open in that case the possibility that a claim for damages or compensation could be made on the undertaking, despite the impossibility of performance (at 39). In the current version of Cordery on Solicitors, now called Cordery on Legal Services the passage in the 5th edition has been replaced by the following:

“The court still retains its inherent jurisdiction to discipline a solicitor and this includes power to strike a solicitor off the roll. Where it is no longer possible for the undertaking to be performed, then the court can direct the solicitor to pay compensation.” (at E – 273)

  1. Section 255(1)(b) of the Legal Profession Act 2004 (NSW) necessarily qualified the Solicitor’s undertaking. Section 255(1)(b) provided:

“255   Holding, disbursing and accounting for trust money

(1)     A law practice must:

...

(b)     disburse the trust money only in accordance with a direction given by the person.

Maximum penalty: 50 penalty units.”

  1. On any view, the Solicitor could and should have responded to Mr Maait’s later demands by asking for the Client’s written authority. On his evidence, he could have reminded Mr Maait that Mr Maait had agreed to provide that authority. I agree with McCallum JA that the Solicitor’s explanation of his advice from LawCover, namely that, according to the Solicitor, he was advised not to communicate further with Mr Maait, provided no proper basis for not reminding Mr Maait of the need for such an authority.

  2. By the same token, Mr Maait ought to have appreciated that need.

  3. But the Solicitor was not charged with failing to pursue Mr Maait to provide a written authority to enable him to comply with his undertaking. He was charged with breach of the undertaking. It would not have been lawful for him to have complied with the undertaking in the absence of a direction from the Client.

  4. For these reasons, and those of Emmett AJA, the Tribunal erred in finding that the Solicitor’s failure to transfer the funds forthwith was a breach of his undertaking and constituted professional misconduct.

  5. A feature of this case is the narrowness of the charges and the grounds for the charges brought against the Solicitor. The charges did not include a charge that the Solicitor failed to pay into his trust account money he held on trust for the Client. Rather, ground 3 alleged that the Solicitor misappropriated the sums of $2,900 and $3,127. Moreover, it was common ground that the allegation of misappropriation required proof by the Law Society that the Solicitor acted dishonestly. In the written submissions of the Law Society before the Tribunal the Law Society accepted that:

“An allegation of misappropriation against a legal practitioner is not made out unless ‘dishonesty’ is proved”, citing Brereton v Legal Services Commissioner [2010] VSC 378 per Bell J at [50]-[51]).

  1. This was so, notwithstanding the doubt expressed by Tate JA (with whom Nettle and Ashley JJA agreed) in Legal Services Commissioner v Brereton (2011) 33 VR 126; [2011] VSCA 241 at [69] and [74] as to whether dishonesty is always an integral element of a charge of misappropriation within a professional disciplinary context. Nonetheless, as in Brereton, in this case the Law Society assumed the task of establishing dishonesty in respect of ground 3.

  2. There were two aspects to ground 3. The alleged misappropriations were of the sums of $2,900 and $3,127. The sum of $2,900 was the balance of the sum of $7,900 deposited in cash into the Solicitor’s Office Account on 26 November 2014. The sum of $3,127 was cash deposited by the Client into the Office Account on 19 December 2014. The Law Society alleged that the misappropriation of $2,900 was effected by transactions on the Office Account between 28 November 2014 and 18 December 2014. The misappropriation of the sum of $3,127 was alleged to have been effected by transactions on the Office Account between 19 December 2014 and 29 January 2015.

  3. In relation to the sum of $3,127, the Solicitor’s evidence was that he was unaware of the deposit until 17 March 2015, which was after the period in which the sum was said to have been misappropriated. As the Law Society alleged dishonest misappropriation, and as there was no evidence, and it was not put to the Solicitor, that he was aware of the deposit of $3,127 prior to 29 January 2015, the allegation of dishonest misappropriation of that sum could not be sustained. I agree with the reasoning of Emmett AJA in respect of the allegation of misappropriation of the sum of $3,127.

  4. I take a different view in respect of the allegation of misappropriation of the sum of $2,900. According to the bank statement for the Office Account, at the close of business on 27 November 2014 the Office Account was in credit in the sum of $11,958.30. This sum included the cash deposit of $7,900 made on 26 November. On 28 November there were debits to the account, including the transfer of $5,000 to Mr Sweet that, at the end of that day, left a closing credit balance of $5,183.15.

  5. The bank statement for the period 1 December to 31 December 2014 shows a closing credit balance on 3 December 2014 for the Office Account of only $2,683.91. The account moved into a credit balance on 5 December of a sum of more than $2,900 as a result of various credits. The credit balance moved again to below $2,900 on 16 December and remained below $2,900 until 17 December. The bank statement shows that on 18 December there were three debit entries that put the account into overdraft of $160.72 (if processed chronologically). There was also a credit on the same day to that account in the sum of $8,000 putting the account in credit in the sum of $7,839.28. The bank statement does not show the time of the day on 18 December on which the debits and credits were processed by the bank. Nor was there evidence as to whether a running account for the Office Account was kept by the bank within the day or only at the end of the day. In the absence of evidence as to when the transfer of $8,000 was made to the account on 18 December, it cannot be inferred that the account ever moved into overdraft on 18 December.

  6. It is true that on 1 January 2015 the bank debited the account with interest of eight cents which would appear to be only explicable with the bank’s asserting that the account had gone into overdraft, but there was no evidence as to the basis upon which the bank was entitled to charge that interest.

  7. Upon the Client’s paying cash into the Solicitor’s Office Account, the cash became the property of the Solicitor’s bank and the debt owed by the bank to the Solicitor, represented by the credit balance of the account, was increased. It does not follow that subsequent transactions on the account that reduced the value of the Solicitor’s chose in action against the bank to below $2,900 did not involve a misappropriation of the Client’s money (In re Hallett’s Estate (1880) 13 Ch D 696 at 711; Brady v Stapleton (1952) 88 CLR 322 at 337-338; Re French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at 381, [61]; 411, [153]).

  8. Whilst the Office Account was in credit for more than $2,900, all withdrawals from the account would be treated as payment of the Solicitor’s own money and not that of the Client. The Client had a charge over the debt owed by the bank to the Solicitor to secure the moneys owed to him. The Client’s right to a charge and the Client’s right to trace were not affected by the fact that the money was paid into a bank account.

  9. The Solicitor gave evidence that he had an overdraft facility of $20,000. The Tribunal rejected that evidence, saying that there was “insufficient documentary evidence of such an overdraft to enable us to conclude on balance of probabilities that such an overdraft existed.” (at [99](a)). But there is nothing inherently improbable in the Solicitor’s evidence. The bank statement for the period 1 January to 31 January 2015 records a statement that “your limit is now $20,000”. The Solicitor submitted that even though the account had not gone into overdraft, because he had an overdraft facility available to him, he would be treated as having used his own moneys and not those of his Client in making the withdrawals from the account where the credit balance fell below $2,900. He submitted that the position was the same even if the account went into overdraft on 18 December 2014.

  10. I do not agree. At the least, by reducing the balance of the account below $2,900, the Solicitor diminished the Client’s charge over the account to secure the Client’s entitlement to payment. On the account going into overdraft the right to trace, to which the charge is ancillary, would be lost (Re Global Finance Group Pty Ltd (In Liq) (2002) 26 WAR 385; [2002] WASC 63 at [129]-[135]; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 1 AC 669 at 700, 706-707).

  11. Moreover, even if in a dispute between the Solicitor and Client, or the bank and the Client, or a third party creditor and the Client, the Solicitor would be taken to have used his own money to meet the withdrawals from the account by drawing on the overdraft, rather than using the Client’s money, that is not what happened. The Solicitor had the benefit of the Client’s moneys in not incurring interest that would have been payable had the account been overdrawn on the occasions (set out above at [26]) where the credit balance fell below $2,900.

  12. It was said in argument by counsel for the appellant that “the essence of the misappropriation is using the money to the detriment of the true owner”.

  13. I do not accept that that is necessarily so. Misappropriation at base means a wrongful conversion of or dealing with property, choses in action, or things belonging to another (The Council of the Law Society of NSW v Doherty [2010] NSWCA 177 at [41]-[43]; Jowett’s Dictionary of English Law (Thomson Reuters 4th ed, 2015)). Whether that is to the detriment of the owner as opposed to the benefit of the wrongdoer, or a third party, is not determinative. It may be all three.

  14. In any event, the misappropriation of the Client’s funds was to the detriment of the Client by diminishing the value of the Client’s charge over the credit balance of the account to secure repayment of the moneys appropriated.

  15. I regard the payments from the Office Account that reduced the credit balance of that account below $2,900 as a misappropriation of the Client’s moneys, although not on that account necessarily a dishonest misappropriation. The Law Society alleged only a dishonest misappropriation.

  16. In cross-examination the Solicitor accepted that he “probably” would have intended to make each of the transactions that were represented by payments debited from the Office Account between 28 November and 18 December 2014.

  17. However, there was no evidence as to whether the Solicitor knew that the credit balance of the account fell below $2,900 when those payments from the account were made. The Solicitor gave evidence in re-examination that he gave no consideration at the time of the transactions on the account to the deposit that had been made by the Client.

  18. The Tribunal made the following finding:

“97    We accept the Law Society's submissions that:

(a)    The relevant acts of the Solicitor were his making, or authorising the making of, the transactions on the Office Account in the period 28 November 2014 to 18 December 2014 in respect of the $2,900 deposit, and in the period 19 December 2014 to 29 January 2015 in relation to the $3,127 deposit.

(b)    The knowledge, belief or intent of the Solicitor to render the abovementioned acts dishonest were the Solicitor's known lack of entitlement to either of the $2,900 or the $3,127, and his appropriation of those amounts, when unauthorised, by the making of the transactions.

(c)    The Solicitor subjectively had the knowledge, belief or intent that his actions were dishonest as he had requested funds from Mr Nenadic for Counsel and filing fees, had agreed not to charge Mr Nenadic for work on the Appeal Proceedings, was aware that the Office Account was not a trust account, was aware that the $7,900 had been deposited into the Office Account and was aware or ought to have been aware of the $3,127 deposit. Despite being so aware (or in relation to the $3,127, in circumstances where he ought to have been aware) the Solicitor nevertheless made withdrawals on the account utilising the monies that Mr Nenadic had deposited. There was, accordingly, misappropriation as alleged.”

  1. As the Law Society alleged that the Solicitor was guilty of dishonest misappropriation of the sum of $2,900, it was incumbent of the Law Society to show that when withdrawals were made from the Office Account between 28 November and 18 December 2014, the Solicitor then knew that moneys standing to the credit of the account included the balance of $2,900 paid into the account on 26 November, and, with that knowledge, directed, or authorised, or knew of, the withdrawals from the account that reduced the balance of the account to below $2,900, and thereby acted dishonestly according to the standards of a solicitor (Peters v The Queen (1998) 192 CLR 493; [1998] HCA 7 applied to the circumstances of this case). The Solicitor’s evidence was that he did not turn his mind to the deposit made by the Client to the account. The Tribunal was not bound to accept that evidence, but there was no evidence that the Solicitor knew that the withdrawals effected between 28 November and 18 December 2014 would reduce the balance of the account to below $2,900.

  2. I conclude that the Law Society did not establish before the Tribunal that the Solicitor had dishonestly misappropriated the Client’s payment into his Office Account of $2,900. Had the Tribunal rejected the Solicitor’s evidence that when the withdrawals from the account were made, he did not consider the Client’s deposit, and had there been evidence that the Solicitor knew of the balance of the account, then I would have upheld the Tribunal’s finding on this count. However, there was no evidence as to the Solicitor’s knowledge of the balance of the account, and the Tribunal did not address his evidence.

  3. For these reasons I agree with the orders proposed by Emmett AJA.

  4. McCALLUM JA:  I agree with Emmett AJA.  I wish only to add one remark.  As his Honour has observed, aspects of the solicitor’s conduct left much to be desired.  One was his failure to respond to Mr Maait’s repeated communications over several months pursuing release of the moneys held on trust.  The solicitor’s explanation was that he had given notification to LawCover of a potential claim and had been advised that he was not to communicate further with Mr Maait in relation to his allegations.  If that was the solicitor’s understanding of the effect of LawCover’s advice, it was misconceived.  No advice from LawCover could prevent him from complying with a request of that kind, concerning moneys held on trust for a former client.  To the extent that he understood otherwise, the proper course was to revert to LawCover to assert the need to comply with that higher duty.

  5. EMMETT AJA:

Introduction

These proceedings are concerned with the conduct of Mr Malcolm Carr (the Solicitor) in relation to funds received by him from a client, Mr Zvonko Nenadic (the Client). On 14 January 2020, in proceedings brought by the Council of the Law Society of New South Wales (the Law Society), the Civil and Administrative Tribunal of New South Wales (the Tribunal), for reasons published on that day, made an order that the Solicitor had been guilty of professional misconduct and unsatisfactory professional conduct in relation to the funds. The Tribunal also ordered that the matter be listed for further hearing on penalty. By notice of appeal filed on 25 March 2020, the Solicitor appeals to this Court from the orders made by the Tribunal on 14 January 2020.

The Solicitor and the Client

  1. The Solicitor acted for the Client continuously between 11 December 2011 and 11 March 2015. In the course of so acting, the Solicitor acted in relation to proceedings in the Equity Division of the Supreme Court between the Client and the Client’s brother in connection with the estate of their mother. The proceedings were heard by Young AJ and the Client was unsuccessful in the proceedings. On 30 September 2014, the Solicitor filed a notice of intention to appeal from certain of the orders made by Young AJ on 2 September 2014. The Solicitor agreed to act on a pro bono basis in respect of the proposed appeal.

  2. Mr Russell Sweet of Counsel was briefed to appear on behalf of the Client in those proceedings. On 13 October 2014, in accordance with instructions from the Client, the Solicitor instructed Mr Sweet to prepare a memorandum of advice on the prospects of a successful appeal from the orders made by Young AJ. On 24 October 2014, in accordance with instructions from the Client, the Solicitor instructed Mr Sweet to cease preparing the memorandum of advice. On 21 November 2014, Mr Sweet emailed the Solicitor confirming that the Client had instructed the Solicitor to resume preparation of the advice.

  1. The Solicitor subsequently asked the Client to provide funds for Mr Sweet’s fees and filing fees for the proposed appeal. On 26 November 2014, the Client deposited the sum of $7,900 in cash to the credit of the Solicitor’s office account with the Commonwealth Bank of Australia (the Office Account). On 28 November 2014, the Solicitor transferred the sum of $5,000 from the Office Account to Mr Sweet in partial payment of a tax invoice from Mr Sweet dated 4 November 2014.

  2. On 17 December 2014, the Solicitor filed a notice of appeal on behalf of the Client and received an invoice from the Supreme Court for a filing fee in the sum of $3,127. However, because the Solicitor was acting pro bono, the Registrar of the Court of Appeal indicated that the filing fee would not be payable by the Client until judgment was given in the appeal.

  3. It must be assumed that the Solicitor requested the Client to pay that sum, since, on 19 December 2014, the Client deposited the sum of $3,127 in cash for the credit of the Office Account. However, the Solicitor asserted that he did not ask the Client to pay that sum into the Office Account and that the deposit to the Office Account was made without notice to him. He asserted that he was first notified of the deposit when he received a copy of the relevant deposit receipt on 17 March 2015 in circumstances to which reference will be made below.

  4. On 2 March 2015, the Client signed an authority for “all files and documents” held by the Solicitor, or under his direction, to be transferred to Mr John Maait of Norris Somers Maait Lawyers (Mr Maait). On 5 March 2015, Mr Maait wrote to the Solicitor by facsimile notifying that Norris Somers Maait Lawyers were then acting for the Client and enclosing a copy of the authority of 2 March 2015.

  5. The Solicitor responded on the same day saying that submissions had been filed in the Court of Appeal on that day and that he would arrange for the files “in the current matter” to be sent to Mr Maait. He said that he would do his best to get all the files to Mr Maait as best he could but that older files belonging to the Client were currently in storage and that he would arrange for them to be sent to Mr Maait. The Solicitor said that he would inform Mr Sweet that he was no longer briefed in the matter.

  6. At 5.20 pm on 5 March 2015, Mr Maait sent an email to the Solicitor requesting him to advise Mr Sweet that his retainer was not being terminated by the Client, despite his decision to change solicitors. The email said that the Client had already paid for completion of certain advices by Mr Sweet and wanted him to see it through and that Mr Maait expected that he would be continuing to brief Mr Sweet in the matter.

  7. On 10 March 2015, Mr Maait sent an email to the Solicitor, saying he could do nothing about the matter until he had the files from the Solicitor and “the moneys information” that he had requested. The Solicitor responded on the same day attaching a trust account ledger for the Client. The Solicitor said that he believed fees of about $3,000 were owed to Mr Sweet but that he had not been able to contact Mr Sweet to verify the outstanding amount. The Solicitor said that he had agreed not to charge the Client any further fees when he indicated that he wanted to appeal from the orders made by Young AJ.

  8. On 16 March 2015, Mr Maait sent a letter by facsimile to the Solicitor, saying that the Client had paid into the Solicitor’s “trust account” all fees due and payable to Mr Sweet, specifically to complete an advice on the prospects of his appeal as well as the submissions for the appeal. On 17 March 2015, the Solicitor sent a letter to Mr Maait by facsimile relevantly saying as follows:

“We are holding no funds in trust because [the Client] directed us to transfer the balance of all monies held on trust to him, which we did. If you require any further specific information on the trust statement do not hesitate to contact us.”

It is relevant that, on 3 November 2014, on instructions from the Client, the Solicitor had transferred the sum of $251,608.02 to the Client. That was the balance standing to the credit of the Client in the Solicitor’s trust account at that time.

  1. At 4.23 pm on 16 March 2015, Mr Maait sent a letter to the Solicitor complaining that he had received no reply or acknowledgement about the availability of the Client’s files for collection. Mr Maait said in the letter that he had telephoned the Solicitor’s office earlier in the afternoon and left an extremely urgent message for the Solicitor to call back. Mr Maait’s letter then relevantly said as follows:

“…

2.   [The Client] instructs us that he has paid into your trust account all fees due and payable to Mr Sweet specifically to complete an advice on the prospects of his appeal, as well as the submissions;

3.   Mr Sweet has advised that there are fees due to him but unpaid by you as his instructing attorney;

4.   Mr Sweet is yet to complete what he has sent to us as being partially completed submissions which we understand will not be completed by him until his fees are paid.

You have recently provided to us a trust account statement showing transactions totalling some $111,223.66, with a zero balance of funds in trust. The statement shows numerous credits and debits and reversal of those debits on the same days. We seek an explanation for what funds have been transacted through your trust account and the purposes of those transactions. More importantly, we require your confirmation by return that [the Client] did pay you sufficient funds for payment to Mr Sweet and whether those funds have been so applied or will be applied to enable completion of the submissions by Mr Sweet.

We seek an explanation specifically as to why Mr Sweet has not completed the submissions, if indeed payment or assurance of payment of his fees have been made or given by the Client to you and by you to Mr Sweet.

Please make available [the Client’s] files for collection as a matter of urgency, hopefully no later than midday tomorrow, including also the foregoing information and disbursement of all funds provided by [the Client] to you, [c]opies of all invoices rendered by you to date and copies of all counsel fees and other disbursement invoices paid by you for or on behalf of [the Client].”

  1. At 11.33 am on 17 March 2015, the Solicitor sent a facsimile letter to Mr Maait in response to his letter of 16 March 2015, which, the Solicitor said, had not been received until 17 March 2015. The Solicitor’s letter relevantly said as follows:

“You have made a number of serious allegations to which I will respond as follows:

1.   You first requested that we return [the Client’s] files on 5 March 2015. Since having relocated offices, we advised you that some of [the Client’s] files would need to be recovered from storage. All the files have been ready for collection since 13 March 2015.

2.   [The Client’s] instructions were on a start-stop-start basis subject to frequent doubts about wanting to proceed with the appeal. Counsel, Mr Sweet who has been drafting the submissions for the Court of Appeal says he found that [the Client’s] indecisiveness very frustrating.

3.   The trust account transactions are explained in the itemised document attached, which was also provided to [the Client]. We attach copies of our invoices together with Counsel’s invoices as you required. …

There were multiple entries which arose as a result of a bookkeeper, who transferred the entries from my old system into the new … database. The accounts have been audited several times and no issues have arisen. …

We are holding no funds in trust because [the Client] directed us to transfer the balance of all monies held in trust to him, which we did. If you require any further specific information on the trust statement do not hesitate to contact us.

4.   Mr Sweet was provided with all necessary documentation to finalise the submissions for appeal. However, Mr Sweet became extremely frustrated with [the Client] who has never been entirely committed to his instructions. We understand that you are in communication Mr Sweet [sic], and you may clarify exactly this with Mr Sweet. Mr Sweet says he provided you with his outstanding account and we assume you will arrange for [the Client] to pay this.

5.   We agreed not to charge [the Client] in relation to commencing his Appeal. You have advised us in writing that [the Client] will look to us for any damages for loss, and accordingly we have notified Law Cover.”

  1. At 11.50 am on 17 March 2015, Mr Maait sent a facsimile letter to the Solicitor saying, relevantly, as follows:

“We refer to your facsimile of today and reply to your number paragraphs as follows:

1.   Despite the known urgency in our several faxes to your office, we were not notified until this letter from you today that the files were available for collection;

2.   We are yet to obtain [the Client’s] instructions about those allegations. What we can say at this stage is that they are at odds with what Mr Sweet has advised us to date regarding the history of his involvement in the matter;

3.   [The Client] has instructed us previously that at least two amounts had been deposited by him into your trust account between 20 November 2014 and 19 December 2014 totalling $11,027.00 (see attached copies of receipts) for which he has received no accounting from you. Indeed we cannot see those 2 amounts appearing anywhere in the trust account statement you have provided. Can you kindly provide some explanation or any indication as to whether those funds were or were not received by your firm. In any event we are yet to discuss the accounting and other issues with [the Client].

…

As to the serious allegations we have made, we assure you they were made on express instructions from [the Client] arising from his many concerns about the delay and lack of diligence and failures to follow his instructions during your firm’s engagement as his lawyers[.]”

Attached to that letter were copies of deposit receipts showing credits to the Office Account of $7,900 on 26 November 2014 and $3,127 on 19 December 2014.

  1. An employee of the Solicitor responded in a letter sent by facsimile dated 17 March 2015. The letter is time stamped 5.26 pm but appears to have been sent earlier than that as Mr Maait responded to it at 3.05 pm stating that he had received it at “14:52 today”. As to the two amounts deposited into the trust account, the Solicitor said that the sum of $3,127 had been used for the commencement of the appeal including the filing fee. He said that he was investigating the payment of $7,900, which he said appeared to have been sent to him on “20 November 2011” [sic].

  2. On 17 March 2015, the Solicitor arranged for a contractor whom he employed as a process server and filing clerk to deliver the Client’s files to Mr Maait’s office on the following morning. The files were delivered on that morning.

  3. Mr Maait’s response sent at 3.06 pm on 17 March 2015 relevantly said as follows:

“The receipt for $7,900.00 relates to a payment made on the date we indicated in our earlier letter today. The original receipt in our possession clearly shows the date 26 November 2014, not 2011 as you assert.

It is our firm instructions from [the Client] that those funds and the $3,127.00 deposited by him on 19 December 2014 were paid into your account on the express request of [the Solicitor] to cover court filing fees and fees payable to Mr Sweet to finalise his submissions. We attach a copy of a text message sent by [the Solicitor] to [the Client] on 8 December 2014 expressly stating that $7,500 was required for Mr Sweet ‘for his professional opinion on appeal.’

On 12 March 2015, Mr Sweet wrote to us dealing at some length the history of the matter. …

Please advise the following by return:

1.   Did your firm or anyone on its behalf appear before the [C]ourt of [A]ppeal [R]egistrar on 18 February 2015;

2.   Were the appellant’s submissions to be filed by 5 or 18 March 2015;

3.   Were the funds deposited by [the Client] on 26 November 2014 and 19 December 2014, requested by you? If so, what were those funds requested for, and were they received as [the Client] has confirmed, and if so, what became of those funds;

4.   If the funds referred to were obtained by you, at least partly on account of Mr Sweet’s fees, has the latter been paid those fees and in what amount and when? If not, why not?

5.   If the funds are held by your from [sic] [the Client] for Mr Sweet’s fees, we request that you pay Mr Sweet immediately those fees, with a request that he finalise the submissions due by tomorrow (according to his own advice to us).

6.   When did you advise us that our client’s files are to be made available at Wolli Creek as opposed to your office, to where we had dispatched an urgent courier to collect them immediately on receipt of your earlier letter via fax?

7.   Do you intend in the circumstances to immediately dispatch your own courier to deliver our client’s files to us? If not, why not?”

  1. During the course of 18 March 2015, several communications took place between the Solicitor and Mr Maait, both by telephone and facsimile. There is a question as to the terms of the telephone conversations between the Solicitor and Mr Maait. That question involves the use, if any, made by the Tribunal in making its finding as to the terms of the conversations, of a file note made by Mr Maait dated 18 March 2015 (the File Note). The File Note was admitted as evidence by the Tribunal over the Solicitor’s objection. Reference will be made to that matter below.

  2. In his affidavit sworn in the proceedings in the Tribunal, the Solicitor said that, on the morning of 18 March 2015, at about 9 am, he received a telephone call from Mr Maait and that his recollection as to the conversation was to the following effect:

“Mr Maait:   Thank you for the sending of the man up with the files, they have been received. I sent you a letter yesterday about Sweet’s fees. He wants to be paid all of the money in advance.

The Solicitor:   Before we get into that I wanted to clear up a position in relation to the money that was deposited. [The Client] did pay $7,900 into our account on 26 November last year. I paid Sweet $5,000 for work he had done, and I still have the balance of $2,900. I haven’t paid it to Sweet as he hasn’t finished the work.”

The Solicitor said in his affidavit that, straight after that conversation, he spoke to Mr Sweet and then called Mr Maait again and had a second conversation to the following effect:

“The Solicitor:   I spoke to Sweet. He says I can’t instruct him to finish the submissions as I no longer act for [the Client]. You need to instruct him to do that.

Mr Maait:   I still don’t understand why you paid Sweet $5,000 [of the Client’s] money. The way you’ve handled this appeal has been catastrophic for [the Client] … I don't understand why you would pay him $5,000 of [the Client’s] money when he hasn’t done them. [The Client] is extremely concerned about this.

The Solicitor:   As I said, Sweet wanted the money so he would complete the advice and the notice of appeal. He refused to do the work if we didn't pay him something. So I paid him the $5,000 so he would do the work. I said I would pay him the other $2,600 plus typing fees when it was finished.

Mr Maait:   Okay, well please confirm in writing what Sweet said to you, and also send the invoice from Mr Sweet and the receipt for the payment.

The Solicitor:   Okay, I’ll get back to you on that. And I’m happy to send you the other $2,900 so you can pay it to Sweet when he’s done with the submissions. Send me your trust account details and a written authorisation from [the Client] and I’ll send you the money.

Mr Maait:   Okay, my trust account details are … .

The Solicitor:   No I won’t take your details over the phone. Please send them to me in writing. I’m happy to send you the money and I will do that straight away, but I need your trust account details in writing and I need a written authority.

Mr Maait:   Okay I’ll do that. And what about the other $3,000-odd that [the Client] also gave to you?

The Solicitor:   That was the filing fee for the appeal.

Mr Maait:   I don’t believe that. That’s far too much for a filing fee for an appeal.

The Solicitor:   Well that’s what the filing fee was. I can send you the invoice.

Mr Maait:   Okay I’ll wait to hear from you.”

  1. At 10.27 am on 18 March 2015, the Solicitor sent a facsimile letter to Mr Maait saying as follows:

“I confirm that the $7,900.00 deposit was made into our account on 26 November 2014 St [sic] the St Mary’s branch of the Commonwealth Bank. On 28 November 2014 I transferred $5,000.00 to Russell Sweet which was an advance payment for him to prepare submissions. I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00.”

  1. At 11 am on 18 March 2015, the Solicitor sent a facsimile to Mr Maait attaching a copy of a facsimile that he had sent earlier in the day to Mr Sweet. The facsimile to Mr Sweet said as follows:

“We refer to your Memorandum of Fees and Tax Invoice dated 12 March 2014.

We attach our transfer receipt dated 28 November 2014 confirming that on 28 November 2014 we transferred to you the sum of $5,000.00 as an advance payment for your preparation of the submissions for [the Client’s] appeal to the Court of Appeal.

To date we have not received a receipt from you for this $5,000.00 payment.

Please send us a receipt as a matter of urgency[.]”

At 3.05 pm on 18 March 2015, Mr Maait sent a facsimile letter to the Solicitor relevantly saying:

“We refer to previous correspondence and to the writer’s several telephone conversations with you today.

We have only been able to superficially review the files delivered by your courier to our office this morning containing 4 manila folders and 5 lever arch folders in varying sizes.

…

Mr Sweet had already advised us that he believes that the appeal was filed out of time and was (and may still be) incompetent. Please advise urgently whether that situation has been rectified. Most of these pressing questions were made in our letter faxed to your office late yesterday afternoon and to which we still do not have any, or any proper, reply.

Have you in fact sent us your current file relating to the appeal, and indeed any file since the decision and orders below were made on 2 September 2014? We must have that file immediately if it exists, but at least must have your answers to the above questions by return, please.”

At 4.41 pm on 18 March 2015, the Solicitor sent a facsimile letter to Mr Maait responding to the facsimile of 3.05 pm. The Solicitor enclosed copies of various documents, including the notice of the intention to appeal dated 30 September 2014, the notice of appeal filed on 17 December 2014, an affidavit of the Solicitor filed on 17 December 2014 explaining the delay in filing the notice of appeal and a letter to the Registrar of the Court of Appeal seeking an adjournment of a directions hearing fixed for 18 February 2015.

  1. On 19 March 2015, Mr Maait sent a facsimile letter to the Solicitor acknowledging the letter of the previous afternoon. The letter relevantly said as follows:

“We trust that you appreciate that the Notice of Appeal filed by you was in fact filed out of time and, as such, is currently incompetent. Notwithstanding the matters deposed to by [the Solicitor] in his affidavit 15 December 2014, the defect in the filing of a Notice of Appeal is not thereby remedied and there is still a need for a formal Notice of Motion seeking leave to appeal out of time. Having received no such document from you or any indication that it had been filed, we shall assume that in fact no such Notice was filed.

Any such Notice of Motion will need to be supported by evidence as to the reason of the delay. The affidavit of [the Solicitor] referred to deposes to several things which are or could be of doubtful validity. We wish [the Solicitor] to be on notice that he may need to provide us by return a fresh affidavit to address those matters which might be misstated in that affidavit of 15 December 2014. ….”

  1. However, upon the cash being received by the Solicitor’s bankers, the cash ceased to be the property of the Client and became the property of the bankers, it being transformed into a debt owed by the bankers to the Solicitor. In the circumstances, whatever other breach or transgression of which the Solicitor might have been guilty, it could not be said that he misappropriated any property of or any money of the Client. The Client, for whatever reason, paid cash into the Office Account. The Law Society and the Tribunal did not explore the circumstances in which that payment occurred and no complaint is made in the Application in relation to those circumstances. It follows that the Tribunal erred in concluding that the Solicitor had misappropriated a sum of $2,900 belonging to the Client. The Tribunal’s finding to that effect should be set aside.

Misappropriation of the Sum of $3,127

  1. While no allegation of dishonesty was made in the Application, the Law Society alleged that the Solicitor intended to make the transactions on the Office Account in the period 19 December 2014 to 29 January 2015. There was no allegation that the Solicitor knowingly appropriated the sum of $3,127 for purposes unrelated to the Client’s appeal proceedings and for the benefit of his law practice or his own personal benefit. The Tribunal did not in fact find that the Solicitor knowingly appropriated the sum of $3,127. The Solicitor gave evidence that he did not become aware until 17 March 2015 that the sum of $3,127 had been deposited to the credit of the Office Account. It was not put to the Solicitor that he gave false evidence in that regard or that he in fact was aware of the deposit having been made in to the Office Account during the period from 19 December 2014 to 28 January 2015. Indeed, the Tribunal simply found that the Solicitor was either aware “or with reasonable diligence ought to have been aware” of the deposit of the sum to the credit of the Office Account. It follows that there was no basis for a finding by the Tribunal that the Solicitor knowingly appropriated the sum of $3,127 in the way alleged.

  2. Rather, the Tribunal, at most, found that there was at least a substantial prospect that the Client would pay the sum of $3,127 into the Office Account and that, in those circumstances, the Solicitor ought to have been diligent in checking the Office Account so as to ensure that, if the sum was deposited into the Office Account, he could take steps to transfer it immediately to the trust account. The Tribunal found that he should have been diligent to ensure that the Client was appropriately advised in writing before November 2014 that any monetary deposits ought to be made to the trust account and should have given details of the trust account of the Client. However, that was not an allegation made by the Law Society and it was not a basis upon which the Tribunal could find that the appropriation of the sum of $3,127, if that occurred, was effected knowingly by the Solicitor. It follows that the finding in relation to the sum of $3,127 should be set aside.

Conclusion

  1. While certain of the Solicitor’s conduct leaves much to be desired, that conduct was not the subject of any complaint. The complaints made by the Law Society in the Application were not made out. The Tribunal erred in concluding that the Solicitor was guilty of professional misconduct and unsatisfactory professional conduct. Accordingly, the appeal should be allowed and the orders made by the Tribunal on 14 January 2020 should be set aside. In lieu of the Tribunal’s orders, there should be an order that the Application be dismissed and that the Law Society pay the Solicitor’s costs of the proceedings before the Tribunal. The Law Society should be ordered to pay the Solicitor’s costs of the appeal.

**********

Endnotes

Decision last updated: 04 November 2020

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