Council of the Law Society of the Act v LP 201810 (Alan Hill)
[2018] ACAT 122
•28 November 2018
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
COUNCIL OF THE LAW SOCIETY OF THE ACT v LP 201810 (Alan Hill) (Occupational Discipline) [2018] ACAT 122
OR 10/2018
Catchwords: OCCUPATIONAL DISCIPLINE – LEGAL PRACTITIONERS – consent orders – finding of professional misconduct – practitioner’s obligation to supervise management of trust moneys – penalty and costs – public reprimand
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 55
Administrative Appeals Tribunal Act 1975 (Cth) s 43
Legal Profession Act 2006 ss 223, 228, 230, 387, 425, 433
Subordinate
Legislation cited: Legal Profession Regulation 2007 ss 44, 46
Cases cited:Law Society of New South Wales v Foreman (1991) 24 NSWLR 238
Legal Services Commissioner v McGregor [2012] VCAT 1742
Negri v Secretary, Department of Social Services [2016] FCA 879
NSW Bar Association v Sahade (No 3) [2006] NSWADT 39
Nursing and Midwifery Board of Australia v Izzard [2016] ACAT 68
Re A Barrister and Solicitor Re Legal Practitioners Ordinance 1970 ACT (1979) FLR 44
Re Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19
The Law Society of the Australian Capital Territory & The Legal Practitioner [2011] ACAT 51
Tribunal:Presidential Member G McCarthy
Senior Member M Brennan
Date of Orders: 28 November 2018
Date of Reasons for Decision: 4 December 2018
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) OR 10/2018
BETWEEN:
COUNCIL OF THE LAW SOCIETY OF THE ACT
Applicant
AND:
LP 201810
Respondent
TRIBUNAL:Presidential Member G McCarthy
Senior Member M Brennan
DATE:28 November 2018
ORDER
The Tribunal orders that:
1.The respondent is guilty of professional misconduct.
2.The respondent is publicly reprimanded.
3.The respondent pay a fine of $12,000.
4.The respondent is not to make an application for an unrestricted practising certificate to be issued to him for a period of five years.
5.The respondent is not to be a signatory to a trust account or have any authority over, or dealings with, a trust account or trust money, for a period of five years.
6.The respondent pay the applicant’s costs fixed in the sum of $30,000.
7.The fine and the costs referred to in orders 3 and 6 be paid in 12 equal monthly instalments of $3,500 payable on the 28th day of each month commencing on 28 January 2019.
The Tribunal notes that:
Pursuant to section 55 of the ACT Civil and Administrative Tribunal Act 2008 the Tribunal was satisfied that the above orders are within the Tribunal's powers and are appropriate.
………….…Signed………..…..
Presidential Member G McCarthy
For and on behalf of the Tribunal
REASONS FOR DECISION
1.By application for disciplinary action dated 21 June 2018, the Council of the Law Society of the Australian Capital Territory applied to the Tribunal for disciplinary orders arising from the professional conduct of the respondent,[1] who practises as a legal practitioner in the Australian Capital Territory (ACT).
[1]This decision was previously anonymised and cited as Council of the Law Society of the ACT v LP 201810 [2018] ACAT 122 pursuant to section 423A of the Legal Profession Act 2006. As the appeal period has ended, the practitioner has now been identified in the citation of this decision. The reasons for decision otherwise remain unchanged from the date of publication.
2.The application was listed for hearing on 27 and 28 November 2018. On 13 November 2018, following a mediation earlier that day, the parties advised the Tribunal that they had reached agreement on proposed orders to resolve the matter. By consent, on 13 November 2018 the tribunal ordered the parties to file a statement setting out agreed facts, charges and penalties. The parties did so. By consent, arising from the agreement, the hearing listed for 27 November 2018 was vacated. The matter was listed for hearing on 28 November 2018, for the purpose of the Tribunal hearing from the parties and determining whether the agreed proposed orders were appropriate.
3.The parties correctly took this course because, under section 425 of the Legal Profession Act 2006 (the Act) it is for the Tribunal, not the parties, to decide whether a practitioner is guilty of unsatisfactory professional conduct or professional misconduct and, if satisfied of either, to decide what orders should be made. However, where parties have reached an agreement about the terms of a tribunal decision, section 55 of the ACT Civil and Administrative Tribunal Act 2008 empowers the Tribunal to make an order consistent with the agreed terms if it is satisfied that the terms would be within the powers of the Tribunal and would be “appropriate” for the Tribunal to make. [2]
[2] Nursing and Midwifery Board of Australia v Izzard [2016] ACAT 68
4.In this case, the parties had reached an agreement about the terms of the Tribunal’s decision in a document entitled “Joint Submission” dated 16 November 2018 signed by the solicitors for both parties (the Joint Submission).
5.There was no dispute, correctly, that the proposed orders were within the powers of the Tribunal. In order to make the agreed orders, it remained only for the Tribunal to decide whether the orders were appropriate. In that context, counsel for the applicant and counsel for the respondent took the Tribunal to the relevant facts, principles and law in an objective and helpful manner. The respondent had sworn an affidavit regarding his actions giving rise to the disciplinary action against him and, to his credit, gave evidence on oath and exposed himself to cross-examination.
6.At the conclusion of the hearing, the Tribunal informed the parties that it was satisfied that the proposed agreed orders were appropriate and made the orders sought by the parties subject to a minor suggested amendment to order 5 that both parties adopted.
7.In the interests of giving effect to the settlement and bringing closure to the matter, the Tribunal gave ex tempore oral reasons for its decision. Notwithstanding those reasons, counsel for the applicant requested written reasons. He submitted that written reasons was in the public interest, as a record of the disciplinary action taken and the outcome that occurred. This, he said, was for the benefit of the public and practitioners.
8.The Tribunal doubted the public benefit of written reasons in this case. The parties had reached agreement on relevant facts, charges and penalties. The Tribunal’s function (in substance) was only to determine whether the orders were lawful and appropriate, having regard to the agreement reached. Both parties were legally represented. The matter did not raise any new matter of principle: the importance of correctly managing a trust account is well-settled by many earlier reasoned published decisions. Notwithstanding, counsel for the applicant pressed his request for written reasons. We agreed to provide them.
9.To some degree, the following written reasons differ and expand upon the oral reasons given at the conclusion of the hearing. They do so to preserve the anonymity of the respondent’s clients whose financial affairs were caught up in the disciplinary action brought against the respondent. Nevertheless, the following reasons reflect the substance of the oral reasons that were given. In our view, that is permissible.
10.In Negri v Secretary, Department of Social Services[3] in the context of the Administrative Appeals Tribunal’s obligation to give reasons under section 43 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act), the Federal Court commented upon the extent to which written reasons can depart from earlier ex tempore oral reasons. At paragraph 11, the Court said:
Based only on the words of s 43, I consider that the section does not prevent the Tribunal giving reasons in writing that it did not give orally, as long as they are “reasons for [the Tribunal’s] decision.” The Tribunal is doubtless permitted to elaborate upon its oral reasons and to improve their expression. Whether something passes from permissible elaboration to impermissible departure is a question to which I will return.
[3] Negri v Secretary, Department of Social Services [2016] FCA 879
11.At paragraph 23, the Court referred to authority as to why a Tribunal is permitted to elaborate upon oral reasons. At paragraphs 27 and 28, the Court commented on the extent to which written reasons can differ from earlier oral reasons as follows:
As I have said, the reasons or explanation given in writing may be different to that given orally. Different reasons, as between those provided orally and those later provided in writing, are not necessarily demonstrative of different reasoning. As long as the reasoning remains consistent, there can be no objection to the provision of a more-elaborate exposition of the same reasoning that was orally explained. What is not permissible is altered or new reasoning. The Tribunal is not permitted to substantially divert from the reasoning upon which its decision was made, but is permitted to explain that reasoning differently and, in doing so, is required to address the matters specified in s 43(2B).
Whether a statement of reasons passes from permissible elaboration to impermissible departure will sometimes be a question of degree.
12.These statements were made in the context of a contested hearing, and in the context of the statutory framework for giving reasons under section 43 of the AAT Act. Neither circumstance is applicable in this case, but the Tribunal has still tried to follow the principles stated.
13.We begin with a summary account of the relevant facts.
14.The respondent has had a long career in the law, having been admitted to practise in New South Wales in 1973 and in the ACT in 1975. He has held an unrestricted practising certificate continuously since 1 July 1979.
15.At all material times, meaning in 2016 and 2017, the respondent was the sole principal of a small law firm carrying on a practice in the ACT. As we understood it, he had been the sole principal of that firm for many years.
16.In 2016 and 2017, several events occurred concerning mismanagement of the firm’s trust account. These events led to the application for disciplinary action against the respondent. There was no suggestion that the respondent was directly involved in these events or had any knowledge of them at the relevant times. The disciplinary action arose from his failure to discharge his supervisory responsibilities regarding the trust account.
17.The first event concerned mismanagement of funds transferred to the firm’s trust account in October 2016. At that time, the firm acted for the executor of a deceased estate. At the request of the executor, a bank transferred $79,430.81 to the firm’s trust account. The money should have been held for the benefit of beneficiaries of the deceased person’s estate (the correct estate), but was incorrectly receipted in the trust account against (or for the benefit of) the estate of a different person (the other estate). A paralegal in the firm and the firm’s office manager were responsible for the error.
18.Soon after receipt of the money into the trust account, a paralegal and the firm’s office manager distributed the funds equally between the three beneficiaries of the other estate. No one in the firm sought instructions to do so from the executor of the other estate or the executor of the correct estate.
19.In March 2017, the executor of the correct estate, wishing to finalise distribution of the estate, inquired about the money transferred from the bank. Only then did the firm, or the respondent, realise that the money had already been transferred from the firm’s trust account to the beneficiaries of the other estate. Fortunately for all concerned, the three beneficiaries of the other estate promptly returned the money. Although not amongst the admitted facts in the Joint Submission, we presume that the money was then paid to the beneficiary of the correct estate.
20.On 6 April 2017, the firm’s office manager spoke to the Law Society about what had happened, although the Tribunal did not obtain detail about what was disclosed.
21.The second event concerned management of deposits paid into the firm’s trust account arising from the sale of units 11, 19, 24 and 25 in a unit title development. The respondent, through his firm, acted for the vendor. On 31 March 2017, following settlement of the sale of unit 25, the firm’s office manager intended to release the deposit on the sale of unit 25 of $24,500 from the firm’s trust account to its client. Unfortunately, the manager incorrectly entered the amount to be released as $245,000, rather than $24,500, causing the trust account to be overdrawn by $220,500. The overdrawn amount was money held in the firm’s trust account for the benefit of other clients. They, of course, had not given a direction for the release of their money.
22.The Joint Submission details efforts to address the error. It states that on 3 May 2017 the respondent transferred $25,000 by journal entry from one matter concerning his client to the matter concerning the sale of unit 25, although that entry was reversed on 9 May 2017. It also states that the respondent transferred $100,000 from the firm’s office account to the trust account to “cover overpayment of deposit release”. It states that the trust receipt incorrectly reflected that the funds were received from the firm’s client, not the firm’s office account. The Joint Submission also states that on 3 May 2018 the firm’s office manager transferred $36,500 from a source not stated into the trust account “to cover some of the shortfall”, and again incorrectly reflected that the funds were received from the firm’s client.
23.The generality, if not ambiguity, of these facts led the Tribunal to seek further detail particularly about the knowledge and involvement of the respondent in these transactions. In answer, counsel for the applicant made clear that there was no suggestion that the respondent had any knowledge or involvement in what occurred, and that the statements in the Joint Submission that the respondent authorised the transfers of $25,000 and $100,000 were incorrect. Counsel for the applicant stated that the office manager authorised all the transfers. The applicant put its case for disciplinary action on the basis that the respondent still bore responsibility for what occurred arising from his failure to supervise management of the trust account in his capacity as the sole principal of the firm.
24.Fortunately for all concerned, the firm’s client returned the sum of $220,500 to the firm. Although not stated as an agreed fact, we presume the money was paid into the firm’s trust account to rectify the deficiencies in the trust moneys held on behalf of other clients.
25.The Tribunal also notes that prior to 30 May 2017 the respondent applied for a loan from a bank, secured against his personal assets, to be used to rectify the deficiency in the trust account but that this did not proceed once the firm’s client had returned the money that had been incorrectly paid to it.
26.The third event arose from the investment of deposits paid by purchasers of properties under construction. The firm acted for the vendors. Rather than holding the deposits in its trust account, the firm’s office manager invested the deposits in term deposits with a bank.
27.Regarding the third event, the Joint Submission states:
27. The firm acted for the vendors of properties under construction.
28. In accordance with the Contracts for Sale, the firm invested the deposits with Bendigo Bank totalling $229,542.40.
29. The Bank required notice of 30 days to release the deposit. Under the Contracts for Sale settlement was scheduled for more than 30 days after exchange.
30. On ten occasions, settlement of the conveyance was required earlier than the notice period to the bank for the redemption of the deposit.
31. In order to provide funds for settlement, the firm’s office manager, [name suppressed] deposited her personal funds into the trust account (ranging from $17,050 to $36,750) totalling $229,542.40. The deposits were as follows:
No. File Sum Date 1. 78775 $36,750 8 December 2016 2. 78548 $20,245 9 January 2017 3. 78544 $25,495 9 January 2017 4. 78538 $23,995 10 January 2017 5. 78550 $21,245 11 January 2017 6. 78550 $20,450 11 January 2017 7. 78557 $17,050 11 January 2017 8. 78572 $21,495 11 January 2017 9. 78552 $18,822.40 11 January 2017 10. 78538 $23,995 11 January 2017 Total $229,542.40 (The above deposits do not include the deposits referred to at paragraphs 22 and 23 [of the Joint Submission]).
32. The funds were receipted into the name of the vendor to the sale and credited to the matter in the trust ledger. According to the Regulations, the employee’s name should have been recorded as the person from whom the money was received and, in any event, her funds should not have been intermixed with trust money.
33. The funds were paid out to the vendor on settlement of the conveyance.
34. The deposit with Bendigo Bank matured and the proceeds of the investment (including interest accrued) were deposited into the firm’s trust account.
35. After receipt of the funds into the trust account, the sums were electronically transferred to repay [the officer manager].
36. There was no authority for the payment of the trust funds to [the officer manager] as required by the Regulations.
37. [The officer manager’s] name should have been recorded as the person from whom the money was received in accordance with regulations 44(1)(e) and 46(4)(d) of the Legal Profession Regulation 2007 (ACT). The employee’s funds should not have been intermixed with the trust account and, finally, the clients needed to give specific authority to withdraw funds to repay [the officer manager].
38. At all material times the respondent, as the principal of the firm, maintained a continuing obligation to supervise all professional and non-professional staff in all matters pertaining to trust monies and to ensure compliance at all times with Part 3.1 of the Legal Profession Act 2006 (ACT) and the Legal Profession Regulation 2007 (ACT) concerning trust money and trust accounts.
39. The respondent’s failure to supervise had no element of dishonesty and further he did not at any time form or have any intention of obtaining a personal benefit.
28.Paragraphs 28-31 in particular raised many questions. For example, if the deposits were invested on term deposit with the bank “[i]n accordance with the Contracts for Sale” why was either party able to require settlement of the conveyance earlier than the notice period that needed to be given to the bank? Where the firm acted for the vendor, why was release of the deposit from the bank necessary for settlement? All the vendors needed to settle, it would seem, was written authority from the purchasers to release their deposits to the vendors. If investment of the deposits was in accordance with the contracts for sale, why did the office manager take personal responsibility for providing “funds for settlement” totalling $229,542.40? What became of the interest earned on the term deposits after it was deposited into the firm’s trust account?
29.Counsel for the applicant was unable to answer these questions, primarily (he said) because efforts to speak with the office manager had been unsuccessful. However the relevance of these questions fell away, for the purposes of the application, upon counsel for the applicant stating that there was no suggestion that the respondent was involved in or had any awareness of these transactions or derived any benefit from them. Again, the application for disciplinary action was based on the respondent’s failure to supervise management of trust moneys in his capacity as the sole principal of the firm.
30.The parties agreed that as a result of these three events, the respondent breached many provisions of the Act and the Legal Profession Regulation 2007 (the Regulation) in his capacity as the sole principal of the firm.
31.They agreed that the respondent breached section 223(1)(a) of the Act by failing to ensure that funds deposited for the benefit of the executor of the correct estate were held in the account exclusively for the benefit of the executor. They agreed that the respondent breached section 223(1)(b) of the Act by failing to ensure that funds were not disbursed from the trust account without a direction to do so from the person on whose behalf the money had been received. They agreed that the respondent breached section 230 of the Act by allowing deficiencies in the firm’s trust account without a reasonable excuse. They agreed that the respondent breached sections 44(1)(e) and 46(4)(d) of the Regulation by allowing the incorrect recording of deposits in its trust account as being from its client where they were received from the office account. They agreed that the respondent breached section 228 of the Act by allowing the intermixing of trust money with money belonging to the firm’s office manager.
32.Having regard to the facts admitted and that the respondent was represented by his solicitor and counsel, the Tribunal accepted the admissions that the respondent had breached the Act and the Regulation as stated.
33.The question then became, under section 55 of the ACAT Act, whether the orders sought arising from those admissions were appropriate.
34.By agreement, the parties first sought an order that the respondent is guilty of professional misconduct. Under section 387(a) and (b) of the Act, “professional misconduct” includes, but is not confined to:
(a) unsatisfactory professional conduct of an Australian legal practitioner, if the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and
(b) conduct of an Australian legal practitioner whether happening in connection with the practice of law or happening otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice.
35.Section 387(a) only was applicable, arising from the respondent’s failure to supervise the proper management of the firm’s trust account. In particular, the applicant disavowed any suggestion that the respondent was knowingly involved in the mismanagement of the account, or derived any benefit from the mismanagement. The applicant acknowledged that the respondent made efforts to rectify the deficiencies in the trust account for the benefit of his clients.
36.There was no suggestion by the applicant that the respondent’s conduct could or should be characterised under section 387(b) as conduct that would justify a finding that he is not a fit and proper person to engage in legal practice.
37.The parties agreed at hearing that mismanagement of trust funds can be characterised as unsatisfactory professional conduct or professional misconduct, depending on the facts and seriousness of the mismanagement. Views can reasonably differ. However, in this case, notwithstanding his lack of involvement in or knowledge of the mismanagement of the trust account, the respondent agreed that his conduct should be characterised as professional misconduct. That agreement was given with representation by his solicitor and counsel. Although with some hesitation, we concluded that his agreement to the characterisation of his conduct, and therefore the proposed order was appropriate. This was not a one-off event. The agreed facts demonstrate three different concurrent and serious events involving mismanagement of the firm’s trust account.
38.The Tribunal accepted that the respondent, as sole principal of the firm and as a solicitor with extensive experience, should have taken much more supervisory responsibility for management of the trust account. Counsel for the applicant took us to several authorities[4] for the accepted proposition that a partner in a law firm has a responsibility to ensure that systems are in place for managing a trust account and to ensure that the systems are working. A partner cannot leave the conduct of financial affairs to others. In our view, that responsibility is especially applicable to a sole practitioner where all others working in the firm are employees of the firm or of the practitioner, depending on contractual arrangements.
[4] Re Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19 at 25; Re A Barrister and Solicitor Re Legal Practitioners Ordinance 1970 ACT (1979) FLR 44 at 62-63; Law Society of New South Wales v Foreman (1991) 24 NSWLR 238 at 249-253
39.In accepting that the finding of professional misconduct was appropriate, we also took into account the public interest in ensuring that practitioners appreciate the importance of maintaining the “sanctity”[5] of a practitioner’s trust account and the funds entrusted to them.
[5] McGarvie - Legal Services Commissioner v McGregor [2012] VCAT 1742 at [34]
40.By agreement, the parties sought an order that the respondent be publicly reprimanded. This order can be made under section 425(3)(e) of the Act. We were comfortable that such an order is appropriate “as a protective mechanism”[6] as “it may operate as a warning to the offender and also to others who may be contemplating similar wrongful conduct.”[7]
[6] The Law Society of the Australian Capital Territory & The Legal Practitioner [2011] ACAT 51 at [35]
[7] NSW Bar Association v Sahade (No 3) [2006] NSWADT 39 at [125]
41.By agreement the parties also sought an order that the respondent pay a fine of $12,000 pursuant to section 425(5)(a) of the Act. Quantifying an ‘appropriate’ fine is inherently subjective. Invariably, there is a range within which reasonable minds will differ. In this case, where both parties were legally represented and had reached an agreement, we were satisfied that the proposed fine is appropriate especially where the respondent is given 12 months to pay.
42.By agreement the parties sought an order that the respondent pay the applicant’s costs fixed in the sum of $30,000 pursuant to section 433 of the Act. The parties are best placed to inquire and form a view about an appropriate quantum of costs that the respondent should pay. We saw no reason to interfere with that process. The agreed amount appears, on its face, to be appropriate in circumstances where settlement was not reached until 13 November 2018, two weeks before commencement of the hearing and where the respondent had in his response dated 27 August 2018 “reserve[d] his defence” on all material issues.
43.By agreement, the parties sought an order that the respondent pay the agreed fine and the agreed costs in 12 equal monthly instalments commencing 28 January 2019. Again, we respected the internal negotiations between the parties presumably designed to achieve payment in a manner that did not bring undue hardship upon the respondent. We are satisfied that that payment plan is appropriate.
44.We close our reasons by acknowledging that these unfortunate events come at the end of the respondent’s long career in the law. There is no suggestion from the applicant of any prior blemish on his professional career. The events in 2016 and 2017 concerning mismanagement of the respondent’s trust account by others is regrettable in many respects. We note the respondent’s contrition and remorse, and accept that they are heartfelt.
………………………………..
Presidential Member G McCarthy
For and on behalf of the Tribunal
HEARING DETAILS
FILE NUMBER: | OR 10/2018 |
PARTIES, APPLICANT: | Council of the Law Society of the ACT |
PARTIES, RESPONDENT: | LP 201810 |
COUNSEL APPEARING, APPLICANT | Mr A Opas |
COUNSEL APPEARING, RESPONDENT | Mr B Buckland |
SOLICITORS FOR APPLICANT | McInnes Wilson Lawyers |
SOLICITORS FOR RESPONDENT | Nelson & Co Solicitors |
TRIBUNAL MEMBERS: | Presidential Member G McCarthy Senior Member M Brennan |
DATES OF HEARING: | 28 November 2018 |
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