Council of the Law Society of the Act v LP 202016 (Occupational Discipline) - [2021] ACAT 58

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

COUNCIL OF THE LAW SOCIETY OF THE ACT v LP 202016 (Occupational Discipline) [2021] ACAT 58

OR 16/2020
Catchwords: OCCUPATIONAL DISCIPLINE – legal practitioner – withdrawal of trust money for legal costs – cost agreement and cost disclosure statement – breach of section 223 and section 269 of the Legal Profession Act 2006 – characterisation as unsatisfactory professional conduct – sanction

Legislation cited: Legal Profession Act 2006 ss 223, 229, 269, 386, 387, 412, 413, 419, 425, 427
Legislation Act 2001 s 104

Subordinate
Legislation cited: Legal Profession Regulation 2007 r 62

Cases cited:Allinson v General Council of Medical Education and Regulation [1894] 1 QB 750
Chamberlain v Law Society of the Australian Capital Territory [1993] FCA 527
Council of the Law Society of the Australian Capital Territory v Giles [2020] ACTSCFC 1
Council of the Law Society of New South Wales v Ginges [2016] NSWCATOD 7
Council of the Queensland Law Society v Tunn [2004] QCA 412
Legal Practitioners Act 1970 and the Law Society of the Australian Capital Territory v Julian Christopher Oakley [1992] ACTSC 90
Legal Practitioner S (Steve Gavagna) v Council of the Law Society of the ACT [2017] ACAT 58
Legal Services Commissioner v McGregor [2012] VCAT 1742

Tribunal:Senior Member Prof A Foley
Member S Keller

Date of Orders:  30 June 2021
Date of Reasons for Decision:         30 June 2021
AUSTRALIAN CAPITAL TERRITORY          )
CIVIL & ADMINISTRATIVE TRIBUNAL     )          OR 16/2020
BETWEEN:
COUNCIL OF THE LAW SOCIETY OF THE ACT
Applicant

AND:
LP 202016
Respondent

TRIBUNAL: Senior Member Prof A Foley
Member S Keller

DATE:30 June 2021
ORDER

After hearing the parties’ submissions, the Tribunal being satisfied that the practitioner is guilty of unsatisfactory professional conduct, the Tribunal orders:

Pursuant to section 425(5)(a) of the Legal Profession Act 2006 the respondent pay a fine of $5,000 by 28 July 2021.
Pursuant to section 425(5)(b) of the Legal Profession Act 2006 the respondent undertake a course in trust accounting approved by the respondent by 30 December 2021.
Subject to subsection 423A(2) of the Legal Profession Act 2006, the respondent is publicly reprimanded pursuant to section 425(3)(e) of the Legal Profession Act 2006.
Pursuant to section 433(1) of the Legal Profession Act 2006 the respondent pay the applicant’s costs calculated on a solicitor own-client basis in accordance with the ACT Supreme Court scale in a sum to be agreed and, if not agreed between the applicant and respondent, the cost are to be assessed by a cost specialist,
namely LegalCost, and the respondent is to pay 90% of the costs so assessed plus disbursements in full.

………………………………..
Senior Member Prof A Foley
for and on behalf of the Tribunal

REASONS FOR DECISION

Introduction

This is an application by the Law Society of the Australian Capital Territory (applicant) for disciplinary action dated 17 August 2020 under section 419 of the Legal Profession Act 2006 (LPA) against the respondent. The application charges the respondent with breaches of sections 223(1) and 269(1)(d) of the LPA. The Tribunal has jurisdiction pursuant to section 425 of the LPA.
In the reasons below, a reference to ‘ACAT’ or ‘tribunal’ refers to the ACT Civil and Administrative Tribunal generally, whereas ‘Tribunal’ refers to the members who heard the application.

The hearing

The matter was heard on 22 March 2021. The Tribunal had before it an amended application, two affidavits and an outline of submissions filed by the applicant. The respondent filed a response to the application, one affidavit and an outline of submissions. The applicant was represented by Mr Danny Moujalli of counsel instructed by McInnes Wilson Lawyers. The respondent was represented by Mr Wayne Sharwood of counsel.
Mr Robert Reis gave evidence on behalf of the applicant. The respondent gave evidence. Both parties made submissions on breach, characterisation and sanction and responded to questions of the Tribunal.
The parties reached agreement on 22 March 2021 as to breach of the two charges. The only issue on which there was no agreement was the appropriate characterisation and sanctions.
At the conclusion of the hearing, the Tribunal reserved its decision and indicated it would provide written reasons. These are those reasons.

The legislation

The LPA is binding on Australian legal practitioners and a failure to comply with the Act can constitute unsatisfactory professional conduct or professional misconduct.
Section 386 provides:
What is unsatisfactory professional conduct?
In this Act:
unsatisfactory professional conduct includes conduct of an Australian legal practitioner happening in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.
Section 387 provides:
What is professional misconduct?
(1) In this Act:
professional misconduct includes—
(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.
(2) For finding that an Australian legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the suitability matters that would be considered if the practitioner were an applicant for admission to the legal profession under this Act or for the grant or renewal of a local practising certificate.
Part 3.1 of the LPA deals with trust money and trust accounts. Relevantly, section 223 in part provides:
Holding, disbursing and accounting for trust money
(1) A law practice must—
(a)hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received; and
(b)disburse the trust money only in accordance with a direction given by the person.
(2) Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law.
Section 229 provides in part:
Dealing with trust money—legal costs and unclaimed money
(1) A law practice may do any of the following, in relation to trust money held in a general trust account or controlled money account of the practice for a person:
(a)exercise a lien, including a general retaining lien, for the amount of legal costs reasonably owing by the person to the practice;
(b)withdraw money for payment to the practice’s account for legal costs owing to the practice if any relevant provision of this Act is complied with;
…
The Legal Profession Regulation 2007 (LP Regulation) is part of the LPA being subordinate legislation.[1]
[1] Legislation Act 2001 section 104
Regulation 62 provides:
Withdrawing trust money for legal costs—Act, s 229 (1) (b)
(1)     This section prescribes, for the Act, section 229 (1) (b) the procedure for the withdrawal of trust money held in a general trust account or controlled money account of a law practice for payment of legal costs owing to the practice by the person for whom the trust money was paid into the account.
(2)     The trust money may be withdrawn as set out in subsection (3) or (4).
(3)     The law practice may withdraw the trust money—
(a)if—
(i)the money is withdrawn in accordance with a costs agreement that complies with the legislation under which it is made and that authorises the withdrawal; or
(ii)the money is withdrawn in accordance with instructions that have been received by the practice and that authorise the withdrawal; or
(iii)the money is owed to the practice by way of reimbursement of money already paid by the practice on behalf of the person; and
(b)if, before effecting the withdrawal, the practice gives or sends to the person—
(i)a request for payment, referring to the proposed withdrawal; or
(ii)written notice of the proposed withdrawal and when it will occur.
(4)     The law practice may withdraw the trust money—
(a)if the practice has given the person a bill relating to the money; and
(b)if—
(i)the person has not objected to withdrawal of the money not later than 7 days after being given the bill; or
(ii)the person has objected not later than 7 days after being given the bill but has not applied for a review of the legal costs under the Act not later than 60 days after being given the bill; or
(iii) the money otherwise becomes legally payable.
(5)     Instructions mentioned in subsection (3) (a) (ii)—
(a)if given in writing—must be kept as a permanent record; or
(b)if not given in writing—either before, or not later than 5 working days after, the law practice effects the withdrawal, must be confirmed in writing and a copy kept as a permanent record.
(6)     For subsection (3) (a) (iii), money is taken to have been paid by the law practice on behalf of someone if the relevant account of the practice has been debited.
In short, the scheme of the LPA, as prescribed in the LP Regulation, provides that funds can be withdrawn from trust for payment of legal costs if made pursuant to either of the two methods allowed under regulation 62:
(a)If there is a compliant costs agreement authorising the withdrawal, the practitioner must give or send a prior request for payment or give or send a prior written notice of withdrawal (subsection 62(3)); or
(b)If a bill has been provided, a seven-day objection period has elapsed without objection (subsection 62(4)).
Section 269 in part provides:
Disclosure of costs to clients
(1) A law practice must disclose to a client in accordance with this division—
(a)the basis on which legal costs will be worked out, including whether a scale of costs applies to any of the legal costs; and
(b)the client’s right to—
(i)negotiate a costs agreement with the law practice; and
(ii)receive a bill from the law practice; and
(iii)request an itemised bill if the client receives a lump sum bill for more than the threshold amount; and
(iv)be notified under section 276 (Ongoing obligation to disclose etc) of any substantial change to the matters disclosed under this section; and
(c)that the client is not entitled to request an itemised bill if the bill is for an amount equal to or less than the threshold amount; and
(d)an estimate of the total legal costs, if reasonably practicable or, if it is not reasonably practicable to estimate the total legal costs, a range of estimates of the total legal costs and an explanation of the major variables that will affect the working out of the costs;
Section 271(1) provides:
How and when must disclosure be made to a client?
(1) Disclosure under section 269 (Disclosure of costs to clients) must be made in writing before, or as soon as practicable after, the law practice is retained in the matter.

Facts

Agreed facts were as follows.[2]
[2] Applicant’s outline of submissions dated 18 January 2021 at [2.1]-[3]; respondent’s outline of submissions dated 26 February 2021 at [3]
As at February 2019 the respondent held an unrestricted practicing certificate issued by the respondent and was principal of a firm carrying out legal practice.
In February 2019 the respondent took instructions from a client in relation to a matter that was before the ACT Magistrates Court. On 22 February 2019 the client was emailed by the respondent’s office, together with a covering letter, a Costs Agreement and a Costs Disclosure Statement (CDS). These two documents were substantially in the form of those available to practitioners on the applicant’s website.
The covering letter requested the client deposit the sum of $2,000 into the respondent’s trust account. This sum was deposited on her behalf on 25 February 2019.
The CDS[3] contained the following clause:
2.2 Estimate of Costs[4]
It is not reasonably practical at this time to provide an accurate estimate of the total legal costs.
[3] Exhibit A1, affidavit of Robert Anthony Reis sworn 6 November 2020, attachment RR1 at page 21
[4] This clause is as appears in the proforma costs agreement available to practitioners on the applicant’s website, save that the additional sentences “Instead a range of estimates is provided inclusive of GST” and “An explanation of the major variables that would affect the working out of the costs” are not included.
It is agreed that the respondent and the client entered into a Costs Agreement on or about 25 February 2019. Relevantly, clauses 11 and 17 of that agreement provided:
11. Trust Monies
Should we received money into our trust account on your behalf:-
(a) You direct us to withdrawn from that money (if applicable) any amount required to pay disbursements in advance, and
(b) You authorise us to withdrawn from that money any amounts owning for our professional charges and/or disbursements in this matter, and for which we have given or sent you a request for payment referring to the proposed withdrawal, or a written notice of withdrawal.
17. PREPAYMENT[5]
The client shall pay into the firm’s trust account upon signing this agreement the sum of $2,000.00 (“the initial advance”) on account of costs and disbursements incurred to date and further costs and disbursements. The firm may, from time to time, request further advances on account of costs and disbursements and the client shall, upon such request or requests, pay the amount so requested into the firm’s trust account. The firm is authorised to transfer moneys held in its trust account on behalf of the client to pay disbursements incurred on the client’s behalf, and to meet accounts (including interim accounts) rendered to the client by the firm from time to time. Should the firm’s costs not exceed the total amount advanced, the firm shall, upon completion of the matter, refund the balance of the advance to the client.
[5] This clause does not appear in the proforma costs agreement available to practitioners on the applicant’s website.
On 1 March 2019 an additional amount of $2,000 was deposited on the respondent’s behalf.
On or about 3 March 2019 the client terminated the respondent’s retainer.
On 5 March 2019 the respondent’s office prepared a tax invoice for the client’s costs. The respondent signed a Trust to Office Transfer Requisition prepared by her office to authorise the transfer of $4,000 from her trust account to her office account as part payment of that invoice.[6]
[6] Exhibit A1, at page 57
On 5 March 2019 at 2.04pm the bookkeeper engaged by the respondent withdrew by electronic transfer the sum of $4,000 held in the respondent’s trust account on the client’s behalf and deposited the funds into the respondent’s office account.[7]
[7] Exhibit A1, at page 57
On 5 March 2019 at 2.36pm an employee in the respondent’s office emailed a letter signed by the respondent to the client enclosing the tax invoice dated that day in the sum of $5,148 including GST and disbursements.
On 5 March 2019 at 4.56pm an employee in the respondent’s office emailed a further letter signed by the respondent to the client identifying an error in the tax invoice. That error did not change the total amount sum of $5,148 including GST and disbursements.
On 5 March 2019 at 6.13pm the client emailed the respondent disputing the costs charged by the respondent.[8]
[8] Exhibit A1, at page 4
On or about 28 April 2019 the client filed a complaint with the applicant.
Additional relevant facts were as follows.[9]
[9] These additional facts were also generally agreed save where indicated.
The initial instructions the respondent took by way of telephone on 18 February 2019 from the client were in relation to a protection order obtained by her ex-husband’s partner that was before the ACT Magistrates Court. During that telephone conversation the respondent provided the client with a verbal estimate of legal fees in the sum of $2,000 (including GST). This was to cover a first conference, preparation for and attendance at court for a Registrar’s Conference. That court attendance had been set for early March 2019. The respondent made a handwritten note at that time of the conversation and recorded in part “Conf. $2000 incl. gst. Court apt. Conf”. The respondent also recorded “Filing-estimate-unable to estimate.” and “Subp.-can’t estimate until conf.”
The initial conference took place at the respondent’s office on 21 February 2019 at 4.30pm. The client’s father was also present. The conference lasted for an hour. During the conference costs were discussed. The applicant accepts in its amended application that the respondent reiterated her oral estimate of costs in the sum of $2,000 (including GST). The respondent says in her response she also told the client, inter alia, that costs were more likely to be $4,000 “due to the large volume of paperwork and the history provided”. The respondent says she also said she wanted an advance of $2,000 and would give a further estimate once all relevant paperwork was received and collated.[10]
[10] Respondent’s outline of submissions dated 26 February 2021 at [2]
The respondent made a handwritten file note dated that day and recorded in part “Conf. $2000 incl. more likely $4K with all paperwork” and “CA + CND | Advance $2K | Unable to estimate”.
A file was opened for the client and the documents referred to in paragraph 16 above were emailed to her.
On 23 February 2019 the client delivered certain documents to the respondent’s office. The office collated the documents, prepared an index and inserted them into a large ring bound folder.[11]
[11] In her complaint to the applicant, the client estimated she delivered 50-60 pages. The respondent in her evidence estimated what was contained in the ring binder amounted to ‘one ream of paper’.
On 28 February 2019 the respondent and the client had a telephone conversation, during which the respondent requested a further $2,000 be deposited into trust due to the volume of material the client had provided. The respondent in her submissions clarified this as “[I] asked [the client] to deposit the further $2,000 if she, [the client], wanted [me] to consider the additional material provided”.[12]
[12] Respondent’s outline of submissions dated 26 February 2021 at [4]
The respondent made a handwritten file note dated that day and recorded in part “T/c [the client] | 3 applications | Sheer volume of extra docs.| 2K to $4K-now b/c paperwork…| Look at or not-if yes then further $2K tomorrow trust |”.
On 1 March 2019 the respondent read the file of documents provided by the client. The respondent made five pages of handwritten notes which recorded a number of issues (11 in all) identified by the respondent. The respondent recorded on the front page of those notes “8 hours”.
On 3 March 2019 the respondent and the client had a telephone conversation. The respondent made a handwritten file note dated that day and recorded in part about that conversation “O/c argumentative and won’t accept |…|Yelling by o/c| My job to tell risks/etc/advantages of going to Court. |…| My job tell your ability to “win’ not to be on your side. Won’t listen to my instructions + failure to provide relevant docs…| Wants docs back. No Probs. Will issue bill.|
On 4 March 2019 the client attended the respondent’s office to collect her documents. The respondent exercised a lien over the file on the basis of unpaid costs and retained the binder she had had collated. The respondent made a handwritten file note dated that day and recorded in part “I explained would do itemised Acc and on payment release file”.

An itemised tax invoice was prepared and emailed to the client on 5 March 2019 for $5,148 leaving a balance after payment from funds in trust of $1,148. The bill includes as an item: “01.03.19 Peruse brief 8 hours”.

Breaches

The applicant charges the respondent with two breaches of the LPA.
Charge 1 -– Withdrawal of funds from trust in breach of the LPA
The applicant asserts that the respondent breached subsection 223(1) of the LPA by causing the withdrawal of trust money in the sum of $4,000 from the trust account in circumstances where she was not authorised to do so by the legislation.[13] The applicant asserts the authority provided for in section 229 to withdrawn trust money for legal costs by following the procedure set out in regulation 62(3) of the LP Regulation was deficient in that:
(a)The respondent’s Costs Agreement did not authorise her to withdraw the money, regulation 62(3)(a)(i).
(b)The respondent did not send a request for payment to the client referring to the proposed withdrawal prior to effecting the withdrawal, regulation 62(3)(b)(i).
(c)The respondent did not give written notice of the proposed withdrawal to the client prior to effecting the withdrawal, regulation 62(3)(b)(ii).
(d)The client did not direct, instruct or authorise the respondent to withdraw the trust money.
[13] Applicant’s outline of submissions dated 18 January 2021 at [4.2]
The respondent accepted in her letter of response dated 28 May 2019 to the respondent’s initial notification of the client’s complaint that she had not complied with regulation 62.[14]
[14] Exhibit R1, affidavit of respondent affirmed 7 December 2020, annexure B at [21]
The respondent now says this concession was based on her acceptance that the seven day notice period required in regulation 62(4) had not elapsed at the time of the trust fund transfer.
The respondent now contends the tax invoice of 5 March 2019 does instead provide the necessary compliance with the alternative prescribed procedure for withdrawing trust money for costs provided for in regulation 62(3).
The respondent asserts more fully that:
(a)Her Costs Agreement authorised her to withdraw the money in satisfaction of subclause 62(3)(a)(i). Clause 11 of the Costs Agreement included the words “You authorise us to withdraw from that money any amounts owning for our professional charges and/or disbursements in this matter, and for which we have given or sent you a request for payment referring to the proposed withdrawal, or a written notice of withdrawal”. The respondent says these words authorised the withdrawal.
(b)The tax invoice dated 5 March 2019 sent to the client constituted either a request for payment in satisfaction of subclause 62(3)(b)(i), or written notice of the proposed withdrawal in satisfaction of subclause 62(3)(b)(ii). The tax invoice included the words “less amount transferred from trust…$4000.00”. The respondent says these words constituted a “written notice of withdrawal” and thus authorised the withdrawal.
The respondent concedes nonetheless that this request for payment or notice of withdrawal contained in the tax invoice were not given or sent to the client “before effecting the withdrawal” as required by subclause 62(3)(b).
The respondent says the letter enclosing the tax invoice was sent to the client at 2.36pm on 5 March 2019, whereas the withdrawal from trust was effected prior to that at 2.04pm. The respondent highlights this is only a period of 32 minutes.
Charge 2 – Failure to provide written costs disclosure
The applicant asserts that the respondent breached section 269(1) of the LPA by failing to provide written cost disclosure to the client. The applicant asserts the respondent’s CDS was deficient in that:
(a)The respondent’s CDS did not provide the client with a written estimate of the total legal costs, section 269(1)(d).
(b)The respondent’s CDS did not provide the client with a written range of estimates of the total legal costs and an explanation of the major variables that would affect the working out of the costs, section 269(1)(d).
The respondent concedes that she failed to provide a wholly compliant written costs disclosure. She concedes the CDS sent to the client did not contain a range of estimates nor an explanation of the major variables that will affect the working out of costs. The respondent says she did keep the client informed of the likely total costs. She told the client during a telephone conversation on 18 February 2019 likely costs would be $2,000. She later told the client during a conference on 21 February 2019 likely costs would now be $4,000, given the amount of additional paperwork to be read.

Finding as to breaches

As to the first charge, the respondent initially adhered to her contention that the tax invoice sent to the client on 5 March 2019 provides “a written notice of withdrawal” as required in 62(3)(b)(ii). This is implausible given that such notice must be provided “before effecting the withdrawal” and that did not occur. In submissions the breach was accepted.
As to the second charge, the respondent accepts the breach under section 269.
The Tribunal finds both breaches charged are made out.

Characterisation

There is agreement between the parties that the respondent’s failure to provide written costs disclosure should be characterised as unsatisfactory professional conduct under section 386 of the LPA. The respondent accepts the breach is made out.
The applicant contends the charge of withdrawal of funds from trust in breach of the Act constitutes professional misconduct within the meaning of section 387(1) of the LPA or professional misconduct at common law.
The applicant says section 387 provides a non-exhaustive definition of professional misconduct as including conduct that “involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence”. This inclusive definition does not displace the common law definition.[15] That definition is drawn from a test first formulated in Allinson v General Council of Medical Education and Regulation[16] and expressed more recently by Black CJ in Chamberlain v ACT Law Society[17] as being “conduct which may reasonably be held to violate or fall short of, to a substantial degree, the standard of professional conduct observed or approved of by members of the profession of good repute and competency”. [18]
[15] Legal Practitioner S (Steven Gavagna) v Council of the Law Society of the ACT [2017] ACAT 58 at [83] (Gavagna)
[16] [1894] 1 QB 750
[17] [1993] FCA 527
[18] (1993) 118 ALR 54 at 58-59. This formulation was endorsed in Gavagna at [84]
Dealing with trust obligations is not specifically referred to in section 387. But the applicant cites the reiteration by the ACT Supreme Court in Council of the Law Society of the Australian Capital Territory v Giles[19] (Giles) that “a lawyer’s trust account has been described as ‘sacred’ and the importance of dealing strictly with trust monies has been emphasised repeatedly”.[20] Indeed, Giles took the characterisation of such conduct, even given absence of dishonesty, as being “borderline” as to whether a practitioner should be struck off for professional misconduct when it relates to the breaches of legislative provisions for trust money and trust accounts.[21]
[19] [2020] ACTSCFC 1
[20] Council of the Law Society of the Australian Capital Territory v Giles [2020] ACTSCFC 1 at [121]
[21] [2020] ACTSCFC 1 at 123
The applicant says the respondent’s failure to meet the requisite standards should be characterised in a manner consistent with such a degree of seriousness for the following reasons:[22]
(a)The respondent recklessly approved the trust to office transfer with no regard as to whether the transfer was authorised.
(b)The respondent has offered no explanation to the Tribunal for the conduct.
(c)The unauthorised dealing related to a not insignificant sum of $4,000.
(d)Reliability and integrity in handling trust funds are fundamental prerequisites for practice as a solicitor.
(e)The courts insist on solicitors maintaining the highest standards of personal honesty and integrity in their dealings with trust money.
(f)The respondent’s conduct involves a substantial failure to maintain a reasonable standard of competence and diligence.
(g)The respondent’s conduct falls short of, to a substantial degree, the standard of professional conduct observed or approved by members of the profession of good repute and competency.
[22] Applicant’s outline of submissions dated 18 January 2021 at [9.1]
The applicant does not contend that the breach was dishonest. However, the applicant disputes its characterisation as mere inadvertence. In exploring this issue in cross examining the respondent, a number of propositions put to her, which she accepted subject to clarification, were noted:
(a)That the words “less amount transferred from trust” communicated to the the client that the funds had already been transferred.
(b)That she had taken no steps to ensure that seven days for objection provided for in regulation 62(4)(b)(i) was available to the client prior to authorising the transfer.
(c)That she had taken no steps to ensure the trust funds would not be transferred before the invoice reached the client.
(d)That she knew the regulatory provisions in place with respect to trust fund transfers and knew it was her responsibility to comply with them.
(e)That it was open to her to give instructions to her staff and bookkeeper not to transfer the trust funds before the notice had been sent.
(f)That when she signed the Trust to Office Transfer Authorisation[23] as at 5 March 2019, she did not take any steps to ensure notice of the proposed transfer had reached the client.
(g)That when the need arose to send the amended tax invoice at 4:56pm on 5 March 2019 to the client, this provided another opportunity to satisfy herself that the requirements of regulation 62 had been met and to ensure notice had been given to the client before the trust transfer and she did not take that opportunity.
(h)That the email[24] disputing the costs received from the client at 6:14pm on 5 March 2019, but not seen by the respondent until the following day, allowed a further opportunity to satisfy herself that regulation 62 had been properly complied with. This was particularly so given that she now knew that the client was dissatisfied with her services and was disputing her costs and she did not take that opportunity.
(i)That the respondent has given no evidence of what measures she has put in place to ensure a similar unauthorised transfer of trust funds will not occur again.[25]
(j)That she had the benefit of trust funds of $4,000 between March 2019 and November 2020.[26]
[23] Exhibit R1, affidavit of respondent affirmed 7 December 2020, annexure M, attachment A
[24] Exhibit R1, affidavit of respondent affirmed 7 December 2020, annexure M at [8]-[9] and attachment C
[25] The respondent denied this indicated she did not take the breach seriously and said in re-examination that she had put in place a dedicated staff member with responsibility for such transfers.
[26] She did however not accept that she had the benefit of funds without a legal entitlement to those funds.
The applicant says in all, that the respondent had four opportunities to satisfy herself that she had complied with regulation 62 and she took none of these. In the applicant’s submission this amounts to more than mere inadvertence. The applicant says it is more in the nature of a degree of substantial inattention falling below a reasonable standard of competence and diligence. As such, the applicant says her conduct amounts to professional misconduct.
The applicant says the respondent was aware from May 2019 of the charge brought by the applicant relating to withdrawal of funds from trust in breach of the Act, but only returned the disputed $4,000 to trust on behalf of the client in November 2020. This was only done following the advice of the applicant’s solicitors.[27] The applicant says the respondent should have done this without direction and much sooner. In the applicant’s submission, the responsibility rests with her to ensure she complies with the trust account regulations. As such, the applicant maintains that her conduct amounts to professional misconduct.
[27] Exhibit R1, affidavit of respondent affirmed 7 December 2020, annexure O at page 4
The applicant contends that even if the Tribunal finds the breach of regulation 62 was due to inadvertence, there is authority that an inadvertent breach of trust account provisions is sufficiently serious to constitute professional misconduct.[28] In Legal Services Commissioner v McGregor (McGregor),[29] the Victorian Tribunal found professional misconduct in such a breach given the ‘sanctity’ in which a practitioner’s trust account should be held.[30] Similarly, in Council of the Law Society of New South Wales v Ginges[31] (Ginges), the NSW Tribunal held that withdrawing trust funds prior to submitting tax invoices amounted to professional misconduct.[32]
[28] Applicant’s outline of submissions dated 18 January 2021 at [7.11]
[29] [2012] VCAT 1742
[30] [2012] VCAT 1742 at [34]
[31] [2016] NSWCATOD 7
[32] [2016] NSWCATOD 7 at 51
The respondent denies that the withdrawal of funds from trust, in breach of the Act, constitutes professional misconduct within the meaning of section 387 or at common law. The respondent contends her conduct should be characterised at its highest as unsatisfactory professional conduct under section 386 of the LPA.
The respondent contends that the breach of regulation 62 was due to inadvertence. She says the four opportunities the respondent alluded to were simply the one inadvertence. She says the oversight was partly due to not fully understanding her obligations when dealing with trust money under the regulation.[33] In response to the finding in McGregor that an inadvertent breach of trust account provisions can be sufficiently serious to constitute professional misconduct, she distinguishes the conduct there as being part of a deliberate course of conduct that potentially jeopardised trust funds. She says her own conduct was not of this magnitude. Her focus, as she said in her evidence, was to have an account issued, her costs paid, and the lien released as soon as possible so as to avoid any repetition of the heightened distress her staff encountered on the morning the client last visited her office. She recorded these concerns in a contemporaneous file note.[34]
[33] Respondent’s outline of submissions dated 26 February 2021 at [28]
[34] Exhibit A2, at page 11
In response to the finding in McGregor that professional misconduct should be found in an inadvertent breach, given the ‘sanctity’ in which a practitioner’s trust account should be held, the respondent appears to suggest trust money held for costs distinguishes her situation. It is troubling that the respondent appears to regard the funds as in some way already hers, saying in her outline of submissions “in this case, the funds prima facie belonged to the respondent”.[35]

Finding as to characterisation

[35] Respondent’s outline of submissions dated 26 February 2021 at [29]

It is instructive to have regard to the gravity given the sanctity of a practitioner’s trust account in Giles. In considering professional misconduct when it relates to breaches of the legislative provisions for trust money and trust accounts, it is clear the twin principles of failure to meet standards of competence and diligence and falling short of the standard of professional observed or approved by the profession are emphatically applicable. Giles takes the characterisation of such conduct to the extent that, even given (as is here) an agreed absence of dishonesty, it is ‘borderline’ for a strike off finding.[36]
[36] Council of Law Society of the Australian Capital Territory v Giles [2020] ACTSCFC 1 at [123]
Without in any way detracting from that level of seriousness a more pertinent question for this Tribunal in this matter is where the borderline lies between unsatisfactory professional conduct and professional misconduct with respect to an “absent dishonesty” withdrawal of trust money for costs in breach of the LPA.
As the applicant submitted, VCAT found in McGregor professional misconduct even where VCAT “accepted that the deficiency in the trust account was caused inadvertently by Mr McGregor.”[37] The circumstances are distinguishable to some degree given Mr McGregor’s conduct gave rise to the potential of a substantial deficiency ($160,000) being caused in his trust account. It was on these facts the tribunal characterised his conduct as being “sufficiently serious to constitute professional conduct…, it constitutes a failure to meet a reasonable standard of competence and diligence, which in this case was ‘substantial”.[38] No such possibility of deficiency existed here.
[37] Legal Services Commissioner v McGregor [2012] VCAT 1742 at [31]-[34]
[38] Legal Services Commissioner v McGregor [2012] VCAT 1742 at [34]
In Ginges, the applicable NSW legislation is similar to regulation 62. It deals with the same somewhat curious situation that withdrawal of trust money for legal costs is permissible without issuing a tax invoice in certain circumstances. In both cases the permission only extends to “trust money held … for payment of legal costs owing to the practice”. It does, however, worryingly hint at some chink in the usual sanctity of a practitioner’s trust account. In the absence of a tax invoice a practitioner needs to properly follow one of the two prescribed procedures: in the case of the ACT that found in regulation 62(3), in the case of NSW that found in clause 88(3) of its Legal Profession Regulation 2005. In Ginges, the prescribed procedure was in no way followed – there was never an invoice, and there was never any notice of withdrawal, and the NCAT held that amounted to professional misconduct.[39] Here the prescribed procedure was followed, but not properly – there was an invoice, which the applicant also sought to characterise as “a written notice of withdrawal” notwithstanding the notice was not given “before effecting the withdrawal”.
[39] Council of the Law Society of New South Wales v Ginges [2016] NSWCATOD 7 at [51]
The respondent says her conduct was of the magnitude of “insufficient checking of the order for sending the tax invoice and the direction to transfer the funds”. She suggested that amounts, at worst, to unsatisfactory professional conduct.[40]
[40] Respondent’s outline of submissions dated 26 February 2021 at [28]
What makes this troubling is the suggestion that “the funds prima facie belonged to the respondent”.[41] Because section 229(1)(b) of the LPA, together with regulation 62, deal with withdrawals from trust for legal costs owning to the practice, this might be taken to suggest that money held on trust for costs has a different status than the sanctity usually afforded entrusted monies generally. This is patently not so. And it is particularly so here where the respondent would reasonably have anticipated, had she given the matter the necessary attention, that such costs would be disputed by the client.
[41] Respondent’s outline of submissions dated 26 February 2021 at [29]
Given this, the respondent’s conduct amounts to more than mere inadvertence in the sense of an accident or an oversight. The extremely high obligation placed upon practitioners for trust account management moves it up several notches in seriousness because her conduct exhibits sustained absence of sufficient attention. In terms of the section 387 LPA definition or the common law test, as formulated in Chamberlain, the conduct does equate to a failure to reach or maintain a reasonable standard of competence and diligence. However, there is nothing to suggest the failure is ‘consistent’ failure. Nor is the failure akin in seriousness to that of the McGregor trust account deficiency found to be ‘substantial’. Therefore, as to the characterisation of the conduct on the first charge, it amounts to unsatisfactory professional conduct, which constitutes a failure to meet a reasonable standard of competence and diligence. That failure has neither the attribute of ‘substantial’ nor ‘consistent’ as to elevate it to professional misconduct.

The Tribunal finds the withdrawal of funds from trust for costs, in breach of section 223 of the LPA, constitutes unsatisfactory professional conduct.
The Tribunal also finds the failure to provide written cost disclosure in accordance with section 269 of the LPA constitutes unsatisfactory professional conduct.

Sanction

The applicant says as to sanction that the misuse of trust money in breach of section 223 is a serious breach of professional standards and should be sanctioned under section 425(5) by way of fine of $10,000 together with other orders.
The applicant says the respondent’s failure to provide proper cost disclosure under section 269 is aggravated by two prior similar matters. In April 2018 a complaint against the respondent relating to her conduct in 2015 inter alia with respect to section 269 was summarily concluded pursuant to section 413 of the LPA by the issue of a public reprimand and a fine of $500. In April 2018 a complaint against the respondent relating to the conduct of a solicitor under her supervision in 2016 inter alia with respect to section 269 was summarily concluded pursuant to section 413 of the LPA by the issue of a public reprimand and a fine of $500.[42] The applicant contends the Tribunal may legitimately conclude the respondent has not learned from these previous conduct breaches.[43]
[42] Exhibit A2, affidavit of Robert Anthony Reis sworn 20 January 2021, attachment RR2 at pages 17-55
[43] Applicant’s outline of submissions dated 18 January 2021 at [8.5] citing Council of the Queensland Law Society v Tunn [2004] QCA 412 at [21]
The respondent says as to sanction that a fine of $10,000 is excessive in the circumstances. It represents the maximum amount prescribed in section 427 that can be imposed by way of fine for a finding of unsatisfactory professional conduct that does not amount to professional misconduct. The respondent characterises a fine of this magnitude as appropriate for a trust account breach rather than her section 223 failure.[44]
[44] Respondent’s outline of submissions dated 26 February 2021 at [24]
As the court affirms is relevant in Giles,[45] a relevant consideration is the applicant’s conduct in the way she dealt with the respondent subsequent to receiving the complaint in May 2019. She was open and fair in all her dealings with the respondent.
[45] Council of the Law Society of the Australian Capital Territory v Giles [2020] ACTSCFC 1 at [128]
The respondent’s conduct with respect to the section 229 breach hovers on the spectrum of professional conduct between unsatisfactory professional conduct and professional misconduct. It only falls in the former category because it lacks the quality of being ‘substantial’ or ‘consistent’ to render it the latter. Therefore, it warrants significant penalty.
The respondent’s conduct with respect to the section 223 breach also warrants penalty. Though the Tribunal has characterised it too as unsatisfactory professional conduct, it is the third almost identical failure to give in writing “a range of estimates” and “some of the major variables which will affect the estimates” in a CDS. As the respondent is all too aware, the requirement for those details appears in the precedent available on the applicant’s website.
Courts consistently make clear the function of deterrence is also a relevant consideration. The aim, as the ACT Supreme Court said as long ago as Legal Practitioners Act 1970 and the Law Society of the Australian Capital Territory v Julian Christopher Oakley[46] (and many times since), is sanction orders act “as a deterrent to others who might for whatever unfortunate reason permit their own standards of professional conduct to deteriorate”.[47]
[46] [1992] ACTSC 90
[47] Legal Practitioners Act 1970 and the Law Society of the Australian Capital Territory v Julian Christopher Oakley [1992] ACTSC 90 at [64]
The Tribunal orders:
1.Pursuant to subsection 425(1) of the LPA, the respondent is guilty of unsatisfactory professional conduct.
2.Pursuant to section 425(5)(a) of the LPA the respondent pay a fine of $5,000 by 28 July 2021.
3.Pursuant to section 425(5)(b) of the LPA the respondent undertake a course in trust accounting approved by the respondent by 30 December 2021.
4.Subject to subsection 423A(2) of the LPA, the respondent is publicly reprimanded pursuant to section 425(3)(e) of the LPA.
5.Pursuant to section 433(1) of the LPA the respondent pay the applicant’s costs calculated on a solicitor own-client basis in accordance with the ACT Supreme Court scale in a sum to be agreed and, if not agreed between the applicant and respondent, the cost are to be assessed by a cost specialist, namely LegalCost, and the respondent is to pay 90% of the costs so assessed plus disbursements in full.
………………………………..

Senior Member Prof A Foley
for and on behalf of the Tribunal

Date(s) of hearing	22 March 2021
Counsel for the Applicant:	Mr D Moujalli
Counsel for the Respondent:	Mr W Sharwood
Solicitor for the Applicant	Ms K Binstock, McInnes Wilson Lawyers