Fulham v Director-General, Department of Environment and Conservation
[2005] NSWADT 88
•04/26/2005
CITATION: Commissionier for Fair Trading v MacLachlan [2005] NSWADT 88 DIVISION: Legal Services Division PARTIES: APPLICANT
Commissioner for Fair Trading
RESPONDENT
Morag MacLachlanFILE NUMBER: 042035 HEARING DATES: 5 April 2005 SUBMISSIONS CLOSED: 04/21/2005 DATE OF DECISION:
04/26/2005BEFORE: Currie JS - Judicial Member; Curraey P - Non Judicial Member; Bubniuk L - Non Judicial Member APPLICATION: Professional Misconduct - breach of duty of trust MATTER FOR DECISION: Principal matter LEGISLATION CITED: Conveyancers Licensing Act 1995
Legal Profession Act 1987CASES CITED: Commissioner for Fair Trading v Walker [2004] NSW ADT 139
Council of the Law Society of New South Wales v Smith [2004] NSW ADT 225REPRESENTATION: APPLICANT
J Coss, solicitor
RESPONDENT
M Parasyn, solicitorORDERS: 1.The Respondent is guilty of professional misconduct; 2.The Respondent will pay a fine of $1,000; 3.The Respondent is publicly reprimanded; 4.The Respondent will pay the costs of the Office of Fair Trading
THE PROCEEDINGS
1 This matter is one in which the Respondent has placed herself in a difficult position and has thereby committed a breach of the trust account provisions of the Conveyancers Licensing Act 1995 ("the CL Act"). The information is brought by the Commissioner for Fair Trading against Morag MacLachlan ("the Conveyancer") a licensed conveyancer under the provisions of the CL Act. The Commissioner alleges that the Conveyancer is guilty of a breach of the trust account provisions of the Act and in particular sub-section 25(1) of the Act, and accordingly is guilty of professional misconduct. It is alleged that the Conveyancer in the course of conducting a conveyancing business received money on behalf of her clients, Mr Hatzianestis and Mrs Velonaki (collectively the "Clients") on 9 January 2002 and 9 April 2002 and failed to pay this money into a general trust account at a bank, building society or credit union, in contravention of section 25(1).
THE LEGISLATION
2 Division 2 of Part 3 of the CL Act deals with trust money and section 25 sets out how conveyancers must deal with monies received on behalf of another person. The relevant parts of that section provide that:
- (1) A licensee who, in the course of conducting a conveyancing business, receives money on behalf of another person:
- (a) must pay the money, within the time prescribed by the regulations, into a general account at a bank, a building society or credit union in New South Wales, and must hold the money in accordance with the regulations relating to trust money…
3 Paragraph 25(3)(b) provides that the trust account provisions in section 25 do not affect any enforceable lien or claim that a licensee has to any money and paragraph (c) of that subsection makes it clear that the provisions do not prevent a licensee from exercising a general retaining lien for unpaid costs and disbursements in respect of money in a trust account.
4 Paragraph 25(4)(b) makes it clear that a lien referred to in subsection (3)(c) may not be exercised unless the licensee has delivered an outlined bill of costs to the relevant client.
5 Subsection 25(7) provides that it is professional misconduct for a licensee to contravene section 25. We note that this is a significant difference from the parallel provisions in section 61 of the Legal Profession Act 1987 ("the LPA"), in that the LPA provision states that contravention of the section will amount to professional misconduct if done "wilfully" whereas the provisions of section 25 of the CL Act provide that any breach of the section is professional misconduct i.e. whether or not the act or omission is wilful.
FACTS
6 It is common ground that the Conveyancer, who was the licensee of the practice known as Sterling Conveyancers, was engaged by the Clients to act for them on the purchase of a company title property at 7/2 Roslyn Gardens, Elizabeth Bay. A fee agreement was entered into but remained silent as to what would happen to any refunds received. Contracts for the property were exchanged on 22 October 2001 with settlement due on 10 December 2001. At the time of exchange finance had not been arranged.
7 Prior to settlement the Conveyancer delegated the matter to a Mr Aird, a conveyancer in her office. This was due to serious ill health of a very close friend of the Conveyancer and she was absent from the office between 6 December 2001 and 14 January 2002. In her absence Mr Aird had carriage of the matter for the Clients.
8 On 6 December 2001 the Clients attended the offices of the Conveyancer and executed mortgage documents. The Clients provided two cheques, being one for stamp duty of $1,701 for an equitable deed of mortgage and the other for stamping fee of $126, making a total of $1,827. The deed of equitable mortgage was stamped and returned to George Shad and Company Solicitors (the solicitors for the mortgagee) on the same day.
9 George Shad & Co overlooked the stamping of the deed of equitable mortgage and proceeded in error to have the mortgage noted and stamped "in house". The security documents were then forwarded to St George Bank (the mortgagee) and the Bank deducted the amount of stamp duty from the funds available at settlement. In short there was a double deduction of the applicable amount of stamp duty.
10 It is acknowledged that this error arose due to no fault of the Conveyancer. George Shad & Co realised that there had been a double deduction in respect of stamp duty and on 9 January 2002 they returned a trust account cheque in favour of the Clients to the Conveyancer. This was in the amount of $1,701. George Shad & Co expressly asked that this third party cheque be passed on to the Clients.
11 It appears that an inexperienced receptionist simply placed the relevant correspondence from George Shad & Co and the refund cheque on the file without informing Mr Aird or the Conveyancer.
12 Again, on 9 April 2002 George Shad & Co forwarded the further trust account cheque for $126 to the Conveyancer, in respect of a refund of the stamping fee, again requesting that this cheque be passed on to the Clients. It is acknowledged that the same receptionist again simply placed this cheque and the relevant correspondence on the file without informing Mr Aird or Ms MacLachlan, and sent the file to storage.
13 Accordingly as at 9 April 2002, the Conveyancer held two third party cheques to the value of $1,827 in respect of the Clients. Significantly, no outline bill had been prepared in respect on these amounts. Clearly the amounts were not banked into a trust account as required by section 25.
14 Following a reminder facsimile from George Shad & Co on 3 July 2002 the Conveyancer's office instituted a search for the file and ultimately discovered the two missing cheques. At this stage the Conveyancer did not send the cheques to the Clients, nor did she bank them into a trust account, but she claimed that she was exercising a general retaining lien. On 8 July 2002 the Conveyancer forwarded her account for $1,403.55 to the Clients and advised them that she held two cheques in their favour for $1,827. She gave no explanation as to how this occurred but indicated that she intended to hold the cheques until the account was paid.
15 The Clients subsequently complained by way of letter of 19 July 2002 to the Conveyancer but the Conveyancer repeated her position that the cheques would not be forwarded until the account was paid.
16 It should be noted that the cheques were made out to the Clients, and that the Conveyancer did not operate a trust account.
THE COMMISSIONER'S SUBMISSIONS
17 It is submitted on behalf of the Commissioner that a clear breach of the trust account provisions of section 25 of the CL Act is involved and accordingly the Conveyancer is guilty of professional misconduct. The Commissioner seeks orders that the Conveyancer be fined, be publicly reprimanded, pay the costs of the Commissioner, and such other orders as this Tribunal sees fit.
18 Mr Coss for the Commissioner made oral submissions to us and Mr Garland who is an investigator with the Real Estate Investigations Branch of the Office of Fair Trading gave verbal evidence.
THE CONVEYANCER'S SUBMISSIONS
19 The Tribunal received written submissions from Mr Parasyn on behalf of the Conveyancer. Mr Parasyn also made oral submissions. The Conveyancer was present at the Tribunal hearing and was invited to give oral evidence but declined to do so.
20 It is clear from the Conveyancer's submissions that the Conveyancer acted on the mistaken assumption that she was entitled to a general lien over the unpresented cheques in favour of the Clients as they could be properly regarded as "documents" rather than as "money". The Tribunal does not doubt that the Conveyancer genuinely held this belief, even though it is clearly incorrect at law. It would appear that this belief was held until about the time of the filing of the Conveyancer's Reply on 24 December 2004. Mr Parasyn has told the Tribunal that the Conveyancer now acknowledges that her belief as to the existence of the lien was wrong, and that she accepts that she had no valid lien over the unrepresented cheques.
21 The written submissions on behalf of the Conveyancer also make it clear that the Conveyancer accepts that her actions in not forwarding the cheques to the Clients (or opening a trust account and depositing the cheques in it) do amount to a breach of section 25. As is said in the submissions:
- "(The Conveyancer) regrets that she did not send off the cheques. … She realises now that she erred because the cheques constitute money within the definition."
22 The Tribunal finds that the Conveyancer is guilty of professional misconduct due to her breach of sub-section 25(1) of the CL Act.
ACTIONS OF THE CONVEYANCER
23 The submissions by the Commissioner and the evidence of Mr Garland in his affidavit of 1 December 2004 support the contention that the Conveyancer was slow to realise her mistake and slow to do anything to resolve the obvious inequity to her Clients. It is submitted on behalf of the Conveyancer that this was due to the Conveyancer's mistaken belief that she had a lien in respect of her unpaid costs. However, it is apparent that investigators from the Office of Fair Trading had, through their visits to the Conveyancer's offices, and correspondence with her from about October 2002, attempted not only to investigate the complaint subsequently lodged at the Office of Fair Trading by the Clients, but to make the Conveyancer aware of her breach of the trust account provisions of the CL Act.
PENALTY
24 We have heard submissions as to penalty from both parties and the issue is covered at some length in the written submissions filed on behalf of the Conveyancer. The two issues which emerge are firstly whether this is a matter in which a private reprimand, as opposed to a public reprimand, is appropriate; and secondly, whether there should be any fine imposed in addition to a reprimand.
25 We have considered the previous cases referred to us by Mr Parasyn on behalf of the Conveyancer. In one of those, Commissioner for Fair Trading v Walker [2004] NSW ADT 139, a private reprimand was imposed.
26 However we feel that there are factors which distinguish the result in the Walker case from the present one. In particular, in the Walker case, it was clear that the Respondent sought to resolve the dispute with her clients and refund the monies in question at an early stage, and did not dispute her breach of the CL Act.
27 In the present matter, although the Conveyancer was acting on the basis of a misapprehension as to her entitlement to a lien, it is also clear that she could have done more to seek to resolve the dispute with her Clients and thereby make a final settlement with them, which would of course have involved an appropriate adjustment out of the funds wrongfully dealt with by her.
28 The Tribunal accepts that the Conveyancer has not been the subject of any other formal complaint and that her actions were not actions of dishonesty.
29 However the evidence clearly shows that the Conveyancer has been slow to comprehend her error, to acknowledge that she was in breach of the CL Act, or to express contrition in any substantial way for her actions. We note that the Conveyancer did not make any express verbal statement of contrition and her solicitor did not do so on her behalf until he was invited to do so by the Tribunal at the hearing. There are statements of regret in the written submissions lodged by Mr Parasyn. However, the Conveyancer was invited herself to give evidence before the Tribunal at the hearing at which time she could have personally stated her contrition. She did not avail herself of that opportunity.
30 Another matter to which we were referred, the Council of the Law Society of New South Wales v Smith [2004] NSW ADT 225, was based on similar facts, and a public reprimand was imposed.
31 In all the circumstances we believe that the appropriate remedy will include a public reprimand.
32 These proceedings have clearly affected the Conveyancer's health and she has apparently not received a payment of her costs. We have no reason to think the breach will be repeated, and no reason to doubt that the Conveyancer is capable of fulfilling her professional obligations in the future.
33 However in all the circumstances some fine must also be imposed. We say this because of the fundamental importance of the trust account provisions in the CL Act, and the need to mark the Conveyancer's conduct, including her failure to comply with sub-section 25(1), and her attitude to resolution of the complaint, as worthy of additional censure.
34 Accordingly the Tribunal orders that
- 1. The Conveyancer be fined $1,000.
2. The Conveyancer be publicly reprimanded.
3. The Conveyancer pay the costs of the Commissioner within one calendar month of the date of this order. Liberty to apply if payment is not made.
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