Law Society of New South Wales v Day
[2009] NSWADT 95
•6 May 2009
CITATION: Law Society of New South Wales v Day [2009] NSWADT 95 DIVISION: Legal Services Division PARTIES: APPLICANT
RESPONDENT
Law Society of New South Wales
Benn Reginald DayFILE NUMBER: 072048 HEARING DATES: 26/11/08 SUBMISSIONS CLOSED: 26 November 2008
DATE OF DECISION:
6 May 2009BEFORE: Pheils J - Judicial Member; Riordan M - Judicial Member; Fitzgerald R - Non-Judicial Member LEGISLATION CITED: Legal Profession Act 2004 REPRESENTATION: APPLICANT
RESPONDENT
P Boyd, solicitor
No appearanceORDERS: 1. Pursuant to s18(2) Legal Profession Act 2004 any law practice is prohibited (without approval under section 17) from employing or paying the Respondent, Ben Reginald Day, in connection with the legal practise engaged in by the law practice
2. The Respondent pay the Society’s costs of these proceedings.
REASONS FOR DECISION
1 On 19 December 2007 the Council of the Law Society of New South Wales filed an application seeking:
a An order under Section 18(2) Legal Profession Act 2004 (“The Act”) prohibiting (without approval under section 17) any law practice from employing or paying the Respondent in connection with the legal practise engaged by the law practice.
b That the Respondent pays the costs of the Law Society of these proceedings.
2 The Respondent did not appear in the proceedings. An affidavit of service was tendered in the proceedings establishing that the Respondent was personally served with the application on 18 February 2008. Further correspondence was tendered from the Law Society to the Respondents last known address establishing that he had been advised of the hearing date of the application. The Tribunal was satisfied that the Respondent was aware of the hearing date and proceeded to hear the matter.
3 The applicant relied on the following material:
i. Affidavit of Raymond John Collins dated 18 December 2007
ii. Affidavit of Jean Sayer dated 1 February 2008.
4 The particulars of the facts are set out below:
Sarah Jane Thomson ["the Solicitor"] was born in New Zealand and obtained her professional qualifications on 31 December 2000. She was admitted as a Solicitor in New
Zealand on 8 June 2001.
The Solicitor obtained a New South Wales Practising Certificate on 6 May 2003 and commenced practice as an employed Solicitor. On 27 April 2004 the Solicitor became an employed Solicitor of Dayton Legal Pty Limited ["Dayton"] and, on 1 August 2004, became a Director Solicitor of Dayton.
On 27 June 2005 the Supreme Court of New South Wales, pursuant to the provisions of
Section 92 of the Legal Profession Act, 1987, appointed Jean Sayer as Receiver to the trust property of the Solicitor.
The Solicitor did not renew her Practising Certificate on 1 July 2005
At all material times, Mr Benn Reginald Day ["Mr Day"] was a non Solicitor/Director of
Dayton and was the managing director and 100% shareholder of Dayton. Mr Day carried out the functions of a paralegal.
Dayton carried on business at 8 Dibbs Street, Alexandria which was the residence of the Solicitor.
On 1 April 2004 a trust account was opened and styled "Dayton Legal Pty Limited Trust
Account" ["the trust account"]. The trust account was kept at the Westpac Bank, Cnr Market and Clarence Street, Sydney. The Solicitor was the sole signatory on the trust account. From 30 June 2004 to 31 May 2005 the trust account had a nil balance except for a small balance of $694.24 as at 31 July 2004.
There was a further account of Dayton kept with the Westpac Bank, Cnr Market and
Clarence Street, Sydney account no. 227724 ["the general account”]. Mr Day was the signatory to this account and which account was used as a general account for the payment of disbursements and overhead expenses including salaries of staff. The general account was also used as a personal/business account for other activities of Mr Day. Trust moneys received in relation to the practice were dealt with in this account.
A Mouzouros
1 Dayton acted for Mrs Mouzouros on a transfer to her, pursuant to Family Court Orders, of a property 9 Angel Court, Glenwood ["the property"]. The Solicitor had the carriage of the matter.
2. Mrs Mouzouros received a mortgage advance of $440,000.00 from the Commonwealth Bank which was to be secured over the property and which was to discharge a prior mortgage thereon.
3. Mr Day, by letter dated 19 May 2005, requested the Commonwealth Bank to draw cheques on settlement as follows:
Perpetual Trustee Company Limited Resimac Limited Dayton Acquisitions Bank Cheque Fee
4, Dayton Acquisitions Pty Limited is a company owned by Mr Day and the sum of
$22,484.97 represented the surplus of the mortgage proceeds to be accounted for to
Mrs Mouzouros.
5. A cheque in the sum of $22,484.97 was, on 20 May 2005, deposited into the account of Dayton Acquisitions Pty Limited kept with the Westpac Bank at its Kogarah Branch. This cheque represented the surplus of mortgage proceeds which were to be accounted for to Mrs Mouzouros.
6. Although it is not known whether a bill was ever forwarded to Mrs Mouzouros, the
Solicitor, by letter dated 31 March 2005, estimated professional fees and disbursements (including GST) in the sum of $396.25.
7. There has been a misappropriation by Mr Day in the sum of $22,484.97 less proper costs due to Dayton in the sum of $396.25.
B Maglis
1 Dayton acted for Mr and Mrs Maglis on the transfer of 165 Dunning Avenue,
Rosebery from themselves, as joint tenants, to Mrs Maglis solely.
2. Dayton also acted for Mr and Mrs Maglis on the re-financing of the property.
3. Both the Solicitor and Mr Day had the carriage of the matter.
4. A mortgage advance was made to Mrs Maglis by RAMS Home Loans Pty Limited.
The proceeds of the loan, in the net sum of $496,818.00, were applied to discharge a mortgage to Bluestone Mortgages.
5. At the direction of Dayton, in a letter dated 29 April 2005 and signed by Mr Day,
cheques were drawn on settlement as follows:
Permanent Custodians Limited Dayton Legal S & A Maglis
6. The file indicates that the sum of $14,350.75 was to cover the following:
Stamp duty on Transfer Costs Disbursements Settlement fees
7. By letter dated 2 May 2005 and signed by Mr Day, the sum of $60,706.31 was forwarded to Mr and Mrs Maglis. Mr Day also reported that the matter had been completed and that professional fees had been paid.
8. The cheque in the sum of $14,350.75 was deposited to the general account of Dayton on 2 May 2005 and was dissipated in that account.
9. Registered Transfer AB473098K recording the transfer from Mr and Mrs Maglis to
Mrs Maglis shows that it was stamped with the stamp provided by the Office of State
Revenue and shows the Transaction Number as 3629238. The Transaction Number is false. The Office of State Revenue has confirmed that that was not a Transaction
Number allocated to Dayton and that the stamp duty was not paid. A Notice of Assessment was subsequently issued to Mrs Maglis dated 13 July 2005 and in the sum of $14,052.50.
10. There has been a misappropriation by Mr Day of the sum of $14,056.50.
C Kong
1. Dayton acted for Mr Kong on the purchase of 2/241 West Street, Blakehurst and a
mortgage to ING Bank (Australia) Limited. The purchase price was $440,000.00 and
a deposit of $22,000.00 was paid by Mr Kong on exchange of contracts on 14
December 2004.
2. The purchase was settled by Mr Day on 8 March 2005, there having been a number
of delays.
3. The mortgage advance available at settlement was $350,288.50. The balance of settlement funds totalling $68,355.78 were provided by Mr Kong.
4. Mr Kong also provided Dayton with funds ( to cover stamp duty and costs) by cheques totalling $16,416.50 dated 2 December 2004 drawn by his company Dabko Pty Limited as follows:
Office of State Revenue Dayton Legal
5. The cheque for $15,290.00 drawn payable to the Office of State Revenue NSW
Treasury has had the name of the payee ruled through and changed to Dayton Legal. Mr Kong has confirmed that he did not change the payee of the cheque.
6. The cheques totalling $16,416.50 and provided by Mr Kong were deposited to the general account of Dayton on 3 December 2004. As at 2 December 2004 that account was in overdraft in the sum of $67.76.
7. The sum of $16,416.50 was almost totally dissipated by 9 December 2004 when the balance in the account was reduced to $37.58.
8. The contract for the purchase was not stamped.
9. Registered Transfer number AB393149P, in respect of the transfer to Mr Kong, was stamped with the stamp provided to Dayton by the Office of the State Revenue and given Transaction Number 2511436. The Transaction Number is false and was not a number allocated by the Office of State Revenue to Dayton. The stamp duty was not paid.
10. The Office of State Revenue subsequently issued a Notice of Assessment for unpaid duty, with interest, totalling $15,971.98.
11. There has been a misappropriation by Mr Day of the sum of $15,290.00.
D. Williams
1. Dayton acted for Mr and Mrs Williams on their purchase of unit 99 "The Palms", Warana, Queensland for the sum of $232,000.00.
2. On or about 11 March 2005 Mr & Mrs Williams paid $5,000 to the agents by way of
deposit.
3. The purchase was settled on 12 April 2005 with the assistance of a mortgage advance from the Commonwealth Bank and a further $40,000 provided by Mr & Mrs Williams.
4. Both the Solicitor and Mr Day, at various times, acted in the matter.
5. On 6 April 2005 the sum of $6,640.00 for stamp duty was deposited directly to the general account of Dayton by Mr and Mrs Williams. At that time the general account had a credit balance of $3,943.17. After a further deposit of $120.00 by another client, Mr Cooper, the general account was in credit in the sum of $10,703.17.
6. The sum of $10,703.17 was disbursed as follows:
Charles Carroll -Barrister re the affairs of Focuson Pty Limited R O'Neill -Barrister AJC Locksmiths Wages -Sarah Millers Storage Balance remaining
7. 6 April 2005 Mr Day purchased a bank cheque in the sum of $6,640.00 payable to the Office of State Revenue by using an advance from his MasterCard account.
8. The matter file indicates that another amount required to be paid from monies received from Mr & Mrs Williams was paid by a cheque purchased from the MasterCard Account of Mr Day.
9. The funds received from Mr & Mrs Williams were misappropriated by Mr Day to cover payments made from the general account, moneys for such payments having previously been misappropriated when used for other purposes.
E. McBryde
1. Dayton acted for Mr McBryde on the sale of 5/557 Victoria Road, Ryde and the purchase of 124 Berrys Head Road, Narara.
2. Settlement of both the sale and purchase took place on 31 March 2005 and the sale proceeds were applied to the purchase which was further funded by a mortgage in favour of ING.
3. On settlement of the sale the sum of $7,769.00 was received by cheque payable to Dayton to cover stamp duty payable on the purchased property. This cheque was deposited to the general account of Dayton on 31 March 2005 at which date there was a credit balance in the account of $1,855,87.
4. Mr McBryde separately paid $1,000.00 for costs and disbursements on the sale and purchase.
5. The amount of $7,769.00 deposited with further subsequent deposits were all disbursed by 15 April 2005 when the then balance of $595.07 was transferred to another account and thus leaving a nil balance in the general account. The general account was then overdrawn until 19 April 2005 when $1,500.00 was deposited described as "from Benn".
6. The contract on the purchase was stamped in the sum of $7,765.00 with the stamp issued to Dayton by the Office of State Revenue. The Transaction Number shown is
2511436.
7. The registered Transfer numbered AB404365D has also been stamped with Dayton's stamp with the same transaction number. The Office of State Revenue has informed the Receiver that the transaction number is false and the stamp duty had not been paid.
8. A Notice of Assessment was issued to Mr McBryde on 13 July 2005 for $7,911.14.
9. There has been a misappropriation by Mr Day of the sum of $7,769.00.
F. Cameron
1. Dayton acted for Ms Cameron on the purchase of 18/8-10 Wallace Street, Swansea.
Mr Day and the Solicitor both acted in the matter.
2. Contracts on the purchase were exchanged on 3 March 2005 and a deposit of
$11,600 was paid by a cheque provided by Ms Cameron on or about the same date.
3. The Stamp duty payable on the purchase was $6,614.00. That amount was credited to the general account of Dayton on 18 March 2005 paid by Ms Cameron using an American Express credit card.
4. The credit of $6,614.00 brought the balance in the general account to $8,861.40.
5. Or 18 March 2005 a direct debit of $16,783.03 in the general account for payment to an American Express account resulted in an overdrawing to the extent of $8,921.63. On 21 March 2005 the Bank dishonoured the direct debit and the general account then had a credit balance of $7,861.40 which, by 24 March 2005, had been dissipated, the balance to the credit of the account then being $724.99.
6. On 20 April 2005 Ms Cameron paid into the trust account of Dayton the sum of $15,600.00. The Receiver was unable to locate a trust account receipt for this payment.
7. In a loose binder containing the Trust Account records, the Receiver found the Trust
Account Cash Receipts Book for the period 30th April 2005 which recorded a receipt
on 26 April 2005 of $16,600 described as received from "Denise Cameron for deposit
on property purchase."
8. The Trust Account Cash Payment Book for the period 30th April 2005 recorded a
cheque drawn on 26 April 2005 in the sum of $16,600 as paid to "J Torr vendor for property being purchased - deposit payable under contract."
9. On 26 April 2005 Mr Day signed a cheque in the sum of $16,600.00 drawn on the trust account payable to "Benn Day -Please pay cash" and deposited it into his Westpac MasterCard Account.
10. The cheque butt for this cheque is in the handwriting of Mr Day. The cheque butts for cheques drawn on the trust account which follow are in the handwriting of the Solicitor.
11 Settlement of the purchase took place on 17 June 2005.
12 Settlement was effected with a mortgage advance of $209,000 from the National Australia Bank and $2,000 from Ms Cameron.
13. Stamp duty of $6,614.00 was paid by cheque drawn on the general account of
Dayton Legal on 22 June 2005. The cheque was dishonoured on 23 June 2005.
14. As at 22 June 2005 the balance in the general account of Dayton Legal was $1.75.
On the same day a direct debit for insurance of $1,291.32 was made on the account resulting in an overdrawn balance of $7,903.57.
15. On 23 June 2005 the Solicitor made a cash deposit of $8,000.00 into the general account on behalf of Mr Day.
16. On 24 June 2005 Mr Day drew a cheque on the general account in the sum of $7,700 drawn as "Please pay cash." The said cheque was used as follows:
Cash 1,078.50 Bank fee for bank cheque 7.50 Bank cheque payable to Office of state revenue 6,614.00 7,700.00
17. The cheque for $7,700.00 was funded by the cash deposit of $8,000.00 paid to the
account by the Solicitor on 23 June 2005.
18. There has been a misappropriation of the sums of $6,614.00 and $16,600.00 by Mr
Day.
G Loisos and Cafios -sale to Sharma
1. Dayton acted for all parties on the sale, for a consideration of $305,000.00, of 1/53-
55 Robinson Street, Wiley Park, the discharge of the vendors' mortgage to the
Commonwealth Bank and the mortgage advance to the purchaser, Ms Sharma, by the Commonwealth Bank.
2. Contracts were exchanged on 22 March 2005 with a deposit covered by a deposit bond.
3. Settlement was effected on 22 April 2005.
4. Both the Solicitor and Mr Day were involved at times in the carriage of both the sale and the purchase despite a letter of 3 March 2005 stating to the parties that to avoid a conflict, the Solicitor would have the carriage of the sale and Mr Day would have the carriage of the purchase.
5. The Commonwealth Bank, as incoming mortgagee, was directed by Dayton to draw cheques as follows:
Commonwealth Bank -discharge of mortgage from Cafios Dayton Legal
6. The cheque in the sum of $128,535.32 was deposited to the general account of Dayton on 20 April 2005 when the account was in credit to the extent of $264.24.
7. There is no formal accounting to the vendors in respect of the sale proceeds. No bills of costs and no correspondence or directions concerning the payment of the proceeds are in the instruction file.
8. The net advance from the Bank to Mrs Sharma was $340,000.00 and from which the sum of $305,046.88 was required to complete the purchase.
9. From the balance of settlement moneys to the vendors [ $305,046.88 ], the following amounts were to be paid:
CBA to discharge mortgage Commission payable Costs and Disbursements P Loisos As directed by vendors
10. The sum of $27,830.00 said to have been disbursed from the sale proceeds (as directed by the vendors) was withdrawn from the general account of Dayton by the
Solicitor on 22 April 2005, which amount was made up as follows:
Local telegraphic transfer Fee for telegraphic transfer Cash MasterCard 9311
11 The sum of $16,800.00 was transferred to the bank account of McDuff & Daniel, Lawyer of Queensland in payment of a deposit of $15,800.00 and part payment of $1,000.00 in respect of a purchase of property known as 3 Martha Street, Howard, Queensland by Mr Day.
12. The Queensland purchase ultimately did not proceed, the sum of $15,800.00 was forfeited and the sum of $1, 000.00 was returned to Mr Day.
13. A cheque for commission due to the Agent in the sum of $3,500 was drawn on 10
May 2005 and as a result of which the general account was overdrawn in the sum of $2,412.26. The cheque was reversed by the Bank and dishonoured the following day.
14. Rates in the sum of $185.35 which should have been paid from the proceeds of settlement were not paid.
15. After payments to the vendors totalling $76,700.00 (which sum included the $60,000.00 referred to in paragraph 9 above) there has been a failure to account to them for the sum of $12,604.50 calculated as follows:
Balance of sale proceeds due to the vendors 89,489.85
Less:
Paid to vendors 26.4.05 60,000.00
- 18.5.05 8,700.00
20.5.05 8,000.00
Rates payable by vendors 185.35 76,885.35
$12,604.50
16. No statement was issued to Mrs Sharma concerning the receipt of the proceeds of the mortgage and the application thereof.
17. From notes contained within the matter file, costs and disbursements due by Mrs
Sharma to Dayton [including GST] amounted to $846.50.
18. Stamp duty on the contract and Transfer amounted to $9,219.00, which amount was to be paid out of the loan proceeds of $340,000 lent by the Commonwealth Bank to
Mrs Sharma.
19. The contract for sale was not stamped.
20. Registered Transfer AB453234S in respect of the sale to Sharma shows that the document was stamped with the stamp issued to Dayton by the Office of State Revenue and shows the Transaction Number as 2553183. The Transaction Number was false and the stamp duty has not been paid.
21. There has been a misappropriation of Mrs Sharma's funds in the sum of $9,219.00 by Mr Day.
H. Renshaw
1 Dayton acted for Mr Renshaw on the purchase of 2207/185-211 Liverpool Street,
Sydney. The purchase price was $535,000.00 and the balance deposit payable on exchange on 29 July 2004 was $25,412.50.
2. On 3 August 2004 Mr Renshaw drew a cheque in the sum of $71,731.50 on account of the balance of the deposit and stamp duty which he paid to Dayton. When received the cheque was deposited to the account of Dayton Acquisitions Pty Limited. The balance in the account after the deposit was then $71,725.69 and amounts were drawn from this sum not related to the affairs of Mr Renshaw until 11 August 2004 when the balance to the credit of the account was reduced to $30,635.70.
3. On 11 August 2004 a cheque was drawn on the account in the sum of $25,412.50 being the balance of the deposit payable by Mr Renshaw.
4. On 16 September 2004 the sum of $86,000.00 was deposited direct to the account.
5. On 17 September 2004 the matter settled. One of the cheques drawn on settlement was a cheque payable to the City of Sydney Council for rates in the sum of $535.00. Such cheque remained in the instruction file.
I Field
1. Dayton acted for Ms Field on the purchase of 1/43 Burton Street, Concord West. The purchase price was $285,000.00 secured by an advance from Colonial State Bank over another property owned by Ms Field in the sum of $300,000.00.
2. Following a request Ms Field paid to Dayton the sum of $21,719.00 which was deposited to the office account of Dayton. Such sum represented the balance of the deposit payable on exchange ($13,250.00) and stamp duty ($8,469.00).
3. On 2 June 2004 a bank cheque received from the Colonial State Bank payable to Dayton was deposited to the general account of Dayton. Such cheque in the sum of $298,195.00 represented the net proceeds of the mortgage advance. At that time the general account had a debit balance of $16.26.
4. Amounts totalling $96,211.29 were drawn on the Dayton general account from the funds of Ms Field between 2 June 2004 and 7 July 2004 and were not related to her affairs.
5. On 2 July 2004 the sum of $200,000.00 was transferred to the Westpac account of Benn Reginald Day and Jean-Francios Antoine Bouton. After such transfer the balance remaining in the general account was $7,270.02.
There was a misappropriation by Mr Day of the sum of $290,941.24 (less fees).
6. On 5 July 2004 an attempt was made to pay the stamp duty in the sum of $8,469.00 but there were insufficient funds to cover the cheque. The stamp duty was later paid on 11 August 2004 from the account of Dayton Acquisitions Pty Limited covered by the funds of Mr Renshaw referred to in the preceding matter.
7. On 8 July 2004 when the matter settled the sum of $1,816.77 representing default interest ($1,193.05) and occupation fees ($707.14) was added to the amount due.
8. On 8 July 2004 from the Westpac account of Messrs Day and Bouton two cheques in the sum of $167,891.49 and $6,250.00 respectively were drawn in order to effect settlement.
9. The amount to be accounted for to Ms Field after settlement was $24,327.49. The instruction file contained no form of accounting other than a Bill of Costs in the sum of $1,193.05 dated 8 July 2004.
10. On 4 October 2004 Dayton forwarded a letter to Ms Field enclosing a bank cheque in the sum of $13,250.00. The amount still due to Ms Field is $11,077.49.
The Respondent’s Position
5 In a letter to the Professional Standards Department dated 20 February 2006, annexure “C” of Exhibit 3 in the proceedings the Respondent admits that at all times he had control of the financial affairs of Dayton Legal (with exclusion of the trust account). In the months prior to June 2005 Dayton was experiencing financial difficulties and the Respondent for a number of reasons was experiencing a “breakdown illness” that caused him to make “desperate and misguided decisions”. He did not make the Solicitor aware of his actions. He did not intend to mislead or cause any harm he merely wanted to keep his business afloat, pay staff’s wages and provide for his family.
6 He agrees that he was in most cases responsible for dealing with clients in relation to their accounts and collection of any funds due to them. He usually opened all mail, collected and banked cheques. He states that at the end of each settlement the solicitor would always enquire as to the outcome of the settlement, and without exception he falsely represented to the solicitor that they had been completed and the settlement funds deposited into the relevant clients account in accordance with their instructions.
7 In relation to matters A – I he admits misappropriating monies, by variously preparing the cheque directions, attending the settlement, and depositing money.
8 He admits that he applied to the Office of State revenue for an in-house stamping facility, which he kept, locked in his drawer. He was the only person who used this stamp. He accepts full responsibility for the fraudulent use of this stamp in the matters of Maglis, Kong, and McBryde.
9 In a letter received by the Law Society on 21 June 2007 from the Respondent, he advises that he was “more than happy” to be subject to orders pursuant to sections 18 & 19 of the Legal Profession Act 2004. He also made a personal undertaking that he would not seek employment or undertake activities relating to the provision of legal services now or in the future. He provided a number of medical reports relating to treatment for depression and anxiety.
Tribunal’s View of the actions of the Respondent
10 The evidence brought by the Law Society clearly establishes a course of conduct by the Respondent involving misappropriation and attempts to defraud.
11 In relation to ground (a) of the application in order to make the substantive order sought the Tribunal is required to find that the Respondent is not a fit and proper person to be employed or paid in connection with any legal practice.
12 In relation to ground (b) of the Application in order to make substantive order sought the Tribunal is required to find that the Respondent has been guilty of conduct which, if the Respondent were an Australian legal practitioner, would have constituted professional misconduct.
13 In relation to ground (a) a Managing Director of an incorporated legal practice who wilfully misappropriates money’s received from clients, and deceives the Solicitor Director of the practice is clearly not a fit or proper person to engage in legal practice. Accordingly the Tribunal finds that the Respondent is not a fit and proper person to be employed or paid in connection with any legal practice, subject to the rights of the Respondent to make and application under section 17 of the Act.
14 In relation to ground (b) the law is clear that fraudulent misappropriation of money received on behalf of another person is professional misconduct, as is an attempt to defraud the Office of State Revenue. If the Respondent had been a legal practitioner the Tribunal would have found this conduct was professional misconduct.
15 There will be an order that the Respondent pays the Law Society’s costs.
Orders
16 No law practice may employ or pay the Respondent in connection with the legal practice engaged in by the law practice, without approval under section 17 of the Legal Profession Act.
The Respondent pay the costs of the Law Society as agreed or assessed.
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