Law Society of New South Wales v Graham
[2007] NSWADT 67
•29 March 2007
CITATION: Law Society of New South Wales v Graham [2007] NSWADT 67 DIVISION: Legal Services Division PARTIES: APPLICANT
Council of the Law Society of New South Wales
RESPONDENT
Ian Douglas GrahamFILE NUMBER: 062017 HEARING DATES: 5 February 2007 SUBMISSIONS CLOSED: 5 February 2007
DATE OF DECISION:
29 March 2007BEFORE: Karpin A - ADCJ (Deputy President); Pheils J - Judicial Member; Fitzgerald R - Non Judicial Member CATCHWORDS: Solicitor – Disciplinary application MATTER FOR DECISION: Principal matter LEGISLATION CITED: Legal Profession Act 1987
Legal Profession Act 2004CASES CITED: Briginshaw v. Briginshaw (1938) 60 CLR 336NSW Bar Association v.Meakes [2006] NSWCA 340 REPRESENTATION: APPLICANT
RESPONDENT
L. Pierotti, solicitor
R Killalea, barristerORDERS: 1. The name of Ian Douglas Graham, be removed from the roll; 2. The respondent to pay the applicant's costs of and incidental to the proceedings.
REASONS FOR DECISION
1 This is an application to remove the name of the respondent from the roll of legal practitioners upon grounds that he is guilty of professional misconduct and unsatisfactory professional conduct and is, accordingly, not a fit and proper person to remain upon the roll.
2 The respondent attended the hearing and was represented by counsel. In the course of preparing the matter for hearing the respondent did not comply with the Tribunal’s directions to file any material upon which he proposed to rely. The respondent did not seek to give evidence before the Tribunal, nor did he file a reply or any evidence. He relied upon a Statutory Declaration dated 1 December 2004, in which he had responded to a notice dated 29 April 2004, served on him by the applicant pursuant to the provisions of s. 152 Legal Profession Act 1987.
3 The matters relied upon by the applicant were not disputed. The respondent’s counsel’s submissions were directed to the orders sought by the applicant.
4 The applicant complained that the respondent was guilty of professional misconduct in that he had committed wilful breaches of sections 61 and 62 of the Legal Profession Act 1987, and had misappropriated trust monies. Further, that he had failed to pay fees due to counsel over a period of some years.
5 The applicant further complained that the respondent was guilty of unsatisfactory professional conduct in that he had failed to respond to correspondence from the applicant, and had failed to respond to correspondence from the New South Wales Bar Association, in relation to the outstanding counsel’s fees.
6 The grounds of complaint constituting the allegations of professional misconduct are as follows:
7 The particulars of the complaints alleging unsatisfactory professional conduct and/or professional misconduct, are as follows:
A. Al Mashwahki : As at 16 September 2003, the trust account ledger for this client was in credit in the sum of $1600.00.
On 16 September 2003 the applicant to drew a cheque in the sum of $1650 on account of costs and disbursements. This caused the trust account ledger to be in debit $50.00.
On 7 November 2003, the respondent provided $50.00 to Mr Andrew Brown who had been appointed manager to the respondent's practice on 21 October 2003. That sum was paid into the trust account, thus balancing the trust ledger.
The respondent had failed to write up the practices trust account records after 31 August 2003, accordingly, the debit balance had not been revealed at the date of drawing the cheque for costs and disbursements.
B. Carla Cole: as at 5 May 2003 the trust account ledger for this client was in credit in the sum of $1009.86. On 6 May 2003 the respondent drew a cheque payable to the client in the sum of $1089.00. Thus the trust ledger was in debit in the sum of $79.14. It remained in debit until rectified by the respondent on 4 August 2003.
C. Estate of Gladys Shawyer: as at 1 October 2003 the respondent's trust account ledger for this client was in credit in the sum of $9,473.54. On that date, the respondent drew a cheque in the sum of $11,390.03 which caused a $1916.49 debit in the trust ledger. That debit balance was rectified by the deposit of funds provided by the respondent on 11 November 2003. The debit balance was not apparent at the time of drawing the cheque because the respondent had failed to write up the trust account records from 31 August 2003.
D. Stojic.: On 2April 2003, the trust account ledger in the name of this client was in credit in the sum of $7.80. On that day, the respondent drew a trust account cheque in the sum of $30.00 against that ledger, causing it to be in debit in the sum of $22 .20. This debit balance was rectified by the respondent on 5 August 2003.
E. IPWorld Limited: At approximately 4:30 p.m. on Friday 1 August 2003, the respondent was informed by the client that a sum of money was to be electronically transferred to his trust account that afternoon. The respondent was instructed to deal with those monies by the close of banking that afternoon, by drawing three cheques, each in the sum of $33,000 to Clue Investments, Searle & Assoc., and Freehills Trust Account. The balance of $30,000 was to be drawn to the respondent's office account as part payment for outstanding costs and disbursements.
The respondent immediately drew and delivered the first three cheques in accordance with his instructions. The respondent also drew a cheque payable to himself in the sum of $30,000, which he banked into his office account that afternoon.
The following Monday was a bank holiday. The banks next opened for business on the day after that, Tuesday. On that morning the respondent ascertained that no monies had, in fact, been transferred into his trust account. The respondent immediately stopped payment on the three cheques he had delivered on the previous Friday. He did not stop payment on the cheque paid into his office account, nor did he stop payment on any cheques drawn on the office account in reliance upon the proceeds of the $30,000 cheque being available.
The respondent repaid the sum of $5,000 into the client's trust account on 27 August 2003 and the balance of $25,000 was paid on 3 November 2003.
8 The applicant relied upon the affidavits of Raymond John Collins sworn 22 June 2006 and Andrew Stuart Brown sworn 6 June 2006. Mr Collins is solicitor for the Council of the Law Society of New South Wales; Mr Brown was appointed manager of the respondent’s practice on 21 October 2003 pursuant to the provisions of s. 114B Legal Profession Act 1987.
F. the respondent acted for M/s Whelan in District Court proceedings.
The respondent briefed Mr Cox of Counsel. M/s Whelan’s claim was successful. Mr. Cox rendered fee notes dated 4 December 2000 and 12 March 2001. The respondent did not pay Mr Cox's fees. Mr Cox wrote to the respondent seeking payment of his fees on 18 June 2001, 8 September 2001, 20 January 2002, 27 March 2002, and 3 November 2002. The respondent did not reply to any of this correspondence.
Mr Cox referred the non-payment of his fees to the New South Wales Bar Association, who wrote to the respondent on 17 April 2002, 20 May 2002 and 30 July 2002. The respondent did not reply to any of that correspondence.
9 Mr Brown’s affidavit annexes his memorandum dated 7 November 2003 to Mr Collins. That memorandum in turn, annexes copies of the relevant trust account ledgers.
10 The respondent informed Mr Brown that after he became aware on the Tuesday following the bank holiday, that there were no funds received into his trust account on behalf of IP World Ltd, he nonetheless, over the following week, used the greater part of those funds to pay his own creditors. Prior to Mr Brown's appointment, he had repaid $5,000 of the outstanding debit. The balance of $25,000 was not paid until Mr Brown threatened to have a receiver appointed. The respondent then borrowed funds to make good the deficit.
11 Mr Collins’ affidavit annexes a notice pursuant to s. 152 Legal ProfessionAct 1987, dated 29 April 2004. The respondent, by statutory declaration sworn 1 December 2004, provided answers to the questions raised in the s. 152 notice, which is also an annexure to Mr. Collins’ affidavit.
12 In his statutory declaration the respondent admits the individual trust account debit balances set out above. In relation to those set out A-D above, he ascribes the debits to inadvertence because the Trust Account records had not been written up at the relevant time. Thus there are clear admissions of breaches of s.61 and s. 62.
13 In relation to client E. the respondent confirms the account he gave to Mr Brown. He notes:
14 That point was repeated at the conclusion of his statutory declaration:
"At no time did the overall trust account bank account go into debit. In relation to the monies drawn to myself, I could not replace the funds immediately. I replaced $5,000 on 27 August 2003 and the balance on 3 November 2003."
15 A submission was made by counsel for the respondent again adverting to the fact that there was not an overall deficit in the trust account. In other words, the respondent had not misappropriated the entire funds in his trust account.
"I point out that at no time was the overall bank balance of the Trust Account in debit. I further state that all client funds were replaced as soon as I became aware of the shortfalls except to the $30,000 paid to myself, which was repaid as a result of me obtaining a loan. I voluntarily agreed to surrender my full practising certificate, and I now work as an employed solicitor and have no access to client funds and I no longer control any trust accounts."
16 The Tribunal regards such submissions on behalf of the respondent, and such statements by the respondent, as demonstrating a profound misunderstanding of the nature of the trust upon which such monies are held by a legal practitioner. It appears to entirely miss the point that a practitioner’s trust account is comprised of individual sums held for individual clients, each of them upon a trust, requiring the practitioner to deal with those fund in accordance with the trust, and the relevant statutory provisions. To overdraw in one trust account ledger, is to produce a shortfall in the funds held in trust for other clients.
17 Section 61 Legal Profession Act 1987 provides:
18 The statute and the regulations clearly define the nature of trust monies, and the manner in which those monies are to be dealt with once they are received by the practitioner. It is simply inappropriate to look at the total funds in the trust account and, in effect, to suggest that the respondent deserves some leniency because the total balance in the trust account remained in credit. A practitioner, who is so ignorant of the true nature of the obligations of a trustee, is indeed a practitioner who should not ever have control of trust monies.
61 Money received by solicitor on behalf of another
(1) A solicitor who, in the course of practising as a solicitor in this State, receives money on behalf of another person:
(a) must pay the money, within the time prescribed by the regulations, into a general trust account in New South Wales at an approved financial institution and must hold the money in accordance with the regulations relating to trust money, or
(b) if the person on whose behalf the money is received directs that it be paid or delivered to a third party free of the solicitor’s control, must ensure that the money is paid or delivered:
(c) if the person on whose behalf the money is received directs that it be paid otherwise than into a general trust account or to a third party, must pay the money as directed and (if the money is to be held under the direct or indirect control of the solicitor) must hold the money in accordance with the regulations relating to controlled money.
(i) before the end of the next working day or, if that is not practicable, as soon as practicable after the next working day, or
(ii) no later than the day allowed by the solicitor’s authority or instructions (if that day is later than the day allowed under subparagraph (i)), or
(2) In any of those three cases, the solicitor must hold the money exclusively for, and must disburse the money in accordance with the directions of, the person on whose behalf it is held.
(3) This section:
(a) …
(b) does not prevent a solicitor from withdrawing or receiving, from trust money or controlled money:
(e) does not prevent a solicitor from holding, or disposing of, a cheque or other negotiable instrument payable to a third party if the solicitor does so on behalf of a client and in accordance with directions given by the client, and
(i) reimbursement for disbursements paid by the solicitor, or
(ii) money for disbursements to be paid by the solicitor, or
(iii) money due, or to accrue due, to the solicitor for costs,
….
(8) It is professional misconduct for a solicitor to wilfully contravene subsection (1) or (2).
(9) In this section:
trust money means money required to be dealt with in accordance with subsection (1) (a).
19 The relatively minor sums involved in matters A to D, demonstrate the problems that so rapidly emerge when a practitioner fails to maintain trust account record in compliance with the provisions of s. 62 Legal Profession Act 1987, which is substantially reproduced in s. 264 Legal Profession Act 2004. Section 62 was in force at the relevant time and provides:
20 Whilst the amounts of money involved in particulars A to D are comparatively minor, each of them involves a clear breach of s. 61 and s.62. The Tribunal accepts that these breaches arose from the respondent’s failure to write up his trust account records in contravention of s. 62. The Tribunal accepts that the respondent, at the relevant time, did not realise that he was putting those individual trust account ledgers into debt. The Tribunal is, however, satisfied to the requisite standard [see Briginshaw v. Briginshaw (1938) 60 CLR 336] that at the time he drew the cheques against each of these ledgers, the respondent was aware that he had failed to write up his trust account records after 31 August 2003. Nonetheless he wrote the cheques at a time when he either knew, or ought to have known that to do so would cause a debit balance in each of the ledgers.
Keeping of accounts
(1) A solicitor shall keep:
that disclose at all times the true position in relation to money received by the solicitor on behalf of another person.
(a) in the case of trust money (within the meaning of section 61)—accounting records, or
(b) in the case of money other than trust money—such accounting records or other records (if any) as may be required by the regulations,
(2) The accounting records referred to in subsection (1) shall be kept in a manner that enables them to be conveniently and properly audited.
(3) Without limiting the generality of subsection (2), the accounting records referred to in subsection (1) shall, if the regulations so require, be kept in such manner as the regulations prescribe.
(4) A wilful contravention of subsection (1), (2) or (3) is professional misconduct.
21 The Tribunal is satisfied that in relation to each of those cheques, the respondent wrote them knowing he was not in a position to ascertain the precise balance in the ledger, and that his conduct was wilful. He engaged in reckless and careless conduct in issuing those cheques, thus putting each ledger into debit.
22 The Tribunal is satisfied that in respect of matters A to D the respondent is, in each case, guilty of professional misconduct,
23 The Tribunal is satisfied that the respondent’s conduct in drawing a cheque in the sum of $30,000 against the trust account ledger of IPWorld Limited, and paying that cheque into his general account before he had ascertained that the funds were in his trust account, thus placing the ledger in debit, constitutes professional misconduct. That misconduct is substantially exacerbated by the events that then unfolded.
24 By the Tuesday after the Bank Holiday Monday, the respondent was well aware that there were no funds in his trust account to cover the cheque he had deposited into his general account. The majority of the funds were still in his general account. He proceeded to use those monies to pay his own creditors. This constitutes a flagrant breach of s. 61, and constituted misappropriation of trust monies.
25 The Tribunal is satisfied that in respect of particular E, the respondent committed a wilful breach of s. 61, misappropriated trust monies and is guilty of professional misconduct pursuant to the provisions of s. 61 (8) and s.62 (4).
26 The respondent does not dispute the fact that, as set out in paragraph 7 above, he failed to pay counsels fees due to Mr. E. Cox, barrister. That failure continued over an extensive period, indeed, until such time as Mr Cox, all other avenues having failed, obtained a judgment against the respondent. Subsequently, the respondent obtained an order to pay the judgment debt by instalments.
27 The debt arose as a consequence of Mr Cox being briefed by the respondent in the matter of Whelan. v. Garcia. Mr Cox submitted fee notes dated 4 December 2000 and 12 March 2001 for a total of $8,745.
28 The respondent did not pay counsel’s fee notes, despite letters from Mr Cox on 18 June 2001, 8 September 2001, 20 January 2002, 27 March 2002 and 3 November 2003; together with letters from the NSW Bar Association, dated 17 April 2002, 20 May 2002, 25 June 2002 and 30 July 2002. None of that correspondence received the courtesy of a reply from the respondent.
29 The Tribunal is satisfied that the lengthy delay in paying counsel’s fees, only brought to a head by counsel obtaining judgement against the respondent, represents such a dereliction of his professional obligations, that it should properly be characterised as professional misconduct. His behaviour was exacerbated by his failure to respond to any of the correspondence from the barrister or from the New South Wales Bar Association At no time was the barrister accorded the courtesy of knowing whether there was some objection to his fees, or a problem in attending to payment, he was simply ignored, as was the Bar Association.
30 The Tribunal regards that conduct, as evidencing a contumelious disregard for the respondent's professional obligations. Such conduct should properly be characterized as professional misconduct, and the Tribunal so finds.
31 The applicant sought an order that the name of the respondent be removed from the roll of legal practitioners. That application was made upon the basis that there are were a number of acts of professional misconduct; that the respondent had given no evidence nor provided any explanation for his conduct; that although he was said to be in employment, no references had been provided by his employers; and that whilst there was no ultimate shortfall in the trust account, the respondent had the use of trust funds for his own purposes for a period of some months, and had only repaid the bulk of the misappropriated monies after being threatened by the manager, Mr Brown, that a receiver would be appointed if he did not repay the money.
32 The applicant argued that it was necessary in the interests of the protection of the public to order that the respondent be struck from the roll.
33 On behalf of the respondent it was argued that he had always admitted his wrongdoing; that he had voluntarily taken the decision not to renew his practising certificate in September 2006; that he had placed himself in a form of employment, which ensured that he did not have access to trust monies; and that whilst he had not filed any evidence himself nor given evidence, his explanation appeared in the statutory declaration dated 1 December 2004, an annexure to the affidavit of Raymond John Collins, filed by the applicant.
34 The respondent sought an order pursuant to s 562 (2) (b) and (d) of the Legal Profession Act 2004, which relevantly provides:
35 The Tribunal is not persuaded that it would properly discharge its obligation to protect the public, if it took a lesser option than ordering that the name of the respondent be removed from the roll of practitioners.
562 Determinations of Tribunal
(1) Orders generally
If, after it has completed a hearing under this Part in relation to a complaint against an Australian legal practitioner, the Tribunal is satisfied that the practitioner has engaged in unsatisfactory professional conduct or professional misconduct, the Tribunal may make such orders as it thinks fit, including any one or more of the orders specified in this section.
(2) Orders requiring official implementation in this jurisdiction
The Tribunal may make the following orders under this subsection:
(a) an order that the name of the practitioner be removed from the local roll,
(b) an order that the practitioner’s local practising certificate be suspended for a specified period or cancelled,
(c) an order that a local practising certificate not be issued to the practitioner before the end of a specified period,
(d) an order that:
(i) specified conditions be imposed on the practitioner’s practising certificate issued or to be issued under this Act, and
(ii) the conditions be imposed for a specified period, and
(iii) specifies the time (if any) after which the practitioner may apply to the Tribunal for the conditions to be amended or removed,
36 The respondent has provided no explanation for his conduct, other than that contained in the statutory declaration of 1 December 2004 and the conversation recorded by Mr Brown in his affidavit, relating to the misappropriation of $30,000 and the failure to write up the trust account records after 31 August 2003. Neither of those gives an adequate explanation in relation to the conduct of the respondent.
37 In the course of the hearing the recent decision in New South Wales Bar Association v.Meakes [2006] NSWCA 340 was brought to the attention of the respondent and his counsel. The respondent did not choose to give evidence, thus, the Tribunal is left with no explanation as to his defalcations; nor any explanation as to his failure to pay Mr. Cox’s fees; nor why the respondent chose not to answer the correspondence from Mr. Cox and the Bar Association.
38 The only facts which could be said to mitigate the culpability of the respondent are that he has never denied his wrongdoing. He made full disclosure of it to Mr Brown. He made full disclosure of it in his statutory declaration of 1 December 2004. He did not seek to defend his conduct before the Tribunal. He voluntarily decided not to renew his practising certificate in September 2006.
39 It was submitted on behalf of the respondent that the Tribunal should make an order pursuant to s. 562 (2) (b), suspending the respondent’s practising certificate for 12 months, and attaching conditions pursuant to ss (2) (d), in respect of the grant of any future practising certificate.
40 The Tribunal is satisfied that the conduct of the respondent involves both a substantial and a consistent failure to maintain reasonable standards of competence. The Tribunal is comfortably satisfied that the respondent is not a fit and proper person to engage in the practice of law.
41 There is nothing before the Tribunal which is capable of satisfying the Tribunal that the respondent is likely to become a fit and proper person either within the short term or long term, there being no explanation for the conduct that has led the Tribunal to the view that the only possible appropriate order is that his name be struck from the roll.
Orders:
1. The name of Ian Douglas Graham to be removed from the Roll of legal practitioners.
2. The respondent to pay the costs of the applicant of and incidental to this application.
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