Law Society of New South Wales v Kennedy

[2006] NSWADT 132

CITATION:	Law Society of New South Wales v Kennedy [2006] NSWADT 132
DIVISION:	Legal Services Division
PARTIES:	APPLICANT Council of the Law Society of New South Wales RESPONDENT Rodney James Kennedy
FILE NUMBER:	052029
HEARING DATES:	10/02/06
SUBMISSIONS CLOSED:	02/10/2006
DATE OF DECISION:	05/03/2006
BEFORE:	Chesterman M - ADCJ (Deputy President); Greenwood J - Judicial Member; Costigan M - Non Judicial Member
CATCHWORDS:	Professional Misconduct - misappropriate trust moneys/moneys
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Legal Profession Act 2004
CASES CITED:	A Solicitor v Law Society of New South Wales (2004) 204 ALR 8 Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 Haddad v Medicare Participation Review Committee, N95/1098, AAT No. 10031A, 2 February 1996 Law Society of New South Wales v Allen [2000] NSWADT 188 Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 New South Wales Bar Association v Cummins [2001] NSWCA 284 O’Reilly v Law Society of New South Wales (1988) 24 NSWLR 204 Prothonotary of the Supreme Court of New South Wales v Ritchard, Unreported, Court of Appeal, NSW, 31 July 1987 Smith v New South Wales Bar Association (1992) 176 CLR 256 Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279
REPRESENTATION:	APPLICANT P Boyd, solicitor RESPONDENT D I Cassidy QC C Taylor, barrister
ORDERS:	1. That the name of Rodney James Kennedy be removed from the Roll of Legal Practitioners in New South Wales; 2. That Rodney James Kennedy pay the costs of the Law Society of New South Wales in these proceedings, as agreed or assessed.

Introduction

1 On 15 August 2005, the Applicant, the Law Society of New South Wales, filed in the Tribunal an Information alleging that the Respondent solicitor, Rodney Joseph Kennedy (‘the Solicitor’) was guilty of professional misconduct on one ground. This was expressed as follows: ‘He misappropriated funds of the North & North West Law Society.’

2 In his Reply, filed on 30 September 2005, the Solicitor stated: ‘Not guilty, but concede my conduct has been unsatisfactory professional conduct.’

3 As the Information was filed before the commencement of the Legal Profession Act 2004, it fell to be determined under the Legal Profession Act 1987 (‘the Act’).

4 Schedule 1 of the Information set out particulars of the alleged grounds of misconduct. The evidence on which the Applicant relied principally comprised an affidavit dated 15 August 2005 by Mr Ray Collins, its solicitor, and an affidavit dated 17 August 2005 by Mr Leo Gore. Annexed to Mr Gore’s affidavit was a report dated 1 October 2004, prepared by him and Mr Warren Gillett, in the capacity of trust account inspectors engaged by the Applicant under s 55 of the Act. These deponents were not required for cross-examination.

5 The evidence on behalf of the Solicitor chiefly comprised his own affidavit (sworn on 5 December 2005), two affidavits of Ms Valmai Sherwell (sworn on 9 September 2005 and 18 October 2005), an affidavit of Mr David White (sworn on 29 September 2005) and several further affidavits, described below, relating to the Solicitor’s psychological state at relevant times or to his character. With the exception of the Solicitor, none of these deponents was required for cross-examination.

6 In Schedule 3 of the Information, the Applicant requested the Tribunal to order that the Solicitor’s name be removed from the Roll and that he pay the Applicant’s costs.

The circumstances giving rise to the Applicant’s allegation of misappropriation

7 Except where otherwise indicated, all the dates mentioned under the present heading are dates in 2004.

8 There was no dispute as to the particulars of the financial transactions effected by the Solicitor that, according to the case against him, constituted misappropriation. They took the form of five withdrawals of cash, amounting to $2,000, that he made between 22 and 27 July from an account held by the North & North West Law Society (‘the Society’) with a credit union.

9 The allegations by the Applicant that the Solicitor contested were that these withdrawals were not made for the purposes of the Society and that until 4 August he retained the amounts withdrawn. On that day, he arranged for the sum of $2,000 to be refunded to the Society.

10 The Solicitor was born on 1 January 1950. He was a member of the New South Wales police force between 1965 and 1999. He then studied law at the University of New England, graduating in March 2002. He was admitted as a legal practitioner on 12 July 2002. He has held a practising certificate since that date and has been employed by A W Simpson & Co, solicitors (hereafter ‘Simpsons’), of Armidale. His practice has almost entirely been in litigation, most of which has been in criminal matters.

11 On 22 May 2004, he was elected President of the Society. On the same day, Mr Damien Ryall was elected Secretary and Treasurer. There were no other office bearers. The Society was not incorporated and did not have a written constitution.

12 Soon after their appointment, the Solicitor and Mr Ryall arranged for the Society’s bank account to be transferred from a credit union at Tamworth (where the previous office bearers practised) to two accounts at the New England Credit Union (‘the Credit Union’) in Armidale. Early in July, the sum of $5,000 was placed in an account (S1) from which cash could be withdrawn at automatic teller machines (ATMs). A further sum of $27,869.53 went into a ‘high rise account’ (S9) attracting a higher rate of interest.

13 The Solicitor and Mr Ryall each received an ATM Visa card from the Credit Union, enabling them separately to withdraw from the S1 account cash amounts to a daily limit of $1,000. Around the middle of July, the Credit Union issued a cheque book to the Society. They instructed the Credit Union that cheques should be signed by both of them.

14 One of the principal functions of the Society was to obtain stationery for its members. After the Solicitor’s appointment as President, the work associated with this was done by two employees of Simpsons (Ms Valmai Sherwell and Ms Pauline Vaughan) working under his instructions. Simpsons established a petty cash float of $250 for this activity. On 14 July, the Solicitor, using the ATM card that had been issued to him, made two withdrawals totalling $250 in order to reimburse Simpsons.

15 During the early part of July, due to a dispute between the partners of Simpsons, the firm’s trust and working accounts were frozen.

16 During July and early August, the demands of the Solicitor’s practice required him to be frequently absent from Armidale. Relevantly for present purposes, he was in Inverell on Thursday 22 and Friday 23 July (he stayed there overnight), in Sydney between Monday 26 and Wednesday 28 July (again staying overnight) and in Inverell on 29 July. He was in Tamworth on Tuesday 3 August and again on the afternoon of Thursday 5 August, then in Inverell on Friday 6 August.

17 On 20 July, the Solicitor and Mr Ryall obtained the agreement of an auditor practising in Armidale to act as the Society’s auditor.

18 The dates, times, amounts and locations of the Solicitor’s five withdrawals from the S1 account that have prompted these proceedings were as follows:-

22 July - 10.40 p.m. - $300.00 - 81-87 Byron Street, Inverell

23 July - 3.21 p.m. - $700.00 - 204 Beardy Street, Armidale

25 July - 5.41 p.m. - $400.00 - Armidale Ex-Services Club

25 July - 7.27 p.m. - $400.00 - Armidale Ex-Services Club

27 July - 8.55 p.m. - $200.00 - Civic Hotel, Sydney

19 After the fourth of these withdrawals, the balance remaining in the S1 account was $211.00. On 27 July, before he made the fifth withdrawal, the Solicitor attempted twice, at an ATM in Skygardens, Sydney, to withdraw unspecified amounts from the account. The account statement records that these attempts were unsuccessful on the ground of insufficient funds.

20 In his affidavit and in cross-examination, the Solicitor admitted making these withdrawals, totalling $2,000, and the two attempted withdrawals. He also admitted that the withdrawn money ‘became intermingled’, in a physical sense, with his own money. With reference specifically to the withdrawal of $300 made at Inverell, he admitted also that in consequence of this ‘intermingling’ he might have returned from Inverell with less than $300 in his pocket.

21 The Solicitor denied, however, making two further attempts to withdraw funds. The account statement recorded these two attempts on 29 July. Each of them was unsuccessful, due to insufficient funds.

22 In a statement given to Mr Gore on 18 August, Mr Ryall said that at 9.30 a.m. on Friday 30 July he obtained a statement from the Credit Union for the S1 account, covering the period from 1 to 30 July. He noticed seven entries indicating withdrawals from ATMs of which he was unaware. These comprise the five withdrawals just described and the two earlier ones, totalling $250, which the Solicitor had made in order to reimburse Simpsons for the petty cash float.

23 Mr Ryall said that at about 10.15 a.m. on 30 July he rang the Solicitor’s mobile telephone and asked the Solicitor to come urgently to his office. The Solicitor, having arrived there around 11 a.m., put his initials beside all but the last of the seven entries on the account statement. After his departure, Mr Ryall noticed that the last entry had not been initialled. On Sunday 1 August, he called at the home of the Solicitor, who put his initials beside this entry.

24 The Solicitor’s account of his dealings with Mr Ryall at this juncture differed in some respects. He said in his affidavit and in cross-examination that Mr Ryall first spoke to him about the withdrawals on the afternoon of 30 July, not in the morning, and that he went to Mr Ryall’s office some time after 5 p.m. on that day. At that meeting, he said that he would replace the $2,000 on the following Monday (2 August) and that he would ‘have the petty cash reconciled’.

25 In an undated letter to the Applicant received on 10 September, the Solicitor said however that he had ‘discussions’ with Mr Ryall over the weekend of 31 July and 1 August. In an earlier statement, dated 18 August, which he had provided to Mr Gore and Mr Gillett, he said that he had ‘conferred’ with Mr Ryall ‘over that weekend 30/31 July 2004’.

26 According to the Solicitor, he gave $2,000 in cash to Ms Sherwell on Wednesday 4 August and instructed her to deposit it at the Credit Union. She paid it into the Society’s S9 account on that day.

27 The Applicant tendered financial statements relating to accounts held by the Solicitor over the period from June to August 2004. These showed, among other things, that (a) his cheque account with Westpac Bank was at times more than $4,000 in overdraft, with the result that he incurred a number of overdraft fees of $30 each; (b) his account with the Police Credit Union was more than $1,000 in overdraft; (c) his credit card account with American Express was cancelled in or before July 2004, with a closing balance of $10,518.06 due immediately; and (d) his credit card account with Virgin had debit balances of nearly $5,000, with the result that he incurred both ‘overlimit fees’ and missed payment charges.

28 On 7 August, the Solicitor handed the Society’s records, the stationery held at Simpsons and the Visa card to Mr Ryall. On 23 August, he resigned from the position of President.

29 The matter came to the attention of the Applicant when it received a faxed letter from Mr Ryall on 7 August. On 11 August, it gave instructions to Mr Gore and to Mr Gillett to commence their investigation. On 30 August, it made the complaint against the Solicitor on which the present proceedings are based.

30 Mr Ryall, it may be noted here, was not a witness in these proceedings. It is clear from evidence to which we need not refer in detail that, at least from the time when he contacted the Applicant about this matter, he and the Solicitor were not on friendly terms.

The Solicitor’s explanations for the withdrawals and for the delay in repayment

31 In his statement of 18 August 2004, prepared for Mr Gore and Mr Gillett, the Solicitor said that the withdrawals had been made in order to pay a company called Boise for stationery that had been ordered, and for petty cash, postage and handling. He had intended, he said, to pay an account owing to Boise from the ‘working account’ of Simpsons and then to reimburse Simpsons from the cash that he had withdrawn. He added, however, that he never discussed this possible arrangement with Mr David White, the principal of Simpsons. This, he said, was because after his discussions with Mr Ryall he said that he would repay the money into the Society’s S1 account.

32 In his undated letter received by the Applicant on 10 September 2004, the Solicitor said that (a) the payment to Boise was to be for a ‘bulk supply of contract forms’; (b) at the time of ordering these the Society had no cheque book; (c) payment was however ‘possible by EFT via the Commonwealth Bank’; and (d) that the August statement from Boise showed ‘a smaller than the anticipated charge of $2,000’. He annexed a copy of a statement from Boise dated 31 August 2004, which showed an order received from the Society on 23 July 2004 for stationery costing $79.20 and three further orders between 3 and 31 August. The total amount due on the statement was $1,309.17.

33 In the course of their investigations, Mr Gore and Mr Gillett obtained from Boise a copy of a statement dated 30 June 2004 that this firm had sent to the Society. This statement recorded five transactions between 11 and 24 June 2004 resulting in an amount outstanding of $2,482.75. Boise also supplied a copy of a cheque for this amount that it received from the Society. The cheque was dated 21 July 2004. It bore the signatures of the Solicitor and Mr Ryall and was drawn on the S1 account.

34 In a letter dated 13 May 2005 to Mr Stewart Cuddy, who was then acting for the Solicitor, the Applicant set out a number of questions to be answered by the Solicitor. The Solicitor’s answers were set out in a statutory declaration sworn by him on 2 June 2005.

35 In those answers, the Solicitor offered the following explanation for his conduct in making the withdrawals. They were made, he said, ‘to build up a fund’ to cover the Society’s expenses, notably the cost of the stationery supplied by Boise. He could not then use the facilities of Simpsons, due to the dispute within that firm. He knew there was a ‘running total’ due to be paid to Boise, and while he had a Visa card with which he could withdraw cash, he had no cheque book. He used the card ‘to keep a running total’ to cover the payment that he ‘envisaged would be due to Boise’. The withdrawals, he said, ‘were made spontaneously at times and locations at which I happened to be at the time they were made’.

36 With specific reference to the cheque to Boise that he signed on 21 July 2004, he said: -

I was involved with a telephone conference in a professional matter on 21 July 2004, and I was interrupted and asked by a secretary to countersign 3 cheques which Mr Ryall had called to our office to have done. I did not make a note of the payees or amounts at the time, and forgot that one was payable to Boise.

37 In her affidavit, Ms Valmai Sherwell stated that she was the secretary who asked for the cheques to be countersigned. She broadly confirmed the Solicitor’s account of this incident.

38 In his statutory declaration of 2 June 2005, the Solicitor answered in the following terms a question asking why, in his earlier statement to Mr Gore and Mr Gillett, he had said that a purpose of his withdrawals from ATM machines had been to pay amounts owing to Boise: -

Due to my failure to recollect the availability of a cheque book on the society account, and that the major payment had been made to Boise by cheque, I continued under the belief that after 21 July I had to assemble funds to meet the society’s obligations… After the cheque countersigned by me on 21 July 2004 was received by Boise, there was no amount due to it unless subsequent orders had been placed on and actioned by the supplier.

39 In his affidavit filed in these proceedings, the Solicitor made no mention of the Society’s dealings with Boise. By way of explanation of the withdrawals, he simply said: -

It was not my intention to misappropriate the money or to utilise same for my own purposes. $250.00 of it was used to reimburse A W Simpson and Co for the petty cash float.

40 In cross examination by Mr Boyd, appearing for the Applicant, the Solicitor repeated the assertion made in his statutory declaration that when making the five withdrawals between 22 and 27 July 2004, he had in mind ‘running totals’ of the amounts owed by the Society to Boise. He was asked why he withdrew different amounts at different times and why, on 25 July, he had made two withdrawals of $400 on the same day rather than a single withdrawal of $800. He could provide no explanation other than to refer again to the presence of these ‘running totals’ in his mind and to say that he wished to ‘keep abreast of orders’ given to Boise. He could not demonstrate any link between these totals and the specific amounts (stemming from orders fulfilled in June 2004) shown on the Boise statement dated 30 June 2004.

41 In response to further questioning, he alleged that Ms Sherwell and Ms Vaughan had kept him advised of amounts owing for current orders of stationery from Boise. He acknowledged however that he had made no such allegation in his affidavit and that Ms Sherwell’s affidavit did not mention having given him such advice.

42 A further matter acknowledged by the Solicitor during cross-examination was that Boise offered to its customers the facility of making payment by electronic funds transfer to its account at the Commonwealth Bank.

43 Mr Boyd put to the Solicitor on several occasions during cross-examination that he had made the five withdrawals and used the withdrawn funds entirely for his own purposes. Mr Boyd suggested specifically that he used these funds in making a payment of $500 that a statement issued by American Express showed to have been made by him on 26 July 2004. The Solicitor denied these allegations ‘categorically’.

44 The Solicitor said that after his meeting with Mr Ryall late on Friday 30 July 2004 he did not repay the $2,000 to the S1 account on Monday 2 August because he believed it to be a bank holiday. He said that he had forgotten about this when he spoke to Mr Ryall on 30 July.

45 In a letter tendered by the Applicant, however, the Credit Union stated that it was in fact open on 2 August. In cross-examination, the Solicitor indicated that he had worked on that day, and may indeed have had a matter at Armidale Local Court.

46 The Solicitor’s explanation for not making the repayment on Tuesday 3 August was that he had been in Tamworth. He believed that he would have left for Tamworth before the Credit Union opened in Armidale. He admitted however that he could have asked Ms Sherwell to deposit the money on his behalf, as indeed she did on the following day. In fact, Ms Vaughan, who was also an employee of Simpsons working under the Solicitor’s instructions, deposited two cheques totalling $248 into the Society’s S9 account on 3 August.

47 In response to questions regarding the amounts owed by him during July and August 2004 on a number of bank, credit union and credit card accounts (see [27] above), the Solicitor admitted that his financial position at that time was ‘not strong’. But he disputed Mr Boyd’s suggestion that he was under severe financial pressure. He also denied delaying the repayment of the Society’s money until 4 August 2004 in order that he would have sufficient funds in his Westpac Bank account to support a direct debit of $220.63 from that account made on 3 August, under an authority previously given by him to the Bank.

48 The Solicitor said in cross-examination that he received his remuneration as a solicitor employed by Simpsons in the form of fortnightly payments of cash. The financial statements put before us did not reflect any deposits made from the amounts so paid.

Our conclusions in relation to the five withdrawals and the repayment

49 The finding of cardinal importance that we make is that the Solicitor effected the five withdrawals of cash between 22 and 27 July 2004 from the Society’s account at the Credit Union in order to use the money withdrawn, at least in the short term, for his own purposes. He did not intend to use the money wholly for the purposes of the Society, in accordance with his obligations as President of the Society.

50 The evidence before us supports this conclusion to ‘a high degree of satisfaction’. Since it is a finding that the Solicitor intentionally breached his fiduciary duties to the Society, a high standard of proof is required: see eg O’Reilly v Law Society of New South Wales (1988) 24 NSWLR 204 at 208.

51 It is possible that he intended over a significant period to continue to have recourse to the Society’s account in order to obtain cash sums to cover his own expenditure. An alternative possibility is that he did not give any real thought to questions such as whether he would continue to act in this way for a significant period and when he would repay to the Society the money that he obtained.

52 The most favourable interpretation that we can put upon his conduct is that during the period from 22 to 27 July 2004 he had forgotten that the Credit Union had issued a cheque book to the Society and he did therefore believe that there would be some longer term benefit to the Society in ‘building up a fund’ (to quote his words) for payment of outstanding debts to Boise or to other creditors of the Society. A finding along these lines is compatible with our principal finding that, irrespective of any longer-term plans and expectations regarding the use of the money withdrawn, his immediate purpose in making the withdrawals was that of supporting his own expenditure.

53 The four principal matters on which we rely in making this finding are these.

54 First, we cannot accord any credibility to the Solicitor’s claim, in cross-examination, that the different dates and amounts of the withdrawals were entirely explicable by reference to ‘running totals’ that he maintained, in his mind, of the amounts owed from time to time by the Society to Boise. We say this for the following reasons: -

(a) This claim receives no support whatsoever from the financial records obtained from Boise.

(b) No correlation can be seen between the differing amounts withdrawn and any amounts that the Solicitor might mistakenly have believed at any time to be owing to Boise.

(c) The claim receives no support whatsoever from any evidence given by either of the two employees (i.e., Ms Sherwell – she in fact swore two affidavits – and Ms Vaughan) who according to the Solicitor communicated the relevant figures to him.

(d) Since Ms Sherwell knew that on 21 July 2004 he countersigned a cheque for $2,482.75 to Boise in full payment of its statement for the month of June, any communication from her to him on this subject during the period from 22 to 27 July would very probably have mentioned this payment, and would have given no grounds whatsoever for his believing that cash withdrawals were still needed to ‘keep abreast of orders’ given to Boise.

55 Secondly, the Solicitor’s explanations of this matter changed materially over time. His claim that the withdrawals were made to pay the Society’s debts to Boise was initially linked (in his undated letter to the Applicant received by it on 10 September 2004) with the statement for August 2004 that Boise issued to the Society. He may have realised subsequently that this explanation was unconvincing because the only item on this statement relating to the month of July was for an amount of only $79.20. In his statutory declaration of 2 June 2005, his explanation was in terms of the ‘running totals’ of amounts due to Boise. In his affidavit of 5 December 2005, he did not mention this explanation at all. In cross-examination, he reverted to it, adding for the first time that the figures from which he calculated the ‘running totals’ were communicated to him by Ms Sherwell and/or Ms Vaughan.

56 Thirdly, he admitted, both in his affidavit and in cross-examination, that the withdrawn money ‘became intermingled’, in a physical sense, with his own money. Furthermore, he admitted in cross-examination that some of the $300 withdrawn at Inverell on 22 July 2004 might have been spent before he returned from Inverell. If this was the case, the inference is inescapable that he spent it on purchases for his own benefit.

57 Fourthly, there was evidence strongly suggesting that the Solicitor at the time of the withdrawals was under significant financial pressure. This provided a clear motive for his making use of the Society’s cash resources, even if it was only to the relatively limited extent of $2,000 and even if he always intended to pay the money back after a short period of time. We acknowledge that we did not have a full picture of his financial situation because the financial statements put before us did not show any deposits from the fortnightly cash payments of salary that, according to his evidence, he received from Simpsons. But it was open to him to tender further evidence to counteract the powerful impression of straitened financial circumstances conveyed by these financial statements. He did not do so.

58 Our finding that the funds were not withdrawn wholly for the purposes of the Society, but for the Solicitor’s own purposes, at least in the short term, necessarily implies that we have disbelieved the explanations that he advanced on this issue, both prior to and during the hearing.

59 We are bound, moreover, to make the finding that at least two statements made by him in giving sworn evidence to the Tribunal were false to his knowledge. We refer here to (a) his claim that his sole purpose in withdrawing the money was to ‘build up a fund’ for the payment of the Society’s debts to Boise and (b) his allegation, which wholly lacks credibility, that during the period of five days when he was making the withdrawals Ms Sherwell and/or Ms Vaughan communicated figures to him from which he calculated ‘running totals’ of the amount owing to Boise.

60 Since delay by the Solicitor in repaying the withdrawn funds was not alleged in the Information, we do not need to make a formal finding as to whether such delay occurred and, if so, whether it was attributable to fault on his part. It is sufficient to say that a finding of intentional delay would be entirely compatible with the findings that we do make. It would seem that, with the assistance of Ms Sherwell or Ms Vaughan, he could have effected repayment of the money on 2 or 3 August 2004. If Mr Ryall’s claim to have met with him during the morning of 30 July were accepted, he could have done so on 30 July. We make no finding, however, as to the time of this meeting, as Mr Ryall was not a witness in these proceedings.

61 In his Reply, the Solicitor conceded that his conduct in withdrawing these funds was unsatisfactory professional conduct. Mr Cassidy QC, who appeared for him at the hearing, argued that if we found that the purpose of the withdrawals was to pay amounts owed by the Society to third parties such as Boise, the Information should be dismissed. He did not specifically address how the Solicitor’s conduct should be characterised if we found that the funds were withdrawn for the Solicitor’s own purposes. Since his submissions, as outlined below, were chiefly to the effect that in such event our order by way of ‘penalty’ should be one of suspension from legal practice rather than removal from the roll, he seems implicitly to have conceded that it would be a case of professional misconduct, not merely unsatisfactory professional conduct.

62 We have no doubt that this is correct. Save in most exceptional circumstances, deliberate misappropriation of any significant amount from the funds of a professional association that have been placed under a legal practitioner’s control by virtue of his accepting office as the association’s president is unquestionably conduct ‘which would be reasonably regarded as disgraceful or dishonourable’ by fellow-practitioners who are ‘of good repute and competency’ (we refer here to the established common law criterion of professional misconduct laid down in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 at 761, 763).

63 A Tribunal decision specifically confirming this proposition with reference to misappropriation of the funds of a local law society is Law Society of New South Wales v Allen [2000] NSWADT 188. We give detailed consideration to this decision later in this judgment.

64 While the evidence tendered by the Solicitor included some material showing that he was subject to some personal pressure at the relevant time, it does not suggest in any way that he was incapable of understanding that his misappropriations constituted serious breaches of his legal and ethical obligations as the President of the Society.

65 For these reasons, we conclude that the Solicitor’s conduct as alleged and particularised in the Information has been proved and that it amounts to professional misconduct.

Evidence relating to ‘penalty’

66 The Applicant tendered no evidence of behaviour by the Solicitor attracting disciplinary intervention, other than the matters alleged in the Information.

67 The evidence tendered by the Solicitor included a report on his psychological condition dated 16 November 2005 by Dr Christopher Lennings, a clinical psychologist, and a report on this matter dated 6 February 2006 by Ms Cecilia Blackwell, a personal counsellor.

68 Based on an interview with the Solicitor for 2.5 hours on 1 November 2005, Mr Lennings concluded that he was ‘of good psychosocial stability’ who had ‘had some difficulty in the regulation of stress but not at a level which would be regarded as pathological’. His principal problem was alcohol abuse, in which he had engaged for most of his adult life. His drinking had not, however, affected his memory or other cognitive functions significantly. His marital relationship had been damaged, with the result that he and his wife were ‘more or less separated but live together in a companionable way’. He told Dr Lennings during the interview that he had had ‘a very large “wake up call” in terms of what is required of diligence’ in the matter that has given rise to these proceedings. In Dr Lennings’ opinion, the Solicitor was unlikely to repeat the mistakes he had made, since he presented ‘a history indicative of good pro-social functioning’ and ‘psychological assessment did not reveal any major personality or psychopathological disorders’.

69 In her report, Ms Blackwell described herself as ‘a welfare worker and counsellor with multiple tertiary nursing and mental health qualifications and over thirty years experience in the provision of health and welfare services’. The precise nature of her qualifications was not spelt out. She interviewed the Solicitor on three occasions between 25 November 2005 and 5 February 2006.

70 Ms Blackwell agreed with Dr Lennings that it was unlikely that another error of judgment such as this case is concerned with would occur if he was permitted to remain in his chosen profession. She based this opinion on her ‘work with him’, his ‘obvious intelligence’ and his ‘commitment to his profession’. She recommended further counselling sessions.

71 During examination in chief, the Solicitor said that during the last six to eight weeks he had drunk alcohol on only one occasion (and then to a moderate level only) and had undertaken a regime of dieting and exercise, with positive results.

72 Seven affidavits or statutory declarations containing observations about the Solicitor’s activities and reputation as a legal practitioner and/or as a police officer were tendered on his behalf. They were all sworn in September or October 2005. None of the deponents was required for cross-examination. They all indicated that they were aware of the nature of the allegations made against him in these proceedings. The gist of what they had to say is as follows.

73 Mr David White stated that he was the principal of Simpsons. He referred to the dispute within this firm between June and August 2004 and the stress that it created for everyone in the office. He indicated that the Solicitor had chiefly done legal aid work for disadvantaged clients within the fields of criminal law, criminal injuries compensation, care applications and family law, that he had assisted in training two employed solicitors and that he had assisted the conduct of mock trials at local schools. Mr White referred also to the Solicitor’s activities as President of the Society and indicated that he himself had answered questions put to him by Mr Gore regarding the allegations against the Solicitor. His affidavit concluded: ‘[The Solicitor’s] work with this firm has always been calmly, honestly, responsibly and competently performed so far as I am aware.’

74 Mr Paul Sattler stated that he had been a friend of the Solicitor for about five years. He had been admitted as a legal practitioner in September 2004. Since then he had worked closely with the Solicitor, and under his supervision, at Simpsons. The Solicitor had been ‘of enormous assistance’ to him. He considered the Solicitor to be ‘a person of integrity’, who had always conducted himself in ‘a most professional and ethical manner’, and to be also ‘a most caring person’, who ‘always displayed great understanding and empathy’ when dealing with clients who had drug and alcohol problems and were ‘challenging to deal with’.

75 Ms Deborah Clarke described a similar personal and professional relationship with the Solicitor, whom she found to be ‘a most supportive mentor’ at Simpsons. She similarly testified to the ‘care and empathy’ that he displayed when dealing with disadvantaged clients. She said that she had always found him to be ‘open and honest’ and to be ‘a very generous, committed and caring family man’. She expressed the opinion that ‘the community of Armidale would suffer a great loss’ if he could no longer practise law.

76 Mr Patrick Kennedy, a solicitor employed in a firm in Armidale, said that he was not related to the Solicitor, whom he had known since 2000. During his law course at the University of New England, he had obtained some practical experience at Simpsons, where he had found the Solicitor to be ‘an excellent source of assistance’. He described the Solicitor’s attitude to disadvantaged clients as ‘understanding and caring’. He said that he was ‘shocked’ to hear the allegation that of misuse of the Society’s funds as he had ‘always known’ the Solicitor to be ‘a forthright and honest person.

77 Mr Andrew McLennan, a solicitor practising in Queensland, said that he met the Solicitor as a law student at the University of New England in 1999 and after returning to Brisbane in 2001 maintained contact with him. He described the Solicitor as ‘a well regarded and a well respected member of the Armidale community’ who ‘enjoys a good working rapport with fellow practitioners and the judiciary’.

78 Mr Roderick Dayment, a retired police officer, said that he had been a colleague of the Solicitor in the police force and had known him for thirty years. He described the Solicitor as ‘the most dedicated, intuitive, ethical and honest police officer’ that he ‘had the pleasure of working with’. According to Mr Dayment, both police officers and members of the public held the Solicitor in high regard, both when he was in the police force and since he became a legal practitioner.

79 Mr Darryl Wilson, a retired police officer, said that he had been a colleague of the Solicitor in the police force and had known him for thirty-five years. He described the Solicitor as ‘an outstanding Investigator’, as ‘a good family man’ and as ‘a valued member of the community’.

Submissions on penalty

80 The applicant’s submissions. Mr Boyd contended that the Solicitor had not only committed professional misconduct by making the five withdrawals from the Society’s account, but had also put forward in these proceedings an explanation for them that lacked credibility. On these grounds, he said, we had no alternative but to find that the Solicitor was not a fit and proper person to remain in practice and to order, as requested in the Information, that his name be removed from the Roll. Mr Boyd referred us to two authorities, Law Society of New South Wales v Allen [2000] NSWADT 188 and Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32.

81 In the first of these cases, which was decided in this Tribunal, the respondent solicitor, having been in practice for less than six years, held the office of Treasurer of the Central Coast Law Society during 1998. Between 15 September 1998 and 18 January 1999, he made eight unauthorised withdrawals of various amounts, totalling $5,500, from this Society’s bank account. When the Society’s President was told in December 1998 that a cheque made out by the respondent in favour of a local restaurant had been dishonoured, the respondent told her that the account was in funds and that the bank must have made an error. He then failed for several weeks to answer requests from the President and the incoming Treasurer to provide a further explanation and to hand over the Society’s books. This made it difficult for them to resolve matters with the restaurant and with other creditors whose accounts had not been paid. Early in February 1999, the respondent admitted his misappropriations of its funds, indicated his willingness to repay ‘any moneys borrowed’ and ceased to practise as a solicitor.

82 The Tribunal was informed that during the period when these misappropriations occurred, the respondent had been suffering from depression, brought about by severe stress. The reasons for this stress were these: (a) a client in a family law matter had threatened in June 1998 to kill him (though the dispute in which he was acting was resolved satisfactorily about five months later); (b) his relationship with his wife was in a state of serious conflict and (c) his financial situation was under extreme pressure, notably after his wife had left her job in July 1998. The respondent, with support from the testimony of a psychiatrist and a cognitive therapist, said that he was in such a state of desperation that he could not think rationally and could not seek assistance in dealing with his stress. As a result, he misappropriated the money without any thought for the consequences.

83 The respondent’s counsel conceded and the Tribunal found, however, that he knew that his conduct on each occasion in doing so was dishonest. During this period, it appeared also that he had been able to perform his professional duties for his clients satisfactorily.

84 The psychiatrist and the cognitive therapist also stated that by the time of the hearing the respondent’s psychological problems had resolved and that in their opinion he would be capable of taking on the responsibilities associated with practice as a solicitor. Several family friends and professional colleagues testified as to his good character, his integrity and his professional competence.

85 The Tribunal held, at [39], that the respondent’s behaviour amounted to ‘very serious’ professional misconduct. It observed that, having been entrusted with control of his professional society’s funds, he had ‘resorted to them on eight occasions over four months to relieve his financial burden’. At the time, he knew that this was wrong. Moreover, he postponed discovery of his wrongdoing for as long as he could, with the result that the society suffered significant embarrassment within the local community.

86 At [40], the Tribunal stated that it was not confident that the respondent understood all that was required of him by the standards of the legal profession, particularly while he maintained that he was merely ‘borrowing’ the money that he had misappropriated. It expressed the view that, even taking into account the evidence of his referees, the prospect of his rebuilding and maintaining the necessary relationship of trust and confidence with his professional colleagues was ‘remote indeed’. It said that it ‘should take into account matters going beyond the mere protection of the public against similar misconduct’ by the respondent and that the ‘object of deterrence’ was also ‘an important factor’. In taking account of these matters, the Tribunal was relying on statements of principle (quoted by it at [37]) in the judgments of Mahoney JA and Giles AJA in Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 444, 471.

87 At [41], the Tribunal held that in view of the respondent’s ‘infringement of the fundamental standards of his profession’, he was not a fit and proper person to remain a legal practitioner. It ordered that his name be removed from the Roll.

88 Mr Boyd relied upon this decision of the Tribunal for the proposition that misappropriation by an office bearer of the funds of a professional association such as the Society in the present case might well amount to professional misconduct of sufficient seriousness to warrant an order for removal from the roll.

89 The issue in relation to which Mr Boyd referred us to Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 is that of the implications of a finding that a legal practitioner has given deliberately false evidence to a court or tribunal engaged in determining his or her fitness to practise. The questions that arise include the following: whether this finding should or may be treated as a relevant consideration by the court or tribunal and, if so, whether this may be done without an appropriate amendment being first made to the particulars of the complaint by which the proceedings were instituted.

90 These issues were discussed at some length in the judgment of Ipp JA (with whom Tobias JA and Stein AJA agreed) at [75 – 110]. His Honour gave extended consideration to passages in Smith v New South Wales Bar Association (1992) 176 CLR 256 (notably in the judgment of Deane J at 270-273) suggesting that the court or tribunal should not take account of such a finding in determining fitness to practise without first amending the complaint and giving the respondent practitioner an opportunity to be heard in relation to the finding.

91 Having examined later authorities, Ipp JA held however that these procedural steps are not always necessary. At [108 – 109], he summed up his conclusions as follows: -

108 The relevant time for determining the fitness of a practitioner to practise is the time of the determination by the disciplinary body seised with the question: cf A Solicitor v Law Society of New South Wales (2004) 204 ALR 8. The misconduct charged will have taken place before the decision is made; there will inevitably be a gap between the date of the misconduct and the date of the determination. It will not be unusual for the practitioner concerned to submit that circumstances have changed since the misconduct charged; arguments as to remorse, reform, character change and subsequent good deeds are not uncommon. The practitioner’s conduct of the defence and the veracity and candour of his or her testimony will often be the best evidence as to whether these mitigating circumstances are to be accepted.

109 It is often self-evident that the tribunal or court determining fitness to practise might find that the practitioner has lied in the disciplinary proceedings before it. It is also often self-evident that such a finding, if made, might influence the tribunal or court in deciding what order should be made in regard to the practitioner’s right to practise. When the practitioner knows that there is a risk of such a finding being made and used by the disciplinary body concerned in determining what final order to be made (sic), and has adequate opportunity to deal with this prospect, there would be no procedural unfairness were the disciplinary body so to act on the finding. This would be the case even though the practitioner may not have been charged with specific misconduct relating to the conduct the subject of the finding. The act of charging the practitioner would be an unnecessary formality.

92 In Mr Boyd’s submission, we accordingly should both find that the Solicitor’s evidence in this case lacked credibility and take account of that finding in concluding that his name should be removed from the Roll.

93 The Solicitor’s submissions. On behalf of the Solicitor, Mr Cassidy argued that, assuming that we made a finding of professional misconduct, this was still not a case warranting the severe sanction of removal from the Roll. Instead, he said, a period of suspension from practice would be a sufficient and appropriate sanction.

94 An initial argument put by Mr Cassidy was that because the funds withdrawn by the Solicitor were not those of a client, but instead belonged to a local law society, the withdrawals were not made in connection with the practice of law. A number of authorities – for example, Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279 – illustrated that in this situation even an act which constituted a criminal offence did not necessarily give grounds for removal from the Roll.

95 Mr Cassidy relied also on the following aspects of the case: -

1. Only a relatively small amount of money – $2,000 – was involved.

2. Both the period during which the Solicitor made the five withdrawals – less than a week – and the period between his being contacted by Mr Ryall and his repaying the money – four days – were relatively short.

3. It was ‘surprising’ that the Society should have elected as its President an employed solicitor who had been admitted for only two years. A senior solicitor who was a principal or partner would have been preferable.

4. No intent to defraud had been established against the Solicitor. He engaged in no more than a temporary misuse of funds, which he would have repaid.

5. At the time when he withdrew the money, the Solicitor was suffering from severe stress and from some personal problems. These factors were no longer present.

6. The Solicitor had shown contrition for what he had done.

7. There were a number of favourable testimonials from his former colleagues in the legal profession and the police force.

96 Mr Cassidy drew to our attention a decision of the Administrative Appeals Tribunal, Haddad v Medicare Participation Review Committee, N95/1098, AAT No. 10031A, 2 February 1996. This case involved a medical practitioner who had been convicted of 28 offences of wrongfully claiming a payment from Medicare for a medical procedure that had not been performed. The total amount wrongfully claimed was only $640, of which the practitioner would have received only 40%. It was clear that he knew that what he was doing was illegal and wrong.

97 The Tribunal held that disqualification for six months was a sufficient ‘penalty’. It took account of (a) the serious consequences that he had already suffered, by virtue of protracted earlier proceedings in the matter; (b) the fact that he had suffered and still suffered from a serious heart condition; and (c) the existence of conditions imposed by the Professional Standards Committee substantially reducing the likelihood of his re-offending.

98 Mr Cassidy submitted that, while an order suspending the Solicitor from practice might have to have a longer duration than six months, this case showed that where a small amount of money was involved, it was not the money of a client and the conduct charged amounted to temporary ‘misuse’ only, the public would be sufficiently protected by an order of this nature.

99 The concluding submissions of Mr Cassidy included an acknowledgment that if our findings as to the purpose of the withdrawals from the Society’s account were adverse to the Solicitor, this would involve our disbelieving the Solicitor’s testimony and finding his answers to be ‘self-serving’. Mr Cassidy argued however that this would not be such an important matter as to warrant removing his name from the Roll.

Our conclusions regarding ‘penalty’

100 Relevant considerations. We have no doubt that the principal order that we should make should be either removal of the Solicitor’s name from the Roll (under s 171C(1)(a) of the Act) or suspension of his practising certificate for a specified period (under s 171C(1)(b) and (c)). As we have indicated, Mr Cassidy suggested that an order of the latter type would be sufficient and appropriate.

101 It is established in the case law that we should not make an order for removal from the Roll unless we are persuaded of the Solicitor’s ‘probable permanent unfitness’ for practice. In Prothonotary of the Supreme Court of New South Wales v Ritchard, Unreported, Court of Appeal, NSW, 31 July 1987, McHugh JA, having used this phrase, explained it as follows: -

The jurisdiction of the court to remove a practitioner from the Roll is entirely protective:… An order for the involuntary removal of a name of a practitioner from the Roll of Solicitors is made only because the probability is that the solicitor is permanently unfit to practise. Unless the court is persuaded that the probability exists the proper order to make will usually be one of suspension or fine instead of removal.

102 In delivering the leading judgment in New South Wales Bar Association v Cummins [2001] NSWCA 284, Spigelman CJ, at [26], expressed his agreement with these observations. At [28], he formulated the basis for the Court’s order of removal as being that the respondent barrister ‘must be regarded, at the present time, as permanently unfit to practise’.

103 In deciding whether the case against the Solicitor warrants such a finding, we have given careful consideration to the question whether we may take into account our finding that at least two statements made by the Solicitor in giving sworn evidence to the Tribunal were false to his knowledge. The statements in question are identified above at [59].

104 As indicated by Ipp JA in Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 at [108] (see above at [91]), ‘the veracity and candour’ of a legal practitioner’s testimony to a disciplinary body ‘will often be the best evidence’ as to whether evidence of mitigating circumstances, such as ‘remorse, reform, character change and subsequent good deeds’ is to be accepted. His Honour then said (at [109]) that when the practitioner knows that the disciplinary body might find that he or she has lied in giving testimony and might take account of this finding in determining what final order should be made, there will be no procedural unfairness if the disciplinary body acts in this manner, so long as the practitioner had an adequate opportunity to deal with this prospect.

105 In this case, it was put to the Solicitor more than once by Mr Boyd, on behalf of the Applicant, that he was not telling the truth on the relevant matters (see [43] above). His counsel, Mr Cassidy, acknowledged during submissions that we might disbelieve the Solicitor’s testimony and conclude that his answers in cross-examination were ‘self-serving’.

106 Mr Cassidy accordingly had an opportunity to deal with this issue in his submissions. He availed himself of this opportunity by arguing that a finding of this nature would not be a sufficiently important matter to warrant removing the Solicitor’s name from the Roll (see [99] above).

107 By virtue of these matters, we consider that our finding that the Solicitor gave testimony that he knew to be false on the issues that we have identified may properly be taken into account in determining the weight that we should give to the evidence of mitigating circumstances tendered on his behalf. To do so would involve no procedural unfairness to him.

108 It is noteworthy that in Law Society of New South Wales v Allen [2000] NSWADT 188 (discussed above at [80 – 88]), an order for removal of the respondent solicitor’s name from the Roll was made in circumstances not dissimilar from those of the present case.

109 In the present case, it could be said in the Solicitor’s favour that his misconduct was less serious than that of the respondent in Allen because (a) the amounts of his misappropriations and the period over which they were effected were smaller ($2,000 over five days, compared with $5,500 over four months), (b) he repaid the money relatively quickly (albeit not as quickly as he might have) and (c) there was no evidence of the Society suffering embarrassment within the local community due to the withdrawal of money from its account with the Credit Union. For these reasons, this is not a case where the prospect of the Solicitor’s rebuilding and maintaining what the Tribunal in Allen described as ‘the necessary relationship of trust and confidence with his professional colleagues’ must be considered ‘remote’.

110 On the other hand, it may well be that the Solicitor would have misappropriated more money over a longer period of time, so as ultimately to inflict embarrassment on the Society, if Mr Ryall had not noticed the unauthorised and unexplained withdrawals on the statement issued by the Credit Union. There are also two matters in relation to which the Solicitor’s conduct compares unfavourably with that of the respondent in Allen. These are (a) that the personal pressures suffered by him during the relevant period were distinctly less serious and (b) that he asserted untruthfully, up to and during the hearing, that his withdrawals were entirely justified. By contrast, the respondent in Allen, after initially claiming that a dishonour of the law society’s cheque was due to a bank error, admitted his wrongdoing.

111 These comparisons with Allen are drawn for the purpose only of guiding us in making what is essentially a value judgment. It is for us to determine, having regard to all the circumstances of this case, whether the probability is that the Solicitor is permanently unfit to practise.

112 The Tribunal’s decision, by majority. In the opinion of a majority of this Panel (Deputy President Chesterman and Judicial Member Greenwood), the Solicitor’s ‘infringement of the fundamental standards of his profession’ (to quote the phrase used by the Tribunal in Law Society of New South Wales v Allen at [41] to describe the misappropriation of law society funds by an office bearer), coupled with his refusal or failure, both before and during the Tribunal hearing, to admit to his serious breaches of well-established fiduciary duties, lead to the conclusion that he ‘must be regarded, at the present time, as permanently unfit to practise’ (to quote the test formulated by Spigelman CJ in New South Wales Bar Association v Cummins [2001] NSWCA 284 at [26]). It follows that the Tribunal’s order in these proceedings must be that his name be removed from the Roll of legal practitioners, pursuant to s 171C(1)(a) of the Act.

113 This majority decision has been reached after careful consideration of the particular circumstances of the case. An important factor, as just indicated, is the Solicitor’s refusal or failure to admit to his wrongdoing both before and during the Tribunal hearing. A significant consequence of this is that no weight can be placed on the submission, put forward but not strongly pressed by Mr Cassidy, that he had shown ‘contrition’ for what he had done. A further consequence is that only limited weight can be attributed to the fact, on which Mr Cassidy relied, that the amounts of the Solicitor’s misappropriations and the period over which they were effected were relatively small. Because the Solicitor showed, more than eighteen months later, that he could not or would not acknowledge and come to terms with the legal and ethical implications of what he did, it cannot be assumed in his favour that if Mr Ryall had not intervened he would, soon afterwards, have ceased of his own accord to make use of the Society’s money.

114 A further factor taken into account in reaching this conclusion is the absence of a strong testimonial in the Solicitor’s favour from any senior member of the legal profession. Those solicitors who supported his case strongly – namely, Ms Clarke and Messrs Kennedy, McLennan and Sattler (see [74 – 77] above) – were all fellow-students of the Solicitor at the University of New England and were therefore, like him, admitted to the profession relatively recently. The only senior legal practitioner who gave evidence regarding the Solicitor’s fitness for practice was the principal of Simpsons, Mr David White (see [73]). Mr White was admitted in 1979. What he said was confined to the following: ‘[the Solicitor’s] work with this firm has always been calmly, honestly, responsibly and competently performed so far as I am aware.’

115 In the view of the majority, the fact that the Solicitor took on the role of President of the Society well before attaining the customary seniority associated with such an office and the value of his work as a solicitor for disadvantaged people in the area of Armidale should, as Mr Cassidy argued, be taken into account. But they are insufficient to displace the opposing considerations just outlined.

116 Minority opinion. In the opinion of Dr Costigan, the Non Judicial Member on this Panel, the evidence does not go so far as to establish the ‘probability’ that the Solicitor is ‘permanently unfit to practise’. While the Solicitor’s conduct in withdrawing the Society’s funds for his own purposes and persisting in his denial of having done this provides grounds for very grave concern as to his fitness for practice, it remains a definite possibility that he might in due time reach the stage of acknowledging fully the wrongfulness of this conduct and adhering consistently to proper standards of professional behaviour. In this context, the reports on his psychological condition by Dr Lennings and Ms Blackwell give some cause for hope.

117 This conclusion stems also from the particular circumstances that placed him in a position to withdraw funds from the Society’s account. It was unwise of other members of the Society to accept as their President a practitioner who had only very recently been enrolled. It must be added that it was unwise of him also to accept this office. His assumption of the responsibilities of President had the effect of increasing significantly the personal pressures to which he was otherwise subject, as a result of which he yielded to the temptation to use for his own purposes some of the money over which he had been given control.

118 A further factor in his favour is the evidence of several of his professional colleagues that he has made a valuable contribution to the provision of legal services to disadvantaged members of the local community.

119 By virtue of these considerations, the opinion formed by Dr Costigan is that the protection of the public, along with the other purposes to be served by orders made following a finding of professional misconduct, would be adequately served by measures falling short of removal from the Roll. It would be sufficient and appropriate to make the following orders under s 171C(1)(b), (c) and (f) of the Act: (1) that the Solicitor be suspended from practice for a period of two years and (2) that, as a condition of being granted a practising certificate at the conclusion of this period, he should attend a course of legal education focussing on the ethical responsibilities of practitioners.

The Tribunal’s orders

120 The Tribunal orders that the name of Rodney James Kennedy be removed from the Roll of Legal Practitioners in New South Wales.

121 The Tribunal further orders that Rodney James Kennedy pay the costs of the Law Society of New South Wales in these proceedings, as agreed or assessed.