Law Society of New South Wales v McCarthy - [2002] NSWADT 58

No judgment structure available for this case.

Set aside by Appeal:
Set aside by appeal on 5/8/2002

CITATION: Law Society of New South Wales -v- McCarthy [2002] NSWADT 58

DIVISION: Legal Services Division

PARTIES: APPLICANT
Council of the Law Society of New South Wales
RESPONDENT
Peter James McCarthy

FILE NUMBER: 002021; 012041

HEARING DATES: 14/08/2001, 01/03/2002

SUBMISSIONS CLOSED: 03/01/2002

DATE OF DECISION:
04/23/2002

BEFORE: Molloy GB - Judicial Member; Robinson WL QC -Judicial Member; Kirkby E - Member

APPLICATION: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - fail to pay counsel's fees - Professional Misconduct - mislead Court/Tribunal

MATTER FOR DECISION: Principal matter

LEGISLATION CITED: Legal Profession Act 1987
Legal Profession Regulation 1994

CASES CITED: Allison -v- General Council of Medical Education and Registration (1984) 1QB 750
Ilija Danilo Vickovich (1997) 1LSTR32
Re: Robb (1996) 134 FLR 294
Carver -v- Law Society of NSW (1998) 43 NSWLR 71
Dimas -v- Hanos & Egan (2001) VSC 173
Ian Gordon Dun (1994) 3 LPDR 5
Barrister's Board -v- Young (2001) QCA 556
NSW Bar Association -v- Cummings (2001) NSW CA 284 at paragraph 59
In re: Thom; Ex-Parte the Prothonotary (1964) 80 WM (NSW) 968
Shearer -v- Manly-Warringah District Rugby League Football Club (Supreme Court Equity No 3226 of 1989, 7 November 1989.)
Re: Mark Phillip Symonds (1995) 2 LPDR 10

REPRESENTATION: APPLICANT
P Boyd, solicitor
RESPONDENT
S Cuddy, solicitor

ORDERS: 1. The legal practitioner be publicly reprimanded; 2. In the course of his practice the legal practitioner be prohibited from accepting instructions from any person in circumstances where he receives money from a client; 3. Order that the legal practitioner's practicing certificate be endorsed with a condition restricting the legal practitioner from acting as a solicitor otherwise than in the course of employment by a solicitor holding an unrestricted practicing certificate; 4. The legal practitioner pay the costs (limited to the costs in matter No. 002021 only) of the Law Society as agreed or as determined by the Tribunal; 5. The costs of the legal practitioner in relation only to matter No. 012041 as agreed or as determined by the Tribunal be paid from the Statutory Interest Account pursuant to the provisions of Legal Profession Act Section 171E(2); 6. On the aspect of quantum of and terms of payment of costs these may be determined by the Tribunal or by a single Judicial Member of the Tribunal at the election of the parties acting jointly.

1 There were two separate Informations filed by the Law Society of NSW against the legal practitioner. The first No. 002021, was filed 26 March 2001 and alleged that the legal practitioner:

The Law Society alleged that the allegations, if found proven amount to professional misconduct and sought an order that the legal practitioner’s name be removed from the Roll of Solicitors and that the practitioner pay the costs of the Society as Informant.

2 Those proceedings were heard on 14 August 2001. At the close of the hearing the Tribunal indicated that it would reserve its decision.

3 Before the Tribunal had delivered its Judgment both parties approached the Tribunal with a view to persuading it not to deliver its Judgment, at that stage for unspecified reasons. Indeed, the Tribunal was not given any reasons for this joint application. However, on the view that “Courts are for people, not people for Courts” the Tribunal acceded to the joint request of the parties and awaited further developments.

4 By Information No 012041 filed in the Tribunal 5 December 2001 the Law Society alleged that the legal practitioner misled or attempted to mislead the Tribunal when, on 14 August 2001 (the date of the hearing of the first matter),the practitioner gave evidence that he had not received the proceeds of cheques totalling $19,030.00 from his client when that statement was not true, alleged that conduct constituted professional misconduct and sought similar orders to those sought in the previous proceedings.

5 The tribunal has indicated, and the parties have agreed, that there will be a joint Judgment dealing with both filed Informations.

Background to Matter No. 002021

6 On or about 26 May 1997 the legal practitioner, a solicitor, received instructions from John Whalen to act for himself and Modular Manufacturers Pty Limited in relation to a claim subsequently commenced by Darvat Pty Limited on 23 June 1997 against, inter alia, Mr Whalen and Modular Manufacturers Pty Limited.

7 Between 7 July 1997 and 21 October 1997 Mr Whalen paid the legal practitioner $11,000.00 which the practitioner placed into his office/general account. No details of the individual payments or dates of payment were in evidence. On 13 November 1997 Mr Whalen paid a further sum of $6,000.00 to the legal practitioner which again was placed into his office account.

8 During the course of the proceedings the legal practitioner briefed a number of barristers who carried out certain legal work upon his instructions and rendered Memoranda of fees to the legal practitioner as follows:

9 On 30.9.97 the legal practitioner rendered to Mr Whelan a Memorandum of costs and disbursements in the sum of $36,500.00, which Memorandum included fees due to Ms Stenmark in $2,300.00 (said to have been paid), Mr B J A Sheilds in $850.00 (also said to have been paid), Mr D Studdy in $1,500.00 and Mr B Cheney in $300.00. In the circumstances set out below none of those fees to counsel had been paid.

10 On 18 March 1998 the practitioner rendered a further final Memorandum of costs and disbursements to Mr Whelan in total $48,116.00 which presumably included the previously rendered Memorandum.

11 A dispute arose between the legal practitioner and Mr Whelan and the matter was resolved by a costs certificate issued by Costs Assessor, Mr F P Riley, who determined that the correct amount of costs to be paid by Mr Whelan to the practitioner was $35,460.00, of which $17,000.00 had already been paid thus leaving the amount due at $18,460.00. Mr Riley observed (paragraph 4 of his Certificate) that the “Certificate of Determination is issued on the understanding that the Respondent (the practitioner) will pay the outstanding fees due to the four barristers ….”. Thereafter the practitioner recovered Judgment against Mr Whelan on 28/4/1999 in $18,512.00 (how this sum was calculated was never explained) and thereafter commenced various bankruptcy proceedings which ultimately resulted in the whole amount being paid by Mr Whelan to the solicitors acting for the practitioner (Mr Mannix of Messrs Dixon Holmes Dupont) as Petitioning Creditor by various bank cheques as follows:

12 As it appeared from the evidence in matter No. 002021 all of these sums were paid to the trust account of those solicitors. However, the true position was revealed in matter number 012041: the moneys were paid to the practitioner by his solicitor (Mr Mannix) and then repaid by the practitioner back to Mr Mannix.

Further Relevant Evidence

13 On 31.10.97 the practitioner paid Mr G J A Shields of counsel $2,250.00 by cheque which was dishonoured upon presentation. Also, in late October or early November the practitioner paid Mr D Studdy of counsel $1,110.00 by cheque which was also dishonoured upon presentation. The practitioner’s explanation, which was unchallenged, was that he had a conversation with Mr Whelan in the first week of November 1997 in the evening in which Mr Whelan said he could not make any further payments. On the “following or the next day” Mr Whelan telephoned the practitioner and said that he would “pay $6,000.00 into your account on the 13th and I will have my wife put in another $6,000.00 a week after that” and the practitioner’s evidence was that in reliance upon that statement he “drew cheques in favour of counsel in late October and dispatched them. I did this in the belief that the further cheque or payment by Mr Whelan would be received then banked and this deposit would cover the cheques drawn.”

14 Although this evidence was not challenged it is plain that it cannot be accepted simply because the conversation with Mr Whelan took place at the earliest in the first week of November 1997 yet the cheque in favour of Mr Shields was received by him on 31 October 1997, before Mr Whelan promised to pay the first payment of $6,000.00.

15 The practitioner compounded his failure to pay counsel’s fees: the evidence clearly demonstrated that the practitioner spoke to Mr Shields on 25 November 1997 and told Mr Shields that he, the practitioner, would deliver bank cheques in payment of the fees owing to both Mr Studdy and Mr Shields before lunch on 26 November and that the practitioner subsequently left a message for Mr Shields promising that the cheques would be delivered before lunch on 27 November. The evidence from Mr Studdy was that the practitioner informed him that he (the practitioner) was “aware of the problem” and that he would arrange for a bank cheque in favour of Mr Studdy’s fees to be forwarded to him by 17 November 1997. It was not in issue that the fees of counsel were not paid at all until after the filing of the Information of these proceedings (17 November 2000), namely on 8 May 2001!

16 The practitioner’s further explanation of his failure to pay counsel was "because of his poor financial position”. The practitioner’s evidence, again unchallenged, shows that he was from date of admission (22.6.73) up to February 1996 employed as a solicitor and later as a partner with Messrs A O Ellison & Co, thereafter for one year as a sole practitioner in a firm styled McCarthy Killalea and from February 1997 to date as a sole practitioner styled “Peter J McCarthy & Associates” performing locum work under contract. He explained his financial position as arising because of an assessment for provisional tax “and at the time I retired I had a substantial tax bill which more than consumed my retirement benefits and payments from (A O Ellison & Co). Due to problems servicing a mortgage over an investment property near Port Macquarie I was made bankrupt in April 1996. I was discharged from bankruptcy in April 1999”. He also gave evidence of difficulties in trading profitably since February 1996 and having personal worry and considerable expense associated with a member of his family.

Practitioner’s Trust Account

17 The practitioner never had a trust account. All moneys that he received from Mr Whelan he paid into his office (general) account, even moneys he had received prior to the rendering of a Bill of Costs.

18 The practitioner and Mr Whelan entered into a Costs Agreement which was defective in at least two aspects: it was not dated and, more importantly, it did not specify the work that the practitioner was to carry out. However, in the circumstances they are probably only minor observations – the more important observations are that the Costs Agreement made the following relevant provisions:

Barrister’s fees
Faxes, photostat, mail, telephone, courier”.

“We will also assume your authority is given for any judgment or settlement moneys to be paid directly into our trust account and to pay ourselves from this money immediately after sending you our Bill of Costs”.

19 It is plain from the above extracts from the Costs Agreement that the practitioner held out to Mr Whelan that he did in fact have a trust account. The practitioner compounded this by forwarding to Mr Whelan on 30 September 1997 a Memorandum of costs and disbursements in the sum of $36,500.00 which include barristers’ fees in total $4,950.00. It must have been plain to this practitioner, he being a person of many years professional experience, that had Mr Whelan paid that $36,500.00 then of that sum $4,950.00 would have been held by the practitioner on account of the named barristers in that bill such that it would have been required by law to have been placed in a trust account. Although it is true that the 30 September 1997 bill specified two of the barristers as having been in fact paid, the truth is that they had not been paid.

20 To same effect is the Bill of Costs rendered by the practitioner on 23 October 1997 to the solicitors for Darvat Pty Limited (against whom a costs order had been made) which bill claimed $12,960.00 and which included claimed barrister’s fees in $2,510.00. Again, those fees had not been paid such that had Darvat paid the 23 October 1997 bill then the $2,510.00 portion thereof would have been held by the practitioner on account of the three named barristers in the bill and would have had to have been deposited into the practitioner’s trust account.

21 It is plain that there was no arrangement between the practitioner and Mr Whelan, nor between the practitioner and counsel, whereby the fees of briefed counsel would be paid by Mr Whelan direct to counsel. Rather, counsel would (as is normal practice) render their fees to the practitioner and the practitioner would either pay those fees direct from his office account or, alternatively, would obtain moneys from the client from which those fees could be paid. Having regard to the fact that the practitioner did not pay counsel from his office account, it is plain that the correct practice would have been for the client to have placed money into a trust account from which the fees of counsel would have been met.

22 During the course of cross-examination the practitioner said that he told Mr Whelan that he did not have a trust account. There was no previous intimation in the evidence of such a statement and it is at variance with the letter written by Mr Whelan to the practitioner 2 February 1998 in which in its third paragraph, Mr Whelan says:

23 This practitioner was and is an experienced practitioner. He has been in practice since 1973, he has held the position of partner in a well known and respected firm of solicitors in Sydney, and must have been aware of the necessity to hold moneys paid to him on account of other persons in a trust account for that purpose.

24 It was submitted that it was not a breach of the trust account requirements to receive moneys from a client prior to the render of a Bill of Costs and simply put those moneys into one’s office or general account. It was submitted, indeed with some force, that the receipt of moneys simpliciter from a client does not of itself charge those moneys with any trust obligation. It was also submitted that the practitioner was at all material times a bankrupt such that he could not have opened a trust account anyway.

25 The problem with those submissions is simply this: if the trust account requirements state that moneys received on behalf of another person must be held in a trust account then it seems to this Tribunal to be absolutely irrelevant that the practitioner is or is not a bankrupt, simply because the trust account requirements for the holding of a practicing certificate must be followed. The plain fact is that up until 21 October 1997 (by which time the practitioner had received $11,000.00 from Mr Whelan) the practitioner had received Memoranda of fees from various counsel in total $7,475.00. Furthermore, a further sum of $6,000.00 was received from Mr Whelan on 13 November 1997 at which time the practitioner had received two further Memoranda of counsel’s fees in total $1,875.00.

26 It seems to us plain and obvious that, having regard to the terms of the Costs Agreement and even without considering the Bill of Costs rendered to Mr Whelan 30 September 1997, the arrangement between Mr Whelan and the practitioner was that the practitioner would brief counsel and that moneys paid by Mr Whelan to the practitioner would be charged with an overriding requirement that from those moneys counsel would be paid. Consequently, it must follow that moneys paid by Mr Whelan to the practitioner should have properly been placed into a trust account and used firstly for the payment of the fees of counsel when rendered and secondly for the payment to the practitioner, but only after the practitioner had complied with the usual requirements under the trust account regulations, namely the render of a Bill of Costs together with an appropriate endorsement under Legal Profession Regulation 32(3)(b).

27 Consequently, and although (and without deciding) that it may be a proper practice and not in breach of the trust account requirements for a practitioner to deposit into his/her office or general account moneys received from a client without render of a bill, in the circumstances of this case plainly that submission cannot survive rigorous examination for the reasons indicated above.

The Conduct of the Case

28 The Law Society however did not put its case before the Tribunal in the manner indicated above. Rather, the Society pleaded its case in the following fashion:

However, in support of allegations c) and d) the Society did not rely upon the receipt of moneys from 7 June 1997 up to 13 November 1997 in total $17,000.00, rather it relied upon the receipt by the practitioner’s solicitors in the bankruptcy proceedings of the $19,030.00 set out in paragraph 6 above, it being submitted that the payment on 6 December 1999 of $4,030.00 coupled with the other payments then enabled the practitioner to pay the outstanding fees of counsel such that at that point (6 December 1999) the failure to pay counsel from those moneys constituted a breach of Section 61 because, it was submitted, at that point of time those moneys (at least as to the total amount then due to the various barristers in $9,100.00) was held by the solicitor on account of those barristers and his failure to pay constituted a breach of Section 61.

29 Indeed, the Law Society quite specifically indicated that this Tribunal was not to investigate as a breach of Section 61 the receipt of the practitioner of the $17,000.00 up to 13 November 1997, the Society having apparently made a determination to the effect that there could not be a breach of Section 61 because the practitioner was bankrupt at the relevant times. Quite frankly, we regard this as a quite extraordinary submission because it seems to the Tribunal to be at variance with the law and does not properly put all the relevant facts and arguable breaches of the law before this Tribunal.

30 This Tribunal is therefore left in an invidious position because it is asked to make findings and on those findings impose an appropriate penalty consistent with its obligations to protect the public but in circumstances where all the relevant facts which may arguably constitute breaches of the trust requirements under the Legal Profession Act are not brought before it although the facts are alleged in the filed Information. And, of course, the practitioner is entitled to frame his filed Reply by reference only to the matters pleaded against him and therefore can avoid responding to the factual matters that arguably constitute further breaches of the Act.

31 The further difficulty that is faced by the Tribunal is that in evidence the practitioner, and for the first time, stated (in re-examination) that none of the moneys received by his solicitors and as set out in paragraph 11 above were ever received by him. He does not make this suggestion in his affidavit, although in paragraph 13 he alleges that his solicitor incurred costs and disbursements of about $23,646.50 with regard to certain appeal proceedings and executing, the judgment, bankruptcy, creditor’s petition and dealing with the Law Society and, presumably by some sort of inference, the Tribunal is asked to infer, coupled with his own evidence, that all of the moneys received from Mr Whelan were in fact paid to the practitioner’s solicitors and none was ever received by him. This issue was clarified upon the hearing of matter 012041.

32 If, of course, the Tribunal accepts that evidence then the whole of the case of the Law Society with respect to Section 61 simply fails and the only matters left for determination are the drawing of cheques payable to counsel not met upon presentation and the failure to pay counsels’ fees.

33 It is curious (to say the least) that the practitioner offers no explanation of how it is that he could pay, on or about 8 May 2001, all of the fees of the various barristers (total $9,100.00) each by bank cheque. Again, this aspect of the matter was not explored.

Findings On Trust Matters

34 The onus of proof rests upon the Law Society to make out its case to the Briginshaw standard. No onus rests upon a legal practitioner other than a duty to be frank and honest with the Tribunal in dealing with the matters raised against the practitioner by the Law Society. But the onus rests upon the Law Society and if it fails to discharge that onus then the case against the practitioner must fail.

35 With regard to the charges levelled against the practitioner for breaches of Section 61, having regard to the way in which the Law Society presented its case, in the view of this Tribunal the Society has not discharged its onus such that this Tribunal is not satisfied that the practitioner was in breach of Section 61 in the manner pleaded against him.

36 Finally on this aspect we should make this observation: the Society in its submissions relied upon a letter written by it to the solicitors for the practitioner 28 June 2000 in which it sought confirmation “that the final payment of $4,030.00 which was paid by way of bank cheque dated 6 December 1999 was in fact paid to (the practitioner)” and a further letter 17 July 2000 referring to that previous letter and assuming “unless (the Society is) advised to the contrary within 14 days of the date of this letter then the matters to which (the Society has) referred in (its) letter dated 28 June 2000 are admitted”. It was submitted that the failure to respond to those letters amounted somehow to an admission by the practitioner that he had in fact received the $4,030.00. We are unable to reach that conclusion. This Tribunal does not reach conclusions by way of inference unless the inference is clearly available from the factual material. In our view no assumption could be possibly drawn from that correspondence and it is up to the Society to prove, to the relevant standard, the factual matters that it alleges against the practitioner. On this aspect that standard is not reached.

Findings Re: Failure To Pay Counsels’ Fees

37 The leaves effectively two matters outstanding. Firstly, there is the complaint that the practitioner drew a cheque in favour of Mr Shields and a cheque in favour of Mr Studdy with respect to their fees, which cheques were not met on presentation. This complaint is conceded. The second complaint is that the practitioner failed to pay the fees to the four separate counsel as stated above. Again, this complaint is conceded. The practitioner’s evidence is that he paid all counsel by bank cheque on or about 8 May 2001 in total $9,100.00. In fact, the total of the fees due to counsel is $9,350.00 (paragraph 3 above) leaving a shortfall of $250.00 which is in fact due to Mr Shields. The practitioner’s evidence is that money has been paid.

38 The real issue before us is whether in the above two circumstances the failure to pay counsel amounts to professional misconduct, or alternatively unsatisfactory professional conduct.

39 The content of each concept and the differences between each concept were analysed by the then Legal Profession Disciplinary Tribunal in the matter of Ian Gordon Dun (1994) 3 LPDR 5. There is no doubt that the conduct of the practitioner at the very least amounts to unsatisfactory professional conduct. It was not contended otherwise. The primary submission of the practitioner was that his conduct in relation to the payment of the fees of counsel did not amount to professional misconduct.

40 It was submitted that the Tribunal could find that the practitioner did not have enough moneys generally from which to pay counsel and that his conduct in those circumstances was not a contemptuous disregard for his obligations to pay counsel when at all times the practitioner knew that he should have paid counsel but financially could not.

41 In our view that is a difficult contention to make in the face of the admitted facts that by 13 November 1997 the practitioner had been paid by Mr Whelan $17,000.00 and by that date he had received all of the Memoranda of fees from the various briefed barristers. What the practitioner did with the $17,000.00 was never properly explained, rather perhaps the Tribunal is invited to infer that the money was otherwise spent on his practice or for his own personal requirements and there is no doubt that at the relevant time the practitioner was an adjudicated bankrupt, a status of which we do not accept that he informed Mr Whelan and in relation to which there was no evidence that he informed briefed counsel.

42 The fact is that the practitioner, and even disregarding his bankruptcy status (a very difficult matter to disregard!), had an absolute obligation to pay counsel whom he briefed. There cannot be any argument that, absent an agreement between the person (whether that person be a barrister or otherwise) and the client that the client would pay the person direct and the person agreed with that arrangement, there is clearly a contractual obligation to pay the person instructed. It used to be regarded, at least as regards barristers, as a matter of honour but in more recent economically rational times the obligation to pay counsel rests in contract and also falls within practice rule 32.

43 Our attention was drawn to a number of various cases, namely Ilija Danilo Vickovich (1997) 1 LSTR 32, Re: Robb (1996) 134 FLR 294 and Carver –v- Law Society (1998) 43 NSWLR 71. However, the facts in this case do not relate to a transfer of moneys from a solicitor’s trust account to office when the fees of counsel are due, rather the payment direct into office and appropriated by the practitioner when he had outstanding obligations to barristers. It seems to us that the general principle in Vickovich that “Solicitors are under an obligation to pay counsel regardless of whether they are put in funds by their clients, unless they have some particular or special arrangement with counsel …” is a principle the breach of which is capable of amounting to professional misconduct. There may be circumstances which could result in such a finding not being made but in the circumstances of this case it is plain to us that the practitioner simply pocketed the client’s money in circumstances where he clearly had received from counsel relevant Memoranda of fees which were due and owing and he failed to use the client’s payments in satisfaction of those outstanding fees in circumstances where the practitioner held out that he had a trust account, where clearly the costs agreement envisaged the engagement of barristers, in circumstances where the client must have been at all times aware that counsel had been briefed and in further circumstances (if such is required) where the practitioner sent to the client a memorandum of costs dated 30 September 1997 which indicated quite clearly that four barristers had at that time been briefed and moneys were due to them.

44 In Dimas -v- Hanos & Egan (2001) VSC 173 (29 May 2001) a Victorian solicitor argued that he was not personally liable to pay the fees of counsel because he was acting as agent for his client and the contract was between the client and the barrister. Gillard J said that, but subject to any evidence to the contrary, the retainer between a solicitor and client authorised the solicitor retain counsel, but that authority did not extend to bringing into existence a contract between the barrister and the client. In Dimas the solicitor was therefore unsuccessful because firstly, there was no evidence from the solicitor that the client expressly authorised the solicitor to bring into existence such a contract, secondly, there was nothing on the backsheet of the brief, which was endorsed with the name and address of the instructing solicitor, suggesting that the retainer was between the barrister and the client, thirdly, there was no evidence of any discussion between the solicitor and the barrister to that effect and finally, there was no evidence that the contract was other than between the contracting parties (ie the solicitor and the barrister) and the mere fact that the services to be rendered by the barrister were in respect of the solicitor’s client did not, in the circumstances of each of the retainers under consideration, lead to the conclusion that the contract was not between the barrister and the solicitor.

45 Although it seems to this constituted Tribunal that the above decision is in accordance with the law as is currently the practice, we can see no significant difference in principle between the issues in the case before this Tribunal and the issues that were before Justice Gillard.

46 In our opinion it is impossible to reach a conclusion other than the practitioner is guilty of professional misconduct at common law within the principles set out in Allison -v- General Council of Medical Education and Registration (1894) 1 QB 750 at 763 and as discussed in Ian Gordon Dun (1994) 3 LPDR 5.

47 In any event, we do not accept the evidence of the practitioner that he relied upon a conversation with his client in November 1997 to draw cheques in favour of counsel in October 1997. Consequently, on both counts there must be a finding against the practitioner of professional misconduct.

Background to Matter No. 012041

48 By these proceedings the Law Society alleged that the practitioner misled or attempted to mislead the Tribunal in the evidence that he gave to this Tribunal on 14 August 2001. The allegation arose in this fashion: in this practitioner’s affidavit sworn 4 December 1999 he stated:

49 In these proceedings Mr Mannix swore an affidavit 4 October 2001 in which he stated:

50 In the Particulars attached to the filed Information the Law Society pleaded that on 14 August 2001 the practitioner gave the following answers to questions from his counsel (Mr Cuddy) and the transcript at page 19 records the following:

51 The Information effectively pleaded that that evidence from the practitioner “was deliberately misleading in that soon after 2 September 1999 Nixon Homes Dupont (Mr J J Mannix) paid to the (practitioner) two bank cheques each in the sum of $5,000.00”. This indeed was the nub of the complaint of the Law Society.

52 Mr Cuddy on behalf of the practitioner, and the practitioner himself, both stated that if asked the same questions again the practitioner would have answered exactly the same way. And for this reason: the evidence discloses clearly that Mr Mannix did not hold a trust account and wished to pay third parties the proceeds of the cheques totalling $10,000.00. Mr Mannix had the cheques endorsed to Mr McCarthy, given to him and provided to him a direction for the dispersal of the total sums. Mr Mannix swears that on 9 September 1999 he received a cheque for $7,000.00 from the practitioner as requested along with cash in the sum of $1,000.00; about two days later he received from the practitioner a further cash amount of $2,000.00 and when he received the ultimate cheque for $4,030.00 in December 1999 his costs were satisfied in full. Mr Mannix also swore that the practitioner did not receive any benefit from the total sum of $19,030.00 received from Mr Whalan during September and December 1999.

53 The argument seems to be that because the practitioner originally stated to this Tribunal that the relevant cheques were paid to Mr Mannix and that Mr Mannix did not give to the practitioner any of the proceeds, that statement was misleading when in fact the practitioner actually received the cheques and shortly thereafter gave the moneys back to Mr Mannix as Mr Mannix directed.

54 The practitioner’s evidence was to the effect that the context of his evidence to the Tribunal on 14 August 2001 was a response to a suggestion in cross-examination that the benefit of the funds paid to Mr Mannix were channelled indirectly to him. He stated that the only benefit he received from the moneys paid by his former client Mr Whalan was to satisfy the costs of Mr Mannix and that none of the moneys paid to Mr Mannix were ever paid to the practitioner beneficially or retained by him.

55 As we understand the evidence of both the Law Society and the practitioner there was really no dispute as to the payment of the cheques from Mr Mannix to the practitioner and the return of the moneys in a different form from the practitioner to Mr Mannix.

56 The practitioner submitted through his counsel that in answering “No” to the question “Did (Mr Mannix) ever give you any of the proceeds?”, that answer was correct because in the view of the practitioner he never retained any of those funds. It was submitted that the answer is obviously the compression of several steps but it in fact and in sense was an honest and correct answer. Consequently, there was no misleading in the context of the question and answer.

57 Considerable weight was placed on the fact that at the time of the payment by the practitioner to Mr Mannix by return of the moneys Mr Mannix had not at that point rendered a Bill of Costs such that it could not be said by Mr Mannix that by those payments his costs had been satisfied in full. We reject that argument. It is not the law that payment of moneys without the render of an account cannot be satisfaction of costs absent the render of an account. If the account subsequently rendered is in the amount paid or exceeds the amount paid but the balance is not pressed, then it seems plain to us that the payment made prior to the render of an account is in satisfaction of the costs as subsequently rendered.

58 Secondly, it was pressed upon by us by the Law Society that we could glean some comfort from the slight differences in evidence between the practitioner and Mr Mannix when they gave slightly different dates for the dates upon which the practitioner repaid Mr Mannix. In our view that argument has no merit at all. To attempt to re-construct by specific dates payments that were made in 1999, where the difference between the evidence was only 1 or 2 days, is in the circumstances unimpressive and in our view does not advance the case of the Society.

59 It was put to us, in very strong terms on behalf of the Society, that the practitioner in his evidence to this Tribunal both on 14 August 2001 and on 1 March 2002, was not only vague but acting fast and loose with the truth, that he did not give a truthful and honest answer to the questions put to him in August 2001 and that he adopted a cavalier attitude to the Tribunal. It was submitted that the practitioner should have told the exact story, ie that he received the moneys from Mr Mannix and paid them back to Mr Mannix.

60 It was submitted that we should bear in mind the observations of the Queensland Court of Appeal in Barristers Board -v- Young (2001) QCA 556 and what McHugh JA said in 1988 in the unreported decision of The New South Wales Bar Association -v- Mannix, namely: “It is a commonplace in disciplinary proceedings against a legal practitioner that his own evidence strengths the case for removing him from the rolls".

61 It was also urged upon us that we should consider in this context the observations of Spiegleman CJ in New South Wales Bar Association -v- Cummins (2001) NSW CA 284 at paragraph 59 when His Honour referred to In re: Thong; ex-parte The Prothonotary (1964) 80 WN NSW 968, in which case the Supreme Court expressly found that wilful non-disclosure by a solicitor with respect to his own divorce proceedings constituted professional misconduct. It was stated that “Fulfilment of a duty of candour to the Court is a quality required of legal practitioners and its breach, even in personal litigation, manifested the absence of that quality."

62 It was therefore submitted, as we understood it, that this legal practitioner in these proceedings did not discharge his duty of candour by failing to tell the Tribunal that he had in fact received the cheques from Mr Mannix and paid them back to him.

63 It is trite to observe that even where there are a number of people who witness an event or hear a conversation then you will hear in evidence different variations of that event or that conversation – see Shearer -v- Manly-Warringah District Rugby League Football Club (Supreme Court, Equity No. 3226 of 1989, Young J 7 November 1989) in which case His Honour said (at page 2): “I am quite sure that almost every witness that gave evidence before me was trying his level best to remember what was said on the drizzly June day before training commenced at the North Head Army Oval. I am quite sure that none of them ever thought that day that five months later they would have to repeat in a Court of law what was said. Because of that it is understandable that the Court has at least seven different versions of what was said. It is also understandable that Mr Daley’s notes do not correspond with the recollection of many of the hearers. It must be remember that oral communication is not an exact science. This is well illustrated by the standard example of a person describing to another person what he sees out of a train window. The person who is doing the describing may see a gum tree and talk about a tree, but the person listening will have in mind the image of a willow tree and will get a quite different impression from that for which the person making the description was hoping for. Accordingly one often gets a situation where “X” uses words which “Y” interprets in a different way than “X” intended.”

64 Similarly, in this case there were slight differences in the evidence of the practitioner and the evidence of Mr Mannix as to when the money was paid from the practitioner to Mr Mannix. In the circumstances, and having regard to the passing of the years, those slight differences are understandable and are not properly the subject of the sort of criticism that was levelled against the practitioner by the Law Society.

65 We agree entirely with the submissions of counsel for the practitioner to the effect that in answering the relevant questions there was no intention to speak an untruth, that the practitioner’s answers were not wilfully misleading, neither was he deliberately lying. There is absolutely no doubt in the mind of the Tribunal that the answers given by the practitioner were directed to whether he had retained or was beneficially entitled to the funds paid to him by Mr Mannix and that his answer was “obviously a compression of several steps but it in fact and in sense was an honest and correct answer”.

66 We reject the Law Society’s submission, we find the submission is without merit in all the circumstances and this Information is dismissed.

Consequences

67 The Law Society has been unsuccessful in its complaints regarding alleged breaches of Section 61 and wholly in relation to matter No. 012041 but has been in our view overwhelming successful in its complaints relating to the non-payment of counsels’ fees and the two purported payments of fees when cheques were dishonoured.

68 This practitioner has been in practice since 1973 in honourable circumstances as set out previously in this Judgment. He has clearly fallen on hard times but that should not be held against him. There was prodigious evidence before the Tribunal from practitioners of note in the legal community to the effect that this practitioner can be trusted and that notable members of the legal profession are able to say they rely upon him.

69 It is further clear that his conduct as set out in this Judgment is an isolated matter in that it affects one client only, no other matters have been drawn to the attention of the Tribunal, we understand that no other adverse findings have been made against him and in these circumstances it was submitted that the public would not be protected by his removal from the Roll.

70 It was submitted that the practitioner mainly practices in personal injury, his current practice is that of a locum by way of contract, that he holds an unrestricted practicing certificate but is not unfit to remain on the Roll.

71 The Society submitted that the Tribunal must be dissatisfied in relation to the practitioner’s conduct in these proceedings before the Tribunal and his lack of candour. It was submitted that the practitioner should have produced bank statements to prove his financial position and it was submitted that the practitioner’s evidence was not evidence upon which the Tribunal could be satisfied.

72 Having made a finding of professional misconduct it now falls the Tribunal to make orders pursuant to the Legal Profession Act. The discretion of the Tribunal is limited by the parameters of Section 171C. The Tribunal is required under the Act to fashion an order that meets the requirements of this Section.

73 In exercising its powers under Section 171C the Tribunal is very mindful of the fact that this practitioner is effectively travelling towards the end of his professional career and that his current practice is as a locum only under contract. It would also seem from what we heard that such contracts do not include dealing with trust moneys, rather they involve analysis of documentation, for example in a personal injury matter or in a commercial matter (analysis of documents on discovery) and there was absolutely no hint of any professional incompetence – indeed, the evidence seemed to show that the practitioner is in the discharge of his ordinary professional duties quite professionally competent.

74 We have formed the clear view that on the evidence before us the protection of the public is not served by an order that he be removed from the Roll of legal practitioners and there is no benefit in imposing a fine having regard to what appear to be the practitioner's parlous financial circumstances.

75 Consequently, for this practitioner in the circumstances as proved against him, the following sub-sections of sections 171C appear to be reasonably available to the Tribunal:

76 In all the circumstances and weighing up the interests of the practitioner and the need for protection of the public the Tribunal has formed the opinion that it is appropriate to make orders in terms of Section 171C(1)(e), Section 171C(2)(f) and (g), in the following terms:

77 The Tribunal wishes to make it clear that it has formed a very clear view that all material relating to the conduct of this practitioner was not put fully before the Tribunal such that it was able to make findings in relation to the totality of the practitioner’s conduct. That is not to say that a finding adverse to the practitioner would have been made, rather that the Tribunal in its view was, by the way in which the Law Society presented its case, prevented in dealing fully with all the matters that should have been more fully ventilated at hearing.

78 However, having said all that, the conduct of the legal practitioner in the circumstances as found amounts to professional misconduct and there must be an order that the practitioner pay the costs of the Law Society in relation to matter No. 2021 as agreed or as determined by the Tribunal.

Costs of the Practitioner:

79 On behalf of the practitioner application was made for an order for costs pursuant to Section 171E in relation to matter No. 012041. It was submitted, and with considerable force, that these proceedings should never have been filed, that when the questions were raised by the Society as to the evidence given by the practitioner on 14 August 2001 the practitioner responded promptly and in any event the proceedings on 1 March 2002 should not have taken as long as they took simply because there was no real need for any cross-examination.

80 The Tribunal agrees with all of those submissions. In our view the laying of the Information was unwarranted in the circumstances because it could not be properly represented to this Tribunal that in all the circumstances the practitioner had misled the Tribunal or attempted to mislead the Tribunal when all that he had done is compress two steps into one. It could not be suggested against him that he had received a beneficial entitlement to the moneys paid to him. Rather the facts were totally against any submission to that extent and in our view the evidence given on 14 August 2001 as explained was clearly not deliberately or inadvertently misleading and was clearly answered in the letter from Mr Cuddy to the Law Society 4 October 2001, no additional material was put before this Tribunal that would have changed the basis of that letter and we agree that there was no factual substrate that would have reasonably warranted the Law Society bringing the additional proceedings against this practitioner.

81 It is not the duty of the Law Society, neither is it the duty of the Legal Services Commissioner to chase every rabbit down every hole. There must, and always should be in any litigation, an analysis by relevant prosecuting parties by way of a cost-benefit analysis such that only matters of importance and substance are brought before the Tribunal. As the Legal Profession Disciplinary Tribunal pointed out in the matter Ian Gordon Dun (1994) 3 LPDR5, matters involving professional misconduct matters that are, “serious, grave and weighty” (page 7). It is unarguably the duty of a prosecuting authority in professional conduct matters to assess the factual material and to bring forward only that factual material which might arguably constitute conduct that would fall within the parameters of professional conduct as discussed in Dun. In our view a proper analysis by the Law Society would have resulted in an assessment in favour of the practitioner or at the very least to the effect that further proceedings against this practitioner were not warranted in the particular circumstances.

82 The real question is whether the practitioner’s application fits within the relevant principles as set out in the matter of Mark Phillip Symonds (1995) 2 LPDR 10. In that case the Legal Profession Disciplinary Tribunal made these observations (at page 12):

Dun

Spero Pitsikas

83 Those observations were made as long ago as 15 December 1994 and are as valid today as they were in 1994.

84 Symonds went on to consider the power of the Tribunal to make orders for costs. The Tribunal reviewed the power to make costs, discussed in detail Section 171E and noted that the Tribunal must be satisfied that there were “special circumstances” that would warrant an order for costs.

85 This Section is directed to the power of the Tribunal after it has completed a hearing and after the Tribunal was satisfied that the practitioner is not guilty of unsatisfactory professional conduct or professional misconduct. In relation to the current application for costs this relates only to matter 012041 and the Tribunal notes that it is satisfied in that matter that the practitioner is not guilty of unsatisfactory professional conduct or professional misconduct. But, as in Symonds, the question is: “Are there special circumstances that warrant an order for costs being made in favour of the practitioner from the Statutory Interest Account?”

86 The answer to this question is “yes” simply because the findings of this Tribunal fits squarely within the principles set out in Symonds and consequently there must be an order for costs in favour of the legal practitioner.

Orders

Actions

Download as PDF Download as Word Document

Citations

Law Society of New South Wales v McCarthy [2002] NSWADT 58

Most Recent Citation

Heng v The Queen No. DCCRM-02-195 [2003] SADC 180

Cases Citing This Decision

45

Quach v Butt [2017] ACTCA 4

Council of the Law Society of New South Wales v Bouzanis [2017] NSWCA 330

Russo v Legal Services Commissioner [2016] NSWCA 306

Cases Cited

1

Statutory Material Cited

2

McGovern v Ku-Ring-Gai Council [2008] NSWCA 209

CITATION:	Law Society of New South Wales -v- McCarthy [2002] NSWADT 58
DIVISION:	Legal Services Division
PARTIES:	APPLICANT Council of the Law Society of New South Wales RESPONDENT Peter James McCarthy
FILE NUMBER:	002021; 012041
HEARING DATES:	14/08/2001, 01/03/2002
SUBMISSIONS CLOSED:	03/01/2002
DATE OF DECISION:	04/23/2002
BEFORE:	Molloy GB - Judicial Member; Robinson WL QC -Judicial Member; Kirkby E - Member
APPLICATION:	Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - fail to pay counsel's fees - Professional Misconduct - mislead Court/Tribunal
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Legal Profession Act 1987 Legal Profession Regulation 1994
CASES CITED:	Allison -v- General Council of Medical Education and Registration (1984) 1QB 750 Ilija Danilo Vickovich (1997) 1LSTR32 Re: Robb (1996) 134 FLR 294 Carver -v- Law Society of NSW (1998) 43 NSWLR 71 Dimas -v- Hanos & Egan (2001) VSC 173 Ian Gordon Dun (1994) 3 LPDR 5 Barrister's Board -v- Young (2001) QCA 556 NSW Bar Association -v- Cummings (2001) NSW CA 284 at paragraph 59 In re: Thom; Ex-Parte the Prothonotary (1964) 80 WM (NSW) 968 Shearer -v- Manly-Warringah District Rugby League Football Club (Supreme Court Equity No 3226 of 1989, 7 November 1989.) Re: Mark Phillip Symonds (1995) 2 LPDR 10
REPRESENTATION:	APPLICANT P Boyd, solicitor RESPONDENT S Cuddy, solicitor
ORDERS:	1. The legal practitioner be publicly reprimanded; 2. In the course of his practice the legal practitioner be prohibited from accepting instructions from any person in circumstances where he receives money from a client; 3. Order that the legal practitioner's practicing certificate be endorsed with a condition restricting the legal practitioner from acting as a solicitor otherwise than in the course of employment by a solicitor holding an unrestricted practicing certificate; 4. The legal practitioner pay the costs (limited to the costs in matter No. 002021 only) of the Law Society as agreed or as determined by the Tribunal; 5. The costs of the legal practitioner in relation only to matter No. 012041 as agreed or as determined by the Tribunal be paid from the Statutory Interest Account pursuant to the provisions of Legal Profession Act Section 171E(2); 6. On the aspect of quantum of and terms of payment of costs these may be determined by the Tribunal or by a single Judicial Member of the Tribunal at the election of the parties acting jointly.