Law Society of New South Wales v Poynten

[1999] NSWADT 21

Set aside by Appeal: Grounds 1-5 set aside by appeal on 4/9/2000

CITATION:	Law Society of New South Wales -v- Poynten [1999] NSWADT 21
DIVISION:	Legal Services
APPLICANT:	The Council of the Law Society of New South Wales
RESPONDENT:	John Goldsworthy Poynten
FILE NUMBER:	9730
HEARING DATES:	29/06/98; 30/06/98
SUBMISSIONS CLOSED:	30/06/98
DATE OF DECISION:	8 April 1999
BEFORE:	R Fox Presiding Judicial Member J Currie - Judicial Member E Hayes - Member
PRIMARY LEGISLATION:	Legal Profession Act 1987
APPLICATION:	Misleading/deceptive/unfair dealing with client; Professional misconduct - solicitor ; Wrongful application of trust/controlled money or other valuable property -
MATTER FOR DECISION:	Principal matter
REPRESENTATION:	Applicant: D Hipsley of counsel instructed by R J Collins Respondent: D Poynten, solicitor
ORDERS:	1. The Respondent's name be removed from the Roll of Legal Practitioners. 2. The Respondent pay the Applicant's costs.

1 In these proceedings the Law Society complains that John Goldsworthy Poynten ("the solicitor"), in his performance of his duties as executor of the estate of his long time friend (and client) L J F Starr ("the Estate"):-

1. Withdrew an amount of $1,000.00 in costs without issuing a bill of costs.

2. Failed to account to the Estate for a sum of $3,131.60 withdrawn from the Westpac Bank Account of the Estate ("the Estate Account") and deposited to his office account on 28th June, 1994.

3. Failed to account to the Estate for an amount of $15,000.00 received on or about 8th August, 1995.

4. Duplicated costs of $1,000.00 in an account dated 28th July, 1995 for the Estate.

5. Failed to advise the beneficiaries of the Estate of the Estate's interest in the Mortgage of C.A.L.M. Enterprises Pty Limited.

5A. Misappropriated the sum of $1,000.00 when he paid moneys in that sum to his clerk, Carole Flanders, by cheque dated 3rd June, 1994 drawn on the Estate Account, all being matters of professional misconduct, and raised matters of unsatisfactory professional conduct, in that, he :-

on May 9th, 1995 swore an Affidavit in relation to the Estate containing incorrect references to documents.

2 Although we are of the view that there were, technically, misappropriations, there is no suggestion of either defalcation or dishonesty brought against the solicitor.

3 The solicitor's reply, in summary, was that, for all matters (other than particular 5A) he had relied entirely on the work of a trusted employee who had more than 20 years experience ("the probate clerk"), and who in any event was at the relevant time an employee of a Firm in which the solicitor had no proprietary interest. It is fair to say that as the solicitor's oral evidence developed this defence was abandoned, nor was it seriously raised in final submissions on his behalf.

4 All of the matters in question took place in the years 1994 and 1995 when there was some turmoil in the practice. The solicitor had been hospitalised for serious surgery, was frustrated in his ambition to have his son succeed to the practice and, in any in any event, was no longer enjoying the practice of law. These were the major reasons why the solicitor, upon his son's leaving the practice, sold to Mrs Dhaliwal, his locum during his hospitalisation.

5 The probate clerk did not get on with Mrs Dhaliwal and was not working as well as she might have been and started committing errors. The solicitor did not pick up the errors because he admitted, as often as not, he would sign whatever the probate clerk placed in front of him, unread. That is an astonishing and heinous abdication of responsibility, and is certainly unprofessional conduct if not, of itself, professional misconduct.

6 The evidence of Mrs Dhaliwal, called to establish the nature of the practice, she being from 4th July 1994 onwards described as the sole proprietor, and Mr Poynten being described as a consultant, served only to highlight the irregularity of the course of assignment of the goodwill of the practice from the solicitor to Mrs Dhaliwal. We were left in no doubt that, despite the representations to the Law Society and the whole world to the contrary, the profits of the practice, and the responsibility for its management in fact, were equally with Mr Poynten and Mrs Dhaliwal, although, as is not unusual in such small practices, each practitioner had the separate conduct of the management of their own part. Mrs Dhaliwal attended to the control of the litigation side of the practice and Mr Poynten held responsibility for the probate and conveyancing.

7 It appears that the only indicator of Mrs Dhaliwal's sole ownership was to be found in the fact that she was the sole signatory of the trust account, and was solely responsible for it. Right from the start Mrs Dhaliwal's husband, Akom took control of the book keeping, he being engaged in legal studies, and expected to qualify within the next year or two.

8 We find that, despite the agreement signed between them (and brought in evidence) the relationship between Mrs Dhaliwal and Mr Poynten was that of equal partners (de facto, if not de jure) and notwithstanding that which may have been held out to the Law Society in the Practising Certificate Application and notwithstanding that which may have been held out to the world at large in signage or letterhead. It follows that Mr Poynten must bear full responsibility for that which he did in the firm's name, but of course, this cannot extend to matters relating compliance with the technical requirements of the trust account, because the solicitor was not a signatory to that account after June of 1994.

9 To administer the estate, the solicitor opened the Estate Account, account number 860915 entitled "L J F Starr c/o Poynten solicitors", with the Westpac Banking Corporation at Ballina.

10 No argument was addressed to us questioning the propriety of the solicitor's management of the Estate account, or the fact that he retained it at all after settlement of the practice sale, when he ceased to be a signatory to the trust account of the firm.

11 It was from this bank account that the solicitor withdrew amounts of $1000.00 (particular 1) $3,131.60 (particular 2) $1,000.00 (particular 4) and $1,000.00 (particular 5A) - all as costs, but improperly because the solicitor had either not issued a Bill of Costs which justified the withdrawal, or alternatively, had not otherwise properly identified the withdrawal as costs.

12 The will, drawn in 1993, appointed the solicitor executor but:-

1. Failed to authorise the solicitor to claim his professional costs of administering the estate and;
2. Was witnessed by the solicitor.

13 We always understood, as a matter of ancient law, that, as witness, the solicitor could not take a benefit under the will and so could not, without authority of all the beneficiaries (on full disclosure, but perhaps without going to the extent of separate independent advice) draw costs on the usual solicitor/client basis.

14 The 1989 amendments to Section 13 of the Wills Probate & Administration Act provide a gateway for a witness to receive such a gift, but that involves either the consent of the beneficiaries on a prescribed form, or an order of the Supreme Court. Without such compliance, the solicitor's only claim upon the estate would have been by way of executor's commission as authorised and assessed by the Court after passing the executor's estate accounts (or possibly, after full disclosure, by authority of all the beneficiaries). Without such authority, the appropriation of costs or commission from the estate was tantamount to misappropriation of the funds in question.

15 It was painfully obvious in cross-examination that the solicitor had no appreciation of the situation at all; he viewed himself, as executor, as the client, and on that basis took the only necessity to be that "the girls" should put an account on the file before taking costs. It was not any part of the Society's case that the solicitor had not earnt the costs, and so no question of dishonesty arose, but the fact of the matter was that the taking of the moneys was highly improper.

16 The issue was somewhat clouded by the fact that the Society conducted its case on the basis that the solicitor had not complied with the requirement of clause 8 of the 1988 Regulation (which applied at the time) which allowed appropriation of costs on the expiry of one month after service of an outline bill, with a one month notice appended thereto, or upon being given specific authority after such service. The solicitor clearly did not understand this requirement, nor did he comply with it, but we are of the view that, even had the solicitor effected "bare" compliance by giving each beneficiary notice in accordance with the one month rule, and so appeared to have gained the beneficiaries' authority, his conduct still would have been improper, because he had no entitlement in the first place, and that should have been fully and frankly disclosed to the beneficiaries.

17 As absolutely no attempt was made to explain to the beneficiaries, and the solicitor had absolutely no concept of his obligations in this regard, and just look took the funds as if he had an absolute right thereto, as costs, we are satisfied that the conduct falls on the more serious side of the dividing line, and is professional misconduct.

18 The failure which resulted in particular 5A arose because the solicitor had previously been in the habit of paying a bonus to the probate clerk upon the resolution of a large estate. Mrs Dhaliwal did not propose to continue this practice and so, perhaps to "get in first", a payment of $1,000.00 was made to the probate clerk on 3rd June, 1994 being the bonus payable to her because of the successful completion of the Starr estate. That payment may well have been open to the characterisation proposed by Mr Hipsley - ie sharing of professional income with an unqualified person, but we consider it to be more appropriate to regard this payment as yet another example of costs paid without the proper authority - this, in the final analysis, being the same technical misappropriation as the payments in particulars 1, 2 and 4.

19 We make this observation despite the disturbing "accounting shortcut" which the solicitor took by paying the money direct to the probate clerk from the Estate Account (being a controlled money account) rather than paying the money into the firm's office account, and then on-paying to the probate clerk.

20 In relation to particular 3 we find that the matter arose out of an error committed by the probate clerk and the solicitor's failure to supervise in this regard was of itself sufficient to generate these proceedings before the Tribunal. But these, of course, would have been clouded by the fact that the solicitor, as a matter of technicality at least, was not responsible for part of it, because the allocation and re-allocation of funds, although carried out under his supervision, was done within the trust account, and of course the solicitor could not have any responsibility for the management of the trust account. However, the fact of it is, that funds in the sum of $15,000.00 which should have formed part of the Starr estate were erroneously transferred to another client's ledger, and then, were by the solicitor, probably with authority of that other client, but clearly in a conflict of interest and duty, paid on to Nambucca Holdings as an investment, and thereafter lost.

21 The solicitor's failure to understand the conflict of his interest as solicitor for Nambucca Holdings in respect of which he was on a monthly retainer, and of his interest as Director of that Company and the interest of his clients whose funds the solicitor channelled to the Company were not specifically matters raised by the Law Society in the initial complaint, but certainly was a matter which caused us more and more concern as the evidence developed and the full scope of the solicitor's failure in this regard became clear.

22 We make no finding in relation to particular 5. We would have expected the Society to call some evidence from the beneficiaries to establish that they had not been told of the asset in question. It seems to us that the only evidence in the end, was the solicitor's admission in cross examination that he could not clearly recall, whether he had advised. However, in the same body of evidence, the solicitor made it clear that he still regarded himself, as appointed Executor, obliged to resolve the Estate, and proposed to do so.

23 We find that the matters of unprofessional conduct arose as a series of oversights, being confusion in the reference to title, and registration numbers of a mortgage. At the conclusion of the hearing we indicated that of the three matters particularised, we were not prepared to accept the first as any kind of unprofessional conduct (being the confusion of LTO Registration numbers E25097 and E25098) but accepted that the other two errors were deserving of reprimand.

24 On further consideration, it seems to us to be safer to note no finding of unprofessional conduct at all. Admitted that there were errors, and admitted that the solicitor should have rectified at least one of those (the CALM mortgage) and may not to this day have done so, the fact of the matter is that the title references appear to have changed because of a road resumption; the Law Society did not bring in evidence a full set of Land Titles Office searches to prove the nature or quality of the mistake, and it seems to us safer in the circumstances to make no finding at all, save to observe that we accept that all practitioners have a high duty to check the correctness of that to which they put their name and even more so in relation to that which they swear, and this is especially so when the "ground work" has been delegated. But that does not mean that the occasional error is an indicator of such gross carelessness as to amount to unprofessional conduct.

25 In this context it is noted that errors creep in the best of regulated affairs. In the particulars of unprofessional conduct given by the Society it was alleged that the solicitor incorrectly nominated the title as Folio Identifier 22/570529 but this was not so, the document in evidence (annexure A3 to the Affidavit of Gary James Still) established the solicitor's error to be a reference to Folio Identifier 22/570519, not 22/570529 as alleged by the Society.

26 We note that the solicitor was admitted in the late 60's, but had, to use his own words, "become involved in the law system of this State in 1950" when he was employed in the Courts administration.

27 To do him justice it seems apt to further quote his testimony:- "I enjoyed practice from the 60's up to the 1970's or the 1980's. You would often see someone and their wife would make a sponge cake and have tea with the girls. That's the sort of relationship we had. In the 1990's, if you charge someone $45.00 for a Will, they'd come back and complain because the bloke up the road said he'd do it for $40.00 and they'd want their $5.00 back".

28 The Tribunal can sympathise with practitioners of long standing who face difficulty in coping with change, especially the change in the costs or fee regime, from that of years past, when as a result of a relationship of trust which existed between the client and the solicitor, a solicitor might well charge a regulated (and profitable) fee for supplying service, a circumstance which must seem vastly different to the modern deregulated situation; however that does not, on the one hand, excuse the solicitor's proven complete abrogation of his responsibilities, or, on the other, excuse failure to understand his very clear obligations.

29 Despite the many references placed before us, and despite the fact that the solicitor, as a result of the Nambucca Investments debacle, now properly declares himself to be facing bankruptcy and can say "my life [is] ruined and I am in the situation I am in now, getting the old age pension and not many friends", and despite the sympathy we feel with his son's very proper plea that we allow him to live out his days without the stigma of having been struck off the rolls, we have a clear duty and must make the protective order.

30 The Tribunal orders that:-

1. The Respondent's name be removed from the Roll of Legal Practitioners.
2. The Respondent pay the Applicant’s costs.

I HEREBY CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF THE ADMINISTRATIVE DECISIONS TRIBUNAL.

REGISTRAR

Last Updated: 08/04/99