Law Society of New South Wales v Shenker

[1999] NSWADT 37

CITATION:	Law Society of New South Wales -v- Shenker [1999] NSWADT 37
DIVISION:	Legal Services
APPLICANT:	The Council of the Law Society of New South Wales
RESPONDENT:	Meryl Faye Shenker
FILE NUMBER:	9815
HEARING DATES:	11/10/1998
SUBMISSIONS CLOSED:	11/10/1998
DATE OF DECISION:	23 April 1999
BEFORE:	C Staff Presiding Judicial Member J Greenwood - Judicial Member A Kennedy - Member
PRIMARY LEGISLATION:	Legal Profession Act 1987
APPLICATION:	Professional misconduct - solicitor ; Wrongful application of trust/controlled money or other valuable property -
MATTER FOR DECISION:	Principal matter
REPRESENTATION:	Applicant: I Wales SC instructed by R J Collins Respondent: P Capelin QC instructed by Holman Webb
ORDERS:	1. The name of Meryl Faye Shenker be and is removed from the Roll of Legal Practitioners on and from 10 November,1998. 2. That Meryl Faye Shenker pay the costs of the Law Society of New South Wales as agreed or as assessed.

Information
1 By an Information filed 4 May, 1998 the Council of the Law Society of New South Wales (“the Society”) complained that Meryl Faye Shenker (“the solicitor”) was guilty of professional misconduct. The grounds upon which the complaint were made were:

(1) The solicitor misappropriated trust monies.
(2) The solicitor wilfully breached Section 61 of the Legal Profession Act.
(3) The solicitor wilfully breached Section 62 of the Legal Profession Act.

2 After preliminary arguments, the Tribunal gave its consent that the name of the solicitor be Published pursuant to section 126 of the Administrative Decisions Tribunal Act, 1997.

3 The matter was heard on 10 November, 1998 when having heard the parties the Tribunal in an ex tempore judgment ordered that the solicitors name be removed from the Roll of Practitioners. The Tribunal now provides reasons for its Orders.

Particulars of the ground of the complaint were set out in the first schedule to the Information as follows:
4 The solicitor misappropriated trust moneys and wilfully breached sections 61 and 62 of the Legal Profession Act, 1987.

Matter of the Estate of Liba New
5 At all relevant times the solicitor acted for Dr S. Hollinger the executrix named in the Will of the estate of Liba New.

6 The assets of the estate consisted of four bank accounts with the Commonwealth Bank and two accounts with the ANZ Bank. The proceeds of one of these accounts, an ANZ bank account totalling $26,102.30 were deposited into the solicitor’s trust account. However the amount was in fact credited against a trust ledger in the account of J. Lai.

As to the proceeds of the Commonwealth Bank Accounts
7 The sum of $15,800.00 was received into the solicitor’s trust account on 22 February, 1996 and this amount was also credited in to the trust account ledger of J. Lai.

8 The proceeds of two Interest Bearing Accounts with the Commonwealth Bank totalling the sum of $12,161.19 were received into the solicitor’s trust account on 22 March, 1996 and credited to the ledger account of the estate of Fiore and described as the “proceeds of investments.”

9 A further sum of $60,207.12 was deposited into the solicitor’s trust account on the 17 April, 1996 and this amount of money was divided into two further amounts which were accounted for in the solicitor’s trust account as follows:-

(a) A sum of $27,860.63 was credited to the trust account in the name of “Lai”; and
(b) A sum of $32,346.49, was posted to the trust ledger on the account of another client “Anisimoff”.

10 At all relevant times the solicitor had no instructions or authority to deal with the estate funds in the manner as set out above.

Estate late Alan Gidney
11 The solicitor acted as an executrix of the estate of the late Alan Gidney. The solicitor also acted for the sole beneficiary of the estate, Mrs Mundrick who resides in the United States of America. Rent on a property at Potts Point and the proceeds of the estate’s investments were received into the solicitor’s trust account from 23 January, 1990.

12 Amounts totalling $5,221.20 were misappropriated by the solicitor from funds held on behalf of the estate. The misappropriations were concealed by false amounts shown in the trust account statements having been forwarded to the beneficiary but which were absorbed into the deficiency in the general trust account.

In the matter of Jane Lai
13 The solicitor acted for Ms Lai in respect of Family Law Property Settlement and other matters.

14 Pursuant to Orders made by the Family Court on 18 August, 1993 Mr White was to pay $50,000.00 to Ms Lai by instalments between August, 1993 and May, 1994.

15 A cash management account was opened by the solicitor with the National Australia Bank at Bondi Junction with the initial deposit of a cheque in the sum of $25,000.00 received on the client’s behalf.

16 Amounts totalling $15,586.00 were misappropriated from the National Australia Bank account between August, 1993 and May, 1994.

17 There was also a second controlled money account opened with the ANZ Bank by the solicitor for and on behalf of the client Ms Lai. On 8 December, 1994 the solicitor withdrew the sum of $18,000.00 from that ANZ Bank account and those monies were paid to M. & M. Spartalis. Evidence before the Tribunal demonstrated that the monies used and payable to M. & M. Spartalis formed part of settlement monies of a purchase by the solicitor and her husband for a property which settled on 8 December, 1994. The solicitor had therefore misappropriated those funds held for and on behalf of Ms Lai.

In the matter of Renee Rossler
18 In this matter the solicitor acted for Ms Rossler in a debt recovery matter filed in the Local Court. The matter was settled in the sum of $1,200.00 inclusive of costs and a cheque in that sum was forwarded to the solicitor and deposited into the solicitor’s general account on 14 February, 1996. The solicitor had no instructions or authority to pay the funds other than into the solicitor’s trust account.

19 A sum of $900.00 was paid to the client on 6 June, 1996 by trust account cheque which was debited to the trust ledger account of Platus. Its withdrawal represented a misappropriation of funds from the trust account of Mr & Mrs Platus.

In the matter of Dr Stern & Others
20 In this matter the solicitor acted for the lessors, Dr Stern & others in relation to the lease to top Signs & Marketing Supplies Pty. Limited of Caringbah.

21 A bill of costs was rendered to the lessee by John S. Zouroudis & Co, the previous solicitor for the lessors, in respect of the lease in the sum of $3,845.00. This amount included stamp duty which was estimated to be in the sum of $1,620.00 and registration fees of $50.00.

22 The matter was taken over by the solicitor’s firm and a cheque of $3,845.00 was received by her on 27 December, 1995 and deposited to the trust account and credited to the trust ledger account of Stern & others – lease matter. These funds were then disbursed by the solicitor by three payments to her own firm.

23 The lease was neither stamped nor registered.

In the matter of White Bros. Tilers Pty. Limited
24 The solicitors acted for W.L. Investments Pty. Limited in respect of a lease by that company to White Bros Tilers Pty. Limited of Eastwood.

25 The solicitor misappropriated the sum of $2,556.00 made up of $589.00 being an overpayment of stamp duty and $1,967.00 being an inadvertent duplicated payment of costs.

In the matter of Brian Wood
26 In this matter the solicitor acted for Mr Wood against Prestige Car Insurance. The matter involved an insurance claim which was subsequently settled.

27 The solicitor received settlement monies of $40,000.00 and a further $5,000.00 on account of costs and disbursements. The sum of $5,000.00 was deposited to the solicitor’s general account on 30 November, 1995.

28 The solicitor had earlier agreed that in the event of Mr Wood being successful in the outcome of the litigation, Mr Finklestein’s fees of $2,000.00 would be paid from the costs received on settlement. Mr Finklestein was in fact the solicitor who had previously been instructed by Mr Wood and whose fees had to be paid once the file had been transferred to the solicitor.

29 In addition to Mr Finklestein’s fees, counsel’s fees were also payable and the solicitor paid $3,500.00 due to Counsel by misappropriation of another client’s funds. On the 18 April, 1996 the sum of $680.00 was paid to Mr Frudenstein by way of cheque drawn on the trust account. This cheque was in fact drawn on the trust account of Lai and represents a misappropriation of moneys from that account.

In the matter of M. & M. Lewis
30 The solicitor received the sum of $25,215.26 on behalf of M. & M. Lewis which was deposited into the solicitor’s trust account on 1 December, 1995. The whole of the amount was misappropriated by the solicitor.

31 Mr & Mrs Lewis did receive the sum of $25,215.26. It was paid some four months later by misappropriation of funds from the estate of Fiore.

Estate of the late Alma Anisimoff
32 At all relevant times the solicitor acted for the executrixes, Shirley Murray for the estate of the late Alma Anisimoff.

33 One of the assets of the estate was an ANZ Bank account the proceeds of which totalled $6,226.95 were deposited into the solicitor’s trust account on 25 October, 1995. This amount was entered into the cash book as being received from J. Lai and was credited to the trust account of J. Lai. The solicitor had no instructions to deal with the monies in this way.

34 The second major asset of the estate was sale proceeds of a home unit at Cremorne which was sold for a consideration of $295,000.00. The deposit of $29,500.00 was received by the solicitor and deposited into the trust ledger for the estate. The balance of purchase money in the sum of $265,899.05 were also credited to the trust ledger account of the estate.

35 The solicitor misappropriated a total sum of $17,777.00 from the trust account for the estate. Ms Sayer was not required for cross examination.

Overdrawn Trust Account
36 The solicitor had at various time from March, 1993 overdrawn the solicitor’s trust account. On various occasions between March, 1993 to May, 1996 the trust account was overdrawn on at least fifteen occasions, by amounts as low as $37.03 and as high as $5,089.41. The evidence in respect of this allegation was set out in the Affidavit of Jean Sayer which was admitted without objection. Ms Sayer was not required for cross examination.

Estate late Joyce Mary McMaster
37 The solicitor acted for Mr Albert McMaster the executor of the estate of the late Joyce Mary McMaster.

38 On the 12 December, 1995 a sum of $14,150.00 representing the deposit from the sale of a retirement village unit (an asset of the estate) was received by the solicitor and deposited into the trust account and credited to the trust ledger of the estate. The deposit was made contrary to the requirement of the contract which specified that a deposit had to be invested.

39 At sometime between the 18 December, 1995 and 22 January, 1996 the solicitor had drawn the sum of $8,750.00 payable to her firm. A further $2,500.00 was drawn from the estate ledger to a L. Tydall of counsel, described as “advice on sale”.

40 In this matter the solicitor was entitled only to costs amounting to the sum of $1,526.10. No monies were due and payable to any counsel in respect of the estate. Such costs were due to this barrister, in relation to a totally different matter.

41 The correct balance in the trust account as at the 12 December, 1995 prior to the misappropriation of amounts totalling $11,250.00 was $14,387.94.

42 The solicitor forwarded a copy of the trust ledger card to the client which did not disclose all the entries made and which misrepresented the misappropriations from the estate funds.

43 There was a failure to account to the estate for all funds and to properly maintain the trust ledger account for the estate.

The matter of Elizabeth Lynch-Stephens
44 The solicitor acted at all times for Mrs Stephens in respects of a sale of property at Randwick and the purchase of a further property a Kincumber.

45 The deposit funds were received and deposited to the ledger card of Elizabeth Lynch-Stephens in the sum of $10,000.00 and a further $7,500.00 was also received into that trust account on 7 June, 1996 both amounts were deposited into the trust account relating to the sale.

46 With the consent of the purchaser the deposit in the sum of $10,000.00 was released to the vendor on the 30 May, 1996.

47 The balance of the deposit of $7,500.00, less an amount of $3,375.00 was transferred to the trust account ledger for the purchase to cover stamp duty and disbursements leaving a balance of $4,125.00 which was dealt as follows:

(a) The sum of $1,500.00 was paid to Mr Tyndall of counsel (this payment related to fees due to counsel in respect of another client’s matter).
(b) The sum of $2,000.00 was paid to the Scleroderma Association of NSW. These funds in fact were paid to that association for and on behalf of the estate of Fiore which was an unrelated to this matter.

48 After transfer of an amount of $53.00 (a disbursement) in respect of the purchase, there was $572.00 remaining to the credit of the trust ledger account. Because of the incorrect drawings on this account, there was a shortage in the trust account and no monies were available to pay the sum of $572.00 to Mrs Stephens.

Estate late Roscoe Thomas Peter Monaghan
49 At all relevant times the solicitor acted for Mr William Roscoe Monaghan the executor for the estate of the late Roscoe Thomas Peter Monaghan.

50 An asset of the estate namely, the proceeds for an AMP policy totalled the sum of $3,590.60. These proceeds were received by the solicitor and applied by the solicitor to make good deficiencies in her trust account.

51 On 9 September, 1992 the solicitor accounted to the executor and enclosed a trust statement showing monies received and
disbursed however neither the account nor the covering letter referred to the proceeds of the AMP Policy.

52 In total the solicitor had failed to account for various sums totalling the sum of $3,078.22.

Estate late Marie Teresa Fiore
53 At all relevant times the solicitor acted for Mrs Donnellan the executrix of the estate of the late Marie Teresa Fiore.

54 In this matter no application for probate was necessary to administer the estate.

55 Various amounts were received by the solicitor and credited to the trust ledger account of the estate. From these funds the solicitor misappropriated the following amounts:

(a) From this ledger, an amount of $25,215.26 was paid to M. & M. Lewis to reimburse them in respect of a misappropriation from them.
(b) An amount of $500.00 was paid to Mr Tyndall of counsel in respect of a matter which had no relationship to the estate.

56 An amount of $1,000.00 was withdrawn and paid into a St George Bank Account on the account of Ms Jodie Bellamy, which had no connection or relevance to the estate matter.

M. & R. Platus Sale
57 The solicitor acted for Mr & Mrs Platus in respect of the sale of their property at Yagoona.

58 Contracts were exchanged on 30 May, 1996. The sum of $31,000.00 representing the deposit payable was received by the solicitor and deposited into the trust account and credited to the trust ledger account.

59 The trust ledger card shows cheques drawn against the sum of $31,000.00 with a balance of $3,731.98 existing as at the date of Receivership.

60 Cheques totalling $27,268.02 drawn between 30 May, 1996 and 13 June, 1996 were not paid to the clients or disbursed on their behalf.

61 Because of a shortage in the trust account the clients will only receive a distribution by the Receiver in the sum of $1,711.59. Accordingly, the clients will be out of pocket by the sum of $29,288.41.

In the matter of P. Howard & Wallace Industries Pty. Limited
62 In this matter the solicitor acted for Mr Howard and Wallace Industries in relation to the sale to G. & F. Catering Services Pty. Limited, of the Roylston Café and in respect of the lease of premises at Kings Cross.

63 The deposit on the sale in the sum of $7,500.00 was received into the solicitor’s trust account and to be held by the solicitor as stakeholder on the 17 March, 1994. Out of this particular trust ledger, cheques were drawn even before funds were debited to the account. On the 2 March, 1994 the solicitor drew from the trust account a cheque for the sum of $1,000.00 which was presented on the same date.

64 A trust account cheque payable to the solicitor’s firm was drawn and presented on 4 March, 1994 and of this sum $750.00 was debited into the account of Howard & Wallace. This was done notwithstanding that the deposit from the sale had not been banked until 17 March, 1994. The debit balance in the account ledger was concealed by reason of the fact that the funds received on 17 March, 1994 were posted prior to cheques being drawn and presented on 2 March, 1994 respectively.

65 In essence the series of transactions meant that there had been a failure to account by the solicitor to Mr Howard & Wallace Industries for the sum of $1,750.00.

66 There was a further cheque drawn for $5,750.00 paid to an agent on account of commission. Those funds were drawn without the consent of the purchaser to release the deposit money or any part of it.

The matter of Peter Howard and Robyn Taylor
67 The solicitor acted for Mr Howard & Ms Taylor in respect of the sale of a property at Bell.

68 The solicitor subsequently received the deposit less commission of $11,530.00 which was deposited into the trust account ledger relating to that specific sale. The solicitor failed to account either to Mr Howard or Ms Taylor for the deposit.

69 In another matter the solicitor acted for Mr Howard & Ms Taylor in the sale of their Rose Blues Café which was settled on 17 November, 1992. The amount of $83,000.00 was paid to Ms Taylor from the proceeds of sale. An amount of $80,000.00 was deposited into a cash management account on behalf of the client leaving a balance in the trust account, to which the client was entitled, of $3,000.00. These funds or part thereof were misappropriated by the solicitor. On 12 February, 1993 a further cheque of $3,000.00 was drawn by the solicitor from the trust account to Ms Taylor and described as a “balance of the sale proceeds”. The cheque was covered by a similar deposit into the trust account some four days earlier of a similar sum.

70 On the 11 December, 1992 the solicitor had received $1,320.39 representing a refund of rent due to Mr Howard & Ms Taylor. The amount was deposited into the solicitor’s trust account relating to the sale matter and the solicitor failed to account to Mr Howard & Ms Taylor for that sum.

71 Mr Howard’s share of the proceeds of sale of the property at Bell and his share of the sale proceeds of the Rose Blue Café were to be applied to payment for his contribution to the purchase of the Chez Oz Café at Kings Cross. From those funds the solicitor disbursed a number of amounts leaving the balance in that account of $7,904.28 which was further disbursed by the solicitor between October 1992 and February, 1993. There were various transfers of funds from this particular account by the solicitor for costs when no costs were due to the solicitor.

72 In respect of the matters in which the solicitor acted for Mr Howard she failed to account to Mr Howard in the sum of $11,260.70.

In the matter of Jodie Bellamy
73 The solicitor acted for Jodie & Heidi Bellamy who were both minors at the time in respect of a Family Provision Act claim against the estate of the late Rebecca Bellamy. The claim was covered by a grant of Legal Aid.

74 Orders were made by the Supreme Court on 11 November, 1994 that a sum of $80,000.00 be paid to the Public Trustee in respect of Jodie Bellamy and a further order of $100,000.00 in favour of Heidi Bellamy.

75 As a result of an application made to the Court on behalf of Jodie Bellamy the solicitor was substituted for the Public Trustee to act as Trustee for Jodie Bellamy.

76 The sum of $80,000.00 was received by the solicitor on 13 December, 1994 and deposited into the trust account. From this sum, at least $40,5000.00 was misapplied by the solicitor by way of deposit to her own office account.

Reply
77 There was no reply filled by the solicitor and the solicitor did not wish to adduce any evidence. Senior counsel for the solicitor did seek to tender a medical report dated 4 October, 1998. However, the doctor was not available for cross examination. The tender of the report was opposed by Mr Wales, S.C. and the tender was not pressed. No further material was filed on behalf of the solicitor by way of explanation of the complaints.

Consideration
78 The evidence relating to each of the trust accounts breaches was investigated by Ms Jean Sayer who was appointed Receiver to the trust property of the solicitor by order of the Supreme Court on 22 July, 1996. The Society filed in these proceedings, an Affidavit of Jean Sayer sworn 23 April, 1998 and filed 4 May, 1998. That Affidavit contains various annexures upon which the necessary tracing exercises had been undertaken by the receiver to investigate each of the grounds set out in the complaint. That Affidavit was tendered into evidence, without reply by the solicitor. The contents of that Affidavit represents essentially the Society’s case. Mr Wales SC for the Society submitted that whilst there were misappropriations on a grand scale, this was not a case of inadvertence. We agree.

79 The evidence shows a deliberate, systematic and calculated attempt to defraud and misappropriate funds for the solicitor’s own use. In other instances there is a misappropriation of one client’s funds for the illegal and unauthorised use of another client. In addition to the systematic nature of the scheme, of debiting one client’s trust account to balance another client’s trust account, false documents were created which clearly go to the heart of dishonesty in dealing with the trust account and the misappropriations generally.

80 It is clear, in our opinion, that in almost all of the matters, the solicitor wilfully breached Sections 61 and 62 of the Legal Practitioners Act. The wilful and systematic nature of the trust defalcations, the fraudulent altering of the trust ledger cards, the failure to properly account as to the true nature of the trust ledger to clients must lead to a finding that the solicitor is guilty of professional misconduct.

81 Mr Capelin Q.C. made no submissions to the Tribunal.

82 The Tribunal is comfortably satisfied that each of the grounds of complaint have been made out.

83 Section 61 and 62 of the Legal Practitioners Act relevantly provide that if a solicitor, in the course of practising as a solicitor, receives money on behalf of another person, that solicitor shall hold that money exclusively for that other person. The wilful breaches of the provisions constitute statutory professional misconduct. The misappropriations were so deliberate as to constitute wilful breaches under the respective sections and amount to professional misconduct. The Tribunal has no difficulty in finding that the conduct of the solicitor constitutes professional misconduct under the general law and under sections 61 and 62 of the Legal Profession Act, 1987 and further that those Sections have been wilfully breached.

84 The Tribunal’s jurisdiction is protective and not punitive. Sheller J.A. said in Law Society of New South Wales v. Bannister (1993) 4 LPDR 24 at 28:

“When the jurisdiction of the Tribunal is invoked under Part 10, Division 7 of the Act to conduct a hearing into a complaint of professional misconduct by a legal practitioner, the primary consideration is to protect the public by preventing a person unfit to practice from holding himself or herself out to the public as a legal practitioner in who members of the public might repose confidence. The Tribunal must also act so as to deter the offender in the future and any other practitioner minded to behave in like manner. In the case of a solicitor these elements together or separately may call for the removal of the solicitor’s name from the Roll or the imposition of a substantial fine.”

85 In Raden v. the Law Society of New South Wales, Court of Appeal, (unreported) delivered on 14 May, 1997 their Honours (at 17) refer to the Decision of Street C.J. in Law Society of New South Wales v. Jones, Court of Appeal, (unreported) 27 July, 1978 (at P10) where His Honour said that:

“Reliability and integrity in the handling of trust funds are fundamental pre-requisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor.”

86 Their Honours agreed with that statement and then went on to refer to Dupal v. the Law Society of New South Wales, Court of Appeal, (unreported) 26 April, 1990 in which Kirby P. at pages 3 to 4 said:

“The researchers of neither counsel before the court could produce a single case in which following a finding of misappropriation of trust funds or wilful contravention of section 41(1) of the (Legal Practitioners Act 1898), Act, the Court had not proceeded to remove the name of the practitioner concerned from the Roll of Practitioners… (the) normal consequence of the misuse of entrusted funds by a solicitor, and a finding of wilful breaches of the Statutory Prohibition in that regard, is removal of the name of the solicitor from the Roll.”

87 By her conduct the solicitor has demonstrated that she is not a fit and proper person to remain on the Roll of Legal Practitioners and consequently the Tribunal ordered the removal of her name from the Roll on 10 November, 1998.

Orders
88 The Tribunal therefore orders:

1. The name of Meryl Faye Shenker be and is removed from the Roll of Legal Practitioners on and from 10 November, 1998.

2. That Meryl Faye Shenker pay the costs of the Law Society of New South Wales as agreed or as assessed.

Last Updated: 06/08/1999