Law Society of Tasmania v McDougall

[2007] TASSC 60

[2007] TASSC 60

CITATION:                 Law Society of Tasmania v McDougall [2007] TASSC 60

PARTIES:  LAW SOCIETY OF TASMANIA (THE)
  v
  McDOUGALL, Peter Thomas

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  M53/2007
DELIVERED ON:  13 August 2007
DELIVERED AT:  Hobart
HEARING DATE:  25 July, 3 August 2007
JUDGMENT OF:  Evans J

CATCHWORDS:

Professions and Trades – Lawyers – complaints and discipline – Professional misconduct – Other matters – Depressive disorder – Striking off and ancillary orders.

Law Society of New South Wales v Harvey (1976) 2 NSWLR 154; Law Society of New South Wales v Moulton (1981) 2 NSWLR 736; Kennedy v The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563; Dickens v The Law Society A42/1981; Legal Practitioners Conduct Board v Trueman [2003] SASC 58; Legal Practitioners Conduct Board v Ardalich [2005] SASC 478, referred to.
Aust Dig Professions and Trades [1250]

REPRESENTATION:

Counsel:
             Applicant:  D J Gunson SC
             Respondent:  In person
Solicitors:
             Applicant:  Law Society of Tasmania
             Respondent:  In Person

Judgment Number:  [2007] TASSC 60
Number of paragraphs:  14

Serial No 60/2007
File No M53/2007

THE LAW SOCIETY OF TASMANIA v PETER THOMAS McDOUGALL

REASONS FOR JUDGMENT  EVANS J

13 August 2007

1. The Law Society of Tasmania has applied for orders that include an order that Peter Thomas McDougall, the respondent, be removed from the roll of legal practitioners of this Court.

1. The respondent, as a sole practitioner, conducted a legal practice in Launceston from September 2004 until early January 2006.  The allegations made against him, which are largely not disputed, relate to his conduct as a practitioner from July 2005 until January 2006.  The respondent ceased practising in early January 2006 when his practising certificate was not renewed as he failed to pay the requisite fees.  Following discussions with the Executive Director of the Law Society, the respondent agreed to his practice being placed under management.  On 9 February 2006, the Chief Justice made an order appointing Graham Leslie Jones to manage the practice.  On that date the firm account of the practice had a balance of $7,607.06 and its trust account had a nil balance.  Subsequent inquiries established that the practice's computerised accounting system had not been accessed since 8 November 2005.  For at least part of that period, access to the system had been denied because the provider of its software had not been paid.  No appropriate accounting records were kept by the respondent during this period.  It was established that on the date of Mr Jones' appointment $12,385.53 should have been held by the practice for the following clients in the following amounts:

Trevor Barnard and Susan Waters	Rates Water charges interest	$1,887.52 45.32
Lorna and Dean Cure	Stamp Duty Registration fee Rates	$9,350.00 131.00 860.74
Grant Beaton	Rates	$110.95
$12,385.53

1. As there were no funds in the trust account and only $7,607.06 in the firm account at the time of Mr Jones' appointment, it is clear that the respondent had misappropriated clients' funds.  An illustration of his misappropriation of funds is his handling of $9,350 retained for the payment of stamp duty on behalf of the Cures.  On 21 December 2005 he paid that amount into his firm account when that account was $322.85 in debit.  The credit of $9,027.15 thus created in his firm account was reduced to $7,607.06 over the ensuing six weeks until 9 February 2006, in part by about 40 separate ATM cash withdrawals made by the respondent.  In consequence of the shortfall in the accounts of his practice, within a few days of Mr Jones' appointment, the respondent obtained $5,000 from his mother and paid it into the firm account.  From about 8 November 2005 until he ceased practising, the respondent conducted his practice in flagrant breach of the rules as to accounts, contained in the Rules of Practice 1994. In his evidence to the Court about his failure to keep proper accounting records during this period, the respondent acknowledged that, as alleged by the Law Society in its originating application, his conduct amounted to professional misconduct, and I so conclude. I reach a similar conclusion in relation to his conduct that resulted in the shortfall in clients' funds.

1. A further allegation against the respondent relates to him borrowing money from two clients, Stephen and Donelle Boseley.  In July 2005 they lent him $3,000 and then a further $5,000.  The respondent prepared an agreement referable to these loans and an anticipated further advance.  That agreement was not signed by any of the parties.  It contained a provision as to the respondent's vehicle being provided as security for the loan.  That security was never provided.  Within about three weeks of the funds being lent, the respondent provided the Boseleys with a personal cheque for $250 in payment of an instalment due to them.  That cheque was dishonoured although a later cheque for $3,000 was honoured.  More than $4,250 remains due and payable by the respondent to the Boseleys referable to these loans.

1. The respondent borrowed funds from the Boseleys when he was in financial difficulties.  No security for the loan was in fact provided and his arrangement with them did not include a requirement that he pay interest.  He did not advise the Boseleys to obtain independent legal advice before advancing money to him and he did not make full disclosure to them of his financial circumstances.  In his evidence to the Court, the respondent said that the impropriety of him borrowing funds from the Boseleys did not occur to him at the time.  A moment's thought should have alerted the respondent to his predicament and a cursory review of the authorities should have brought home to him that what he was doing was wrong.  In Law Society of New South Wales v Harvey (1976) 2 NSWLR 154 at 170 – 171, Street CJ, Moffitt P and Hutley JA, said:

   "Where there is any conflict between the interest of the client and that of the solicitor, the duty of the solicitor is to act in perfect good faith and to make full disclosure of his interest.  It must be a conscientious disclosure of all material circumstances, and everything known to him relating to the proposed transaction which might influence the conduct of the client or anybody from whom he might seek advice. … A solicitor, who deals with his client while remaining his solicitor, undertakes a heavy burden.  Where a solicitor discovers that continuing to act for his client will, or may, bring the interests of his client and his own interests into conflict, it will be a rare case where he should not, at least, advise his client to take independent legal advice. …

   A conflict of interest which is avoidable, and ought to be avoided, is that which arises from a deliberate proposal of the solicitor that his client deal with him. … In the absence of very special circumstances, a solicitor who promotes himself as the dealer with his client misuses his position. … The price of being a member of an honourable profession, whose duty to his client ought not to be prejudiced in any degree, is that a solicitor is denied the freedom to take the benefit of any opportunity to deal with persons whom he has accepted as clients.  Therefore, he ought neither to promote, suggest nor encourage a client to deal with him, but rather should take all reasonable steps positively to avoid dealing directly, or indirectly, with his client.  There are of course exceptional cases where the transaction may be in the special interest of a particular client, but such cases will be isolated and need to be dealt with conscientious regard for the procedures already referred to."

   In Law Society of New South Wales v Moulton (1981) 2 NSWLR 736, Hope JA said at 739:

   "In cases such as the present one, it is essential to remember, indeed to emphasize, that a solicitor stands in a fiduciary relationship to his clients.  If he is to have business dealings with them on his own account, and in particular if he is to borrow money from them, the requirements of the law are rigorous.  The need for that rigour is obvious.  Commonly to a great extent, always to some extent, the solicitor is in a position of special influence in respect of his client.  Clients must be able to rely upon the professional advice of their solicitor and to place in him the fullest confidence that he will protect them and handle their affairs in their interests.  Where a solicitor wishes to borrow from a client, the client must be put in a position to make a free and informed decision about the proposed transaction.  Since in these circumstances the interests of the client and of the solicitor can and generally must conflict, the best and easiest way to achieve this result is to insist that the client have independent and informed advice.  If this does not happen, a heavy burden indeed lies upon the solicitor to show that he has done everything in his power to protect the interests of his client and to ensure that the client is aware of every circumstance that is or might be relevant to his decision.  If a solicitor wishes to use his client's money to finance some business he is carrying on, it is almost impossible to see how the client can be adequately protected and advised without insisting that he gets independent advice.  Moreover it must be borne in mind that many clients are not able effectively to decide whether an investment is a prudent one, no matter what information is given to them, and that the greater the trust of the client in the solicitor the greater is the need for independent advice where a conflict of interest may arise.

   Having regard to the emphasis which was given to it in this case, it would seem necessary also to restate what has been pointed out before, that in considering whether a solicitor has been guilty of professional misconduct in a dealing with a client, and in considering the gravity of that misconduct, the fact that the client, in the ultimate event, suffers no loss is of little, if any, relevance.  If the acts or omissions of a solicitor constitute professional misconduct, they do so at the time when they occur.  Their character is not changed by the fact that subsequently a loss, or no loss, is sustained."

2. In the course of the hearing, the respondent acknowledged that his borrowing of funds from his clients, the Boseleys, amounted to professional misconduct, and I so conclude. 

1. A further allegation made against the respondent arises from his communications with a fellow member of the profession, Leanne Topfer, referable to a contract for the sale of a property.  The purchasers, for whom Ms Topfer was acting, asserted that a misdescription of the property in the contract of sale entitled them to rescind the contract.  On 14 February 2005, the respondent commenced to act for the vendors.  On 5 July 2005, the respondent told Ms Topfer that he was obtaining an opinion from a barrister, William Griffiths, regarding the dispute and said he hoped to have the opinion by 13 July 2005.  On 21 July 2005, the respondent wrote to Ms Topfer advising that he anticipated that his barrister's opinion would be returned mid-next week.  On 26 July 2005, the respondent told Ms Topfer that Mr Griffiths had returned the brief but that he had briefed Peter Heerey to provide him with the necessary advice.  On 8 August 2005, the respondent told Ms Topfer that he had been advised by Mr Heerey that the issue between the parties was "line ball".  No brief had in fact been provided to Mr Griffiths and returned by him and although the respondent did enquire of Mr Heerey as to whether he would provide an opinion in relation to the dispute, Mr Heerey declined to do so and did not advise the respondent that the matter discussed was "line ball".  The respondent knowingly misled Ms Topfer in relation to the matters referred to.  In the course of the hearing, the respondent rightly acknowledges that his conduct amounted to professional misconduct.  I say "rightly" because what he did was indicative of a failure on his part to either understand or practise the precepts of honesty or fair dealing and this would reasonably be regarded as disgraceful or dishonourable by members of the legal profession of good repute and competency.  See Kennedy v The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563.

1. A further allegation made against the respondent relates to his handling of a file on behalf of Melanie Wyatt.  In September 2005, he was engaged by Ms Wyatt to act on her behalf in relation to disputes between herself and her ex-husband over a property settlement and contact with the child of their marriage.  The respondent failed to act appropriately on Ms Wyatt's instructions and he was unresponsive and evasive in his dealings with her from the time that he accepted her instructions until he ceased to practise.  The Law Society alleges that the respondent's conduct referable to Ms Wyatt amounts to unprofessional conduct, the respondent agrees, and I so find.

1. The above findings have been provided to the parties and they have been heard as to the consequential orders that should be made.  The power of the Court to make consequential orders is entirely protective in character and no element of punishment is involved.  The powers are to be exercised for the purpose of, and in a manner seen likely to achieve, the maintenance of that high standard of conduct within the profession which will continue its good reputation and so protect, not only the future of the profession, but also its clients and others who deal with members of the profession.  The Court is required to look to the future.  The practitioner's capacities and attitudes have been revealed to be such that the practitioner's continuance in practice constitutes a threat to the profession and those who deal with members of the profession.  The practitioner may still be struck off even though the practitioner's misconduct be relevantly slight.  See Dickens v The Law Society A42/1981 at 15 – 16 and the authorities there cited.

1. The respondent is 44 years of age.  In 1991 he graduated with an Honours degree in law.  In the course of his studies he has won a number of awards and prizes.  Save for the misconduct in question, he is a person of unblemished character.  He is most remorseful and ashamed about what occurred.  He submits that an order striking him off is neither warranted nor necessary as at the time of his impugned conduct he was suffering from severe depression.  In May 2005, the respondent consulted his general practitioner and sought a reference to a psychiatrist.  This led to the respondent attending Dr Stephane Auchincloss on 26 August 2005.  Her assessment at that stage was that the respondent might have a very early form of bi-polar affective disorder and that there were considerable personality issues and conditions affecting his way of handling the world.  She made a plan for him to make some changes with regard to his practice and he was to return if he needed further help.  She next saw the respondent on 16 February 2006.  She said he had become extremely unwell over the preceding 2 to 3 months and unable to cope with his job.  She considered that he was suffering from a non-melancholic major depressive disorder and prescribed anti-depressant medication.  She saw him again on 27 February and 6 March 2006 when she noted that his depression was starting to lift and that he seemed to be improving quickly.  On 7 March 2006 her view was that his major depressive disorder was resolving and there was no reason why he should not be able to return to his normal pre-morbid level of functioning.  She said that in the meantime it was quite possible that he would be able to undertake some court work.  She said that the depressive disorder would have meant that the respondent was unable to run his own business correctly and undertake all of the problems associated with it.  Her affidavit and the report upon which it is based do not address the respondent's mental state since 7 March 2006. 

1. The evidence before me leaves me in no doubt that the respondent was not fit to practise law during the last six months that he did so.  I am also satisfied that during that period the respondent suffered to varying degrees from a non-melancholic major depressive disorder.  Evidence of a link between a practitioner's proven misconduct and a mental condition can be of significance to the course that the Court should adopt in consequence of a finding of misconduct.  However, it must be remembered that the Court is not concerned with considerations of punishment.  The fact that the respondent sought treatment for his condition and that there has been an improvement in his condition would be very important if the orders to be made were based on considerations of punishment.  The Court is concerned with fitness to practise and the public interest.  See Legal Practitioners Conduct Board v Trueman [2003] SASC 58 [22]. Nevertheless, the approach of the Court could be quite different than it would otherwise have been if it was established that a mental condition to which misconduct was attributable had been successfully treated and was unlikely to reoccur. See Legal Practitioners Conduct Board v Ardalich [2005] SASC 478 [48]. In some circumstances a relevant mental condition may also provide a basis for a person to reapply for admission as a practitioner at some time in the future.

1. In this case I am unable to say with any certainty what part the respondent's mental condition played in his misconduct.  The evidence does not establish that had it not been for the respondent's mental condition he would not have behaved as he did, for example, he would not have borrowed from the Boseleys or would not have knowingly misled Ms Topfer.  Whilst the respondent acknowledged in the course of the hearing that his borrowing from the Boseleys amounted to professional misconduct, as recently as 8 June 2007 he was reluctant to face the facts in relation to that transaction.  Mr Boseley swore an affidavit on 16 March 2007 which annexes documents that show that the respondent borrowed $3,000 and then a further $5,000 from the Boseleys in July 2006.  One of the documents annexed to the affidavit is an agreement prepared by the respondent dated   day of July 2006.  The loans were accordingly made about 11 months after the respondent commenced practice as a sole practitioner.  However, in an affidavit sworn on 8 June 2007, the respondent, whilst acknowledging that he had borrowed money from the Boseleys, said:

"I do not believe I borrowed money from them after I entered practice by myself but I can't be 100 per cent certain as I have not had any access to my file for some time."

In the face of the documents annexed to Mr Boseley's affidavit, the respondent's professed belief that he had not borrowed from the Boseleys after he entered practice by himself was, to say the least, disingenuous and is indicative of his inability to face the truth.

1. Although it may be that the respondent's mental condition precipitated his misconduct, it may also be that his misconduct was the result of inadequacies that in turn gave rise to his depression.  Even if I was satisfied that but for the respondent's mental condition he would not have behaved as he did, on the evidence before me I am not able to conclude that it is appropriate to allow him to remain on the roll of practitioners.  The evidence does not establish that he has fully recovered, or will fully recover, from his depression.  There is no evidence about the likelihood of him suffering recurrences.  In these circumstances, I am of the view that the only appropriate order is an order directing the Registrar to remove the name of the respondent from the roll of legal practitioners.

1. Pursuant to the Supreme Court Rules 2000, r93, these reasons are published in Court.