LEGAL PRACTITIONERS COMPLAINTS COMMITTEE and EDWARD
[2006] WASAT 113
•15 MAY 2006
LEGAL PRACTITIONERS COMPLAINTS COMMITTEE and EDWARD [2006] WASAT 113
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2006] WASAT 113 | |
| 11/10/2013 | |||
| LEGAL PRACTICE ACT 2003 (WA) | |||
| Case No: | VR:23/2004 | 2 DECEMBER 2004 20 DECEMBER 2005 | |
| Coram: | HON. H WALLWORK QC (PRESIDING MEMBER) MR N W MCKERRACHER QC MR S PENGLIS MS V RIVALLAND | 15/05/06 | |
| 30 | Judgment Part: | 1 of 1 | |
| Result: | Report transmitted to the Supreme Court (full bench) of Western Australia. Supervisory orders imposed. | ||
| B | |||
| PDF Version |
| Parties: | LEGAL PRACTITIONERS COMPLAINTS COMMITTEE PATRICIA MAY VERSCHUER EDWARD |
Catchwords: | Legal practice – Legal practitioner – Misappropriation of trust funds – Reviewing previous conclusions as to appropriate penalty Legislation |
Legislation: | Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA), s 4 Interpretation Act 1984 (WA), s 37(1) Legal Practice Act 2003 (WA), s 2, s 162, s 164(1)(f), s 185(1), s 185(2), s 185(2)(a), s 187, s 187(1), s 187(1)(c), s 187(1)(d), s 250A Legal Practitioners Act 1893 (WA), s 29A(1), s 29A(2), s 29A(3), s 29A(3)(b), s 29A(4) State Administrative Tribunal Act 2004 (WA), s 3(1), s 7, s 13(1), s 87(2), s 167(1), s 167(4)(b), s 167(15) State Administrative Tribunal Regulations 2004 (WA), reg 33A, reg 33A(1), reg 33A(2) Trustees Act 1962 (WA), s 102 |
Case References: | Attorney-General v Bax [1999] 2 Qd R 9 Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 Hoad v Nationwide News Pty Ltd (1997) 37 IPR 407 Jauncey v Law Society of NSW (NSW Court of Appeal, 2 December 1988, unreported) Law Society of New South Wales v Moulton (1981) 2 NSWLR 736 Legal Practitioners Complaint Committee and Cullen [2005] WASAT 211 Maraj (a Legal Practitioner) (1995) 15 WAR 12 Marinoff v Bailey (1970) 92 WN (NSW) 280 Monaco & Anor v Arnedo Pty Ltd & Anor (1994) 13 WAR 522 Moulton, In Re a Practitioner [1982] 30 SASR 27 Norman v Norman (1992) 6 WAR 372 Re Fabricius and McLaren and Re Legal Practitioners Ordinance 1970 (1989) 91 ACTR 1 re Harrison’s share under a settlement [1955] Chancery 260 Re Nelson and the Legal Practitioners Act 1970 (1992) 106 ACTR 1 Smith v NSW Bar Association (1992) 176 CLR 256 The Law Society v McNamara (1980) 47 NSWLR 72 Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 Yenald Nominees Pty Ltd v Como Investments Pty Ltd (1996) ATPR 41–508 (Fed C of A) Ziems v The Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279 Bar-Mordecai v Rotman [2000] NSWCA 123 Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 Council of Law Society of NSW v Foreman (No 2) (1994) 34 NSWLR 408 Home Management Maintenance Pty Ltd v Doyle (1992) 107 FLR 225 Kuan v Kang [2003] NSWCA 336 Lam v Beesley (1992) 7 WAR 88 Law Society of NSW v Harvey [1976] 2 NSWLR 154 Lewis v Hillman (1852) 3HL Cos 607 McCarthy v McIntyre [2000] FCA 1250 Mishal v The Queen [2001] WASCA 328 Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378 Southern Law Society v Westbrook (1910) 10 CLR 609 Space Investments Ltd v Canadian Imperial Bank Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 Ta v Lucky Import & Export Co Pty Ltd [2002] WASCA 65 Walker v Stones [2001] QB 902 Wendt v Orr [2004] WASC 28 Wickstead v Browne (1992) 30 NSWLR 1 |
Orders | (1) The Tribunal finds Patricia May Verschuer Edwards (the practitioner) guilty of unprofessional conduct during the period from 12 December 2002 to 7 August 2003 under the Legal Practitioners Act 1893 (WA). ,(2) The Tribunal makes and transmits a report on the finding it has made to the Supreme Court (full bench) which, for purposes of the Legal Practice Act 2003 (WA), s 185(2)(a) is constituted by these reasons for decision.,(3) No later than twenty-eight (28) days after the date of the order, if it has not already been paid, the practitioner is to pay the sum of $7156 to the Public Trustee of the estate of Herbert Raymond Hudson.,(4) Pending the determination of the Supreme Court (full bench) in relation to the report transmitted to it by the Tribunal, in accordance with s 29A(3)(b) of the Legal Practitioners Act 1893 (WA) and s 187(1)(d) of the Legal Practice Act 2003 (WA), the following conditions shall be imposed on the right of the practitioner to practice for a period of two (2) years from the date of this Order: ,(i) The practitioner must follow the procedures set out in paragraph (ii) below in relation to the trust account of the Practitioner's firm and in relation to the trust account of any other firm in which she may be a partner or sole practitioner. ,(ii) The procedures referred to in paragraph (i) are as follows: ,(a) On a daily basis, deposits to the trust account are to be reconciled, by an experienced bookkeeper or the Practitioner, with the trust account bank statement referenced by the internet. ,(b) On a weekly basis, the trust account bank statement (referenced by the internet) is to be reconciled by an experienced bookkeeper with all deposits to and withdrawals from the trust account, and a copy of the reconciliation is to be provided to the practitioner, for her review, investigation and rectification of all outstanding items (such as outstanding deposits and issued unpresented cheques over 15 (fifteen) months old). The reviewed reconciliations are to be signed and dated by the practitioner and provided to a Senior Trust Account Inspector of the Legal Practice Board nominated by that Board within seven (7) days of the date on which reconciliation is provided by the bookkeeper to the practitioner.,(c) In addition to the annual audit required under the Legal Practice Act 2003 (WA), within seven (7) days of the end of each quarter, the practitioner must provide all material relating to the trust account, including bank statements, deposit slips, receipts and withdrawal authorities, to an independent firm of accountants/auditors for a quarterly review of the trust account operations. The practitioner must ensure that, within twenty-one (21) days of the end of each quarter, the independent firm of accountant/auditors provides a quarterly report on its review of the trust account operations to the practitioner and a Senior Trust Account Inspector of the Legal Practice Board nominated by that Board. The review is for the purpose of ensuring that the trust account is being properly maintained.,(5) In accordance with s 29A(4) of the Legal Practitioners Act 1893 (WA) and s 87(2) of the State Administrative Tribunal Act 2004 (WA), the practitioner must pay the applicant its costs of and incidental to the hearing and determination of the proceedings, which are fixed in the sum of $8000.00, within twenty-eight (28) days of the date of this Order. ,(6) The reasons for decision and orders in this matter are to be published.. |
Summary | The practitioner admitted borrowing substantial sums for her personal and business needs from a trust fund under her control. The fund held on trust was that of a former client who had died. The borrowings were repaid with interest at a rate higher than the trust fund was earning but at rates lower than the practitioner was incurring on her borrowings. No approval for the borrowings had been sought or obtained from her client while he was alive nor from any other authorised person at any time. Although there was no illegality or dishonesty involved, the conflict of interests and the breach arising from it was serious. ,The Tribunal had originally formed the view (when constituted as the Legal Practitioners Disciplinary Tribunal) that the offence could be penalised within the jurisdiction and power of that Tribunal. When the matter was listed to be completed in this Tribunal (constituted by the same members), the Tribunal was persuaded by more detailed submission and argument that the findings required that the matter be the subject of a report to be submitted to the Supreme Court of Western Australia (full bench) to enable the court to consider argument as to the appropriate penalty in all the circumstances. These reasons set out the findings and conclusions. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : VOCATIONAL REGULATION ACT : LEGAL PRACTICE ACT 2003 (WA) CITATION : LEGAL PRACTITIONERS COMPLAINTS COMMITTEE and EDWARD [2006] WASAT 113 MEMBER : HON. H WALLWORK QC (PRESIDING MEMBER)
- MR N W MCKERRACHER QC
MR S PENGLIS
MS V RIVALLAND
- 20 DECEMBER 2005
- Applicant
AND
PATRICIA MAY VERSCHUER EDWARD
Respondent
Catchwords:
Legal practice – Legal practitioner – Misappropriation of trust funds – Reviewing previous conclusions as to appropriate penalty - Legislation
(Page 2)
Legislation:
Acts Amendment and Repeal (Courts and Legal Practice) Act 2003 (WA), s 4
Interpretation Act 1984 (WA), s 37(1)
Legal Practice Act 2003 (WA), s 2, s 162, s 164(1)(f), s 185(1), s 185(2), s 185(2)(a), s 187, s 187(1), s 187(1)(c), s 187(1)(d), s 250A
Legal Practitioners Act 1893 (WA), s 29A(1), s 29A(2), s 29A(3), s 29A(3)(b), s 29A(4)
State Administrative Tribunal Act 2004 (WA), s 3(1), s 7, s 13(1), s 87(2), s 167(1), s 167(4)(b), s 167(15)
State Administrative Tribunal Regulations 2004 (WA), reg 33A, reg 33A(1), reg 33A(2)
Trustees Act 1962 (WA), s 102
Result:
Report transmitted to the Supreme Court (full bench) of Western Australia. Supervisory orders imposed.
Summary of Tribunal's decision:
The practitioner admitted borrowing substantial sums for her personal and business needs from a trust fund under her control. The fund held on trust was that of a former client who had died. The borrowings were repaid with interest at a rate higher than the trust fund was earning but at rates lower than the practitioner was incurring on her borrowings. No approval for the borrowings had been sought or obtained from her client while he was alive nor from any other authorised person at any time. Although there was no illegality or dishonesty involved, the conflict of interests and the breach arising from it was serious.
The Tribunal had originally formed the view (when constituted as the Legal Practitioners Disciplinary Tribunal) that the offence could be penalised within the jurisdiction and power of that Tribunal. When the matter was listed to be completed in this Tribunal (constituted by the same members), the Tribunal was persuaded by more detailed submission and argument that the findings required that the matter be the subject of a report to be submitted to the Supreme Court of Western Australia (full bench) to enable the court to consider argument as to the appropriate penalty in all the circumstances. These reasons set out the findings and conclusions.
(Page 3)
Category: B
Representation:
Counsel:
Applicant : Mr G H Murphy SC and Ms R Tapper
Respondent : Mr E M Corboy SC and Mr MD Cuerden
Solicitors:
Applicant : Legal Practitioners Complaints Committee
Respondent :
Case(s) referred to in decision(s):
Attorney-General v Bax [1999] 2 Qd R 9
Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32
Hoad v Nationwide News Pty Ltd (1997) 37 IPR 407
Jauncey v Law Society of NSW (NSW Court of Appeal, 2 December 1988, unreported)
Law Society of New South Wales v Moulton (1981) 2 NSWLR 736
Legal Practitioners Complaint Committee and Cullen [2005] WASAT 211
Maraj (a Legal Practitioner) (1995) 15 WAR 12
Marinoff v Bailey (1970) 92 WN (NSW) 280
Monaco & Anor v Arnedo Pty Ltd & Anor (1994) 13 WAR 522
Moulton, In Re a Practitioner [1982] 30 SASR 27
Norman v Norman (1992) 6 WAR 372
Re Fabricius and McLaren and Re Legal Practitioners Ordinance 1970 (1989) 91 ACTR 1
re Harrison’s share under a settlement [1955] Chancery 260
Re Nelson and the Legal Practitioners Act 1970 (1992) 106 ACTR 1
Smith v NSW Bar Association (1992) 176 CLR 256
The Law Society v McNamara (1980) 47 NSWLR 72
Wentworth v Woollahra Municipal Council (1982) 149 CLR 672
Yenald Nominees Pty Ltd v Como Investments Pty Ltd (1996) ATPR 41–508 (Fed C of A)
Ziems v The Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279
(Page 4)
Summary of Tribunal's Decision
1 The practitioner admitted borrowing substantial sums for her personal and business needs from a trust fund under her control. The fund held on trust was that of a former client who had died. The borrowings were repaid with interest at a rate higher than the trust fund was earning but at rates lower than the practitioner was incurring on her borrowings. No approval for the borrowings had been sought or obtained from her client while he was alive nor from any other authorised person at any time. Although there was no illegality or dishonesty involved, the conflict of interests and the breach arising from it was serious.
2 The Tribunal had originally formed the view (when constituted as the Legal Practitioners Disciplinary Tribunal) that the offence could be penalised within the jurisdiction and power of that Tribunal. When the matter was listed to be completed in this Tribunal (constituted by the same members), the Tribunal was persuaded by more detailed submission and argument that the findings required that the matter be the subject of a report to be submitted to the Supreme Court of Western Australia (full bench) to enable the court to consider argument as to the appropriate penalty in all the circumstances. These reasons set out the findings and conclusions.
Background
3 These proceedings were commenced by a reference from the Legal Practitioners' Complaints Committee dated 12 October 2004 to the Legal Practitioners' Disciplinary Tribunal (the LPDT). The reference was heard on 2 December 2004 (the original hearing). For the purpose of these reasons and for the sake of consistency with records of the hearing in the LPDT, the respondent will be referred to as the practitioner. For the same reasons, the applicant will continue to be referred to as the Committee. The State Administrative Tribunal is referred to as "the Tribunal".
4 A complaint of unprofessional conduct was alleged by the Committee. The unprofessional conduct was said to be a breach of the practitioner's duty to avoid a conflict between her duty and her personal interest by taking trust money from a trust fund for charitable purposes in her control until the fund was exhausted and in applying that fund for her own business and domestic purposes. The funds were withdrawn in the period between December 2002 and August 2003.
(Page 5)
5 It was common ground that the practitioner repaid the funds borrowed and although the Committee asserted that the practitioner only repaid it after a complaint was made by the Committee, the practitioner contends that the repayment had been arranged and was imminent. There is evidence to support that contention and at no stage did the Committee seek to cross-examine the practitioner on this point. The Tribunal accepted the practitioner's account of this aspect of the matter.
6 At the original hearing the balance of the facts were not in issue. At no time has the assertion of unprofessional conduct been at issue. The only matter at issue has been the appropriate penalties.
7 When the matter was last heard before the LPDT, the LPDT was of the view that the conduct, while serious, fell just short of conduct that required a referral to the full bench of the Supreme Court of Western Australia for further submissions concerning the appropriate penalty.
8 Final orders had not been made at completion of the initial hearing before the LPDT and when this matter was re-listed before this Tribunal for finalisation, the Committee made further detailed submissions in support of its contention that a report should be transmitted to the full bench of the Supreme Court of Western Australia for consideration of the appropriate penalty. While the Tribunal was reluctant to review its previous decision and reluctant to amend its previous decision in light of the manner in which it perceived the earlier hearing being conducted, it recognised that any form of borrowing of funds from a trust account without the client's permission was sufficiently serious to warrant the matter being referred to the Supreme Court (full bench) for further determination in the interests of protecting the public and in the interests of maintaining the integrity of the profession.
The Facts
9 The facts relied upon and established by the Committee were the following -
1. At all relevant times the practitioner has been the principal of the law firm Verschuer Edward.
2. The practitioner drew a will for one Herbert Raymond Hudson (Mr Hudson) dated 12 March 2002.
3. In the will Mr Hudson, inter alia:
- (a) appointed the practitioner to be the executor and trustee of his estate (the estate);
(b) bequeathed $30 000 to the RSPCA; and
(c) bequeathed the residue of the estate to the practitioner as trustee, the moneys to be applied "for such charitable or other purposes as she shall determine including but not limited to the provision of financial or other assistance to individuals or associations dedicated to the preservation of the Siberian Tiger".
- 4. Mr Hudson died on 12 October 2002.
5. On 8 November 2002 the practitioner was granted probate of the will as executor appointed under the will.
6. Mr Hudson's estate included:
- (a) moneys in a Challenge Bank account BSB No. 736-000, account no. 557978, in excess of $100 000;
(b) a home unit (the unit), which was encumbered by a first mortgage to Westpac Banking Corporation (the mortgage).
- (a) sold the unit, discharged the mortgage, and from the balance of the proceeds of the sale, paid the sum of $30 000 to the RSPCA, pursuant to the term of the will referred to in paragraph 3(b) above;
(b) on or about 25-28 November 2002, closed Mr Hudson's bank account referred to in paragraph 6(a) above and transferred the funds therein, totalling
- $105 185.87, to a cash management account in the name of Mrs Patricia May Edward, BSB No. 036-011, account number 26-7485 (the Cash Management Account).
- 8. At all material times on and after 28 November 2002, the practitioner held the moneys in the Cash Management Account as trustee for charitable purposes, in accordance with the term of the will referred to in paragraph 3(c) above and by operation of section 102 of the Trustees Act 1962.
9. In the period December 2002 to August 2003 the practitioner made the following payments totalling $99 153.47 from the Cash Management Account:
- (a) 12.12.02 - $5000 in cash to Ms Carol Harrison, an employee of the practitioner;
(b) 13.1.03 - $8000 to Verschuer Edward;
(c) 23.1.03 - $300 to cash;
(d) 3.2.03 - $5900 to Masters Business Support;
(e) 5.2.03 - $1355 to Commercial Sales & Salvage;
(f) 7.3.03 - $7580 to Airco;
(g) 7.3.03 - $572 to Choice Relocations;
(h) 12.3.03 - $4500 of which:
- (i) $1220 was paid in cash to the practitioner; and
- (ii) $3280 was deposited into the practitioner's business overdraft account, BSB Number 036-000, account number 45-0954 (the Practitioner's Overdraft Account);
- (i) 7.3.03 - $3145 to Masters Business Support;
- (j) 11.3.03 - $385 to Simon Watters, Counsel;
(k) 2.4.03 - $15 000 to the Practitioner's Overdraft Account;
(l) 28.3.03 - $990 to Masters Business Support;
(m) 15.4.03 - $6900 to Peter Masters;
(n) 17.4.03 - $1406.90 to Rest-A-Sured Securities;
(o) 24.4.03 - $1440 to Pensioner Funeral Services;
(p) 1.5.03 - $6613.20 to Dragnet Technology Consultants;
(q) 7.5.03 - $1688.50 to Simon Watters Counsel;
(r) 19.5.03 - $2312.40 to Corser & Corser;
(s) 26.6.03 - $1400 to Oxford Engines;
(t) 7.8.03 - $24 665.47, being the balance of the said account, of which:
- (i) $14 665.47 was paid to the practitioner's Visa credit card; and
(ii) $10 000 was paid to an account for long service leave provision for an employee of the practitioner, being one Ann Cox.
- 10. The payments set out in the preceding paragraph:
- (a) referred to in sub-paragraphs (b), (h)(ii) and (k) were used to reduce the practitioner's business overdraft;
(b) referred to in sub-paragraphs (d), (e), (f), (g), (i), (l), (m), (n), (p) and (t)(i) were used to pay the practitioner's liabilities associated with her business;
(c) referred to in sub-paragraphs (a), (c) and (h)(i) were direct cash payments to or at the direction of the practitioner;
- (d) referred to in sub-paragraph (t)(i) was used to reduce the practitioner's personal credit card debt;
(e) referred to in sub-paragraphs (j) and (q) were used to pay counsel's fees incurred by the practitioner in relation to other clients' matters; and
(f) referred to in sub-paragraphs (o), (r) and (s) were used to pay debts of other clients of the practitioner.
Practitioner's Response
10 The practitioner admitted those facts.
11 The practitioner further admitted that she was guilty of unprofessional conduct in the manner alleged, but also said -
(a) The payments constituted loans to her which she at all times intended to repay with interest calculated at an appropriate commercial rate.
(b) She repaid to Mr Hudson's estate the moneys so advanced with interest calculated at the rate of 7.2 per cent per annum.
(c) She maintained a proper record of the amounts borrowed and the payments made by her.
(d) By originating summons dated 30 September 2003 in CIV 2171 of 2003 she applied to the Supreme Court for directions regarding the administration of Mr Hudson's estate. The directions sought included a declaration as to whether "… it is or was a breach of trust for the plaintiff (the practitioner) to seek to increase the quantum of the residuary estate of the deceased by using it for short term lending …";
- (e) The affidavit sworn by her on 26 September 2003 in support of the originating summons fully disclosed the steps that she had taken in administering Mr Hudson's estate. In particular, the practitioner disclosed that she had treated the funds held in the Cash Management Account as a loan to herself and had used them for the purposes of her practice or for purposes associated with her practice;
(f) The practitioner now accepts (contrary to the belief she held at the time she swore the affidavit) that by borrowing the funds and using them to pay expenses associated with her practice she improperly placed herself in a position where her interests and those of the estate of Mr Hudson, for which she was trustee, were in conflict.
Original Disposition of the Matter
12 At the conclusion of the hearing, the LPDT recorded the finding that the practitioner had engaged in unprofessional conduct. In stating that fuller reasons were to follow in due course, the LPDT indicated that it was minded to make orders under s 187(1)(c) of the Legal Practice Act2003 (WA) (2003 Act) to the effect that the practitioner should "take advice in relation to the management and conduct of her practice".
13 The hearing was not finalised at that stage because the mechanics of how the supervision of the practice should be effected was a matter on which the LPDT was to receive further submissions (joint or otherwise) after the parties had consulted. Additionally, the questions of whether there should be a fine, other repayments and the question of costs was outstanding. The hearing was therefore adjourned at that point.
14 In delivering ex tempore reasons of the LPDT, the following was recorded -
"Fuller reasons will follow in due course, but the Tribunal's conclusion is that, to adopt the words of Mr Murphy, the matter before the Tribunal does to the Tribunal suggest a gross and fundamental failure to appreciate what
(Page 11)
- the Tribunal considers to be fundamental matters of a legal practitioner's duties. The Tribunal has had very close and careful regard to the submissions advanced both on behalf of the Committee and on behalf of the practitioner and largely through those submissions has been able to form a view relatively quickly. As I have indicated, fuller reasons will follow.
The Tribunal has had careful regard to the decision of the New South Wales Court of Appeal in Moulton's case and agrees that the matter is extremely serious. Notwithstanding, the Tribunal is of the view that by reason of various matters it is not persuaded that the matter requires a reference to the Full Court and the Tribunal considers that it has available to it mechanisms under section 187 of the Legal Practitioners Act that will properly deal with the severity of the matter and safeguard the public interest.
The intention of the Tribunal is that I will indicate the Tribunal's general view and the matter will then be adjourned so that the parties can perhaps come to some agreement in regard to the detail of the proposed orders and those orders can be made in due course after submissions are received in writing. Certainly there will obviously be a recorded finding of unprofessional conduct as alleged. Mr Corboy, you have not addressed us but I am confident you would accept that publication necessarily follows given the gravity of the matters.
…
Costs would obviously be an element that needs to be agreed. The Tribunal would be keen to see the estate fully compensated for the practitioner's use of the funds. In this regard the Tribunal refers to the differential between 7.2 percent that was paid and the benefit the practitioner received from avoiding incurring excess overdraft funds. That is a matter which will need to be agreed hopefully between the parties so that an order can be made.
The Tribunal is of the view that in order for the public interest to be protected - and indeed, for my part anyway, the correspondence that has been referred reinforces its conclusion - there needs to be supervision with respect to the practitioner's practice and the Tribunal has in mind making an order under section 187 sub-section 1(c) of the Act which allows the Tribunal to make an order that the legal practitioner take advice in relation to the management and conduct of the practice, whether from the board or a person named and approved by the board or the Law Society.
The Tribunal's intention is that that would operate for a period of two years, that the advice be taken on a monthly basis, that the advice include the trust account that the practitioner operates and that the practitioner put forward and hopefully be agreed by the Committee for approval ultimately by the Tribunal of the person who would undertake that management supervision; in other words, providing advice.
(Page 12)
- The Tribunal will reserve for further consideration the question as to whether or not in addition to those matters there will be a fine and that may well be influenced by the extent to which there is agreement as to the amount to be further paid to the estate. I think strictly speaking, looking at the Tribunal's powers, we probably could not order that to occur so we are looking at an undertaking on the part of the practitioner being proffered of the exact amount and when we know what that amount is also know what the amount of agreed costs is, we will form a view as to whether there is also to be a fine or, I should say, payment of an amount rather than a fine.
THE CHAIRMAN: Yes, they will be the present orders of the Tribunal and the submissions can be sent in in writing. Thank you."
The State Administrative Tribunal Legislation
15 No further submissions were received after this hearing because of the legislative circumstances outlined below. As such, there was no opportunity for almost a year to hear further submissions and to dispose of the balance of the orders to be made.
16 Less than one month after the hearing, the State Administrative Tribunal Act2004 (WA) (SAT Act) came into operation (on 1 January 2005). As a consequence, on the same date the disciplinary proceedings were transferred to the State Administrative Tribunal under s 167(4)(b) of the SAT Act.
17 Upon the commencement of the Tribunal, the President's power to constitute a Tribunal to deal with a matter under the 2003 Act was affected by s 250A of the 2003 Act. This meant the only persons who could hear and determine a matter transferred from the disciplinary Tribunal were the President or Deputy President of the Tribunal, a Senior Member of the Tribunal who was legally qualified as defined in s 3(1) of the SAT Act, and a person who was not a legal practitioner but had knowledge and understanding of the interest of the person dealing with the legal practitioner.
18 Because of s 250A of the 2003 Act, it was not open to the President of the Tribunal to exercise the powers he is otherwise given by s 167(15) of theSAT Act, when constituting a Tribunal, to include a person who was a member of the former adjudicator.
19 This limitation meant it was not open to the President to call on the members of the former LPDT to be convened under the new Act to finalise the proceedings.
(Page 13)
20 However, regulations were subsequently made under s 167(1) of the SAT Act which qualify the operation of s 250A of the 2003 Act. Regulation 33A(2) now provides that despite the 2003 Act s 250A, SAT Act s 167(15) applies to a "disciplinary matter". A "disciplinary matter" is defined by Reg 33A(1) to mean a "devolved matter" that immediately before the transfer date was partly or fully heard before, but not determined by, the LPDT and was then transferred to the Tribunal under s 167(4)(b) of the SAT Act. A "devolved matter" is further defined to have the meaning given to that term in the SAT Act s 167 (1).
21 The introduction of Reg 33A meant that a State Administrative Tribunal constituted of the persons who were members of the former LPDT was able to be convened by the President to finalise the proceedings.
Relevant Legislation
22 As observed in Legal Practitioners Complaint Committee and Cullen [2005] WASAT 211 at [8] et seq, although the 1893 Act was repealed a year before the establishment of the Tribunal, by s 7 of the SAT Act, the Tribunal has jurisdiction to make a finding that the practitioner is guilty of unprofessional conduct under s 29A(1) of the 1893 Act and to make consequential orders under s 29A(2) and s 29A(3) of that Act. Section 13(1) of the SAT Act provides that "a provision of an enabling Act that enables an application to be made to the Tribunal gives the Tribunal jurisdiction to deal with the matter concerned". Section 3(1) of the SAT Act defines the term "enabling Act" to mean "another Act … under which jurisdiction is conferred on the Tribunal … ". Given that the 1893 Act was repealed prior to the commencement of the SAT Act, it did not, by its terms, enable an application to be made to the Tribunal. However, the effect of section 37(1) of the Interpretation Act1984 (WA) is that the Committee may commence professional disciplinary proceedings in the Tribunal in relation to conduct by a practitioner prior to 1 January 2004, and the Tribunal has jurisdiction, under s 29A(1) of the 1893 Act, to make a finding that a practitioner has been guilty of unprofessional conduct during that period, and has power, under s 29A(2) and s 29A(3) of the 1893 Act, on making such a finding, to make any of the orders …" under these sub-sections.
23 The Legal Practitioners Act1893 (WA) (1893 Act) was repealed with effect from 1 January 2004: Acts Amendment and Repeal (Courts and Legal Practice) Act2003 (WA) s 4. The 2003 Act commenced on that day: 2003 Act s 2 and GovernmentGazette 30 December 2003 page
(Page 14)
- 5722. Section 162 of the 2003 Act established the Committee. By s 164(1)(f) of the 2003 Act, the functions of the Committee include, if it "considers it appropriate to do so, and whether or not it has conducted an inquiry, to institute professional disciplinary proceedings against a legal practitioner before the State Administrative Tribunal". Between 1 January 2004 and 31 December 2004, s 164(1)(f) gave the Committee the same function, but provided for the institution of professional disciplinary proceedings against a practitioner before the LPDT.
24 Since 1 January 2005, s 185(1) of the 2003 Act has conferred jurisdiction on the Tribunal to make a finding that a legal practitioner is guilty of "unsatisfactory conduct". Between 1 January 2004 and 31 December 2004, equivalent jurisdiction was conferred on the LPDT. The term "unsatisfactory conduct" is defined in s 3 of the 2003 Act to include "unprofessional conduct on the part of a legal practitioner, whether occurring before or after admission as a legal practitioner". Section 185(2) and s 187(1) of the 2003 Act confer on the Tribunal (and, during 2004, conferred on the LPDT), on making a finding that a legal practitioner is guilty of unsatisfactory conduct under s 185(1), equivalent powers to those available to the LPDT under s 29A(2) and s 29A(3) of the 1893 Act, prior to its repeal. The only differences are in relation to the maximum fine and maximum compensation that may be imposed. The maximum fine which could be imposed by the LPDT from 1 January 2004, and which can be imposed by this Tribunal, is $25 000.
Hearing in this Tribunal
25 The Tribunal convened on 20 December 2005 following the passing of the regulations referred to above.
26 Prior to convening, written submissions for both the applicant and the respondent were filed.
27 Mr GH Murphy SC and Ms R Tapper continued to appear for the Committee and Mr MD Cuerden on this occasion appeared for the respondent.
Reviewing the Previous Conclusion
28 The essence of the submission for the Committee was that the Tribunal should re-visit its conclusion in relation to the appropriate penalty and that as the hearing had not been completed, it was open for the Tribunal to do so.
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29 The Committee further argued that the admitted offence was of such gravity that the Tribunal could not possibly do otherwise than refer the complaint to the Supreme Court (full bench) of Western Australia.
30 The thrust of the Committee's submission was that the original hearing had in a sense miscarried by reference to the notion of "borrowing" funds from the trust account. Senior counsel observed that it would have been of greater assistance for the Tribunal to have been taken to authorities that suggest that dealings of any nature with the trust account, whether they be temporary borrowings or otherwise, will constitute such a serious breach of duty that there could be no circumstance imaginable and certainly not this instance where there was a large amount of money and numerous transactions in which the practitioner should not be referred to the Supreme Court (full bench).
31 Senior counsel for the Committee submitted that the original hearing should have focussed more on misappropriation of the funds rather than "borrowing". He said the misappropriation was "objective dishonesty" regardless of the state of mind of the practitioner.
32 Although on the original hearing senior counsel had relied upon Law Society of New South Wales v Moulton(1981) 2 NSWLR 736, which was also a case of a borrowing from a trust fund, on this occasion senior counsel cited a number of additional authorities dealing with the question of obligation of trustees in such circumstances and the reaction of Full Courts in various Australian states to breaches of those obligations. Some of those authorities are referred to below.
33 Mr Cuerden helpfully assisted the Tribunal by accepting the proposition that it was open in theory for the hearing on the referral issue to be re-opened but he submitted it would be a rare instance and certainly not this instance in which it would be appropriate to do so. He developed those submissions both orally and in writing but one point was paramount in his argument namely, that the Committee had never raised any suggestion of dishonesty of the practitioner in the original hearing (either in any subjective or "objective" sense). He observed that the practitioner had been totally open about her actions and submitted she had actually demonstrated an intent to benefit the trust fund by recording an obligation to pay the trust fund interest at a greater rate than it was receiving on bank investment. Mr Cuerden made the point that while the practitioner (since being advised) had at all times fully accepted that the conduct was serious and clearly unprofessional, there had never been any allegation of any form of dishonesty or illegality.
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34 Neither counsel was able to refer the Tribunal to any authority in which the facts were particularly similar to those presently under consideration. Mr Cuerden suggested that this may be because where there is unprofessional conduct said to constitute a conflict of interest rather than dishonesty and the facts in support are similar to those of the present case, that courts would not usually consider striking off to be necessary. This, he said, was in contrast to those misuse of trust fund cases where there was a clear indication of illegality in the sense that it could be seen that the practitioner's objective was to permanently deprive a client of funds in which case, he acknowledged, there should unquestionably be striking off.
35 It was submitted for the practitioner that leave to re-open should be refused and that the Tribunal should decline the invitation to depart from the decision already made by the LPDT in this matter.
36 Mr Cuerden argued that the proposed further submissions simply repeated matters originally submitted to the LPDT. To the extent to which the Committee put additional submissions that were not put to the LPDT, none of them was a new matter that could not have been put to the LPDT at the original hearing.
37 Mr Cuerden submitted that to describe the practitioner's conduct as "objectively dishonest" did not add anything to the submissions that had been before the LPDT. If it were now sought to be submitted that the practitioner was dishonest (which seems not to be the case given the reference to "objective dishonesty"), that would be inconsistent, he said, with the terms of the reference to the LPDT, the way the case was put before the LPDT, and the Committee's failure to cross-examine the practitioner. This was not a submission the Committee should now be permitted to make for the first time.
Dishonesty
38 The question of dishonesty or otherwise arose on a number of occasions on the original hearing. The LPDT formed the impression that as the complaint was of conflict of interests and as it raised no issue of dishonesty or illegality, that the gravamen of the complaint was the entirely inappropriate conduct of the practitioner in using or borrowing the funds from the trust account without permission and for the wrong purpose even though they were repaid with greater interest than was accruing on the trust fund. The LPDT accepted that this was very serious misconduct but part of what was effectively a plea in mitigation by senior
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- counsel for the practitioner in the original hearing focussed upon the fact that there were no allegations of subjective dishonesty or illegality.
Ruling on Leave to Re-Open
39 A Court as distinct from a Tribunal has jurisdiction to recall orders which, as in this case, have not been perfected or acted upon and may do so if persuaded, after further consideration, that its original decision was wrong. The jurisdiction must be exercised "with great caution": Wentworth v Woollahra Municipal Council (1982) 149 CLR 672, 684, per Mason ACJ and Wilson and Brennan JJ. See also the decision of Anderson J in Hoad v Nationwide News Pty Ltd(1997) 37 IPR 407 and Smith v NSW Bar Association (1992) 176 CLR 256, at 265; re Harrison's share under a settlement [1955] Chancery 260, at 276; Norman v Norman (1992) 6 WAR 372, at 375 376. The nature and extent of the review, which it is proper for the court to undertake, will depend upon the nature of the error or omission that has necessitated the review. The power of review must be exercised judicially: Yenald Nominees Pty Ltd v Como Investments Pty Ltd (1996) ATPR 41–508 (Fed C of A).
40 The power is discretionary and, although it exists up until the entry of judgment, it is one that is exercised having regard to the public interest in maintaining the finality of litigation Wentworth v Woollahra Municipal Councilat p 684. Thus, if reasons for judgment have been given, the power is only exercised if there is some matter calling for review Marinoff v Bailey (1970) 92 WN (NSW) 280, at p 284.
41 As observed in Smith at p 265:
"…there may be more or less reluctance to exercise the power depending on whether there is an avenue of appeal State Rail Authority of N.S.W. v. Codelfa Constructions Pty Ltd (1982) 150 CLR 29, at pp 38-39, 45-46; Wentworth v. Rogers (No. 9) (1987) 8 NSWLR 388, at pp 394-395. It is important that it be understood that these considerations may tend against the re-opening of a case, but they are not matters which bear on the nature of the review to be undertaken once the case is re-opened, as this case was."
42 In Monaco & Anor v Arnedo Pty Ltd & Anor (1994) 13 WAR 522 Malcolm CJ observed at 524:
"At all events the court does have an inherent jurisdiction to rectify situations of injustice as I said in Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400 at 407: see also Gould v Vaggelas (1985) 157 CLR 215, L Shaddock Associates v Parramatta City Council [No 2]
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- (1982) 151 CLR 590; Commonwealth v McCormack (1984) 155 CLR 273. Those cases are authority for the proposition that if an order of the court is made or not made which turns out to be incorrect as a result of the inadvertence of counsel or, I would add, a mistake being made by a judge which is not corrected by counsel, there is an inherent jurisdiction, quite apart from the slip rule, to rectify the orders to avoid injustice."
43 In this instance, although the Tribunal is not a court, the principles guiding such decisions are of considerable assistance.
44 The Tribunal is mindful of the force of the submissions for the practitioner that it would be a rare instance in which leave to re-open would be granted and there would need to be good reason to do so. The Tribunal also accepts that there are no changes to the relevant facts and it is basically a question of whether the aspect of the previous hearing dealing with referral to the Supreme Court (full bench) was correctly decided.
45 There is obviously prejudice to the practitioner in permitting a re-opening as the reference has at least in one major respect been dealt with and the practitioner has been entitled to conduct her affairs in accordance with the LPDT's indication that although the matter was very serious, it was not satisfied on the material before it at that time, that a referral to the Supreme Court (full bench) was warranted.
46 No other more specific prejudice has been identified but that prejudice alone is a very considerable factor. However, as against that prejudice, it is also necessary and, indeed paramount, to weigh the prejudice to the public in precluding the Committee's opportunity to submit to the Supreme Court (full bench) that a penalty greater than that which the Tribunal is empowered to order, should be ordered.
47 The matter is clearly part heard. The orders to be made have not been finalised. No formal orders have yet been extracted in any sense and neither party has acted on the reasons in any formal manner so far as is known to the Tribunal.
48 The application is not an application to re-open generally - for example no submissions have been made that there should be a fine or suspension. The application to re-open is confined to the topic of whether or not there should be a report to the Supreme Court (full bench) - which is not to minimise the significance of that step.
49 Both parties have had the opportunity to make exhaustive submissions on the power to re-open and when that power should be
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- exercised. Submissions have also been made on the appropriate penalty itself.
50 The Tribunal recognises that leave to reopen a matter would not be given lightly where the issue sought to be opened was fairly raised on a previous occasion. Nevertheless, the Tribunal is satisfied that the original hearing miscarried to an extent on an important point upon which the Tribunal did not have the benefit of full submissions and the interests of the public are a paramount consideration in the disposition of this complaint.
The Authorities on the Appropriate Penalty
51 The Committee relied mainly on three authorities: Moulton,In Re a Practitioner[1982] 30 SASR 27 and Re Nelson and the Legal Practitioners Act 1970(1992) 106 ACTR 1.
52 Moulton focuses not so much on the practitioner's dealings with trust monies as the failure of the practitioner to understand and appreciate the care that must be taken with a trust account.
53 Hope JA explained at page 739 that "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". Where the client has not given free and informed consent any dealings by a practitioner with the trust monies constitutes a breach of trust. It is irrelevant that the beneficiary suffered no loss from the transaction. Further, the fact that the practitioner thought that he was doing his best for his client has no bearing on the matter. Given the practitioner's breach of his fiduciary duty the court found him guilty of grave misconduct.
54 Despite acknowledging the breach, the court did not focus so much on the consequences of such misconduct. Rather, the court was more concerned with the practitioner's defence of ignorance. The practitioner argued that he did not realise that there were limitations upon the investments that a trustee might properly make. Hope JA held (at page 743) that "such an unawareness of and lack of care about the most elementary propositions of law concerning the responsibility he had taken on and that standards required of solicitors are themselves sufficient to justify the protection of the public by his removal from the roll".
55 In considering the appropriate penalty for such ignorance, the critical question was whether "the solicitor [was] fit to be held out as a member of the profession". Citing Kitto J in Ziems v The Prothonotary of the
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- Supreme Court of NSW (1957) 97 CLR 279 the court held that "the answer must depend upon one's conception of the minimum standards demanded by a due recognition of the peculiar position and functions of a (solicitor)". This approach to the question of penalty suggests that no benchmark is to be drawn as to when disbarment must be ordered. Applying this test, the Court took the view that such blatant ignorance rendered the practitioner unfit to practise in the profession.
56 In Re a Practitioner involved a circumstance where the practitioner had withdrawn monies from the trust account before the relevant deposits were made. In a sense, it was also a case of "borrowing" from the trust account. In his defence, the practitioner stressed that no client suffered any loss, no client was denied access to his money or delayed in his access to it. Notwithstanding this, the Full Court of South Australia took a firm view of the mismanagement of the trust account. King CJ held at p 31 that "whenever a client's money is deliberately used for a purpose other than the purpose for which the client entrusts it to the practitioner, there is an act of dishonesty".
57 The Court observed at p 33 that "...no one suffered financial loss, the overdrawn moneys were covered by ample assets; and that for fifteen years the practitioner practised as an honourable practitioner...". The Court was mindful of the fact that it was likely that the practitioner would be reinstated in the future.
58 Nevertheless, the Court took the view that the integrity of the profession was the paramount consideration and the practitioner's name was struck off the roll.
59 In Re Nelson the practitioner was found to have committed several offences. Relevantly, he was found guilty of professional misconduct for the unauthorised withdrawal of trust moneys and the application of those moneys to his own overdraft account. The Court rejected the practitioner’s characterisation of the transactions as mere "borrowings". The Court took the view that the "borrowing" of trust funds would have to be preceded by proper authority given by the client based on the receipt of independent legal advice. Without such authority the Court held that the solicitor "quite dishonestly" misappropriated the money. Such conduct it said "cannot be regarded as less than disgraceful and dishonourable" (p 7).
60 The Full Court of the ACT was empowered to suspend the practitioner for such a period as it saw fit. Alternatively, it had the power to direct that the name of the practitioner be removed from the Roll.
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- Again, the protection of the public was the paramount consideration in the determining the appropriate penalty. Notwithstanding the serious misconduct, the Court took the view that "the protection of the public from future conduct of this solicitor [did] not require his removal from practice for an indefinite period of time". It observed at p 24:
"It is apparent that from three to four years ago, the solicitor had considerable family and personal stress. That goes some way towards explaining his acts of neglect and omission. It does not explain, and certainly does not excuse, his acts of misappropriation. It is open to conclude, however, that those acts were out of character and unlikely to be repeated."
"We find this to be a case warranting absence from practice for three years. However, in the circumstances of this case, the solicitor is better off being now removed from the roll rather than suspended. That course allows the solicitor to work within a legal practice for at least part of the period during which he is unable to practise as a solicitor as a result of his removal from the roll."
62 While there is no blanket restriction on legal practitioners borrowing from clients the courts adopt a strict approach to such transactions. A lawyer may "borrow" trust monies provided that the practitioner has taken steps to ensure that the client has given fully informed consent. Fully informed consent must be given in light of full disclosure of the risk attached to the loan and the advantages that may flow to the practitioner from the use of the client's money. It is the provision of independent legal advice that serves as perhaps the best means of achieving this. Where independent advice has not been given the lawyer carries a heavy burden to show that he or she properly protected the client’s interest and ensured that the client is aware of every matter that is or might be relevant to the decision in question.
63 In Barwick v Council of the Law Society of New South Wales [2004] NSWCA 32 Ipp JA with whom Tobias JA and Stein AJA concurred held:
- "117 The Appeal Panel dealt with the appellant's misuse of trust account funds as follows:
"200 In that [regard], we emphasise the numerous serious transgressions admitted started with the taking of trust moneys without authority and in an irregular way (to put it at its best light). It is well accepted that the
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- misuse of trust account funds is a matter that will ordinarily call for striking off.
201 The trust account is `sacred': ` trust accounts should be sacred, so that moneys paid into the account should only be paid out to the persons to whom the money belonged, or as directed': In re a Practitioner [1941] SASR 48 at 51.
202 It is no reply that the practitioner intended to pay the money back, and did so. Conduct of this kind remains `an affront to the sanctity of a practitioner's trust account': In re a Practitioner (1982) 30 SASR 27 at 31 per King CJ. King CJ went on to say at 31, responding to the circumstances of that case (short term holding of client funds before payment into the trust account):
`The public can feel confidence in legal practitioners and their handling of their money only if they know that there is involved no element of judgment on the part of the practitioner, and their money must remain in his Trust Account until it is disbursed in accordance with their direction; because no matter how good the intentions of a practitioner might be, no matter how confident he might be that the money can be made good, whenever a client's money is deliberately used for a purpose other than the purpose for which the client entrusts it to the practitioner, there is an act of dishonesty on the part of the practitioner and one which exposes the client to some risk as to his money. There are two aspects of such misuse of trust moneys held for clients (1) the clients are exposed to some risk, great or small, depending upon the situation, as to their money, and (2) there is a dishonest misuse by the practitioner of money which does not belong to him for his own purposes and, of course, free of interest.'
To similar effect, see Dupal v Law Society of New South Wales (unreptd, [NSWCA], 26 April 1990) per Handley JA at 23: `Sympathy for [the solicitor] and for the tragedy that he has brought on himself and his family by his inability to live up to the high standards which this Court and the profession demand of solicitors can not be allowed to deflect this Court from doing its duty': cited with approval by Sheller JA in Law Society of New South Wales v Bannister (1993) 4 LPDR 24 (CA) at 30."
118 In my opinion, the views expressed by the Appeal Panel are entirely correct. The trust and confidence which clients place in their solicitors are a basic element of the administration of justice in this country. Violations by legal practitioners of trust accounts betray that trust and harm public confidence in the legal system. This explains the sacrosanct nature of trust accounts and the acute concern that courts have when practitioners, in breach of their fiduciary obligations, misuse trust moneys for their own benefit (see, for example, Law Society of New South Wales v Bannister)."
64 In another case of borrowing from a trust fund, Re Fabricius and McLaren and Re Legal Practitioners Ordinance 1970 (1989)91 ACTR
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- 1, while employed as a salaried solicitor, Fabricius acted for Cole in relation to a number of matters. Fabricius subsequently left the employ of the firm of solicitors and Fabricius and McLaren began to practise in partnership. They purchased the practice of the firm of solicitors by whom Fabricius had previously been employed. Cole lent money to the partnership at less than the current bank overdraft rate of interest. Neither Fabricius nor McLaren suggested to Cole that he seek independent legal advice, nor did he do so. This was in breach of professional rules. The firm later acted for Cole in relation to another matter. When the partnership was dissolved, the loan money had not been repaid. Subsequently Cole and McLaren executed another loan agreement to reflect the fact that McLaren had taken over the responsibility for the loan made to McLaren and Fabricius. Cole continued to use McLaren as his solicitor until McLaren left the practice of the firm, at which time the principal was outstanding. McLaren was subsequently made bankrupt.
65 The Full Court of the ACT suspended each practitioner for two years, saying at p 7:
"Quite apart from the terms of the Law Society's Guide to Professional Conduct and Etiquette which, in our view, correctly states the relevant principles which govern a solicitor/client relationship, courts of the highest authority have said over and over again that a solicitor who deals with his client while remaining his solicitor undertakes a heavy burden and it will be a rare case where he should not at least advise his client to take independent legal advice: see for example Law Society of New South Wales v Harvey [1976] 2 NSWLR 154 at 171 per Hutley JA.
In Law Society of New South Wales v Moulton [1981] 2 NSWLR 736 at 739–40 Hope JA said -
" … 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
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- 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...
On the other hand, we do not take the view that the legal practitioners acted disgracefully or dishonourably. Their errors arose from inexperience and general lack of understanding of a solicitor’s duties to his client. In addition to the matters set out above, which we find amounted to unprofessional conduct, there were other aspects of the transactions in which the legal practitioners showed lack of knowledge of the law and of good practice in solicitors’ offices. They are not matters calling for action by this court, but they do serve to underline the danger in solicitors setting up practice after limited relevant experience.
On the subject of penalty, we take into account -
(a) No fees were charged to Cole in relation to either transaction.
(b) Fabricius has made restitution to the estate of Cole in the sum of $10,000.
(c) The subsequent transaction by McLaren with Cole sprang from a recognition that the earlier transaction may not have been equitable and McLaren evinced a desire to acknowledge that inequity by increasing the principal sum and the interest rate.
(d) Neither practitioner is in private practice. Fabricius is in Public Service employment as a salaried officer and McLaren is a full-time student unlikely to return to legal practice, at least in the foreseeable future
In the circumstances we take the view that the appropriate penalty for both practitioners is to suspend the right to practise in the Australian Capital Territory for a period of two years.
We recommend to the Law Society that it not issue an unrestricted practising certificate to either practitioner until it is satisfied that he has, since the expiration of the suspension, spent at least 12 months as an employee in a solicitor's office."
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Penalty
66 The primary role of disciplinary proceedings is to protect the public from persons not fit to be held out as officers of the court.
67 Unfitness to practise in the profession may be inferred from a practitioner's breach of his or her fiduciary duties, from an act of dishonesty, whether actual or constructive, or from their continued ignorance. The weight of judicial opinion favours the view that the "borrowing" of trust moneys almost certainly demonstrates an unfitness to practice in the profession. However, as Fabricius shows, that is not invariably so. In Nelson,Higgins and Foster JJ took the view that notwithstanding the finding of misconduct no general unfitness to practice was shown. Furthermore, in Attorney-General v Bax [1999] 2 Qd R 9, Pincus JA held that not every proved act of dishonesty on the part of a practitioner demonstrated an unfitness to practice, explaining "dishonesty, like other forms of misbehaviour, has grades of seriousness".
68 If an unfitness to practice is shown it will be a rare case in which the court does not order a striking off. In The Law Society v McNamara (1980) 47 NSWLR 72, Reynolds JA expressed the view that when cases of present unfitness were shown it would rarely be appropriate to order suspension.
69 However, in the subsequent case of Jauncey v Law Society of NSW (NSW Court of Appeal, 2 December 1988, unreported) Clarke JA of the same court proposed that in some cases an order of suspension may be appropriate. Such a situation is "likely to arise in cases where an order is made long after the misconduct which demonstrated unfitness occurred and a meritorious degree of rehabilitation extending over the interval between misconduct and the hearing of the case as been shown".
70 In this State, the Full Court has observed in Maraj (a Legal Practitioner) (1995) 15 WAR 12,
"The practitioner has already received substantial punishment in the sense that he has lost his practice which he himself recognised that he should cease to conduct. It is also a case in which the Tribunal itself was initially of the view that the practitioner should be struck off. In the end, the Tribunal still recognised that this was a view that was "still open and could properly be held". The Tribunal accepted that the object of disciplinary proceedings was not retribution, but the protection of the public and the reputation of the profession. This is correct. However, the Tribunal appears to have considered that the various mitigating factors listed in para 33 of the report meant that striking off was too harsh and unnecessary for
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- the attainment of the relevant object. In so doing the Tribunal seems to have misunderstood the significance of the object in relation to the protection of the public. The significance is that in order to protect the public and the reputation of the profession the consequences for the practitioner may need to be more severe than they would be if the only object of the proceedings was one of punishment. As Kennedy, Franklyn and Anderson JJ said in Re a Legal Practitioner's Act 1893, (unreported Supreme Court, WA, Full Court; Library No 930527, 30 September 1993) at 7:
"Despite the fact that the practitioner can already be seen to have suffered substantial punishment as a result of his conduct, it must be appreciated that the responsibility of this Court is not to impose punishment but to maintain the integrity of the profession."
…
Their Honours also cited the well known passage in Re Barrister and Solicitor (1979) 40 FLR 1 at 24-25 per Blackburn CJ, Connor and Davies JJ, in which it was explained that the object of disciplinary proceedings is the protection of the public and the maintenance of proper standards in the legal profession, rather than punishment. It is clear from the relevant passage and the authorities which have been repeatedly followed in this Court that when the question is whether a practitioner should be struck off the roll and the only question is whether the practitioner is a fit and proper person to remain a member of the legal profession: see Re Davis (1947) 75 CLR 409 at 416 per Latham CJ and Ziems v Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279."
Conclusion
71 At the time of the original hearing, the Tribunal recognised that the repeated personal usage by unauthorised borrowings from trust funds by a practitioner would, not only be regarded as serious impropriety but usually warrant a referral to the Supreme Court (full bench). However, the Tribunal did not perceive the Committee as putting the complaint on that footing. There was no apparent emphasis of any form of dishonesty or any illegality when the reference was first heard by the Tribunal. The actions were conducted openly and interest on the borrowings was paid.
72 It was in those circumstances that the Tribunal concluded that the appropriate disposition of the complaint fell just short of a referral to the Supreme Court (full bench). Regrettably, with the benefit of further argument, we are persuaded that we would not be discharging our duty to the public to not refer the matter to the Supreme Court (full bench). In doing so, the Tribunal does wish to record the unfortunate history of the resolution of this complaint from the practitioner's perspective. This
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- relates to both timing (in terms of the unavoidable delay in being able to conclude the matter while there was a hiatus in the legislation) and also in the need for the Tribunal to reconsider the appropriate order to be made.
73 In all those circumstances, including the apparent absence of precedent in this State of a "borrowing" type of contravention, the Tribunal would not make a recommendation to the Supreme Court (full bench) that the practitioner be struck off the roll. The Tribunal notes that senior counsel for the Committee did not, in written or oral submissions, request that the referral should include a recommendation that the practitioner be struck off the Roll of Practitioners. Rather, the relief sought was that the matter be referred to the Supreme Court (full bench). Implicitly, a report to the Supreme Court (full bench) is appropriate in those circumstances in which the Tribunal does not consider that the penalties it may impose pursuant to s 187 of the 2003 Act are necessarily adequate or appropriate to deal with the professional misconduct under consideration.
74 The Tribunal considers that the nature of the contravention warrants a report being transmitted which it will do so by forwarding these reasons. The Tribunal notes that there has been no allegation of illegality or dishonesty in the complaint (although the Committee now raises a notion of 'objective dishonesty') and that no client has suffered a loss of money as a result of the misconduct. In addition, and largely as a result of the focus of the presentation of the complaint and supporting submissions by the Committee a year after the matter had been originally dealt with on the major issue of referring the matter to the Supreme Court (full bench), the Tribunal has concluded that it should, regrettably, re-visit its earlier conclusion on that point and should so refer the matter.
75 The Committee sought costs in excess of $17 000. In the circumstances under which it was necessary to re-open the hearing through no fault of the practitioner, the Tribunal considers costs should be fixed at $8000.
76 The Tribunal will also make supervisory orders as foreshadowed.
Orders
77 The Tribunal makes the following orders:
(1) The Tribunal finds Patricia May Verschuer Edwards (the practitioner) guilty of unprofessional conduct during the
- period from 12 December 2002 to 7 August 2003 under the Legal Practitioners Act 1893 (WA).
- (2) The Tribunal makes and transmits a report on the finding it has made to the Supreme Court (full bench) which, for purposes of the Legal Practice Act2003 (WA) s 185(2)(a) is constituted by these reasons for decision.
(3) No later than twenty-eight (28) days after the date of the order, if it has not already been paid, the practitioner is to pay the sum of $7156 to the Public Trustee of the estate of Herbert Raymond Hudson.
(4)Pending the determination of the Supreme Court (full bench) in relation to the report transmitted to it by the Tribunal, in accordance with s 29A(3)(b) of the Legal Practitioners Act 1893 (WA) and s 187(1)(d) of the Legal Practice Act 2003 (WA), the following conditions shall be imposed on the right of the practitioner to practice for a period of two (2) years from the date of this Order:
- (i) The practitioner must follow the procedures set out in paragraph (ii) below in relation to the trust account of the Practitioner's firm and in relation to the trust account of any other firm in which she may be a partner or sole practitioner.
(ii) The procedures referred to in paragraph (i) are as follows:
- (a) On a daily basis, deposits to the trust account are to be reconciled, by an experienced bookkeeper or the Practitioner, with the trust account bank statement referenced by the internet.
(b) On a weekly basis, the trust account bank statement (referenced by the internet) is to be reconciled by an experienced bookkeeper with all deposits to and withdrawals from the trust account, and a copy of the reconciliation is to be provided to the practitioner, for her review, investigation and rectification of all outstanding items (such as outstanding deposits and issued unpresented cheques over 15 (fifteen) months old). The reviewed reconciliations are to be signed and dated by the practitioner and provided
- to a Senior Trust Account Inspector of the Legal Practice Board nominated by that Board within seven (7) days of the date on which reconciliation is provided by the bookkeeper to the practitioner.
- (c) In addition to the annual audit required under the Legal Practice Act 2003 (WA), within seven (7) days of the end of each quarter, the practitioner must provide all material relating to the trust account, including bank statements, deposit slips, receipts and withdrawal authorities, to an independent firm of accountants/auditors for a quarterly review of the trust account operations. The practitioner must ensure that, within twenty-one (21) days of the end of each quarter, the independent firm of accountant/auditors provides a quarterly report on its review of the trust account operations to the practitioner and a Senior Trust Account Inspector of the Legal Practice Board nominated by that Board. The review is for the purpose of ensuring that the trust account is being properly maintained.
- (5) In accordance with s 29A(4) of the Legal Practitioners Act 1893 (WA) and s 87(2) of the State Administrative Tribunal Act 2004 (WA), the practitioner must pay the applicant its costs of and incidental to the hearing and determination of the proceedings, which are fixed in the sum of $8000.00, within twenty-eight (28) days of the date of this Order.
(6) The reasons for decision and orders in this matter are to be published.
I certify that this and the preceding [77] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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HON. H WALLWORK QC, PRESIDING MEMBER
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