Legal Practitioners Complaints Committee v Thorpe - [2008] WASC 9

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : FULL BENCH

CITATION: LEGAL PRACTITIONERS COMPLAINTS COMMITTEE -v- THORPE [2008] WASC 9

CORAM: STEYTLER P
WHEELER JA
NEWNES J

HEARD: 13 DECEMBER 2007

DELIVERED : 1 FEBRUARY 2008

FILE NO/S: LPD 8 of 2004

BETWEEN: LEGAL PRACTITIONERS COMPLAINTS COMMITTEE
Applicant
AND
ANDREW CECIL THORPE
Respondent

Catchwords:

Legal practitioners - Misconduct - Disciplinary proceedings - Application for practitioner to be struck off roll - Appeal from finding of disciplinary tribunal - Protracted course of conduct - Principles justifying an order to strike off Roll of Practitioners - Turns on own facts

Legislation:

Trust Accounts Act 1973 (Qld)

Result:

Practitioner struck off Roll of Practitioners

Category: B

Representation:

Counsel:

Applicant: Mr P A Tottle
Respondent: Mr R E Birmingham QC & Mr G R Dean

Solicitors:

Applicant: Tottle Partners
Respondent: Dean & Rowick

Case(s) referred to in judgment(s):

A Solicitor v Council of the Law Society of New South Wales [2004] HCA 1; (2004) 216 CLR 253
Attorney‑General and Minister for Justice (Qld) v Priddle [2002] QCA 297
Council of the Queensland Law Society Inc v Cummings; Ex parte Attorney‑General of Queensland and Minister for Justice [2004] QCA 138
In Re Davis (1947) 75 CLR 409
Law Society of New South Wales v Moulton [1981] 2 NSWLR 736
Law Society v Murphy [1999] SASC 83
Legal Practitioners Complaints Committee v Edward [2007] WASC 287
Legal Practitioners Complaints Committee v Lashansky [2007] WASC 211
Legal Practitioners Conduct Board v Trueman [2003] SASC 58
Queensland Law Society Inc v Carberry [2000] QCA 450
Re A Barrister and Solicitor (1979) 40 FLR 1
Re Maraj (A Legal Practitioner) (1995) 15 WAR 12
Thorpe v Legal Practitioners Complaints Committee [2007] WASCA 8
Ziems v Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279

JUDGMENT OF THE COURT: The Legal Practitioners Complaints Committee (Committee) has applied to have the respondent legal practitioner, Andrew Cecil Thorpe, struck off the roll of practitioners. The application arises out of findings by the Legal Practitioners Disciplinary Tribunal (Tribunal), in nine of twelve references to it by the Committee, that the practitioner had been guilty of unprofessional conduct.

Background to the references

The nine references concerned the affairs of two of the practitioner's clients, respectively described by the Tribunal as Mr B and Mrs S.
Mrs S was the mother of a friend of the practitioner's wife. She first sought legal advice from the practitioner in 1985. In 1988 she appointed him as her attorney. He was given power to manage her business affairs and to invest her funds in whatever manner he thought fit.
Mr B was the director of a company, Prudential Holdings Pty Ltd (Prudential). That company owned the Arthur River Roadhouse (roadhouse). In August 1991 Mr B, acting on behalf of Prudential, retained the practitioner to recover possession of the roadhouse from a defaulting purchaser. He also requested finance to enable Prudential to occupy and run the business of the roadhouse once possession had been obtained. The property was mortgaged in favour of the Commonwealth Bank.
At that time, the practitioner practised law in partnership with Mr Bruce Duckham under the name 'Duckham Thorpe'. That firm advanced $10,000 to Prudential to enable it to purchase stock for the roadhouse once possession had been taken. The loan was secured by a second mortgage over the property. It accrued interest at the rate of 24%, compounding monthly. The mortgage also secured legal costs payable to Duckham Thorpe and any other moneys to be advanced by that firm from time to time. Subsequent advances were made to Prudential by Duckham Thorpe. Funds for that purpose were raised, in part, by the realisation of investments belonging to Mrs S.
By April 1992 Duckham Thorpe had advanced some $39,143 of Mrs S's money to Prudential. It had also rendered an account to Prudential for $4,531 in respect of legal fees. Prudential was then in financial difficulties. Messrs Duckham and Thorpe consequently gave notice to it 'calling up the mortgage'. They subsequently entered the roadhouse as mortgagees in possession.
One of the issues that arose in the references was whether, in 1991 and afterwards, Mrs S had lent money directly to Prudential or whether the practitioner, or the practitioner and Mr Duckham, had borrowed money from her and on‑lent it to Prudential. Statements produced by the practitioner from his files in relation to the roadhouse showed that the money made available by Mrs S was a debt due to her from Prudential. However, when called before the Committee to be examined on oath arising out of a complaint against him made by Mr B, the practitioner denied that this was so. He said that Mrs S had lent the money to Duckham Thorpe, which had on‑lent it to Prudential. In later legal proceedings against Mr B, the practitioner swore an affidavit stating that he had lent money to Prudential on his own account. Still later, in his written answers to some of the references, the practitioner said that Mrs S's money had been loaned to Prudential and that, in effecting that loan, he had acted in his capacity as attorney and trustee for her.
The practitioner used a further $58,000 of Mrs S's money to run the roadhouse while he and Mr Duckham were mortgagees in possession. It is plain from the Tribunal's reasons (upheld in this respect on appeal: Thorpe v Legal Practitioners Complaints Committee [2007] WASCA 8 [48] ‑ [50]) that it found that the total of around $97,000 had been loaned by Mrs S to Duckham Thorpe and not to Prudential.
In April 1993 Messrs Duckham and Thorpe, as mortgagees in possession, sold the roadhouse to a company, Star Dust Holdings Pty Ltd. The sale was under a terms contract which required Duckham Thorpe to provide vendor finance for the purchase by providing the buyer with $300,000 at 11.5% interest. In May 1993, Messrs Duckham and Thorpe paid out the mortgage in favour of the Commonwealth Bank. The bank was then owed about $97,000. The two men received, in return, an assignment of that mortgage from the bank. The Tribunal found that the 'funds for this assignment were provided by calling in some further moneys from Mrs S's investments and also from other sources' (Tribunal's reasons, p 4).
In August 1993 the practitioner began to practise on his own account. However, in December 1993 Duckham Thorpe rendered an account to Prudential for 'Mortgagees' costs' of $55,000. At that time, the amount outstanding to Mrs S was $117,197.
Also in December 1993, Messrs Duckham and Thorpe arranged a mortgage of the roadhouse in favour of Prudential. At that time they received $150,000 which, together with the terms payments received from the purchaser of the roadhouse, was used to repay the sum of $97,700.45, plus interest, advanced by them in order to pay out the mortgage to the Commonwealth Bank. This money was also used to pay sums of about $11,000 (in respect of legal fees) and $34,422 (costs incurred in relation to Prudential) owing to Duckham Thorpe. The mortgage over the roadhouse in favour of Messrs Duckham and Thorpe was then discharged.
Subsequently, further payments were received from the purchaser of the roadhouse pursuant to the terms contract. These payments were made between 1993 and 1996. Final settlement under the contract took place in early 1996. There was then what the Tribunal described as a 'shortfall' of approximately $105,000 (Tribunal's reasons, p 6). This was effectively funded by Mrs S, as all others who had contributed funds to repayment of the mortgages over the roadhouse had been paid out. This sum of around $105,000 appears to have been made up of two items reflected in a statement made available to Mrs S by the practitioner in respect of the period 30 June 1995 to 30 June 1997. Each of these appeared under the heading 'Current assets'. The first was an amount of $60,634.78, described as 'Prudential Holdings Pty Ltd (in recovery)'. The second was an amount of $45,000, described as 'Mortgage 36B Harcourt Street Bassendean (maturing March 1, 1998)'. The Tribunal found, in this last respect, that 'the person entitled to ownership' of the Bassendean property had mortgaged it in favour of the practitioner in order to secure costs due to the practitioner in respect of a matrimonial property settlement in which he had acted. However, the Tribunal found that the mortgage 'could not in fact be registered because the property was not then in the name of the practitioner's other client'. The Tribunal also found that the mortgage was subsequently replaced by a registered mortgage over a property in Maylands.
Mrs S was eventually repaid the total amount owing to her. This was probably paid by the practitioner from his own funds. The Tribunal found that interest was also paid to Mrs S, but that it was impossible, on the available information, to assess the rates or the amounts. This court, on the appeal from the Tribunal's decision, similarly found [21] that the records kept by the practitioner were opaque.
That brings us to the nine references that were found to have been established.

Reference 14B of 2003

The first of the references found to have been proved against the practitioner alleged unprofessional conduct in two respects. One was that the practitioner had improperly permitted Mrs S to lend to him, or to him and Mr Duckham, not less than $97,152.14 between 30 August 1991 and 13 January 1993 on an unsecured basis and without any agreed terms as to interest and repayment. The other was that he had preferred his personal interests to those of his client. He was said to have done this by permitting her to lend this money on an unsecured basis and by on‑lending it to Prudential, without her knowledge and consent, when the loan by the practitioner and Mr Duckham was secured but Mrs S's loan to the practitioner, or to the practitioner and Mr Duckham, was not. In the course of finding this reference to have been established, the Tribunal said that it was clear from the evidence that the practitioner had been using Mrs S 'as a banker for whatever arrangement he and his partner had with Prudential'. The Tribunal went on to say:
It was improper in all the circumstances as we have found them to be for Mrs S to be permitted to lend moneys to the practitioner and his partner, without any security, terms and most importantly, without any understanding of what was to occur. Mrs S was certainly never told the true situation which … also disclosed a gross undisclosed conflict of interest.

Reference 14C of 2004

Reference 14C alleged that the practitioner charged professional costs and disbursements to Mrs S without informing her. It also alleged that he applied money held on trust for Mrs S to the payment of his costs and disbursements without having served on her a bill of costs showing that trust moneys had been applied in payment, and without otherwise informing her of the application of those moneys for that purpose. The total amount involved was $17,946.42.
The practitioner asserted, in his written answer to this reference, that he had rendered invoices to Mrs S. The practitioner did not give evidence concerning this, or any other, reference before the Tribunal. The Tribunal accepted Mrs S's evidence that she had never received any account for legal fees in relation to the management of her finances by the practitioner. The Tribunal found that there had 'always been a clear obligation on a Practitioner to account to a client before deducting monies held on trust for that client for the payment of legal fees' (Tribunal's reasons, p 12).

Reference 14D of 2003

Reference 14D alleged that, throughout the period 25 July 1995 to 18 August 2002, the practitioner falsely represented to Mrs S that he had made advances on her behalf to Prudential. The falsity was said to arise from the fact that he knew that those advances had been made by him, on her behalf, from trust moneys under his control, to himself or to Duckham Thorpe and that he or Duckham Thorpe had on‑loaned the money to Prudential.
The Tribunal found that the practitioner's correspondence and accounts falsely represented that Mrs S's money had been invested directly in the roadhouse, to be repaid by Prudential. The Tribunal said that this, like many other issues raised in the references, required a cogent explanation from the practitioner, but that none had been provided.

Reference 15A of 2003

Reference 15A alleged that the practitioner placed himself in a position of conflict of interest. He is said to have done so by taking out a mortgage to secure legal costs and the payment of advances, without having obtained Prudential's fully informed consent. In his written answer to this reference, the practitioner claimed that Mr B had signed a letter of engagement. He said that this included a recommendation that Prudential should obtain independent legal advice. However, the practitioner was unable to produce the letter. The Tribunal preferred the evidence of Mr B, who said that he had never been told to seek independent advice. The Tribunal said that, in circumstances in which the practitioner and his partner had taken the mortgage as security for legal costs and money to be advanced, carrying interest at 24%, the interests of the client were 'sharply different' to those of the practitioner. This was said to have 'demanded a specific requirement that the client should seek independent advice' (Tribunal's reasons, p 14).

Reference 15B of 2003

Reference 15B alleged that the practitioner was guilty of unprofessional conduct in charging grossly excessive fees to Prudential. The fees were charged between 24 April 1992 and 27 March 1996, when he and his partner were mortgagees in possession of the roadhouse. The amount charged during that period was $62,424. In his written answer, the practitioner did not dispute that he charged this amount. However, he said that his firm had undertaken a great deal of legal and other work relating to running, financing and selling the roadhouse. No detailed accounts were produced to justify the bills rendered. Also, the documents discovered on the practitioner's file, and supported by statements of account and sums received, could not be reconciled with the available books of account. The Tribunal found that Mr B and his children had been running the business during the relevant period. It said that 'the solicitor's remuneration for any work undertaken could not on the non‑contentious scale total anything even remotely approaching the total figure charged' (Tribunal's reasons p 17).

Reference 15C of 2003

Reference 15C alleged unprofessional conduct on the part of the practitioner in failing fully to account to Prudential as to the disposition of the proceeds of the realisation of its assets between 18 August 1993 and 6 May 1996. It was common cause that, during that period, the practitioner deposited the receipts of sales of Prudential's assets into his trust account. He withdrew a total of $152,244 of that money, which he used to pay a significant number of personal expenses, including his credit card bill. In his written answer to the reference, he asserted that the ledger reflecting these transactions related to himself and Mr Duckham as mortgagees in possession and that it did not record sums deposited in trust for Prudential.
This reference also alleged that, throughout 1994 to 1996, the practitioner prepared and forwarded statements of account to Prudential that were inconsistent and that failed to adequately explain the debts claimed by the practitioner, or Duckham Thorpe. These statements of account were also said to have failed to explain adequately the amounts received from the sale of Prudential's assets and the disposition of those amounts. It was effectively conceded by the practitioner that it was not clear from the available documents how the proceeds of the sale of the roadhouse had been disposed of.
On the unsuccessful appeal from the Tribunal's decision, the court said, in this respect [99]:
As the [Committee] put it to us, there is no basis in [the available documents] upon which it can be determined how Prudential went from a position where it owned the roadhouse and owed about $100,000 to the Commonwealth Bank, to a position where the roadhouse was sold, with Duckham Thorpe receiving approximately $320,000 and Prudential receiving nothing … It has, then, been established that the appellant did not properly account at the time and that it is now apparently impossible for him to do so. Whatever the appellant's belief, it is difficult to see a fundamental failure to account of this kind as being anything other than unprofessional conduct.

Reference 24A of 2003

On 30 November 2000, after the sale of the roadhouse to Star Dust Holdings Pty Ltd, the practitioner wrote to Mrs S enclosing a statement of account dated 30 September 2000. This referred to a 'residual debt' of $8,334.78 owed to her by Prudential. At that time, Duckham Thorpe was suing Mr B in the Local Court to recover that money. We have said that, in those proceedings, the practitioner swore an affidavit to the effect that he had lent the money to Prudential on his own account.
On 12 February 2001 Mrs S revoked the power of attorney that she had given the practitioner. She sought a statement of her financial affairs. She made a further request for payment on 10 July 2002. However, as the Tribunal put it, the account ultimately given to her on 18 August 2002 'raises more questions than it answers'. The money was not repaid to Mrs S until 17 July 2003.
Reference 24A alleged that the practitioner was guilty of unprofessional conduct by failing promptly to repay the sum of $8,334.78 to Mrs S, with interest. The Tribunal found that this had been established. It referred, in the course of making this finding, to the practitioner's conflicting positions as regards the person to whom the money had been lent. It said that he had not sought to explain 'the obvious discrepancies in the conflicting stances he has sought to maintain' (Tribunal's reasons p 21).

Reference 24B of 2003

Reference 24B alleged unprofessional conduct on the part of the practitioner in allowing $12,000 of Mrs S's money to be used as vendor finance for the purchase of a Maylands property, after Mrs S had instructed him to repay all money due to her under the registered mortgage held by her over the Maylands property.
When the Maylands property was sold, and the mortgage was discharged, the practitioner made available to the purchaser, as vendor finance, $12,000 of Mrs S's money. This was done without her knowledge or consent. She had, by then, demanded that the practitioner pay all of the money owing to her. Notwithstanding this, the practitioner allowed settlement to proceed, and the mortgage to be discharged, without receiving the $12,000. On 18 August 2002, the proposed settlement statement provided by the practitioner to Mrs S showed that this sum of $12,000 had been retained as an allowance for taxation liability and contingencies. The Tribunal found that this was done so as to give Mrs S the impression that the practitioner was holding the money in trust for her when that was not the case.

Reference 28 of 2003

Reference 28 alleged that the practitioner was guilty of unprofessional conduct in failing to account properly for an amount of $173,125.29 paid to him by Mrs S for investment on her behalf, in the period 13 January 1988 to 30 July 2003. It also alleges that the practitioner borrowed money in his capacity as trustee without the informed consent or proper authority of Mrs S and that he failed to invest the trust money properly and prudently. In the appeal against the Tribunal's decision, the court accepted [72] that there was no clear finding of unprofessional conduct arising out of a failure to account or of unprofessional conduct arising out of a failure to obtain informed consent. However, the Tribunal found the reference to have been proved in relation to the failure to invest the trust moneys properly and prudently. The Tribunal said, in this respect (Tribunal's reasons, p 27):
It seems to us that the Practitioner has finally understood that he has been propping up investments of other people's money in a business that was failing when he first became involved, and which thereafter continued this down hill trend where effectively his client Mrs S had no effective security except a right of recourse against the Practitioner, which apparently the Practitioner recognised when he arranged the other mortgages to cover the huge losses. It seems to us to be a reasonable inference to draw that the reimbursement to Mrs S has been met from the Practitioner's own resources, which of course is most laudable. However it does not alter the fact that the client's money used to prop up Prudential Holdings was simply not secured and was an entirely ill advised and improvident investment. The fact that Mrs S was prepared to leave matters in the hands of a Practitioner without being concerned to know the detail, surely in our view cast even greater duties of obligation on a solicitor who clearly had the trust of the client, which was that he would act properly and in accordance with the usual duties of a Trustee.
In this case, the Practitioner failed in his obligations in this regard and we find this Reference established.

The Tribunal's conclusions on penalty

On 27 August 2004 the Tribunal heard submissions as regards the penalty that should be imposed in respect of the references found to have been established. On 20 September 2004 it ordered that a report be submitted to this court recommending that the practitioner be struck off the roll. It considered that the practitioner's conduct was so serious that, notwithstanding favourable references from respectable lawyers, this was the only appropriate outcome. It said that the practitioner had not been helpful during the investigation into the matters the subject of the references by the Committee and that his 'apparent false representations to [Mrs S] as to the borrower of some of her money contravenes … the very essence of the duty owed by a solicitor to a client'. The Tribunal also referred to the contradiction between evidence given by the practitioner to the Committee's inquiry in 2002 and some of the written answers filed by him in the Tribunal. It said that it had not 'had the benefit of hearing the practitioner to ascertain the reason for this divergence because the practitioner elected not to give evidence before the Tribunal'.

The practitioner's personal circumstances

The practitioner, who is 56 years old, was a relatively late entrant to the legal profession. He had always wanted to study law, but his family did not have the resources to fund full time study. He completed a period as a cadet journalist and, after a period of national service in 1972, worked in that profession. His desire to study law remained unabated and, in each of five years commencing in 1974, he applied for entry to the University of Western Australia's Law School. He was unsuccessful each time. Instead, he completed a degree in history and politics and a diploma in education. During this period he married, had a child and purchased a house. He was finally accepted by the Law School in 1980, became articled in 1983 and was admitted in 1984. He commenced his own practice in 1987.
Between 1990 and 1993 the practitioner practised in partnership with Mr Duckham. This continued until August 1993. He returned to sole practice until December 2003, when he merged his practice with another law firm and took up a position as a consultant with that law firm.
In 1997 the practitioner's marriage came to an end. The divorce was preceded by a long and difficult period in which there had been a number of separations. These events placed the practitioner under considerable stress.
We have said that the practitioner has been provided with several references, including references given by experienced and reputable legal practitioners. None of those who provided a reference had any cause to doubt his honesty. All of the lawyers who gave references spoke well of the practitioner's legal ability. One of these lawyers is Mr Roderick Hager, the principal of the law firm in which the practitioner was employed as a consultant. In his reference, Mr Hager identified, as the practitioner's only deficiencies, that he was disorganised and that his administrative skills were uncoordinated. Mr Hager suggested that these deficiencies would have been overcome with the support of legal practitioners in his office and full‑time secretarial staff. He said that the practitioner was not involved directly or indirectly in the management or operation of the firm's trust account or in any aspects of its administration.
The practitioner has previously been found guilty of unprofessional conduct on five references between 1988 and 2002. These relate, respectively, to acting in a conflict of interest; knowingly or recklessly misleading or attempting to mislead the Local Court at Perth on 21 July 1997; knowingly misleading or attempting to mislead the Local Court at Perth on 3 November 1997, alternatively knowingly permitting his employee to mislead the court on that day; failing to comply with taxation obligations concerning an employee between 1 July 1995 and 31 July 1997; and neglect and undue delay between 4 March 1999 and 22 May 2000. In four of the five references the practitioner was fined (the fines ranged between $400 and $2,000). In the fifth reference the practitioner was reprimanded.

Submissions made on behalf of the practitioner

In his submissions on behalf of the practitioner, senior counsel for the practitioner very properly acknowledged that conduct of the kind engaged in by the practitioner would ordinarily result in a practitioner being struck off. However, he urged us not to take that course in this case. He relied upon a number of matters which, he submitted, militated against that course.
The first of these is that the practitioner had lacked the benefit of supervision and mentoring in the past, but now has proper support. Mr Hager indicated that he will employ the practitioner, if not struck off, and that he will supervise the practitioner and ensure that he plays no part in the administration or management of the firm. We were told that, if the court should elect not to strike him off the roll, the practitioner will undertake never again to practise on his own account.
Next, counsel for the practitioner relied upon the fact that, for at least a part of the period of the references, the practitioner was in a situation of personal crisis, culminating in his divorce in 1997. We were told that the practitioner now acknowledged, for the first time, that he had had 'a problem' during the period giving rise to the references.
Reliance was also placed upon the fact that the practitioner had repaid to Mrs S the whole of what was owed to her.
Finally, senior counsel for the practitioner pointed to what he described as the practitioner's deep commitment to the practise of law, as demonstrated by his determination to enter law school and by the various references which have been provided in respect of him.
When the practitioner's failure to give evidence before the Tribunal was raised with counsel, he acknowledged that this was an 'appalling error of judgment' but said that the decision not to give evidence had been made in reliance on advice from his then legal representative.

Applicable legal principles

The aim of disciplinary proceedings is not that of punishing the practitioner. Rather, it is to protect the public and the reputation and standards of the legal profession: Re Maraj(A Legal Practitioner) (1995) 15 WAR 12, 24 (Malcolm CJ, with whom Kennedy & Franklyn JJ agreed); Re A Barrister and Solicitor (1979) 40 FLR 1, 24 ‑ 25 (Blackburn CJ, Connor & Davies JJ). Where an order for removal from the roll is contemplated, the ultimate issue is whether the practitioner is shown not to be a fit and proper person to be a legal practitioner of the Supreme Court upon whose roll his name presently appears: Ziems v Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279, 297 ‑ 298 (Kitto J); A Solicitor v Council of the Law Society of New South Wales [2004] HCA 1; (2004) 216 CLR 253 [15] (Gleeson CJ, McHugh, Gummow, Kirby & Callinan JJ). A finding of professional misconduct does not necessarily require a conclusion of unfitness to practise and the question of fitness must be decided at the time of the hearing: A Solicitor [21]. Fitness to practise law requires that the practitioner must command the personal confidence of his or her clients, fellow practitioners and judges: In Re Davis (1947) 75 CLR 409, 420 (Dixon J); Ziems, 287 (Fullagar J). Also, Malcolm CJ, in Maraj (25), has said that:
Integrity, reliability and an appropriate level of efficiency in the administration of money held on trust are all qualities which any reasonably experienced practitioner may be expected to demonstrate, in addition to being professionally competent in pursuing his or her clients' interests.
A prolonged period of unprofessional conduct may justify an order removing a practitioner from the roll even if aspects of that conduct, taken individually, would not justify such an order: Legal Practitioners Conduct Board v Trueman [2003] SASC 58 [13] (Doyle CJ, Duggan & Gray JJ agreeing); Law Society v Murphy [1999] SASC 83 [18] (Doyle CJ, Millhouse & Prior JJ agreeing).
A practitioner's failure to understand the impropriety of his or her conduct may be an important factor in determining whether that practitioner should be permitted to remain on the roll: Legal Practitioners Complaints Committee v Lashansky [2007] WASC 211 [35]; New South Wales Bar Association v Evatt (1968) 117 CLR 177, 183 ‑ 184; Law Society of New South Wales v Moulton [1981] 2 NSWLR 736, 740 ‑ 741, 742 ‑ 743 (Hope JA, Reynolds JA agreeing), 754 (Hutley JA).
An inability to keep a trust account adequately will not necessarily lead to a practitioner being struck off the roll. Examples of cases in which conduct of that kind did not result in a striking off are Council of the Queensland Law Society Inc v Cummings; Ex parte Attorney‑General of Queensland and Minister for Justice [2004] QCA 138 and Attorney‑General and Minister for Justice (Qld) v Priddle [2002] QCA 297. However, in Cummings the practitioner pleaded guilty to all allegations and cooperated with the investigation. He did not directly benefit from improper transfers of funds from his trust account to his general account and, it seems, the shortcomings complained of arose out of his failure to supervise and control his staff rather than from any personal dealings with the trust funds [14], [18], [24]. The lack of dishonesty was regarded as significant.
The lack of any dishonesty was also regarded as significant in Priddle [12]. The court in that case also regarded it as significant that the respondent's conduct arose 'from his difficulty in admitting to his relatives and the Society that his poor judgment was responsible for the loss of a substantial amount of trust money' [12]. In that case, too, the trust moneys were not used for the practitioner's own purposes and he did not profit from his behaviour. The court also mentioned that this had been the only lapse in the practitioner's legal career and that there were personal circumstances which helped provide some explanation for his 'grossly unsatisfactory conduct' [12], [13].
In Legal Practitioners Complaints Committee v Edward [2007] WASC 287, a practitioner who had lent money to her legal practice from a trust fund of which she was the trustee was not struck off. However, the practitioner in that case was motivated by the desire to earn higher interest for the trust fund, she paid interest at overdraft rates which were higher than prevailing bank rates, she kept detailed records of the transactions and she acted openly. The court rejected an allegation that she had behaved dishonestly [64], [77]. When the matter was referred to the Tribunal, the practitioner immediately accepted that a conflict of interest had occurred.
In more serious cases, the courts have not hesitated to strike off defaulting practitioners. Queensland Law Society Inc v Carberry [2000] QCA 450 provides an example. In that case, the practitioner had acted in circumstances of a conflict of interest, although the Tribunal was not satisfied that he had deliberately preferred the interest of someone other than his own client. The practitioner had, on three occasions, failed to provide adequate explanations of his dealings when sought by the Law Society; he had failed adequately to maintain records in relation to trust moneys; and, on two occasions, he had failed to provide the Law Society with an auditor's report as required by the Trust Accounts Act 1973 (Qld). He was also found to have withdrawn trust account funds, other than in compliance with the Trust Accounts Act, on three occasions. On the first of these he had paid trust funds of $1,000 to a client at a time when he held only $606 on behalf of that client. On the second occasion he paid $3,500 from his trust account to his general account, including an amount of $1,500 received by him on account of counsel's fees, at a time when counsel's fees were still unpaid. On the third occasion he paid $3,207 from his trust account to his general account in purported reimbursement of registration fees in circumstances in which his general account cheque for that amount in respect of the registration fees had been dishonoured. A further general account cheque in the same amount had yet to be presented. The Tribunal concluded that the respondent's attention to instructions displayed lack of competence and ignorance and that the interests of others were inadvertently or accidentally advanced. It suspended the practitioner from practice for a period of 12 months and ordered him to attend and successfully complete a practice management course.
The Law Society appealed. The Court of Appeal upheld the appeal and ordered that the practitioner should be struck off the roll. The court (Moynihan SJA & Atkinson J (with whom Pincus JA was in general agreement)) said that it would be inconsistent with its duties 'to preserve the standards of professional practice not to conclude that what had been found against the respondent demonstrated unfitness to practise' [39].
In Moulton, a solicitor had borrowed money from his clients, over a considerable period, at rates of interest below the commercial rate and often on inadequate security. He failed to provide adequate advice, and in some instances gave no advice, to his clients about the desirability or need for obtaining independent legal advice. He was struck off. Hutley JA said of the practitioner (754):
He is a professional man, put forth as a professional adviser and any person is entitled to have from a solicitor on the roll elementary advice on the law of trusts. It is not, in my understanding of what is the minimum standard required of a solicitor, that such ignorance, coupled with an unwillingness or incapacity to take the elementary steps necessary to equip himself with the requisite knowledge, should be tolerated. The respondent was at the time of hearing a practitioner of some eighteen years standing, and he was no mere tyro emerging from a law school. To look at this transaction purely in terms of whether or not he was guilty of a deliberate breach of trust is to weigh it, in my opinion, on entirely wrong principles. It, of itself, disqualifies him from remaining a solicitor, unless it is to be treated as an entirely exceptional aberration.
In the same case, Hope JA, after referring to the decision of the High Court in Evatt, went on to say (740 ‑ 741):
A failure to understand and appreciate the care that must be taken by a solicitor who wants to make use of his trusting client's money for his own purposes would generally show an unfitness to remain on the roll. In so far as Mr Moulton's ignorance should be treated as a lack of knowledge rather than a lack of standards, it was not ignorance of some esoteric or difficult corner of the law; it was an ignorance of general principles applicable to common activities of a solicitor in which, for the most part, Mr Moulton was regularly engaged, and it was an ignorance which he took no steps to remedy.

Should the practitioner be struck off the roll?

This is a case of prolonged, serious breaches of professional duty. Reference 14B related to conduct between 30 August 1991 and 13 January 1993. Reference 14C related to conduct between 1 March 1988 and 26 June 1992. Reference 14D related to the period between 25 July 1995 to 18 August 2002. Reference 15A dealt with conduct occurring on or about 16 August 1991. Reference 15B dealt with the charging of excessive fees between 24 April 1992 and 27 March 1996. Reference 15C alleged a failure fully to account to Prudential between 18 August 1993 and 6 May 1996. Reference 24A related to conduct between 12 February 2001 and 17 July 2003. Reference 24B dealt with conduct in July and August 2002. Reference 28 related to a failure properly to account for money paid in the period 13 January 1988 to 30 July 2003.
The obligations breached by the practitioner were fundamental to his profession.
He acted in a position of blatant conflict of interest. This was so when he arranged for Duckham Thorpe to take out a second mortgage over the roadhouse to secure legal costs incurred by, and advances made to, his client Prudential. It was also the case when he on‑lent Mrs S's money on the security of a mortgage, while giving her no such security, thereby favouring his own interests over hers. This conduct shows, at best, a failure by the practitioner to understand basic fiduciary duties owed by a solicitor and trustee.
Importantly, there were elements of concealment and misrepresentation in the practitioner's conduct. We have said that he was found to have misrepresented the true state of Mrs S's affairs in correspondence with her and that, at material times, he was not forthcoming about the fact that he, or Duckham Thorpe, and not Prudential had borrowed the money from Mrs S.
The practitioner's grossly inadequate record‑keeping, over a prolonged period of time, called for some explanation. To take only one example, his record‑keeping was so poor that it was impossible to tell whether or not Mrs S was ever paid adequate interest. However, as we have said, the practitioner did not give evidence before the Tribunal, in circumstances in which he had provided no sufficient written explanation for his conduct in that respect or in other respects. It is not a sufficient answer to say that he was advised by some other practitioner not to give evidence.
While it may be accepted that the practitioner's matrimonial problems were productive of stress, that cannot sufficiently explain his conduct over the course of many years. As will be apparent, the period covered by the references commenced in early 1988, some nine years prior to his divorce, and ended around the middle of 2003, some six years thereafter.
Notwithstanding that reputable practitioners speak highly of the practitioner, the evidence overwhelmingly establishes that his conduct, engaged in over a sustained period of time, is such as to demonstrate his unfitness to practise. Even if it were to be accepted that his conduct was the product of a failure to understand his obligations, and nothing more, its nature and extent reveals that he did not appreciate even the most elementary obligations owed by a solicitor to a client. In all of the circumstances, no other conclusion is open than that his name should be struck from the roll of practitioners.
We would accordingly order that the practitioner's name be removed from the roll.