Meredith v Legal Profession Admission Board of NSW

[2008] NSWSC 1170

CITATION:	Meredith v Legal Profession Admission Board of NSW [2008] NSWSC 1170
HEARING DATE(S):	2 October 2008
JUDGMENT DATE :	6 November 2008
JURISDICTION:	Civil
JUDGMENT OF:	McClellan CJatCL
DECISION:	1. Summons dismissed 2. Order the plaintiff to pay the second defendant's costs.
CATCHWORDS:	LEGAL PRACTITIONERS - readmission to practice - after being struck off - whether fit and proper person to be readmitted - where plaintiff has not discharged debts to Fidelity Fund to extent of full capacity to do so
LEGISLATION CITED:	Legal Profession Act 2004
CATEGORY:	Principal judgment
CASES CITED:	Dawson v Law Society of New South Wales (Court of Appeal, 17 November 1989 and 21 December 1989, unreported) Evatt v NSW Bar Association (Court of Appeal, 12 April 1972, unreported) Kotowitz v The Law Society of New South Wales (Court of Appeal, 2 August 1987, unreported)
PARTIES:	Warner Maxwell Meredith (Pltf) Legal Profession Admission Board (1D) The Law Society of NSW (2D)
FILE NUMBER(S):	SC 2008/12083
COUNSEL:	T Hall (Pltf) C A Webster (2D)
SOLICITORS:	Hall Partners Pty Limited (Pltf) Crown Solicitor's Office (1D) Raymond John Collins (2D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

McCLELLAN CJ at CL

THURSDAY 6 NOVEMBER 2008

12083/2008 MEREDITH v LEGAL PROFESSION ADMISSION BOARD & ANOR

JUDGMENT

1 HIS HONOUR: The plaintiff was admitted as a solicitor on 17 March 1972. He practised as a sole practitioner until 21 January 1999 when his practicing certificate was cancelled by a resolution of the second defendant (The Law Society of New South Wales). The plaintiff’s name was removed from the Roll of Legal Practitioners on 12 August 2004 following a hearing before the New South Wales Administrative Decisions Tribunal Legal Services Division. The plaintiff had misappropriated trust funds belonging to a number of his clients. The total sum taken was $219,510.95.

2 The plaintiff applied to the Legal Profession Admission Board pursuant to s 24 of the Legal Profession Act 2004 to be readmitted as a legal practitoner. That application was refused and by letter dated 9 April 2008 the Board stated that:

“The reasons for the Board’s decision were based on the following:

· The admitted misappropriations were committed over an extended period which spanned the five year period from 1993 until 1998. The offences resulted in severe losses to clients and were prolonged, deliberate and quite antithetical to the position of trust that you held as a Solicitor of the Supreme Court of NSW;

· The context and duration of the past misappropriations is destructive of present satisfaction of your good character and therefore your suitable for the readmission.”

3 The plaintiff appeals from the Board’s decision to this Court.

4 The plaintiff’s dishonest conduct continued over a number of years. Between 22 November 1993 and 10 December 1998 he misappropriated a total sum of $123,652.25 which was the monies of Ms Samson. Ms Samson had given a power of attorney to the plaintiff and entrusted monies to him to be invested in mortgage advances. The monies were misappropriated in a total of five transactions.

5 The plaintiff also misappropriated monies from two deceased estates for which he was acting. From the Estate of Parish he drew a total of $5,000 in excess of his proper entitlement to fees. In relation to the Estate of Withers he misappropriated a total sum of $17,827.07 between December 1997 and November 1998.

6 The plaintiff also misappropriated the sum of $25,000 being the monies of a client Ms Davis. He used the monies to meet liabilities which he and his wife had to the Westpac Banking Corporation.

7 He also misappropriated a sum of $30,000 from the account of his client Ms Langley. He repaid these monies entering the transaction under the name of J & H Howland in an attempt to disguise the fact that he was making the payment.

8 On 12 September 1996 he misappropriated monies in the sum of $16,576.84 from the account of his clients Mr and Mrs McIntyre. Those monies were misappropriated on 12 September 1996 but were “repaid” by monies misappropriated from the Samson account.

9 His final act of dishonesty was his failure to pay $1,000 of counsel’s fees owing in respect of fees incurred on behalf of his client Mr Desmond Francis.

10 The Administrative Decisions Tribunal decision contains a summary of some but not all of the defalcations. The Tribunal found that upon discovery the plaintiff made a full and prompt confession of his misdeeds. The Tribunal was of the opinion that his conduct indicated genuine remorse and contrition.

11 The Tribunal accepted that the plaintiff had engaged in property speculation which had led him into financial difficulties. Apart from monies owed to his bank he had ongoing debts with the Australian Taxation Office. His dealings with that office became embroiled in litigation and mounting interest liabilities. During the period of his defalcations he also suffered from personal difficulties occasioned by the ill-health of his wife. The defalcations were discovered during an inspection of his Trust Account by an auditor from the Law Society. A Receiver was appointed to his property on 22 December 1998. The plaintiff sold his legal practice in 1999 and was made bankrupt in 2001. He initially experienced difficulty in obtaining other employment. However, since September 2005 he has been employed by the ICA Group earning $115,000 per annum.

12 The plaintiff’s family difficulties were exacerbated when his wife purchased an hotel in 2001. She financed the acquisition by borrowings which included borrowings from her brother and the daughter she has with the plaintiff. The hotel venture, in which the plaintiff was employed, ran into difficulties. The hotel has been lost leaving substantial monies owing to the family members.

13 There was evidence before the Tribunal, as well as evidence before this Court, of the assistance which the plaintiff has voluntarily provided for others. He has engaged in pro bono legal work and has demonstrated a compassionate generosity in his dealings with various people.

14 In July 2000 the plaintiff and his wife refinanced their home borrowing $420,000. From these monies a total of $141,000 was paid to the Law Society to meet part of the plaintiff’s liability to the Fidelity Fund. However, the monies were claimed by the plaintiff’s Trustee in Bankruptcy and the Fidelity Fund received only $35,687.75 from the bankruptcy leaving an amount outstanding to the Fund, including interest, of $231,771.37. The plaintiff has incurred further debts to the Society in relation to costs totalling $4,599.47. He has made payments of $200 per month, commencing in February 2008 to discharge this further debt. However, he has fallen into arrears and to date has paid only $800 of the total sum.

15 I have already referred to the fact that the plaintiff’s misconduct continued over a number of years. It was a deliberate course of conduct by which he misappropriated the monies of a number of clients. It was not an isolated incident. Although a response to the financial difficulties in which he found himself, his repeated defalcations over a significant period indicated a significant flaw in his character.

Relevant principles

16 Following the enactment of the Legal Profession Act 2004 a former legal practitioner who is denied readmission by the Board can appeal to the Supreme Court (s 28(1)). The appeal is to a single judge. Under the previous legislative regime these matters were considered by the Court of Appeal. It is in that Court that the relevant principles have been considered and refined. There are two decisions of particular significance in the present case.

17 In Kotowitz v The Law Society of New South Wales (Court of Appeal, 2 August 1987, unreported) the Court of Appeal considered the position of a solicitor who sought to be restored to the Roll. In that case the solicitor was found to have misused his trust account. However, he was also found to have deceived the Statutory Committee and to have actively deceived the Court of Appeal. Since his removal from the Roll he had successfully conducted a real estate business and involved himself in teaching real estate. Kirby P who was in the minority was of the view that the solicitor should be restored to the Roll. His Honour provided the following summary of the relevant principles:

“Applicable legal principles
The legal principles to be applied to the case include the following:
1. The purpose of the jurisdiction which is exercised by the Court is not the punishment or further punishment of the former solicitor. That is the province of the criminal law. Rather the Court's jurisdiction is for the protection of the public which deals with solicitors on the basis that they are members of an honourable profession who can be expected, without reservation, to conduct the affairs of their clients with honour and in whom the clients can place unbounded confidence. See Willes J in In Re Poole LR 4 CP 350; Griffith CJ in Incorporated Law Institute of New South Wales v Meagher (1909) 9 CLR 655 and Ex parte Munro Re Law Society of New South Wales (1969) 71 SR (NSW) 448
2. The claimant, who seeks to establish his fitness to be restored to the Rolls, having been removed therefrom, bears the onus of proving his case. It has frequently been said that it is a heavy onus. See eg Street CJ in Evatt v The New South Bar Association, unreported, CA 15 December 1981.The same view precisely is taken in other jurisdictions eg the United States of America. See In the Matter of Sidney J Clark 406 A 2d 28 (1979).
3. The question whether the claimant is a fit and proper person and one to be trusted to exercise the high responsibilities of a "minister of justice" is one to be determined on solid and substantial grounds. See Griffith CJ in Meagher , ibid p 664. See also Ex parte Lenehan (1949) 77 CLR 422; Re A Solicitor [1952] VLR 385; Re a Solicitor [1985] VR 343;
4. After having had his name removed from the Roll, an applicant for restoration to the Roll is in a more disadvantageous position than an original applicant. He must, in effect, displace the decision which has been made. That decision involves the judgment that the solicitor is "probably permanently" unfit to be on the Roll. See Ex parte Lenehan, ibid, 422. Presumptions of fitness which might arise otherwise from an absence of contrary suggestions, can no longer advantage the former solicitor precisely because of his removal from the Roll on the basis of unfitness. See Ex parte Lenehan ibid, 422. Cf Ex parte Munro, ibid, 451. In so far as there is a difference between this statement of principle and the observations of Isaacs J in Meagher, ibid, 679, this Court does well to follow the later statements of the High Court. They have been applied many times since in this Court. They appear to reflect, more accurately, the inevitable burden which a person, having been removed for misconduct, must face in displacing the formal finding of unfitness which is inherent in the earlier removal. Cf Re A Solicitor [1952] VLR 385, 389; Re Lundon [1926] NZLR 656, 657.
5. The decision to be made in each case depends, ultimately, on the facts proved. There is no simple formula which can be applied by reference to the seriousness of the offences and the passing of time. There is no sure path to restoration to the Roll, guaranteed by engaging in particular activities, whether of employment or of service to the community.
6. The issue in each case ultimately, is whether the court hearing the application can conclude, on the basis of all the evidence, that the claimant is now a fit and proper person to join other members of an honourable profession in the responsible and trusted activities that are involved in the work of the legal profession. It has been said many times that what is at stake is not so much the reputation of the claimant but the Court's assessment of his character, uprightness, honour and trustworthiness. See Meagher, bid, 692, and Re S (A Solicitor) [1985] VR 343, 347. Again, the same criteria apply in other jurisdictions, notably the United States. See eg Schwarz v Board of Bar Examiners of New Mexico 353 US 232 (1957) and Koninsberg v State Bar of California 353 US 352 (1957), discussed in A Gerson, Lawyers Ethics , 1980, New Brunswick, 225 sub nom B Brown “Reinstatement Dilemma”. See also State; ex rel Spillman v Priest 242 NW 433 (1932). Expressions such as “the instrinsic moral character” of the claimant bear the stamp of nineteenth century approaches to psychology. However, they recur in the statements of the highest courts in this and other countries. One day they may need to be re-considered because of our modern knowledge about the complexity and variability of human personality and its many motive forces. For present purposes I approach this case assuming that it is possible to search for and to find in a person such as the claimant a single "instrinsic moral character."
7. Nonetheless, relevant to the decision to be made is any evidence concerning the reputation which the claimant holds, the employment which he has pursued, any community activities he has engaged in, the time which has passed within which to assess the question posed for the Court and, if the time be long, whether the claimant would be sufficiently knowledgeable to re-join a learned profession without re-training. As these questions are asked in the context of the exercise of a jurisdiction for the protection of the public, it is plainly important to have regard to any dealings which the claimant has had, since removal, with the public, in so far as these may demonstrate such a change as converts the claimant from an unfit person to a person fit to be restored to the Roll.
8. Because the jurisdiction is for the protection of the public, regard also may be had, to the public's interest in the restoration to the Roll of such persons as have demonstrated, including by their work, activities and life, a fitness to be restored. For. cultural and historical reasons, redemption and forgiveness are important attributes of the shared morality of our society. In part, this is because of the teachings of religious leaders who have profoundly influenced our community's perception of justice and fairness, reflected from earliest times in the courts. See eg St Matthew's Gospel, 18, 11 ff, The Acts, 3, 19. In part it derives from the self interest which any community has to encourage the rehabilitation of those who lapse and to hold out to them the hope that, by diligent and honourable efforts over a period, their past may be forgiven and they may be restored to the good opinion of their family, friends, colleagues and society. The public’s interest also includes the economic interest which is involved in utilising, to the full, the skills of talented people who have undergone years of rigorous training but who, having misconducted themselves, have had to be removed for a time from positions of responsibility and trust. Disbarment or removal from the Roll of Solicitors is not necessarily intended to be permanent in fact. See Ex parte Evatt; Re New South Wales Bar Association (1971) 71 SR (NSW) 153, 157; The Prothonotary of the Supreme Court of New South Wales v Ritchard , unreported, CA, 31 July 1987 and cf 7A Corpus Juris Secundum para 122, (1980).
9. In the case of some offences, committed over an extended period, with deliberate intent and resulting in severe losses by clients, it will be difficult to contemplate any circumstances in which the offender will be restored to the Roll. But where the offences are isolated, where there is no evidence of prolonged deliberate conduct and where, to the full extent possible in the circumstances, the funds of clients have been restored so that there is no eventual pecuniary loss, the public interest which this Court protects includes the public interest, certain matters being affirmatively proved, in the restoration of the practitioner to the Roll.
10. There is no public interest in denying forever the chance of redemption and rehabilitation to former practitioners. On the contrary, the public is better served if, in appropriate cases, those who have offended are afforded a second chance, under whatever conditions and after whatever time lapse, the court considers appropriate. This Court has full power to protect the public by imposing appropriate conditions relating to such matters as limitations on practice or preconditions as to refresher legal education which take account of developments in the law during the period of removal from the Roll.”

18 Of particular significance to the present case are the principles defined in para 9. The plaintiff committed his misappropriations over an extended period. The amounts lost vary but were not insignificant. Although bankruptcy has intervened the plaintiff has failed to reimburse the Fidelity Fund beyond the monies paid by his Trustee in Bankruptcy.

19 As I have indicated Kirby P was in the minority. Both Samuels and Mahoney JJA were of the opinion that the solicitor should not be restored to the Roll. Their Honours concluded that the solicitor had failed to demonstrate that he was again a fit and proper person for readmission “upon solid and substantial grounds”.

20 In Dawson v Law Society of New South Wales (Court of Appeal, 17 November 1989 and 21 December 1989, unreported) the Court of Appeal considered the position of a solicitor who had wrongly taken a total sum of $19,934.45 from his clients. The Council of the Law Society had resolved to approve his readmission on conditions. Those conditions included a requirement that the solicitor pay to the Law Society an amount equivalent to any amount paid by the Fidelity Fund in respect of his practice as a solicitor.

21 Kirby P repeated the principles which he had defined in Kotowitz. In applying those principles to the facts in Dawson his Honour discussed the question of reimbursement and possible conditional readmission of a solicitor. His Honour accepted that it was not a universal rule in New South Wales “that before a practitioner’s name is restored to the roll he or she must reimburse all clients who have suffered financial loss or, where those clients have been indemnified by the Fund, must reimburse it.” However, his Honour went on to say:

“Although each case is different and no universal rule may be laid down, I see disadvantages in a scheme of repayment which follows the restoration of the name of the former practitioner to the roll. What is the court then to do if the solicitor fails to maintain the payments? If he is otherwise an honourable practitioner, is his name then to be removed, eg for financial disabilities? It is much preferable that the reimbursement, if it should be ordered, should be made before the order is made restoring the solicitor’s name to the roll. Although I realise that the claimant would have difficulty in raising the funds I am not persuaded that it would be impossible. I do not believe that to so require would render the order of restoration ineffective and pointless. It is preferable in my opinion that the losses of former clients which the claimant agrees he must bear and reimburse should be entirely out of the way before his name is restored to the roll. Then, in his dealings with practitioners who know of these unhappy events he could proceed on the basis that he has not only restored himself personally and professionally. He will also have closed the chapter of the losses of his former clients.”

22 His Honour concluded that the solicitor should be readmitted but only on condition that he pay the appropriate monies to the Law Society before he was readmitted. As I have related below a belated offer of conditional readmission was made in the present case.

23 Both Mahoney and Meagher JJA were of the view that the solicitor should not be readmitted. Mahoney JA emphasised that it was expected of a solicitor that he or she would not only obey the law but would behave honourably. His Honour said:

“The law cannot function – at least, it will not function as it is required to do in this country – if the court and his fellow practitioners cannot act upon the basis that a solicitor will honour his word, that he will not abuse confidence reposed in him, and that property entrusted to his care will be safe.”

24 His Honour emphasised that a court may determine whether a solicitor will act properly in the future “by taking into account the standards that he has exhibited and his understanding of what conduct is required of a solicitor” (page 6). His Honour concluded that the application should be rejected and said, inter alia:

“I am not satisfied that he now accepts, or at least fully appreciates, what is required in terms of obligation and honour, of a solicitor. He has done little if anything, to repay the monies lost because of his misconduct.”

25 Meagher JA was not persuaded that the solicitor had furnished “demonstrative, objective proof of persistence in habits of integrity, uprightness and responsibility” (per Sugerman P and McLelland JA in Evatt v NSW Bar Association (Court of Appeal, 12 April 1972, unreported). In expressing his reasons his Honour was critical of the fact that the solicitor had made no attempt to repay some of the monies he had taken. On this issue his Honour said:

“It is timely to reiterate the proposition that, except perhaps in the most exceptional circumstances, no defaulting member of the profession will ever be readmitted until at least he has made full restitution to those clients whom he has caused financial loss. Justice requires such a rule.”

26 As I have indicated the plaintiff’s defalcations reflect a deliberate course of dishonest conduct over a significant period of time. He took money from a number of clients and from some clients took money on a number of occasions. As the authorities make plain when the conduct which has led to the removal of a solicitor from the Roll is not an isolated act but a deliberate and continuous process over a period of time it may be more difficult for the former solicitor to demonstrate to the requisite standard that he is fit and proper to be readmitted as a legal practitioner. Notwithstanding these difficulties I do not believe that the plaintiff’s past conduct should have the consequence that he could never be readmitted. The Tribunal found that the plaintiff cooperated in the investigation of his practice and has demonstrated genuine remorse and contrition. I have no doubt that the sentiments which he expressed to and which were accepted by the Tribunal and which he repeated before me are genuine. I am also satisfied that if readmitted to practice he would be most unlikely to re-offend.

27 It is apparent from the evidence before this Court, and the submissions on behalf of the plaintiff by his solicitor, that the plaintiff, until well into the hearing, had adopted the position that by reason of his earlier payment and his bankruptcy he no longer had an obligation to the Fidelity Fund. His solicitor submitted to this Court that, by reason of the monies he had paid to the Law Society, but which were claimed by the Trustee in Bankruptcy, and the fact that the plaintiff repaid the sum taken from Mr Langley and repaid from the Samson monies the monies misappropriated from Mr and Mrs McIntyre, the present shortfall in the Fidelity Fund was in the order of $32,000. The submission was without merit. Although the plaintiff did, to his credit, raise monies against the family home in an endeavour to discharge some of his debts, the Fidelity Fund, together with interest, is still owed a total sum of $231,771.37. It is apparent that until I raised the matter the plaintiff did not recognise an obligation to repay these monies. Although he rightly had concluded that his legal liability was confined by his bankruptcy, he entirely failed to recognise his moral obligations.

28 The plaintiff’s lack of appreciation of his moral obligations was compounded by the fact that he has in recent years been receiving an income in the order of $115,000 per annum. No doubt at considerable personal sacrifice this income has been used to meet the obligations to the mortgagee of the family home and also repay monies owing to the plaintiff’s brother-in-law and daughter. However, by giving priority to these obligations, he has entirely failed to recognise or attempt to meet his obligations to the Law Society. By choosing to advance the interests of his family, maintain the mortgage on the family home and make repayment of his wife’s debt rather than meet his obligation to the Fund, the plaintiff has demonstrated a serious misunderstanding of the attributes required of a person who seeks to be readmitted to the legal profession.

29 When this matter was pointed out to the plaintiff’s solicitor and an opportunity granted for reflection he provided the Court with an offer which contemplated his readmission on condition that he entered into binding arrangements to repay the Fidelity Fund over time. Although this offer indicates that the plaintiff now has some appreciation of the conduct expected of him it suffers from the problems identified by Kirby P in Dawson in relation to conditional readmissions. The fact that the offer was only made in response to my raising of the issue confirms that the plaintiff has not yet come to a proper appreciation of the conduct required of him if he is to be readmitted as a legal practitioner. I am satisfied that he is not a fit and proper person to be readmitted to the legal profession.

30 For these reasons I have concluded that the summons must be dismissed with costs. However, I confirm, as did the Administrative Appeals Tribunal, that I should not be taken as concluding that the plaintiff could never be readmitted. This can only occur when by his actions he has demonstrated an appreciation of the conduct and personal qualities expected of a member of the profession.

ORDERS:

31 Summons dismissed. Order the plaintiff to pay the second defendant’s costs.

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