Nelson v Legal Services Commissioner
[2013] VSC 486
•6 September 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
S CI 2013 04625
| DARROLL NELSON | Plaintiff |
| v | |
| LEGAL SERVICES COMMISSIONER | Defendant |
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JUDGE: | WARREN CJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 September 2013 |
DATE OF JUDGMENT: | 6 September 2013 |
CASE MAY BE CITED AS: | Nelson v Legal Services Commissioner [2013] VSC 486 |
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PRACTICE AND PROCEDURE – Stay – Application for stay of orders cancelling plaintiff’s practicing certificate – Where plaintiff involved in several ongoing matters – Whether need for public protection – Whether personal prejudice to the plaintiff – Whether conduct serious – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | J Walsh of Branagh | Lewenberg & Lewenberg |
| For the Defendant | P Matthews | Legal Services Commissioner |
WARREN CJ:
The plaintiff seeks a stay of orders of the Victorian Civil and Administrative Tribunal (VCAT) suspending his right to practise as a lawyer for a period of eight months.
The Legal Services Commissioner applied to VCAT pursuant to s 4.4.13(2) of the Legal Profession Act2004 (‘the Act’) for an order under Division 4 of Part 4.4 of the Act.
In the application by the Legal Services Commissioner, the Commissioner recited and brought a total of nine charges against the plaintiff. Essentially the charges related to professional misconduct with respect to the receipt of trust moneys from individuals without a principal of the practice holding an Australian Practising Certificate authorising the receipt of trust money and also the failure to issue a receipt to individuals for cash moneys received.
In the reasons of VCAT, the tribunal set out extensively the facts of the matter including recital of the allegations by the Commissioner:[1]
[1]Legal Services Commissioner v Nelson (Legal Practice) [2013] VCAT 1347 [4]-[23].
THE CHAPPLE COMPLAINT (CHARGES 1-6)
4Mr Nelson’s firm acted for Mrs Cheryle Chapple in a Supreme Court proceeding relating to a mortgage over land owned by Mrs Chapple. Notwithstanding that Mr Nelson did not hold a practising certificate authorising the receipt of trust money, a law clerk employed by him, Mr John Lelleton, received three cash payments, direct from the client, each in the sum of $2,500. No receipt was issued by Mr Lelleton for any of the three cash payments. The first payment was made in April 2009 in the vicinity of chambers of a barrister brief in these proceedings. The second payment was made in or around June 2009 outside the chambers of another barrister, who was subsequently briefed in the matter. The third payment was made in July 2009 either outside Mr Lelleton’s home or in his office.
5Mr Nelson was still unaware of the receipt of these payments by Mr Lelleton in March 2012. Of the $7,500 received, $1,100 was used to pay the first barrister’s fee. The balance of the moneys received from the client ($6,400) has not been able to be recovered.
6The receipt of these three sums is the basis for the first six charges of professional misconduct against Mr Nelson. For each payment, there is a pair of charges. First, there is a charge of receiving trust moneys without holding a practising certificate authorising this (contrary to s.3.3.71(1) of the Legal Profession Act 2004 (the Act)). In each case the professional misconduct alleged is a substantial failure to maintain a reasonable standard of competence and diligence, contrary to s.4.4.3(1)(a) of the Act.
7The second charge in relation to each of the three payments is of professional misconduct, once again within the meaning of s.4.4.3(1)(a) of the Act, and comprised by the failure of the law practice to issue a receipt to the client for the cash money received from Mrs Chapple.
8The LSC’s investigation into Mrs Chapple’s matter commenced with receipt of a complaint from her dated 22 January 2010. Mr Nelson’s practice had acted for her in relation to a foreclosure process by a mortgagee of her house in Mulgrave. It appears the practice negotiated a settlement, which would have prevented the sale of Mrs Chapple’s house, but the moneys due to be paid under that settlement were not paid, and so Mrs Chapple did lose her house.
9Whilst Mrs Chapple alleged that this occurred because the practice and counsel briefed had in effect abandoned her, and acted negligently, those issues were not part of the matters put by the LSC in its case against Mr Nelson. I note for completeness that in a letter to the LSC of 17 November 2011, Mr Nelson asserted that Mrs Chapple was the victim of a fraud perpetrated by a finance broker, that her predicament was hopeless, and her legal team had done all it could to assist her.
10However, even in March 2012, Mr Nelson was still asserting to the LSC in correspondence that there was no proof that Mrs Chapple had made the three cash payments to Mr Lelleton. It was not until some later time that Mr Nelson accepted that this had occurred. This is illustrative of the difficulties the LSC faced in conducting the investigation: it was ultimately discovered that Mrs Chapple was the victim of two separate alleged frauds, and those involved (in particular Mrs Chapple, Mr Nelson and Mr Lelleton) were unable or unwilling to provide information to the LSC. So it took a long time for the LSC to get to the bottom of the events which actually occurred. It had to chase down original records of payments made to Mr Lelleton and to counsel. Mr Nelson’s practice did not have adequate records, and Mr Nelson was not aware of the cash payments having been made.
11The graveman of Charges 1 – 6 is that Mr Nelson did not properly supervise Mr Lelleton. Whilst his guilty plea is an acknowledgement that he did not, Mr Lewenberg sought to emphasise the extent to which Mr Nelson himself was a victim.
FAILURE TO PROVIDE INFORMATION TO THE LSC (CHARGE 7)
12Charge 7 alleges professional misconduct within the meaning of s.4.4.3(1)(a) of the Act in that contrary to s.4.4.11(1)(a) and (b) of the Act, Mr Nelson failed to provide the LSC with documents, records and an explanation relevant to its investigation into a complaint by Mrs Chapple.
13The LSC’s investigation proceeded from January 2010 to May 2012 without much progress being made. On 7 May 2012, the LSC sent Mr Nelson a formal request for specified information under s.4.4.11(1)(a) and (b). The LSC’s request was for:
•Confirmation that counsel had been paid $1,100 by cheque from Mr Nelson’s personal bank account. Or if this was not correct, and the circumstances were as stated in his letter of 15 March 2012 that Mr Lelleton used his own funds to purchase a bank cheque, Mr Nelson was requested to provide his firm’s documentary evidence that such a cheque was purchased.
•A complete set of accounting books (ledgers, journals, cash receipt books, cash payment books, banking records) and any other documents that disclose the receipt and expenditure of funds in relation to the Chapple matter.
•Records disclosing all employee payments to Mr Lelleton.
•Documentary evidence and an explanation of the source of funds used for payment of two sets of court fees for the filing of a counterclaim in the Chapple matter. This was to include the precise amount paid, the date paid, who paid the funds into court and how they were accounted for in the firm’s records.
14Despite a number of follow-ups and promises of a response over the following several months, Mr Nelson has never complied with this request.
THE FITZPATRICK COMPLAINT (CHARGES 8 AND 9)
15In 2009 Mr Nelson’s firm was acting for Ms Wendy Fitzpatrick in relation to recovery of a debt owed to her. Ms Fitzpatrick’s partner, Mr Kerry Milte, a barrister, and Mr Nelson were longstanding friends. The appropriate procedure for a practitioner such as Mr Nelson who did not hold a practising certificate authorising the receipt of trust moneys was for him to arrange for a client to pay disbursements such as Court filing fees direct.
16However, for the convenience of Ms Fitzpatrick, who it was said lived some distance from central Melbourne, a different arrangement was made to enable the filing of a complaint in the Magistrates’ Court at Melbourne. The sum of $350 was paid into Mr Nelson’s TAB account on 11 June 2009 at 1.47 pm. Six minutes later, the sum of $330 was withdrawn by Mr Sam Dinley, who was working for Mr Nelson at the time. Mr Dinley used those funds to pay the filing fee at the Melbourne Magistrates’ Court.
17Again, this comprised the receipt of trust moneys by Mr Nelson, contrary to the restriction on his practising certificate. This was the subject of Charge 8, which alleged professional misconduct within the meaning of s.4.4.3(1)(a) of the Act (being a substantial failure to maintain a reasonable standard of competence and diligence) by these actions.
18A second payment of $460 from Ms Fitzpatrick was made into Mr Nelson’s TAB account some time after the first payment. The purpose was to enable Mr Sam Dinley to pay the Court fee for entering judgment in default of appearance. The sum of $350 was withdrawn from the account on 7 July 2009, 10 minutes after the sum of $460 had been deposited.
19It was later demonstrated that this money would not have been used to enter judgment, because firstly, a defence had been lodged. And secondly, had a default judgment been able to be entered, the cost at that time would have been only $17.
20Subsequently, in a letter dated 8 August 2011, Mr Nelson asserted he would have regarded the deposit of $460 into his TAB account as reimbursement by Mr Milte for use of a mobile phone provided to him by Mr Nelson. Mr Milte advised he did pay an amount into the TAB account for mobile phone usage, but recalls that the amount was around $100 or $200. Mr Nelson accepted that at least part of this sum of $460 comprised trust money.
21Regardless of these uncertainties, the position is that the payment of both these amounts constituted the receipt of trust money by Mr Nelson, contrary to the restriction on his practising certificate.
22The receipt of $460 on 7 July 2009 was the subject of Charge 9, which was otherwise in the same terms as Charge 8.
23Whilst the payments the subject of Charges 8 and 9 were relatively small and were made to save inconvenience for clients, who were also personal friends, and were only held for a short period, nevertheless they were a breach of the strict rules prohibiting the receipt of trust moneys by Mr Nelson, given that his practising certificate did not allow this.
The plaintiff pleaded guilty to all charges. The tribunal made the following orders:
1.Mr Nelson’s practising certificate is cancelled, with effect from 2 September 2013. No practising certificate may be issued for eight months after the date the cancellation commences.
2.Any practising certificate issued to Mr Nelson as a principal in the future is to be subject to the condition that he employ a bookkeeper approved by the LSC, and/or make other arrangements for the financial management of his practice approved by the LSC.
3.Liberty to apply in relation to the date when the cancellation of Mr Nelson’s practising certificate comes into effect.
4.Mr Nelson is to pay the LSC’s costs, fixed at $9,000.
It is to be noted that the tribunal delayed the taking of effect of the orders for a period of one month to enable the plaintiff to make whatever professional and personal arrangements were necessary.
The background to the plaintiff is that he is now a 79 year old individual. He was admitted to practice in 1958. He has practised for nearly 55 years. There was evidence given to the tribunal as to his good character provided by barristers and solicitors who have worked with the plaintiff. There was also evidence before the tribunal, and reasserted before me, that the plaintiff has engaged in extensive pro bono work during his period of practice. Furthermore, he has been an individual who has been prepared to take on cases that other solicitors would not.
The plaintiff has a prior history, which is recited in the reasons of the tribunal. In the course of submissions to me, counsel for the plaintiff accepted the description of the prior history of the plaintiff as being correct:
In December 1990, his practising certificate was suspended for 12 months following findings of misconduct for failing to complete work on behalf of five clients, and acting for both lender and borrower in connection with a loan of money, without the written acknowledgement of the parties. He did not resume practice in Victoria until June 1998. In 2000, after a further 27 months of practice holding a principal practising certificate (without the authority to receive trust money) he again ceased practising for seven and a half years. On this occasion his ceasing to practice was associated with fraudulent activities having been undertaken by an employee who he had failed to supervise properly. At a disciplinary hearing relating to these matters in November 2003, he undertook not to practise for another three years.[2]
[2] Legal Services Commissioner v Nelson (Legal Practice) [2013] VCAT 1347 [1].
The plaintiff seeks a stay of execution of the tribunal’s orders. No summons has been filed seeking such relief, however an affidavit has been filed. A summons was filed seeking an extension of time to seek leave and also applying for leave to appeal.
I was informed, and this was confirmed in an affidavit, that the plaintiff had omitted to file the application seeking leave to appeal within time due to a misunderstanding as to the nature and timing of the orders of the tribunal and also because in the intervening month he was seeking legal advice.
However, the matters before me are confined to the stay application. The question of whether an extension of time and, in the event, whether leave to appeal should be granted are matters to be determined by an associate justice of this Court.
I note that the plaintiff intended to file a notice of appeal citing various grounds attacking the VCAT reasons. I was provided by counsel for the plaintiff with a draft notice of appeal. However, those grounds were not pursued. Ultimately it was conceded by counsel for the plaintiff that there was one error of law giving rise to a ground of appeal to the effect that the penalty imposed by VCAT was manifestly excessive.
The plaintiff submitted, both before VCAT and this Court, that no cancellation should be ordered, rather that conditions of practice should be imposed upon the plaintiff.
The Legal Services Commissioner, before VCAT and before me, urged that the plaintiff's right to practice should be cancelled for a period 12 months. Ultimately the tribunal, obviously taking into account all matters, imposed a penalty of eight months cancellation, delayed the taking of effect of that cancellation for one month and otherwise made various orders with respect to the anticipated application of the plaintiff seeking to recommence practice.
In the affidavit filed in support of the stay application, the plaintiff said:
Given my plea, the appeal is confined to errors of law in relation to my sentencing, culminating in the cancellation of my practising certificate and disqualification from reapplying for a period of eight months. I am 79 years of age and rely upon my practice as a solicitor for my income. I have been in a relationship for 35 years and my partner's and my financial circumstances are such that we are dependent on that income derived from my practice as a solicitor.
This was the extent of the evidence relied upon by the plaintiff to support the application for the stay. Of course, under the usual principles, the plaintiff bears the onus, and it is indeed a high onus, of satisfying the Court that the prerequisites for the granting of a stay are met. Unfortunately, the plaintiff has provided very little evidence to the Court as to his circumstances other than the broad assertions contained in the paragraph I have just recited.
In the course of submissions, and I emphasise this was not provided on affidavit, counsel for the plaintiff informed the Court that the plaintiff had a number of ongoing matters where it was considered his continued involvement was essential. I was informed that there are the following:
a) a part-heard matter in the Supreme Court of Victoria before Ginnane J. I was not told of any details of that matter;
b) a matter called Palmer in the Supreme Court of Western Australia, which is set down on 11 and 12 December 2013. I was informed it has been a matter ongoing for some two years and that it would be burdensome to the plaintiff's client for another solicitor to be retained at this time;
c) a matter in the Supreme Court of Queensland;
d) a matter in the Court of Appeal of the Supreme Court of Queensland concerning acquisition of farming property. I was informed that no trial date had been set but that the case involved a property worth around $6 million and that the parties have little in the way of funds. I was informed that there would be difficulty if another solicitor was to take the matter over at this stage.
These matters properly should have been on affidavit. However, I take note of those matters in the course of considering whether or not to exercise the discretion.
In the course of argument, counsel for the plaintiff submitted that there was no risk to the wider public in all the circumstances, because the plaintiff would undertake not to take on any new or further work, save would only continue to act in the matters referred to. The point was made that the Legal Services Commissioner has already looked into the practice of the plaintiff.
It was acknowledged by counsel for the plaintiff that these matters should have been deposed to on affidavit. In any event, it was ultimately put to me that there would be no prejudice to the wider public on the basis of these matters. It was further urged that the conduct perpetrated by the plaintiff should at most be described as careless. It was submitted that the circumstances involved two legal practices and that the individuals who had in fact perpetrated the offending conduct had been given a free hand and abused that liberty which had been given to them.
It was also submitted that the plaintiff had simply trusted people too much. Emphasis was placed on the fact that the plaintiff had not personally benefited from the moneys involved in all the circumstances. Ultimately counsel for the plaintiff put to me that the plaintiff had received ‘a huge wake-up call’ as a result of what had occurred.
For the Legal Services Commissioner, I was assisted by reference to the various authorities.[3] Counsel for the Commissioner placed emphasis on the fact of the prior history of the plaintiff and that these breaches were serious breaches. It was emphasised that it would be entirely inappropriate to downplay or qualify the conduct of the plaintiff.
[3] Jackamarra (an infant by her next friend Jackamarra) v Krakouer & Anor (1998) 153 ALR 276; Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331; Woods and Geary v The Legal Ombudsman [2002] VSCA 133; Bell Corp Victoria Pty Ltd & Ors v Stephenson [2003] VSC 255; Bendigo Bank Ltd v Zoltan Csizmadia-Estok [2007] VSC 112; Maher & Anor v Commonwealth Bank of Australia & Anor [2008] VSCA 122; Medical Practitioners Board of Victoria v Lal [2008] VSCA 264; Frugtniet v Law Institute of Victoria Ltd [2011] VSCA 184; Legal Services Commissioner v Turner [2012] VSC 394.
Ultimately it was urged for the Commissioner that the public needs protection from conduct of the type carried out by the plaintiff. In particular, it was emphasised that the perception of the public is significant in this case. It was argued that if a person is permitted to behave as the plaintiff has, without appropriate sanction, it sends a poor message to the community. Ultimately it was urged that the need for public protection outweighs the personal impact on the plaintiff in all these circumstances.
Turning then to the principles on which I must be satisfied in the exercise of the discretion[4], I turn first to the question of personal prejudice to the plaintiff, namely, whether the plaintiff will be unable to regain his position. Doubtless there will be difficulties for the plaintiff, however I am confined to the matters on affidavit that have been put to the Court. I do note however the matters described by counsel that I have already adverted to.[5] There is nothing apparent to me to disclose why his current files cannot be assumed by a different practitioner. His financial circumstances are not clarified. He will be able to resume his practice at the appropriate time.
[4]Maher & Anor v Commonwealth Bank of Australia & Anor [2008] VSCA 122.
[5]Para [17].
In the ordinary course, if this was the first offending of the plaintiff then the prejudice may be construed in a different way. The difficulty for the plaintiff is that he has had, to use his counsel's expression, previous ‘wake up calls’. Those circumstances do not appear to have been appropriately heeded. In any event it seems to me that, on balance, the personal prejudice to the plaintiff is very limited on the evidence that he has put before me.
The next matter is the seriousness of the conduct. On the face of matters as described by the tribunal and in the light of the prior history of the plaintiff, they are indeed serious matters. This question is also considered in the context of public protection. The President of the Court of Appeal Justice Winneke recited in Woods[6] the significance of public protection and the need to find a balance of the factors involved.
[6]Woods and Geary v The Legal Ombudsman [2002] VSCA 133 [7].
It is all very well to describe the plaintiff as endeavouring to provide a service to his existing clients and I advert to his cases already referred to. The fact remains that the wider public needs to be protected from conduct of the plaintiff. In my view it is not sufficient to say that he would proffer the undertaking indicated by his counsel that he would not take on any new matters. The fact also remains that the wider public embraces the clients in the particular cases adverted to. Those clients need protection just as much as the wider public in the broader sense.
I turn then to the question of the merits of the appeal. Given that the plaintiff may yet pursue his application for an extension of time for leave to appeal and apply for leave to appeal I will be constrained in what I say on the matter of the merits.
As I have observed the plaintiff’s counsel conceded that the appeal will be confined to the question of the penalty, that is, it is tantamount to an appeal against sentence. It was acknowledged by counsel for the plaintiff that the penalty imposed by the tribunal was within range. It is not for this Court to look at what it would have imposed. Rather it is necessary to show that there has been an arguable error perpetrated by the tribunal in the nature of manifest excess. The principles in that regard are well known.
On the materials before VCAT and on the materials before me it is difficult to see that the contemplated appeal has very much in the nature of merit operating in favour of the plaintiff. Of course, this view is provisional and is not concluded without the materials and submissions that may be pleaded before an associate justice.
Finally, there is the question of public protection which I have already adverted to. Applying principles as stated by Winneke P in Wood, I would see the balancing factors as weighing against the exercise of the discretion to grant the stay. I observe that the discretion is a wide one and, also, that the plaintiff carries the burden.
In the circumstances I will refuse the application for the stay.
I would further add that if the plaintiff intends to pursue his appeal he will, as I have said, need to apply for an extension of time and then apply for leave.
In my view it is in the interests of the individual and also the public interest to resolve these other applications quickly. If I am asked I would be prepared to direct expedition for the hearing of those matters before an associate justice of this Court.
I will order accordingly.
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