Prescott v Legal Practitioners Conduct Board - [2012] SASCFC 145

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
PRESCOTT v LEGAL PRACTITIONERS CONDUCT BOARD
[2012] SASCFC 145
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Peek and The Honourable Justice Blue)
21 December 2012
PROFESSIONS AND TRADES - LAWYERS - COMPLAINTS AND DISCIPLINE - PROFESSIONAL MISCONDUCT AND UNSATISFACTORY PROFESSIONAL CONDUCT
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - DEALINGS WITH CLIENT
PROFESSIONS AND TRADES - LAWYERS - TRUST ACCOUNTS - COSTS OWING TO SOLICITOR
The Legal Practitioners Conduct Board laid a charge in the Legal Practitioners Disciplinary Tribunal alleging unprofessional conduct on the part of the appellant and the second respondent. The charge related to a matter in which the practitioners acted for several investors in relation to potential claims against professional advisors for losses suffered as a result of investments made in the Lateral Investors group of companies. The charges alleged:
(a)     the appropriation of trust monies on seven occasions towards the firm's bills without the clients having been given the relevant bills and in one case contrary to the express terms of the retainer;
(b)     failure on three occasions to ensure that clients were provided with trust account statements showing appropriations within a reasonable time of the appropriations;
(c)     failure to ensure that separate trust ledger accounts were kept in respect of each client;
(d)     gross overcharging of clients on four occasions in respect of standard form letters sent to multiple addressees;
(e)     failure to maintain adequate communications with clients over the currency of the matter.
The Tribunal found the appellant and the second respondent guilty of unprofessional conduct in each respect as charged. The Tribunal also found that the appellant gave deliberately false evidence in the proceedings before it. It recommended that disciplinary proceedings be commenced against him in this Court.
The appellant appeals against the findings of unprofessional conduct and the recommendation that disciplinary proceedings be commenced in this Court. The Board brings disciplinary proceedings seeking that the appellant's name be struck off the roll of legal practitioners.
Held:
Per the Court:
1.       The Board's allegations and the Tribunal's findings in relation to the six aspects of unprofessional conduct alleged were available on the face of the charge laid in the Tribunal (at [106]-[114]).
Observations about the appropriate form of charges laid in the Tribunal under the Act (at [100]-[104]).

2.       The Tribunal did not err in finding and correctly found that Mr Prescott was guilty of unprofessional conduct in each of the six respects alleged by the Board (at [173]-[182], [190], [197], [208], [226] and [239]).
3.       All of the conduct charged related to the same clients and the same matter. In these circumstances, it was appropriate for the Tribunal to consider the whole of the appellant's conduct to assess whether collectively it amounted to unprofessional conduct. The Tribunal correctly concluded that it did (at [241]).
4.       The Tribunal did not err in finding and correctly found that the appellant gave deliberately false evidence before it in 2011 (at [183]).
5.       The appeal is dismissed. The Court will hear the parties as to the appropriate disciplinary order in the circumstances (at [242]).
Fair Trading Act 1987 (SA) s 56; Legal Practitioners Act 1981 (SA) s 5, s 41, s 42, s 82, s 86, s 89; Legal Practitioners Regulations 1994 (SA) r 14, r 17A; Supreme Court Civil Rules 1987 (SA) r 101A.01, Fourth Schedule, referred to.
Re A Practitioner of the Supreme Court [1927] SASR 58, applied.
Kerin v Legal Practitioners Complaints Committee (1996) 67 SASR 149; The Law Society of South Australia v Murphy [1999] SASC 83; (1999) 201 LSJS 456; Legal Practitioners Conduct Board v Ardalich [2005] SASC 478; Legal Practitioners Conduct Board v Kerin [2006] SASC 393; (2006) 246 LSJS 371, considered.

PRESCOTT v LEGAL PRACTITIONERS CONDUCT BOARD
[2012] SASCFC 145
Full Court: Kourakis CJ, Peek and Blue JJ

THE COURT:      The Legal Practitioners Disciplinary Tribunal found the appellant, Mr Prescott, guilty of unprofessional conduct.[1] The Tribunal recommended that disciplinary proceedings be commenced against him in this Court.[2]
[1]    Legal Practitioners Act 1981 (SA) s 82(6).
[2]    Legal Practitioners Act 1981 (SA) s 82(6)(a)(v).
Mr Prescott appeals to this Court[3] against the findings of unprofessional conduct[4] and the recommendation that disciplinary proceedings be commenced in this Court.[5]
[3]    Legal Practitioners Act 1981 (SA) s 86.
[4]    Second Notice of Appeal dated 23 August 2012 in Action No 788 of 2012.
[5]    Notice of Appeal dated 12 October 2012 in Action No 788 of 2012.
The Legal Practitioners Conduct Board has instituted disciplinary proceedings in this Court[6] against Mr Prescott seeking an order that his name be struck off the roll of legal practitioners.[7]
[6] Legal Practitioners Act 1981 (SA) s 89.
[7] Action No 1567 of 2012.
Mr Prescott’s appeals and the Board’s disciplinary proceedings were heard together insofar as they raise for determination the question whether Mr Prescott was guilty of unprofessional conduct. The question what orders ought to be made following that determination in each matter was deferred for subsequent hearing and determination.
The charge
On 14 July 2006, the Board laid a charge in the Tribunal alleging unprofessional conduct on the part of Mr Prescott and Mr Reynolds. The charge was amended on 1 May 2007 (“the charge”).
The conduct the subject of the charge occurred between January 1998 and September 2000. Up to October 1998, the charge related to conduct by Mr Prescott and Mr Reynolds while they were legal practitioners employed by the incorporated legal practice conducted by Townsends Barristers and Solicitors Pty Ltd trading as “Townsends”. After October 1998, Mr Prescott and Mr Reynolds were practising in partnership under the firm name “Reynolds Prescott” until its dissolution in August 2000.
The Board’s case before the Tribunal was that the practitioners engaged in unprofessional conduct in six respects. We refer to them as six “counts”, even though they were not so described or numbered in the charge.[8]
[8] There is an issue on appeal whether it was open to the Tribunal to make a finding of unprofessional conduct in the second respect (“count 1B”) given the structure and wording of the charge (and also in certain other respects). While not an issue in the appeal, the question was also raised whether allegations of unprofessional conduct in different respects ought to be expressed as separate counts in a charge. We address those questions below.
The charge related to conduct by the practitioners in connection with a matter in which Townsends and Reynolds Prescott successively acted for several investors in relation to potential claims against professional advisors for losses suffered as a result of investments made in the Lateral Investors Limited group of companies (“the Lateral Investors Group”).
The six counts are summarised as follows.
Count 1A.The practitioners were responsible for Townsends appropriating a total of $42,741.60 on seven occasions between March and October         1998 towards Townsends’ bills for legal costs without the clients       having been given a bill specifying the costs and describing the legal       work to which they related, contrary to section 41(1) of the       Legal        Practitioners Act 1981 (SA) (“the Act”).
Count 1B.The practitioners were responsible for Townsends appropriating      money on one of those occasions, being $3,830 in July 1998, contrary      to the express terms upon which they were paid into Townsends’        trust account by Mr Wetherall.
Count 2A.The practitioners were responsible for the failure by Townsends on three occasions between March and July 1998 to provide to the clients a trust account statement within a reasonable time of          appropriation of trust moneys towards legal costs, contrary to regulation 17A of the Legal Practitioners Regulations 1994 (SA) (“the Regulations”). This related to three of the appropriations, being those made on 9 and 11 March and 5 June 1998, in respect of which trust account statements were not provided to the clients until 29 July 1998.
Count 2B.The practitioners were responsible for the failure by Townsends between February and October 1998 to ensure that a trust account ledger was kept in respect of each client, contrary to regulation 14(1) and (2) of the Regulations. A single trust account ledger was maintained for all clients who had potential claims in relation to investments in the Lateral Investors Group.
Count 3.The practitioners were responsible for gross overcharging by          Townsends on four occasions between January and August 1998.      Improper and inappropriate charges were alleged to have been made         for standard form letters sent to multiple addressees, being investors in the Lateral Investors Group. The four bills included seven standard       form letters sent to multiple addressees ranging from 11 investors in one case to 353 investors in another case. The total amount charged       for the seven standard form letters was alleged to be in excess of       $19,000.
Count 4.The practitioners were responsible for Townsends and Reynolds     Prescott between March 1998 and September 2000 failing to maintain        adequate communications with each of the clients. With the exception      of two client groups, it was alleged that there was little or no reporting    to clients over that period of progress or developments in the matter or        otherwise.
Until 31 January 1999, the Act referred to “unprofessional conduct” but did not exhaustively define it. Section 5 provided that the term included two types of conduct without affecting the generality of the phrase. Section 5 relevantly provided:
“unprofessional conduct” in relation to a legal practitioner includes –
(a) an illegal act of any kind committed in the course of practice by the legal practitioner; and
(b) any offence of a dishonest or infamous nature committed by the legal practitioner in respect of which punishment by imprisonment is prescribed or authorised by law;
In Re A Practitioner of the Supreme Court,[9] this Court held that “unprofessional conduct”, in the ordinary sense of the term, includes:
conduct which may reasonably be held to violate, or to fall short of, to a substantial degree, the standard of professional conduct observed or approved of by members of the profession of good repute and competency.[10]
[9] [1927] SASR 58.
[10] Ibid at 61 per Murray CJ, Angas Parsons and Richards JJ.
This concept of “unprofessional conduct” applies to counts 1 to 3 and to that component of count 4 which relates to conduct up to and including January 1999.
With effect from 1 February 1999, the Act was amended to replace the single concept of “unprofessional conduct” with a two tier definition. The lower tier was designated “unsatisfactory conduct” and was defined by section 5 to mean:
conduct in the course of, or in connection with, practice by the legal practitioner that is less serious than unprofessional conduct but involves a failure to meet the standard of conduct observed by competent legal practitioners of good repute.
The term “unprofessional conduct” was defined to mean:
(a) an offence of a dishonest or infamous nature committed by the legal practitioner in respect of which punishment by imprisonment is prescribed or authorised by law; or
(b) any conduct in the course of, or in connection with, practice by the legal practitioner that involves substantial or recurrent failure to meet the standard of conduct observed by competent legal practitioners of good repute;
This exhaustive definition of “unprofessional conduct” applies to that component of the conduct the subject of count 4 which relates to the period between February 1999 and October 2000.
Background facts
Mr Prescott was admitted as a barrister and solicitor of this Court in 1979. Between 1979 and 1996, he worked as an employed solicitor successively in five law firms. He commenced as an employed solicitor (senior associate) with Townsends in 1997 and became a principal of that firm[11] on 1 July 1998. The other principals were Mr Townsend, Mr Prescott and Mr Allen as at 1 July 1998.
[11] Shareholder in and director of the company but designated “partner”.
Mr Reynolds was admitted as a barrister and solicitor of this Court in 1991. He worked as an employed solicitor with the predecessor firm of Townsends and became a principal of that firm in 1995. In October 1998, Mr Prescott and Mr Reynolds left Townsends to establish their own practice known as Reynolds Prescott. They dissolved that partnership in August 2000.
The Lateral Investors Group
Directors of companies in the group included Jim McDonnell, Ian Westcott and Darren Brown. The Group promoted a system known as FIDM, which invested in the futures market and reputedly produced a return variously represented to investors at between 20 and 40 per cent per annum.
Approximately 60 family groups in South Australia invested in or through the Group. They included the Schilling, Schubert and Fuss families. Most of those investors were introduced by Mr Askwith, who had an association of some type (never apparently ascertained) with Bird Cameron.
In the case of the Schilling, Schubert and Fuss families (from whom witness statements were taken by ASIC in the presence of Mr Prescott), Mr Askwith introduced each family to one or more of the three directors of the Group. The director or directors made representations to the families in the presence of Mr Askwith. They represented that at least 70 per cent of invested funds were deposited with a bank and up to 30 per cent were invested in the FIDM system. The Fuss family invested $185,000 in or with the Lateral Investors Group. These representations were made from late 1995 to early 1996 onwards. Mr Askwith made no representations himself.
Approximately 350 Victorian families made investments in or through the Lateral Investors Group. It appears that many of them made investments after receiving advice from a professional investment advisor (there being several different advisors depending on the family).
An unknown number of New South Wales and Queensland families also made investments in or through the Lateral Investors Group.
In November 1997, the Lateral Investors Group collapsed. The principal companies were placed in liquidation.
Instructions to Townsends
In December 1997, the Schuberts were referred to Townsends for legal advice concerning their lost investment. Mr Reynolds opened a file in the name of Mr and Mrs Schubert and transferred the file to Mr Prescott, although he retained a supervisory role and undertook some limited work from time to time.
On 11 December, the Schilling family spoke to Mr Reynolds and on 15 December, the Fuss family spoke to Mr Prescott.
On 19 December, Mr Prescott obtained from the liquidator of Lateral Investors Ltd a list of shareholders for the purpose of a possible joint or class action against a financial advisor.
Canvassing SA investors
On 24 December, Mr Prescott wrote a standard letter in common form to 63 South Australian investors (all of the shareholders shown on the list received from the liquidator except the Schubert, Schilling and Fuss families). He said that there may well be potential for a successful claim against the accountant and his former firm for negligent advice. He proposed that investors join together and contribute to a fighting fund to enable the matter to be prosecuted. He proposed contributions pro-rata to the amount of investment, with an initial contribution (in an amount to be fixed depending on the number of participating investors) for the initial stages comprising expert and legal advice.
On 13 January 1998, Mr Prescott sent a standard letter in common form to 43 investors who had not responded to the 24 December letter. He said that the setting of a pro-rata contribution could not be made until Townsends knew which investors were interested and the amount of their investment.
On 14 January, Mr Prescott retained Ian Robertson as counsel to advise during the investigative stages of the matter.
On 29 January, Mr Prescott wrote a standard letter in common form to 32 investors who had expressed interest in response to his 24 December letter as well as the Schuberts and Schillings. He enclosed Terms of Engagement and a Schedule setting out the proposed pro-rata contribution calculated at 4 per cent of total investment.
The Terms of Engagement provided for Townsends to act on the client’s instructions to investigate recovery of the client’s investment. They provided for Townsends to provide a monthly report outlining the progress of the investigation, keep the client informed of significant events falling within each reporting period and provide monthly bills for fees. They provided for time‑based charging at $160 per hour together with disbursements. They provided for payment of fees from money held in Townsends’ trust account on behalf of the client. Townsends agreed to keep the client informed, which included replying to correspondence and returning telephone calls. The letter requested the return of the signed Terms of Engagement and Schedule.
The Tribunal found that the Terms of Engagement made no reference to a pooling of funds, to other investors, to joint instructions, to use of the client’s funds for work undertaken prior to the date of the Terms of Engagement or to the use of the client’s funds to pay for work undertaken in connection with claims by other investors.
Mr Prescott and Mr Reynolds had assessed that $175,000 was sufficient to undertake the investigation and provide the advice which Mr Prescott was proposing to the investors.[12] This was the basis for their selection of the figure of 4 percent referred to in Mr Prescott’s 29 January letter. The Tribunal found that at 29 January when Mr Prescott wrote to investors who had expressed interest, he did not know how many investors (if any) would contribute and hence did not know what would be the size of the pooled fund. Mr Prescott’s letter to the investors did not provide any estimate of the costs likely to be involved in the investigation and provision of advice proposed by Mr Prescott, nor did it inform them of the number or value of the claims of investors who had expressed interest. The Tribunal found that, if only some investors contributed to the pool, that would have a significant impact on the money available to investigate, obtain an opinion and prosecute any action that may follow.
[12] The Tribunal’s finding to this effect at [55]-[56] of its Report is not challenged on appeal.
Over time, files were opened in the names of individual investors in the Lateral Trading Group who instructed Townsends but a single working file was maintained for all of them. We refer to that file as the Lateral Investors file.
January bill
The bills and trust account transactions on the Lateral Investors file are summarised in tabular form in Appendix A, but are explained in greater detail below.
On 30 January, Mr Prescott prepared a bill addressed to “Lateral Investors c/- Townsends Solicitors” for work undertaken in December and January. The bill was $11,602.20 for professional fees and a total of $12,025.95.

In mid-January, Mr Robertson had advised Mr Prescott that the apportionment of costs between group members was a difficult issue and should be done carefully and documented and that he should talk to the Law Society before proceeding. No doubt as a result of this advice, Mr Reynolds asked Townsends’ internal bookkeeper, Mr Astley, to telephone the Law Society’s trust account inspector to enquire whether Townsends could operate a single trust ledger account for the Lateral Investors clients collectively.
On 9 February, Mr Astley telephoned the trust account inspector, Mr Staunton. There is a difference between Mr Staunton’s contemporaneous handwritten note and Mr Astley’s recollection of the conversation three years later. However, it was common ground that, on the premise of whatever factual assumption was put by Mr Astley to Mr Staunton (which on either account was inaccurate), Mr Staunton advised that Townsends did not need to have separate trust ledger accounts for each depositor.
Canvassing Victorian investors
On 11 February, Mr Prescott sent a standard letter in common form to 353 Victorian investors. Mr Prescott said that the issues were common to all investors, regardless of where they were located, and hence there was no need for each State to conduct its own investigation. He said that Townsends, together with counsel and accounting advisors, believed that there were very good prospects of success against the financial advisors (whether accountants or stockbrokers). He said that Townsends had already been instructed to act on behalf of a large number of investors in South Australia (as at 11 February, Townsends had received expressions of interest from a number of South Australian investors, but had only received instructions to act from three investors). He sought expressions of interest. He did not refer to or give an estimate of the likely costs of undertaking the action which he proposed, nor to the amount which had been contributed or was to be contributed by South Australian or Victorian investors.
Further communications
On about 11 February, Mr Prescott received a letter from Piper Alderman, who had been instructed by the Schillings in relation to the action proposed by Townsends on behalf of investors in the Lateral Investors Group. Piper Alderman said that it was important that, as soon as practicable and before significant costs were incurred, various matters be addressed in either a deed or rules adopted by a meeting of the investor clients. Those matters included the election of a committee to instruct Townsends; the need to ascertain and disclose the number of clients, the amount of their losses and their contributions to costs made from time to time; the need to agree on methods for addressing clients who defaulted in contributions towards legal fees; the need to identify and agree the stages of the prosecution of the matter and the estimated costs of those stages, funding in stages and other matters. Mr Robertson endorsed to Mr Prescott the views and proposals of Piper Alderman. On 4 March, Mr Prescott wrote a letter to South Australian investors foreshadowing a draft set of rules, but he took none of the steps suggested by Piper Alderman and endorsed by Mr Robertson.
On 19 February, Mr Prescott wrote a letter to a South Australian investor who had asked a series of questions. He advised that he was intending to prepare and send to each investor a questionnaire seeking details of meetings and investments together with documentation to be collated and assessed. He proposed seeking information at the same time on how Lateral Investors operated, with the assistance of the Australian Securities Commission (“ASIC”) and the liquidator and probably court orders for access to documents. An assessment would then be made as to the realistic chance of success. This process might take six months in all. He expressed confidence that there was a good case and that the chances of recovery were good and said that counsel was of the same view.
On 27 February, Mr Prescott prepared a bill addressed to “Lateral Investors” for work in February 1998. The bill was $10,051.14 for professional fees and a total of $10,588.69.
Between February and mid-May, the Fuss family and six smaller investors sent to Townsends contributions totalling $14,607.60 together with signed Terms of Engagement and the Schedule. The contributions were paid into Townsends’ trust account and recorded in a single ledger account in the name of “Mr and Mrs J Schubert and others re Lateral Investors”.
On 4 March, Mr Prescott sent a standard letter in common form to 41 South Australian investors. He said that Townsends had received an indication of interest in proceeding from nearly 100 Victorian investors and that, although the investment advisors varied, the background work required would be the same and hence would reduce the individual costs of the South Australian investors. He said that Townsends would soon be arranging a meeting of investors at which draft rules, to be sent to investors in the near future, would be proposed for adoption and a committee elected. Mr Prescott did not ultimately send to investors draft rules or call a meeting of investors.
March appropriations
On 9 March, Townsends drew a cheque on its trust account for $12,025.95 and deposited the cheque into its general account in full payment of the January bill. The trust cheque requisition could not be located. The cheque was signed by Mr Townsend. There is a dispute as to who caused or was involved in this trust transfer, to which we return later. There is no dispute that Townsends’ January bill was not sent to any of Townsends’ clients.
On 11 March, Townsends drew a cheque on its trust account for $140 payable to its Victorian agents. The trust cheque requisition to initiate this payment was signed by Mr Prescott. No bill for that disbursement was sent to any of Townsends’ clients.
Exploration of external funding
Between December 1997 and May 1998, no substantive work was undertaken by way of investigation of the potential claim against investment advisors or otherwise. Such steps as were taken were limited to exploring internal and then external litigation funding. No report was sent to clients or investors at the end of February, March or April. They were not informed that only seven investors had contributed approximately $15,000, no substantive work had been undertaken, or that the contributions which had been made had been applied to charges for steps taken to the end of January.
Contribution by the Schillings
On 29 May, the Schillings contributed $20,000 as a first instalment which was credited to the trust account ledger in the name of Mr and Mrs Schubert.
On 29 May, Mr Prescott sent a standard letter in common form to 278 Victorian investors. He explained the delays since his initial letter (11 February) as being due to unsuccessful efforts to gain external funding (thwarted by maintenance and champerty). He said that, while there was some prospect of a change in the law, it was very important to progress the matter and conduct the necessary investigation without further delay. He enclosed Terms of Engagement and a Schedule and in this respect his letter was similar to the 29 January letter to South Australian investors. The Terms of Engagement and letter did not address the matters identified at [33] above which had not been addressed in the 29 January letter to South Australian investors.
June appropriations
On 29 May, Mr Prescott prepared a bill addressed to “Lateral Investors” for work undertaken between March and May. The bill was $11,957.62 for professional fees and a total of $12,298.32.
On 5 June, a cheque was drawn on Townsends’ trust account for $22,461.65 and paid into the general account. The cheque was used to pay the February bill and almost all of the May bill. The principal source of the funds used was the contribution of $20,000 made by the Schilling family on 29 May. The trust cheque requisition was completed by a Townsends secretary, Ms Campbell, and she wrote Mr Prescott’s initials on it but it was not signed. Mr Reynolds filled in the amount and signed the trust cheque. There is a dispute as to who caused or was involved in this trust transfer, to which we return later. There is no dispute that Townsends’ February and May bills had not been sent to the clients who had deposited those moneys into Townsends’ trust account or indeed any of the investors.
June to July
On 9-10 June, 18 June and again on 25 June, Mr Prescott travelled to Coonalpyn to take statements from the Schilling family. Mr Reynolds accompanied Mr Prescott on some or all of those trips. Mr Prescott attended at an interview by ASIC of Mr Fuss on 23 June and of the Schuberts on 26 June.
On 16 June, Mr Prescott wrote to a Victorian investor in response to several queries. In response to a question whether the proposed pro-rata contribution would be a deposit for future work or for expenses already incurred in rounding up investors to join, he said that contributions would assist in work to be done from that point in time being the investigatory process. In response to a question how a class action could be mounted by people who received advice from many different types of advisors in many different ways, he said that it was not intended to mount a class action but rather a group action in which all costs would be shared, depending on level of investment, regardless of investment advisor or circumstances. In response to a question about hourly rates, he said that no charge would be made for typists, mailing clerks or other normal work performed by administrative staff and, where there was extraordinary administrative work (such as collating or sorting documents), the charge would not exceed $58.07 per hour.
On 22 and 26 June, Mr Prescott created two disbursement bills addressed to “Lateral Investors”, each in the sum of $111 for travel between Adelaide and Coonalpyn. The bills were not sent to the clients. On 26 June, he signed a trust cheque requisition for $222 in payment of those two bills. On 6 July, a cheque was drawn on the trust account for $222, signed by Mr Reynolds and paid into Townsends’ general account in satisfaction of those two bills.
On 27 June, a Victorian investor, Mr Wetherall, wrote to Mr Prescott. He enclosed a cheque for $3,830 together with signed Terms of Engagement and a completed and signed Schedule. In his covering letter, he said that he understood from his telephone discussions that Townsends were to assess the viability of his case and, if they considered it unlikely to succeed, would return his contribution in full shortly after reaching such opinion.
On 30 June, Mr Prescott prepared a bill addressed to “Lateral Investors” for work in June.[13] The bill was $14,318.35 for professional fees and a total of $15,097.25.
[13] It also included eight items omitted from the May bill.
In June and July, Townsends received contributions from nine Victorian investors totalling $6,914.
On 16 July, Mr Prescott and Mr Reynolds travelled to Coonalpyn to meet with the Schilling family. At one stage, Mr Prescott was present when the Schillings were interviewed by ASIC. On 21 July, Mr Prescott sent to each of the Schuberts and Mr Fuss a copy of the statement taken by ASIC from them and a copy of a draft statement which Mr Prescott had taken at the same time based on the ASIC interview.
On 22 July, Mr Reynolds caused draft trust account statements to be prepared for 15 of the 16 investors who had made contributions (excluding the Schillings). The typed drafts showed the date and amount of deposits into the trust account but not payments out. Mr Reynolds hand wrote on to the drafts the dates and amounts of payments out of the trust account. Some of those notations were referable to payments actually made out of trust. However, some of the notations appear to anticipate a payment to be made on 27 July. Mr Reynolds also drafted a standard letter to each of the 15 investors. The letter said that Townsends were finalising the matters required for the barrister’s opinion and that they would advise the client further of progress once counsel’s opinion had been obtained.
At the end of 23 July, Mr Reynolds went on leave. Mr Prescott signed the 15 letters on 29 July and sent them to the clients with accompanying trust account statements.
July appropriations
On 21 July, Mr Prescott signed a trust cheque requisition for $141.90 payable to Diners Club in respect of his accommodation at Coonalpyn. A trust cheque was signed by Mr Reynolds and banked into Townsend’s general account. No bill for those disbursements had been or was later sent to any clients.
On 28 July, a cheque for $6,550 was drawn on Townsends’ trust account and paid into its general account in payment of the balance of the May bill and part-payment of the June bill. The trust cheque requisition could not be located. The trust cheque was signed by Mr Townsend. There is a dispute as to who caused or who was involved in this trust transfer, to which we return later. There is no dispute that Townsends’ May and June bills had not been sent to the clients who had deposited those moneys into Townsends’ trust account or indeed any of the investors.
August to October
On 5 August, a Victorian investor paid a contribution of $1,200. No further contributions were made after this date, other than by the Schillings.
On 21 August, Mr Prescott wrote to Mr Fuss, Mr Schubert and Mr Schilling enclosing draft witness statements. On 28 September, Mr Prescott wrote to Mr Robertson. He enclosed witness statements prepared by him for the Fuss, Schubert and Schilling families together with statements taken from them by ASIC and the documents attached to their ASIC witness statements. He requested Mr Robertson’s advice in relation to possible defendants, heads of action and prospects of success.
On 19 October, Townsends drew a cheque for the balance of funds held in trust, being $1,200.10, to Simon Lane in part payment of his bill dated 29 June for counsel fees. The trust cheque requisition and trust cheque could not be located. There is a dispute as to who caused or was involved in this trust transfer, to which we return later. No bill for that disbursement had been or was later sent to the clients who had deposited those moneys into Townsends’ trust account or indeed any of the investors.
On 22 October, Mr Prescott wrote to Mr Schilling on the letterhead of Reynolds Prescott informing him that Mr Reynolds and he had established their own practice and requesting the Schillings to complete an attached Authority for the Schilling file to be transferred to Reynolds Prescott.
Counsel’s opinion
On 8 January 1999, Mr Robertson provided a written opinion to Mr Prescott. The opinion related only to the Schilling, Fuss and Schubert families. It was based on their ASIC statements together with the documents attached to those statements. Mr Robertson concluded that it could not be determined from the documents provided to him what (if any) relationship there was between Mr Askwith and Bird Cameron and hence whether there was any potential claim against Bird Cameron. Any claim against Mr Askwith was problematic because he had not made any positive representations or given any advice to the three families concerning the Lateral Investors Group. He had merely introduced them to directors of the Lateral Investors Group and remained silent while those directors made representations. Mr Robertson described misleading conduct as the strongest of the potential causes of action, but assessed it only as “reasonably arguable”. He assessed a breach of duty of care cause of action as “arguable”. He said that it was not known whether Mr Askwith was insured and recommended that formal notice of claim against each of Mr Askwith and Bird Cameron be given forthwith with a view to triggering any policy of insurance which might respond (if not too late). Mr Robertson said that there were potential claims against Messrs McDonnell and Brown but such claims were practically valueless because they were insolvent.
On 25 January, Mr Robertson produced three separate opinions (one dealing with each of the Schilling, Fuss and the Schubert families). Mr Prescott provided either the original opinion or the separate opinion relating to the Schilling family to the Schillings. He did not provide any opinion to any other investors.
On 24 February, Mr Schilling wrote to Mr Prescott saying that the Schillings had decided to terminate their instructions to Reynolds Prescott and instruct Piper Alderman exclusively instead.
On 10 August, 28 September, 22 January, 12 February and 1 March, Mr Prescott prepared bills addressed to “Lateral Investors” for work between July 1998 and February 1999. The bills totalled approximately $14,000.
Mr Wetherall and Ms Schlemmer
On 21 February 1999, Mr Wetherall wrote to Mr Prescott saying that he had made his contribution in June 1998 on the basis that the viability of his case would be assessed and, if it was considered unlikely to succeed, his contribution would be returned in full. He sought clarification of the position.
On 24 June, Mr Wetherall wrote to the Board complaining that he had made his contribution on the basis that his case would be assessed and charges would only begin when Townsends were ready to proceed with the case on his behalf. He also complained that he had not received monthly reports and had not received answers to his questions and correspondence. On 11 August, Mr Prescott wrote to Mr Wetherall. He advised Mr Wetherall that, in his view, there was a claim against the broker who had advised him to invest in the Lateral Investors Group. He said that he was in discussions with a Melbourne firm of solicitors with a view to working together to progress the claims. He apologised for the delays and gave an undertaking that they would not occur in the future. He said that Mr Wetherall’s contribution would be refunded if he had no valid case.
On 22 August, Mr Wetherall replied. He provided further information, enquired whether an opinion had been obtained on his standing to claim, enquired about the other investors’ claims and asked several other questions. On 6 September, Mr Prescott replied. He said that Mr Robertson’s opinion was, by and large, supportive of a cause of action against the investment advisor but did not cover Mr Wetherall’s particular situation. He did not provide a copy, explain the position in relation to other investors or address the use of Mr Wetherall’s contribution.
On 28 October, Mr Wetherall replied to Mr Prescott’s letter. He enquired about reimbursement of contributions and asked a number of other questions. Mr Prescott did not reply.
On 22 May 2000, Ms Schlemmer wrote to Mr Prescott enquiring about the current status of the legal action against Lateral Investors Limited. She said that, contrary to the Terms of Agreement, she had not heard from Townsends for 18 to 24 months. Mr Prescott did not reply.
On 2 August 2000, the partnership of Reynolds Prescott was dissolved. Mr Reynolds initially retained the Lateral Investors file but on 7 September 2000 he sent it to Mr Prescott who declined to receive it.
Proceedings in the Tribunal
Between July 1999 and April 2005, correspondence passed between the Board and Mr Prescott and Mr Reynolds. On 14 July 2006, the Board laid the charge against Mr Prescott and Mr Reynolds.
A panel of three members of the Tribunal (chaired by Ms Pyke QC) heard the charge over nine days in May and September 2007. We will refer to that hearing as the 2007 hearing. Documents were tendered and the Board called Mr Townsend as part of its case. Mr Reynolds gave evidence and called Mr Allen as a witness. Mr Prescott gave evidence-in-chief and was cross-examined by Mr Reynolds. He was cross-examined by the Board at the end of Friday 21 September.

On Monday 24 September, Mr Prescott applied for the hearing to be adjourned because he was suffering from depression. On 25 September, Ms Bonesmo was called by Mr Prescott to give expert costing evidence and Mr Ericson was called by the Board on the same topic. The Tribunal then adjourned the further hearing of the charge on Mr Prescott’s application due to his depression.
During the adjourned period, one member of the panel died and another was appointed a Magistrate. On 21 July 2008, the Presiding Member of the Tribunal, Mr Morcombe QC, heard Mr Prescott’s submission that he had no power to constitute a new panel to hear the charge. On 17 October, Mr Morcombe QC held that he had power and constituted a new panel of three members, presided over by Ms Maharaj QC.
On 17 December, Mr Prescott instituted proceedings in this Court against the Board and Tribunal seeking a permanent stay of the proceedings in the Tribunal. The initial challenge was to the power of Mr Morcombe QC to constitute a new panel. Ultimately, that challenge was abandoned. Mr Prescott then contended that the prosecution of the proceedings in the Tribunal was an abuse of process due to delay.
On 30 September 2009, Justice Layton dismissed Mr Prescott’s judicial review proceedings on the basis that the prerogative relief sought by him was not available (in part because Mr Prescott could apply to the Tribunal for a stay).[14]
[14] [2009] SASC 309.
On 19 October, Mr Prescott applied to the Tribunal for an order that the proceedings be permanently stayed. His application was listed for hearing on 2 to 5 February 2010. On 19 January, he abandoned the application.
The new panel heard the charge over eight days in July, October and December 2011. We will refer to that hearing as the 2011 hearing. It was agreed that the exhibits tendered and oral evidence given before the first panel in 2007 would be treated as evidence given in the new hearing.
Mr Reynolds and Mr Prescott gave further evidence-in-chief and in cross‑examination. Mr Prescott called three medical practitioners, Dr Healy, Mr Clark and Professor McFarlane, concerning his depression in September 2007 when he gave evidence before the first panel. The Board called Dr Raeside in response. The Board also called Ms Campbell, who had been a secretary at Townsends relevantly between December 1997 and October 1998.
On 10 May 2012, the Tribunal delivered a Report and Findings. It found that each of Mr Prescott and Mr Reynolds had engaged in unprofessional conduct as charged. In addition, it found that Mr Prescott’s evidence before it that he had not been aware before late July 1998 that bills had not been sent to clients or that moneys had been transferred from the trust account in payment of Townsends’ bills was an untruthful reconstruction designed to absolve him.
On 20 September 2012, the Tribunal delivered a Report and Finding on penalty and costs. It noted that Mr Reynolds had been cooperative with the Board, made admissions at an early stage, made restitution to clients and that his conduct reflected insight into and remorse regarding his breaches. It reprimanded him, fined him $5,000 and required him to complete a trust account course.
The Tribunal observed that the most serious finding against Mr Prescott was that he had given deliberately false evidence and that he had not displayed insight or remorse. It recommended that disciplinary proceedings be commenced in this Court against him.
The Tribunal’s Reasons
The Tribunal concluded that Mr Prescott was guilty of the unprofessional conduct particularised in Count 1A. The Tribunal found that both Mr Reynolds and Mr Prescott were knowingly involved in the appropriation of the trust moneys in that they had both “set up and were aware of the modus operandi for appropriations to be made”. The Tribunal found that Mr Prescott prepared all of the bills and that he knew “about all of the relevant appropriations and sanctioned them”. The Tribunal found that Mr Prescott requested and completed the trust requisitions. The Tribunal found that both he and Mr Reynolds displayed a reckless indifference to compliance with the terms of their engagement and the requirements of the Act and Regulations.
The Tribunal found that both Mr Prescott and Mr Reynolds were motivated by a desire to bill and recoup trust moneys on account of fees as soon as possible without proper regard to their professional obligations to report and send bills and trust statements to their clients. The Tribunal found that Mr Prescott’s ambition to become a partner of Townsends without making a capital contribution substantially clouded his appreciation of his obligations to the Lateral Investors clients.
In its determination of Count 1A, the Tribunal also made a finding that Mr Prescott’s testimony in the 2011 hearing was “an untruthful reconstruction of events which is designed to absolve him from any implication in the firm’s failure to send out accounts, trust account statements and the transfer of trust moneys without the statutory requirements of the Act being followed.”
In relation to count 1B, the Tribunal construed Mr Wetherall’s letter dated 27 June 1998 as making it clear that his funds could not be used until a favourable opinion had been provided on his claim. It referred to Mr Prescott’s own evidence that he took the view in July 1998 that the conditions imposed by Mr Wetherall precluded use of his funds. It found that Mr Wetherall’s conditions were known to Mr Prescott and were never fulfilled. It found that the funds were wrongly paid out of the trust account in breach of trust and thereby misappropriated. It found that Mr Prescott was responsible for the appropriation, which was a consequence of its findings in relation to count 1A.
In relation to count 2A, the Tribunal found that Mr Prescott had an obligation to ensure that bills and regular trust account statements were sent to clients both under regulation 17A and under the general law. The Tribunal found that Mr Prescott failed to discharge these obligations. The Tribunal found that Mr Prescott was aware that trust moneys had been appropriated towards payment of the bills and that trust account statements were not sent out to clients shortly thereafter. The Tribunal concluded that Mr Prescott was guilty of unprofessional conduct.
In relation to count 2B, the Tribunal found that, as the practitioner with the primary responsibility for the file, Mr Prescott had a responsibility to enquire into the proper method of trust ledger accounting and ensure that it complied with the relevant obligations. The Tribunal found that, because there was no agreement with clients for the conduct of a joint action, it was improper and inappropriate to operate a single trust ledger account. The Tribunal found that Mr Prescott should have himself liaised with the Law Society and in any event should have ensured that the Law Society was given the full facts concerning the nature of the matter and of instructions from clients. The Tribunal concluded that Mr Prescott was guilty of unprofessional conduct.
In relation to count 3, the Tribunal found that the terms of retainer provided for time-based charging rather than scale-based charging. It found that the multiple letters sent to investors were in common form and characterised them as “circular letters”. It followed that Townsends overcharged clients for those letters. The Tribunal found that Townsends were not entitled to charge for time spent canvassing prospective clients but only for investigating the claim and preparing a brief to counsel to obtain an opinion. The Tribunal found that, in reality, Townsends did very little work by way of investigating the claim and preparation of the brief and most of the work billed was merely preparatory work. The Tribunal found that on any view there was gross overcharging, for which Mr Prescott was directly responsible as the author of the bills. The Tribunal concluded that he was guilty of unprofessional conduct.
In relation to count 4, the Tribunal referred to the initial communications from Mr Prescott which led investors to believe that there were a large number of investors contributing to the fund, only substantive work would be charged to investors, only a pro-rata amount would be charged to each investor and there were good prospects of success against professional advisors. The Tribunal found that these communications were misleading. The Tribunal found that, after the initial canvassing letters, Mr Prescott failed to inform the clients generally of progress (or lack of it) and failed to correct the impressions which he had given to investors by his earlier letters. The Tribunal found specifically that there was inadequate communication with the Fuss family, Mr Wetherall and Ms Schlemmer. The Tribunal found that Mr Prescott was directly responsible for the inadequate communication and was guilty of unprofessional conduct.
Overarching matters
The form of the charge
The charge was expressed to charge the practitioners “with unprofessional conduct in that" and then proceeded to set out in four numbered paragraphs a set of four allegations, with each paragraph containing a number of sub-paragraphs described as “Particulars of Misconduct”.
Mr Prescott contends that, by reason of the form and content of the charge, the Board was not entitled to ask the Tribunal, and the Tribunal had no jurisdiction, to find Mr Prescott guilty of unprofessional conduct in the following respects.
1.The finding that appropriation of Mr Wetherall’s moneys from Townsends’ trust account was in contravention of the Terms of Engagement by Mr Wetherall of Townsends.
2.The finding that Townsends were not entitled to appropriate trust moneys towards Townsends’ bills to work in connection with other investors in the absence of either specific instructions or pre-existing general instructions for the appropriation of trust moneys.
3.The finding that clients were grossly overcharged by Townsends, taking into account the fact found by the Tribunal that, pursuant to the terms of engagement, Townsends were only entitled to charge for investigating and advising concerning and prosecuting claims against professional advisors and not for preparatory work attracting clients and establishing a fighting fund.
4.The finding that communications by Mr Prescott to the clients were misleading.
We address these four contentions below. Mr Prescott does not challenge the overall form of the charge insofar as it made a single charge of unprofessional conduct followed by and as set out in four numbered paragraphs. However, submissions were made by the parties concerning the form of the charge and it is desirable that we address that topic.
Proceedings before the Tribunal are disciplinary, rather than criminal, in nature.[15] The overriding consideration is the interest of the public (clients and others dealing with the practitioner).[16] The onus of proof is the civil onus (including the “Briginshaw approach”).[17] It follows that a charge laid before the Tribunal is not necessarily subject to the considerations which apply to an indictment in a criminal proceeding.
[15] Legal Practitioners Conduct Board v Ardalich [2005] SASC 478 at [32]-[44] per Perry ACJ (Duggan J and Anderson J agreeing).
[16] The Law Society of South Australia v Murphy [1999] SASC 83; (1999) 201 LSJS 456; Legal Practitioners Conduct Board v Kerin [2006] SASC 393; (2006) 246 LSJS 371.
[17] Kerin v Legal Practitioners Complaints Committee (1996) 67 SASR 149; Legal Practitioners ConductBoard v Ardalich [2005] SASC 478.
The circumstances involved in conduct alleged to constitute unprofessional conduct vary extensively from case to case. In some cases, the subject of a charge is a single act or omission alleged to comprise unsatisfactory or unprofessional conduct. Where there are multiple acts or omissions involved, at one extreme, there might be two entirely independent and disparate acts or omissions, involving different clients and matters each of which is alleged to comprise unsatisfactory or unprofessional conduct. At the other extreme, there might be a series of acts or omissions comprising a course of conduct in respect of which the conduct as a whole (and no single act or omission) is alleged to comprise unsatisfactory or unprofessional conduct. Between these two extremes, there may be two acts or omissions connected in some way to each other in respect of which the Board’s primary case is that each constitutes unsatisfactory or unprofessional conduct but in the alternative the combination constitutes unsatisfactory or unprofessional conduct. Similarly, it may be the Board’s case that each of two acts or omissions comprises unsatisfactory conduct but that both in combination comprise unprofessional conduct.[18]
[18] Under the regime which has applied from 1 February 1999 onwards: see [13]-[14] above.
Because proceedings in the Tribunal are disciplinary and not criminal in nature, and because the ultimate consideration is the protection of the interests of the public in relation to practitioners who fail to meet the standard of conduct observed by competent practitioners of good repute, the charge ought not to be the subject of rigid rules or construed in a technical manner. It will be sufficient if the charge gives to the practitioner fair notice of the practitioner’s conduct which is alleged to be unsatisfactory or unprofessional and why it is so.
Where multiple acts or omissions are alleged to constitute unsatisfactory or unprofessional conduct, the charge should separately specify each act or omission which is alleged. The charge should identify whether each act or omission is alleged to constitute unprofessional conduct or unsatisfactory conduct and, if the former, whether it is alleged in the alternative that the act or omission constitutes unsatisfactory conduct.
If it is alleged that a series of acts or omissions together constitutes unprofessional conduct, the charge should be expressed so as to give to the practitioner notice of the Board’s case as to the relationship between them. If it is alleged that each act or omission in itself comprises unsatisfactory or unprofessional conduct, the charge should be so expressed.[19] Conversely, if it is alleged that it is only the entire course of conduct, encompassing multiple acts and omissions, which comprises either unsatisfactory or unprofessional conduct, the charge should be so expressed.
[19] For example: “Count 1. The practitioner engaged in unsatisfactory/unprofessional conduct between [date] and [date] by [set out conduct alleged]. Count 2: The practitioner engaged in unsatisfactory/unprofessional conduct between [date] and [date] by [set out conduct alleged”].
In the present case, there are connections between the “counts” contained within the charge. The conduct relates to the same group of clients and the same matter over the same or overlapping time periods. There is an interrelationship between counts 1A and 1B in that both relate to appropriations of trust moneys in satisfaction of Townsends’ bills and both include the appropriation on 28 July 1998 to the extent that it was of Mr Wetherall’s contribution of $3,830. There is an interrelationship between counts 2A and 2B in that both relate to the operation and provision of information in relation to trust ledger accounts. There is an interrelationship between counts 1A, 1B and 2A in that each relates to the appropriation of trust moneys towards Townsends’ bills. The Board’s case, as conducted before the Tribunal, was that the practitioners were guilty of unprofessional conduct in each of the six respects and, alternatively, that a combination of those respects constituted unprofessional conduct. In those circumstances, it would have been preferable for the charge to contain six counts each alleging unprofessional conduct with an alternative count at the end relying upon the combination of the acts and omissions contained within some or all of those counts.
Appropriation of Mr Wetherall’s trust moneys
The Tribunal found that the appropriation of Mr Wetherall’s moneys from Townsends’ trust account was in contravention of conditions imposed by Mr Wetherall which formed part of the Terms of Engagement between Mr Wetherall and Townsends. Mr Prescott contends that this finding was not open to the Tribunal on the ground that this allegation was contained in sub-paragraphs 1.7-1.9 and 1.12 of the charge which were described as particulars of the allegation in paragraph 1 but in truth raised an independent allegation.
Paragraph 1 and sub-paragraph 1.12 of the charge relevantly read as follows:
1. Between about 9 March 1998 and 19 October 1998, in breach of their obligation pursuant to section 41(1) of the Act, the practitioners failed to deliver to their clients, either personally or by post, a bill specifying the total amount of the costs before appropriating money in satisfaction of a claim for legal costs.
…
1.12 … the practitioners appropriated Mr Wetherall’s contribution of $3,830.00 on 28 July 1998 without having communicated with Mr Wetherall and in contravention of the specific terms of engagement with Mr Wetherall.
It is true that paragraph 1 alleged that moneys were appropriated towards Townsends’ bills without a relevant bill having previously been delivered to the clients and that this allegation does not raise the question whether the appropriation was contrary to the terms of engagement with a specific client. However, paragraph 1.12 makes the clear and unequivocal allegation that the practitioners appropriated Mr Wetherall’s contribution in contravention of the specific terms of engagement with him. The Board opened its case before the first and second panels on the basis that the practitioners’ conduct in this respect was unprofessional conduct. No objection was made by Mr Prescott during or at the conclusion of the Board’s opening on either occasion in this respect.
It is well established in civil matters that if, without objection, a party conducts its case at the hearing on a basis different to its pleading, objection cannot normally be taken at the end of the hearing based on the departure from the pleading. In our view, a similar principle applies in disciplinary proceedings before the Tribunal. Accordingly, while the allegation concerning the appropriation of Mr Wetherall’s trust moneys contrary to his instructions ought to have been the subject of a separate paragraph in the charge, we reject this complaint by Mr Prescott.
Appropriation from trust moneys unauthorised by clients
The Tribunal found that Townsends were not entitled to appropriate trust moneys towards Townsends’ bills to work in connection with other investors in the absence of either specific instructions or general pre-existing instructions for the appropriation of trust moneys. Mr Prescott contends that the Tribunal had no jurisdiction to make this finding on the ground that no such allegation was made in the charge.
The principal paragraphs of the Tribunal’s reasons at which the Tribunal made the relevant finding are [77], [80], [82] and [85]. Read in context, in those paragraphs, the Tribunal was not making an independent finding that the practitioners engaged in unprofessional conduct by appropriating moneys from trust in circumstances in which they had no authority from the clients to do so. We agree that, if the Tribunal had made such a finding, it would have been inappropriate in light of the content of the charge and the manner in which the Board conducted its case and would have resulted in a denial of procedural fairness to the practitioners. However, we read those paragraphs as merely forming part of the context and overall picture in which the Tribunal ultimately concluded that the practitioners were both responsible for the appropriations from trust moneys towards Townsends’ bills in circumstances in which the bills had not been delivered in advance to the clients. Accordingly, we do not uphold Mr Prescott’s complaint in this respect
Billing for work not properly chargeable

The Tribunal found that clients were grossly overcharged by Townsends taking into account the fact that Townsends were only entitled to charge for investigating and advising concerning prosecuting claims against professional advisors and not for preparatory work attracting clients and establishing a fighting fund. Mr Prescott contends that the Tribunal had no jurisdiction to make this finding on the ground that the allegation of overcharging contained in paragraph 3 of the charge was confined to overcharging for circular letters and did not address other aspects of Townsends’ bills.
Paragraph 3 of the charge read as follows:
3. Between about 13 January 1998 and 10 August 1998 the practitioners made inappropriate and improper charges to the clients in so far as they made separate charges for a number of letters without categorising the letters as circular, resulting in gross overcharging.
The principal paragraphs of the Tribunal’s reasons at which the Tribunal made the relevant finding are [96], [120], [215]-[217], [226] and [238]. Read in context, in those paragraphs the Tribunal was addressing a subsidiary aspect of the issue whether clients were overcharged in respect of circular letters, namely the response by Mr Prescott that it was an answer to that allegation that the bills as a whole were not proved to comprise overcharging. The Tribunal was only addressing Mr Prescott’s response and not making an independent finding of overcharging other than in connection with the circular letters. Accordingly, we reject Mr Prescott’s complaint in this respect.
Misleading communications
The Tribunal found that communications by Mr Prescott to the clients were misleading. Mr Prescott contends that the Tribunal had no jurisdiction to make these findings on the ground that no such allegation was contained within the charge.
The principal paragraphs of the Tribunal’s reasons at which the Tribunal made the relevant findings are [73], [75], [214], [242] and [249]. Where the Tribunal made specific findings that communications by Mr Prescott were misleading (such as [73], [75] and [214]), those findings formed an important part of the context against which it was to be considered whether the communications to clients were adequate. We refer to this further in some detail below.
However, at [242] the Tribunal first made a finding that the practitioners failed to maintain proper or reasonable communications and then proceeded to make a “further” finding that some of the communications were misleading. To the extent that the Tribunal found that misleading communications comprised unprofessional conduct, the Tribunal erred. There was no allegation contained in paragraph 4 or any of sub-paragraphs 4.1 to 4.15 which alleged that the practitioners engaged in unprofessional conduct because communications were misleading as opposed to inadequate. We uphold Mr Prescott’s complaint in this limited respect.
Appropriation from trust moneys for legal costs
In the ordinary course of legal practice, a senior solicitor with the day to day conduct of a file carries the responsibility of making arrangements for the payment of costs for his or her work, including the payment of money into trust on account of future fees. A senior solicitor also generally prepares and delivers bills for work done and initiates transfers from the trust account into the firm account for his or her fees in accordance with the arrangement made with the client and his or her professional responsibilities.
In contrast to that ordinary practice, Mr Prescott testified in the 2011 hearing that:
·he was unaware whether any bills had been finalised or sent to the Lateral Investors clients;
·he did not requisition the trust cheques by which his fees were paid;
·he was unaware that any payments from the trust account had been made until about August 1998 when Mr Reynolds returned from leave.
That testimony was inconsistent with Mr Reynolds’ evidence and the evidence which Mr Prescott himself gave before the Tribunal in the 2007 hearing.
Townsends’ general practice
It is convenient first to set out the evidence of Mr Reynolds, which was broadly consistent with the evidence of Mr Townsend, with respect to the firm’s usual charging and accounting practices.
Mr Reynolds explained that a copy, usually on pink A4 paper, of the bill sent to a client was stamped “file copy” and placed on the file. Bills were typed by a secretary who gave the file copy and the original bill to the solicitor with the management of the file to action.
The original bill was signed and sent to the client with a covering letter. File copies were not signed. Mr Reynolds explained that in accordance with Townsends’ practice, the existence of a pink file copy of the bill in the client file indicated that the bill had been sent to the client.
In the 2007 hearing, Mr Reynolds gave evidence that it was the office practice that the solicitor who had the conduct of the file filled out a trust requisition slip for payment of Townsends’ bills. Blank requisition slips were kept by all solicitors in folders in their offices. The bookkeeper, Mr Astley, provided the requisition slip, the office copy of the bill and a trust cheque drawn in accordance with the requisition slip to a partner. The office practice was to not requisition a trust cheque until at least 48 hours after the bill had been sent to the client. The receipt of a payment, whether from trust or the client, was recorded on the office copy of the bill. Mr Prescott had, on his own admission, prepared requisitions for trust cheques to be drawn on the Lateral Investors trust account to pay a Victorian solicitor who had acted as Townsend’s agent and in favour of the firm to reimburse it for travel and accommodation costs incurred in visiting clients to take instructions.
Townsends kept an eponymously named “green book” in which a record was maintained of the bills issued by the firm. The attribution of the profit costs to the solicitors who performed the work was recorded in the green book. The apportionment of fees between the partners and solicitors was important for several reasons. Mr Reynolds testified that there was an incentive arrangement built into Mr Prescott’s pay structure.[20] Mr Reynolds’ evidence was that the profit costs with respect to the Lateral Investors bills were largely attributed to Mr Prescott. His evidence accords with the entries in the “green book”.
[20] T580-581.
Mr Reynolds testified that he relied on employed solicitors, including Mr Prescott, to follow the practice he described. Mr Reynolds testified that it was also the obligation of the solicitor who had the conduct of the file to send out the trust account statements.
Mr Reynolds’ evidence
Mr Reynolds gave evidence that he did not requisition the trust cheque, which Mr Townsend signed, to pay the first of Townsend’s bills in the Lateral Investors matter. Mr Reynolds denied that he directed Mr Prescott to cause the payment to be made and that he signed the requisition for the first appropriation on 9 March 1998. He explained that, if he had signed the requisition, he would also have signed the cheque. Mr Reynolds testified that he may have become aware of the payment of the bill on reading the green book.
With respect to the appropriation of 5 June 1998, Mr Reynolds testified that he did not ask Mr Prescott to prepare the requisition. On Mr Reynolds’ evidence, it came to him in accordance with the ordinary office practice. Mr Reynolds denied that there was an office practice whereby he gave verbal approval before requisitions were prepared. Mr Reynolds’ evidence was that his practice was to sign the trust cheque after confirming that there were sufficient funds in trust to meet the cheque.
Mr Reynolds testified that he was first alerted to the absence of trust account statements in July 1998, shortly before he went on leave. Mr Reynolds’ last working day before taking leave was Friday, 23 July 1998. The drafts are dated 22 July 1998.
Mr Reynolds thought it probable that he noticed that trust account statements had not been sent when he was considering a requisition to make a further payment of the firm’s legal costs out of the trust account. In considering such a requisition, his practice was to review the trust ledger card. Mr Reynolds thought it was likely that on doing so he saw that the trust deposits of some clients had been appropriated to pay several different bills. The use of the Hartman trust money to pay the Townsends bills F98996 and F98566 on 9 March 1998 and 29 May 1998 respectively and the Harvey Buck disbursement is an example of the multiple appropriations which may have caught Mr Reynolds’ attention. The use of the Edwards trust money is another. Mr Reynolds testified that he looked for the trust account statements to see how those appropriations had been recorded.
Mr Reynolds testified that, when he discovered that no trust account statements had been prepared, he drafted trust account statements to address the previous appropriations and the requisition with which he was dealing. Mr Reynolds testified that the draft trust statements he prepared were not authorities for the transfer of the money from trust into firm. Mr Reynolds reaffirmed that it was the requisition slip which authorised the accounts manager to prepare a trust cheque.
It is possible that both the absence of trust account statements and the availability of trust funds to make a further payment of Townsend’s bills came to Mr Reynolds’ attention when he considered the requisition of 21 July 1998 to reimburse the firm for Mr Prescott’s travel expenses. It is also possible that Mr Prescott informed Mr Reynolds, by sending through a requisition or telling him, that further payments had been made into the Lateral Investors’ trust account during June and July and that there were funds available to pay Townsends’ bills. Either way, they are likely to have discussed making a further appropriation.
The objective facts
The circumstances that the trust cheque was signed by Mr Townsend when Mr Reynolds was on leave and that the trust account statements were signed by Mr Prescott in the same period broadly supports Mr Reynolds’ account of events. It is likely that, having become aware that trust account statements had not been given, Mr Reynolds drafted trust account statements and left them to be settled and completed by Mr Prescott whilst he was on leave. It is unlikely that Mr Reynolds prepared a requisition slip with a final amount before he went on leave. If he had, there would have been no reason not to sign the trust cheque.
It can be accepted that Mr Reynolds anticipated that a requisition slip would be completed and that a trust cheque would be drawn to make good the appropriations on which the drafts were prepared. However, only Mr Prescott was in a position to give effect to what Mr Reynolds intended. Mr Prescott signed the covering letters sent with the trust account statements which were typed up from Mr Reynolds’ drafts. In accordance with his practice, he is likely to have personally filed the copies on the separate files kept for each of the Lateral Investors clients. Mr Townsend did not have any involvement in the file. The secretaries are unlikely to have presented the requisition slip, office copy of the bill and cheque to Mr Townsend on their own initiative. To present the requisition slip to Mr Townsend, Mr Prescott must have reviewed the matter to ensure that the trust statements were accurate and to ensure the trust cheque did not exceed the funds in trust.
The trust cheque in the sum of $16,550 drawn on the Lateral Investors trust account on 28 July 1998 was signed by Mr Townsend. Mr Prescott’s counsel contends that there is significance in the fact that the trust cheque drawn on 28 July 1998 was ten cents short of the balance then in the trust account. It is clear that Mr Reynolds prepared the draft trust account statements on the premise that all of the trust money would be appropriated. It can be also accepted that the trust account statements were drafted by Mr Reynolds before he knew that the trust cheque was, or would be, drawn in an amount ten cents short of the balance in the trust account. It is not possible to determine why the person who drew the cheque left ten cents in the trust account. The trust account statements drafted by Mr Reynolds were premised on leaving a nil balance. Mr Reynolds had signed a trust cheque which had earlier reduced the balance to nil on 5 June 1998. The failure to leave a nil balance, if anything, suggests that Mr Reynolds did not draw the trust cheque.
Mr Prescott’s evidence
We turn to Mr Prescott’s evidence.
In the 2007 hearing, Mr Prescott testified that Mr Reynolds retained control of the financial aspects of the Lateral Investors matter, even after he assumed the day to day conduct of the file. Mr Prescott testified that he regarded the file as a joint one and that, from time to time, Mr Reynolds directed him to prepare bills. Mr Prescott said that the bills were typed up by a secretary who worked from his cost sheets. Mr Prescott also included in his costing sheets the work which he apprehended, from his perusal of file notes, that Mr Reynolds had performed. He settled the draft bills prepared by the secretary before giving them to Mr Reynolds to finalise. According to Mr Prescott, his signature block was placed on the draft bills by the secretary because he had the management of the file and the bill was prepared on the basis of his cost entries.
Mr Prescott testified that his draft bills were addressed to “Lateral Investors c/- Townsends Solicitors”. Mr Prescott claimed not to know who had addressed the bills in that way but claimed that such matters were Mr Reynolds’ responsibility.
Mr Prescott’s evidence was that he had no experience with trust accounts and that he expected Mr Reynolds to manage the trust account for the Lateral Investors file. Mr Prescott testified that Mr Reynolds informed him that advice had been obtained from the Law Society on how “the trust account system was to be run” and that from that point Mr Prescott relied on Mr Reynolds to ensure that the advice from the Law Society was implemented.
Mr Prescott testified that he did his own filing. Mr Prescott gave evidence that he kept the draft bills which he prepared at Mr Reynolds’ request on the file. He claimed not to know whether copies of the bills as finalised by Mr Reynolds were also placed on the file. The only copies of bills on the file are those stamped either as file copies or office copies. Those bills charge the amounts which were paid by the appropriations from the trust account. Mr Prescott suggested that the copies marked “file copy” and bearing bill numbers were drafts, explaining that there was no “draft” stamp used in the office.[21] Mr Prescott testified that, after forwarding the bills to Mr Reynolds to finalise, he saw neither finalised signed bills nor copies of covering letters forwarding those bills to the Lateral Investors clients. He claimed that no such documents were given to him to place on the file. He testified that he was not concerned at the time because he did not know that trust moneys were being appropriated from the trust account to pay the bills he was drafting. There is no evidence that any changes were made to the bills, copies of which were marked as “file copies” and kept on the file.
[21] T771-772.
In the 2007 hearing, Mr Prescott claimed not to have any recollection of who signed the bills which he believed were being finalised by Mr Reynolds. Mr Prescott was asked if he knew anything about the payment of the bills which he had prepared and in particular whether he became aware of transfers from the trust account to the firm account. He gave the following evidence:
AAfter it had happened, yes.
QAre you able to recall now when it was – I’m just asking you for the time now … that you learned that there had been a transfer from the trust account to the firm account.
AJust after it had occurred.
Mr Prescott went on to testify that he learned of the first payment into the firm on about 9 March 1998 when Mr Reynolds came to his office door and told him that he had transferred the money from the trust account into the firm account. Mr Prescott testified that he inquired as to whether the operation of the trust account had been approved by the Law Society and was assured that it had been. Mr Prescott continued:
After the discussion with Mr Reynolds I went to Mr Astley to ask him about this issue. Mr Astley told me that the Law Society had been contacted and my understanding at the time was that Mr Reynolds contacted the Law Society and that the trust account system had been explained and approved by the Law Society.
Mr Prescott testified that further bills were prepared by him after that conversation, at Mr Reynolds’ direction and in the fashion recounted.
Mr Prescott gave evidence of a later conversation with Mr Reynolds about appropriating money which Mr Wetherall had paid into trust. After referring to the trust account ledger which showed that the amount paid into trust by Mr Wetherall was transferred to the firm account on about 28 July, Mr Prescott testified that it was on that day, or a day later, that he spoke to Mr Reynolds. When Mr Prescott was reminded by his counsel that Mr Reynolds was on holiday at that time, he responded:
Yes. Sorry, I better clarify that, it must have been after he had returned from leave, logically, I couldn’t have done it if he was on leave.
Mr Prescott claimed that, in the conversation with Mr Reynolds, he admonished Mr Reynolds for using Mr Wetherall’s trust money to pay the firm’s bill because Mr Wetherall had placed special conditions on the use of the money to pay Townsend’s fees. Mr Prescott testified that he told Mr Reynolds that the payment should be reversed. Mr Prescott described the Wetherall retainer as a “unique retainer”. Mr Prescott gave evidence that he had explained the terms of that retainer to Mr Reynolds when Mr Wetherall first paid the money into trust.
Mr Prescott accepted that he signed the trust account statements sent to the Lateral Investors clients, including Mr Wetherall, on 29 July 1998 which showed the transfer of their funds out of the trust account to pay for legal costs. Mr Prescott claimed that he did not notice the trust account statement addressed to Mr Wetherall when he signed it because it was part of a bundle of trust account statements for the Lateral Investors clients which Mr Reynolds had left for him to sign. Mr Prescott claimed that he did not read the names of the addressees.
As we earlier observed, Mr Prescott accepted that he had completed and signed the requisition for the reimbursement of the firm account for the amounts which he had drawn from it for his travel and accommodation in taking statements from the Schillings in Coonalpyn. Mr Prescott also accepted that he had signed the original of one of the bills to the Lateral Investors clients, against which the withdrawal from the trust account was made. That signed bill was addressed in the same way as the other firm bills and was placed, and remained, in the file. The circumstance that Mr Prescott dealt with that bill in the same way as the other bills strongly suggests a knowledge of the way in which those bills were dealt.
Mr Prescott gave the following answers when challenged about that original bill:
QIt’s clear you signed it.
AI have signed it, yes.
QIt is clear the original was put on the file.
A.The original is on the file, yes.
QSo it wasn’t posted out to the client.
ANot that I am aware.
QThat would have been your responsibility to post it out to the clients.
AI guess so.
QSo I put to you that is the same as all of the other accounts on the file.
ANo.

In summary, the state of the file, having regard to the ordinary practice of solicitors, strongly indicates that Mr Prescott knew, or at least recklessly adverted to the possibility, that the bills had been finalised and paid out of trust without being sent to the clients. The financial importance of the bills is such that an inference can be drawn that the payment or non-payment of the bills would have been brought to Mr Prescott’s attention.
In addition to those facts, the Tribunal was entitled to accept Mr Reynolds’ testimony over Mr Prescott’s. The Tribunal had the advantage of seeing and hearing their evidence. Mr Reynolds’ testimony that Mr Prescott prepared the bills and requisitioned the trust transfers is supported by the following objective evidence.
First, there is Mr Prescott’s admitted involvement in charging and requisitioning a trust cheque for the travel expenses in visiting Coonalpyn to take statements.
Secondly, the first and the last of the cheques were signed by Mr Townsend but the requisition forms were never found. It is unlikely that those requisition forms would have been completed by Mr Reynolds because if he had done so he would also have signed the cheques. That strongly suggests that Mr Prescott caused those requisitions to be made.
Thirdly, the evidence concerning the 28 July payment strongly suggests that Mr Reynolds put in train steps to make that payment but that it was finalised by Mr Prescott.
Fourthly, there are Mr Prescott’s testimonial admissions in the 2007 hearing. The Tribunal, having heard Mr Prescott’s testimony in the 2011 hearing, was entitled to reject it. In our view, the Tribunal’s rejection of that evidence was plainly right having regard to the many improbabilities and inconsistencies to which we have referred and which cannot be explained by the psychiatric evidence.
On Mr Prescott’s own testimony in the 2007 hearing, upon which the Tribunal was entitled to act as containing admissions against interest, the evidence that Mr Prescott was knowingly involved in the trust appropriations was overwhelming. Even if Mr Reynolds’ testimony that he acted on the requisitions made by Mr Prescott were rejected, and it were accepted that Mr Reynolds was the prime mover of the scheme, the evidence that Mr Prescott knowingly participated in it is overwhelming. The inference that Mr Prescott knew that the bills would not first be sent to the clients, even when he prepared the first bill, can be drawn from the way in which that bill was addressed, together with the evidence of his subsequent involvement in the preparation of bills and requisitions. That inference is reinforced by the inference which can be drawn from the false statements made to the Conduct Board referred to at [162]-[165] above.
The Tribunal’s conclusion that Mr Prescott’s testimony in the 2011 hearing was a deliberately untruthful reconstruction of events follows ineluctably from the following evidence:
•   the objective evidence of his knowing involvement of the scheme referred to at [133]-[135] and [175]-[182];
•   Mr Reynolds’ testimony referred to at [121]-[132];
•   Mr Prescott’s testimonial admission in the 2007 hearing, referred to at [141]-[148], that he knew that the first appropriation was made without a bill being sent to the clients;
•   the circumstances surrounding the sixth appropriation referred to at [157]-[158];
•   the fundamental inconsistency between Mr Prescott’s 2007 testimony in which he admitted learning of the first appropriation in March 1998 and his testimonial assertion in the 2011 hearing that he only became aware of any appropriations in August 1998 which is incapable of explanation by way of mistake or confusion;
•   the lack of any support in the psychiatric evidence for the existence of a mental state which could explain the inconsistency referred to at [166]‑[172];
•   the many inconsistencies and improbabilities in Mr Prescott’s account of the circumstances surrounding his signing of the trust account statements; and
• the knowingly false statement to the Conduct Board referred to at [162]‑[165] above.
Count 1B: Appropriation of Wetherall trust moneys for legal costs
In relation to count 1B, the Tribunal found that the appropriation of Mr Wetherall’s contribution of $3,830 on 28 July 1998 was in contravention of the terms of engagement with Mr Wetherall.
Mr Prescott contends that the Tribunal erred in making this finding. He contends that, on its proper construction, Mr Wetherall’s letter did not impose a restriction on the appropriation of his funds but rather expressed the terms upon which he would be entitled to a repayment by Townsends.
We reject Mr Prescott’s contention. In his letter dated 27 June 1998, Mr Wetherall referred to Mr Prescott’s previous letters to him and to a telephone discussion between Mr Wetherall and Mr Prescott. Mr Wetherall then said:
I understand that you will assess the viability of my case, and if you consider it unlikely to succeed, you will return my contribution in full, shortly after reaching such opinion.
…
I also understand you have yet to decide, and are to advise me on the following:
Should my case fail subsequently – after your acceptance to proceed with it, I shall be entitled to a pro-rata benefit of the total sum, less expenses, of those cases where costs are awarded as a result of the efforts made by you, to recover moneys from the insurers, and any others associated with the collapse of Lateral Trading Group.
The latter is based on the premise that we are a group with a common problem and purpose, and contributions on a pro-rata basis.
After litigation proceeds, it would seem difficult to absolutely differentiate between one section of the group receiving more attention and more of the pooled resources, than others, thereby being inadvertently subsidised.
I think that all accepted contributors have an entitlement to synergies of the exercise and pooled resources, and that compensation be shared on an equitable basis; whatever is considered to be appropriate.
Whether the chances of recovery for each case could be established and noted from the outset – after your assessment, and applied to a weighted entitlement, is another but perhaps questionable approach …
Reading Mr Wetherall’s letter as a whole, he was clearly stipulating that the first thing to occur should be an assessment whether he had a viable case and that only then could Townsends accept his contribution. The meaning of the letter is that Mr Wetherall’s contribution was conditional on the making of a positive assessment. Once his contribution was accepted, Townsends would then proceed collectively on behalf of all investors whose contributions had been accepted. It would be contrary to the whole tenor of Mr Wetherall’s letter that, before any assessment of the viability of his case, his contribution could be appropriated for work done for other investors or work done generally in the matter. The concept of “return” of Mr Wetherall’s contribution referred to in the first paragraph quoted above did not mean Townsends making a payment out of their own moneys to Mr Wetherall but rather the return of Mr Wetherall’s own money to him.
Mr Prescott relies in support of his construction of the letter upon the paragraph (omitted from the quote above) which immediately follows the first paragraph quoted above, which read as follows:
In the event of another party financing the costs of restitution, my contribution is to be refunded in full, say within 30 days of receipt of the finance being allocated by another party.
That paragraph does not support Mr Prescott’s construction. On the contrary, it was addressing a quite different situation which would arise at a later stage, namely after Mr Wetherall’s case had been assessed as viable and his contribution had been accepted. It was referring to the concept of external litigation funding which Mr Prescott had addressed at some length in his letter to Mr Wetherall dated 29 May. Mr Wetherall used the term “refunded” to refer to this situation, in contra-distinction to the term “return” in the first paragraph quoted above.
In his testimony in 2007[22] and in 2011[23] and in his statement dated 20 January 2011, Mr Prescott said that he himself took the view in late July 1998 that the appropriation of Mr Wetherall’s funds towards Townsends’ bill was contrary to the terms upon which Mr Wetherall had made his contribution and that he complained to Mr Reynolds accordingly. The construction advanced on Mr Prescott’s behalf of Mr Wetherall’s letter before the second panel and before this Court is contrary to Mr Prescott’s own contemporaneous construction of it.
[22] T 777/1-779/33.
[23] T 628/4-629/6.
The Tribunal did not err in its finding and correctly found that the appropriation of Mr Wetherall’s contribution of $3,830 on 28 July 1998 was in contravention of the specific terms of engagement with Mr Wetherall. By reason of our conclusion in relation to Count 1A, Mr Prescott was responsible for this appropriation. His conduct violated, to a substantial degree, the standard of professional conduct observed by members of the profession of good repute and competency. It was unprofessional conduct within the meaning of the Act at the relevant time.
Count 2A: Failure to provide trust account statements
Count 2A of the charge alleged that, in breach of regulation 17A(1)(b), the practitioners failed to provide to those clients whose trust moneys were appropriated towards Townsends’ bills a trust account statement within a reasonable time of that appropriation.
Regulation 17A(1) of the Regulations relevantly provided:
Pursuant to section 31(7a) of the Act, a practitioner who receives trust money in the course of acting in a matter must provide the person who instructed him or her in the matter with a trust account statement within a reasonable time of –
…
(b) an appropriation of trust money in or towards satisfaction of legal costs payable by the person who instructed him or her in the matter …
The charge alleged that the failure occurred in relation to three appropriations:
1.$12,025.95 on 9 March 1998 to Townsends’ bill dated 30 January, being an appropriation of four clients’ trust moneys;
2.$140 on 11 March 1998 to pay the costs of Townsends’ Victorian agents, being an appropriation of one client’s trust moneys;
3.$22,461.65 on 5 June 1998 in payment of and towards Townsends’ bills dated 27 February and 29 May respectively, being an appropriation of five clients’ trust moneys.
In his response, Mr Prescott admitted that Townsends had breached the trust account regulations by not issuing trust account statements within a reasonable time of the appropriations. However, he denied responsibility for the establishment or operation of the trust account system. He admitted that he signed the trust cheque requisition for the disbursement for $140 on 11 March 1998, but denied involvement in or knowledge of the appropriations made on 9 March or 5 June 1998.
It follows from our conclusion in relation to count 1A above that the Tribunal did not err and was correct in finding that Mr Prescott was responsible for the failure by Townsends to provide to the clients trust account statements within a reasonable time of each of the three appropriations.
Mr Prescott did not contend that, if he was responsible for the failure by Townsends to comply with regulation 17A(1)(b), he was not guilty of unprofessional conduct. Leaving aside regulation 17A, it is an important duty owed by practitioners to their clients to communicate with them and keep them informed. Solicitors owe fiduciary duties to clients in their dealings with them, and in particular as trustees in relation to moneys held in trust. Solicitors therefore owe a duty to clients to inform them when they have appropriated moneys held in trust to their own fees. Regulation 17A(1)(b) reinforces this obligation as well as imposing an independent statutory obligation on practitioners.
Approximately $35,000 of clients’ moneys were appropriated towards Townsends’ bills in early March and early June 1998 but the clients were not informed of the appropriation until the end of July. The appropriations used up the whole of the moneys contributed by the eight clients in question. This was in circumstances in which no progress in the investigation of potential claims or giving of advice to clients had been made. Mr Prescott’s conduct violated, to a substantial degree, the standard of professional conduct observed by members of the profession of good repute and competency. It was unprofessional conduct within the meaning of the Act at the relevant time.
Count 2B: Failure to maintain separate trust ledger accounts
Count 2B of the charge alleged that, in breach of regulation 14(1) and (2), the practitioners failed to maintain separate trust ledger accounts for each client’s matter.
Regulation 14 relevantly provided:
(1)     A practitioner must ensure that the practitioner’s trust ledger accounts are kept      separately-
(a)     in respect of each of the practitioner’s clients; and
(b)     if the practitioner performs services for a client in respect of a number of              transactions between different parties - in respect of each such transaction.
(2)     The practitioner must record in each of the separate accounts the following details:
(a)     the name and address of the client to whom the accounts relate;
(b)     a brief description of the service provided and the transaction to which the            accounts relate …
The Tribunal proceeded on the basis that, if an agreement had been finalised between Townsends and participating investors for the joint conduct of the matter with instructions being provided by the clients jointly, it would have been appropriate for Townsends to maintain a single trust ledger account for that joint matter. For example, if the clients had all signed a common terms of engagement or each had signed separate terms of engagement which provided for a joint matter and each participating investor had agreed to a set of rules to govern a joint matter, it would have been appropriate for Townsends to maintain a single trust ledger account. The Tribunal correctly found that the Terms of Engagement signed by each client were framed on the basis of the client providing individual instructions for the recovery of their investment, there was no set of rules provided to or agreed by the relevant clients and otherwise there was no agreement finalised for the conduct of a joint matter.
Mr Prescott contends that it was abundantly clear on the evidence before the Tribunal that clients who contributed funds intended those funds to form part of a single “fighting fund” and that regulation 14 should be construed not to require separate trust ledger accounts where the purpose of the payment into trust was a contribution to a single fund.
Mr Prescott’s initial letters to South Australian and Victorian investors dated 24 December 1997 and 11 February 1998 respectively referred to investors contributing to a “fighting fund” a pro-rata contribution reflecting the amount of their investments. The letters sent to South Australian and Victorian investors dated 29 January and 29 May 1998 respectively which led to the contributions described them as being calculated on a pro-rata basis. However, as the Tribunal found, at the time that each investor paid his or her contribution to Townsends, it was not known by anyone how many investors would in fact make contributions, how big the “fighting fund” would be, what claims by what investors were to be investigated, what would be the common issues as between those specific claims or how the ultimate group of clients would provide instructions to Townsends insofar as Townsends were to undertake the conduct of a matter jointly for that group. Mr Prescott never informed clients of the number of investors contributing or total moneys contributed nor did he take any steps for clients to authorise the conduct of a single fighting fund.
Mr Prescott contends in the alternative that his failure did not comprise unprofessional conduct. He contends that it was not unreasonable or inappropriate to set up a single trust ledger account in circumstances in which the contributors were intending to pool their resources into a single “fighting fund”. He contends that Townsends’ bookkeeper Mr Astley consulted with the Law Society in connection with the appropriate way in which the trust account was to be set up. He contends that there was no detriment because the single ledger account recorded full details of all payments in and out of the trust account.
As to Mr Prescott’s first contention, for the reasons given by the Tribunal with which we agree, it was not reasonable or appropriate to set up a single trust ledger account in the circumstances pertaining as at February to October 1998. Townsends, and in particular Mr Prescott, never took the necessary steps which were a pre-condition to setting up a single ledger account.
As to Mr Prescott’s second contention, Mr Prescott was extremely vague in his evidence as to what he was told concerning the enquiry of the Law Society. He said he was told by Mr Reynolds that the Law Society had approved the method of setting up the trust account, but he did not recall or apparently know any detail at all as to what it was that the Law Society had approved. Assuming that Mr Prescott was told that Mr Astley had made an enquiry of the Law Society and that Townsends could operate a single trust ledger account if it was acting for the clients jointly, the obligation remained on Mr Prescott to ensure that Townsends were in fact acting for the clients on a joint basis. He failed to do this, and on the contrary knew that no steps had been taken of the type identified at [40] above for joint instructions.
As to Mr Prescott’s third contention, the principal vice of a single account was not the lack of detail of payments in or out. It was that the method of accounting did not segregate the moneys held on trust for one client from another’s. If separate ledger accounts had been established and maintained, the question would necessarily have arisen as to what proportion of a client’s moneys should be applied to a bill. Mr Prescott’s letter to clients led them to believe that it would be done on a pro-rata basis, ie a client would only pay a share of a bill proportioned to the client’s investment over the total investment of each client. By operating a single ledger account, one client’s moneys could be used entirely to pay a Townsends’ bill without anyone giving any thought to the question. This in fact occurred.
Mr Prescott’s failure in relation to the trust ledger accounts is exacerbated by the fact that he was informed at a very early stage by Piper Alderman and Mr Robertson in January and February 1998 of the need to arrange and document carefully the apportionment of costs between clients and the need to put in place agreements and procedures for joint instructions from clients.
The establishment and operation of a single trust ledger account in the circumstances described by the Tribunal was manifestly inappropriate and fell a long way short of the standard of professional conduct observed by members of good repute and competency. While the breach by Mr Prescott in this respect was at the lower end of the scale, it was nevertheless unprofessional conduct within the meaning of the Act at the relevant time.
Count 3: Overcharging
Count 3 of the charge alleged that the practitioners were responsible for gross overcharging in respect of circular letters sent to investors.
The details of the charges alleged by the Board to have been made by Townsends are summarised in the following table.

Bill

Letter Date

Number Charged

Amount

30.1.98

24.12.97

70 letters

$ 3,934.50

13.1.98

43 letters

$ 1,386.75

27.1.98

29 letters

$     935.25

27.2.98

11.2.98

353 letters

$ 6,812.90

29.5.98

2.3.98

11 letters

$     638.55

29.5.98

278 letters

$ 5,521.96

10.8.98

29.7.98

12 letters

$     232.32

TOTAL

$19,462.23

In his response to the charge, Mr Prescott did not dispute that the four bills in question included the amounts alleged in respect of the seven letters in question. Before the Tribunal, this fact was not contested. On the face of the bills, there were items included for the number of letters shown in the above table. While the bills themselves did not show the amount of the charge for each item, Mr Prescott’s primary costing records upon which the bills were based showed the amount of the charge for each letter. In addition, Mr Prescott subsequently prepared and submitted to the Board itemised versions of the bills showing the separate charges for these letters.
The Terms of Engagement submitted by Mr Prescott and signed and returned by the clients who paid moneys into Townsend’s trust account explicitly provided for time-based charging at $160 per hour for work undertaken by Mr Prescott. The Terms of Engagement did not provide for “scale-based charges”, ie charges in accordance with the Fourth Schedule to the Supreme Court Civil Rules 1987 (SA) which was in force in 1997 and 1998 pursuant to rule 101A.01(1)(a) of those rules. As a matter of contract, as recognised by section 42(6)(a) of the Act, the costs chargeable by Townsends to the clients were to be calculated based on the hourly rate and not upon the Fourth Schedule scale.
In respect of the letters of 24 December, 29 January and 29 May, if the charges had been calculated on an hourly basis, it would have entailed Mr Prescott spending 24, 42 and 34 hours respectively drafting each letter. No solicitor could reasonably have charged more than a few hours at the very most for these letters, and hence the bills included charges in respect of the letters which constituted gross overcharging.
The other four letters were short (approximately half a page or one page) and straightforward, and no solicitor could reasonably have charged more than one hour for drawing them. The charges in respect of them involved gross overcharging.
In his response to the charge, Mr Prescott denied that the seven standard letters should be charged on the basis of a “circular letter”. There was no basis for this contention given that it was an express term of the agreement with the clients that they would be charged on an hourly basis. In any event, it is clear that each letter was a “circular” letter within the meaning of the Fourth Schedule scale. This contention was not advanced on appeal.
The other answer by Mr Prescott in his response to the charge was that the charges made should be seen in the context of the totality of the legal work undertaken for the period of each bill and a costs item should not necessarily be looked at in isolation. Mr Prescott called Ms Bonesmo to give evidence that, if every item in every bill rendered by Townsends and Reynolds Prescott in respect of the period from December 1997 to March 1999 had been charged on the basis of the Fourth Schedule scale, the total charged would have exceeded the total of the Townsends’ bills actually rendered for the period December 1997 to July 1998. Ms Bonesmo accepted at face value the legitimacy and details of each item as recorded by Mr Prescott. She was not attempting to assess the amount properly chargeable for the work. Mr Prescott did not contend before the Tribunal that the charges were reasonable; rather he contended that the Board could not prove overcharging absent an adjudication by this Court under section 42 of the Act. Ms Bonesmo did not take issue with Mr Ericson’s evidence that in themselves the charges for the seven circular letters were grossly excessive.
Ms Bonesmo was not comparing apples with apples, because the periods were markedly different and she only made a comparison in total and not in respect of each of the four bills in question. More importantly, she applied the Fourth Schedule scale rather than the contractual time based method of charging.
In any event, it is apparent on the face of the four bills in question that a large proportion of the work the subject of each bill did not represent work for the purposes of or incidental to the investigation, advice concerning or prosecution of a recovery action for which Townsends were entitled to charge (if for anything) pursuant to the Terms of Agreement. The Tribunal rightly found that the majority of the work was in the nature of soliciting clients, client relations and other preparatory work for which Townsends were not entitled to charge. Given the answer by Mr Prescott that regard should be had to the entirety of the bills, the Tribunal was entitled to make this finding. On the basis of the Tribunal’s finding, which is supported by an examination of Mr Prescott’s file, records and the bills, the total amount of each bill represented a gross overcharging to the clients. While that finding does not and cannot in itself represent a finding of unprofessional conduct by Mr Prescott, it does negate Mr Prescott’s contention that regard should be had to the total of the relevant bills.
In any event, once the Board demonstrated that there was apparently a gross overcharging of clients in relation to the seven standard letters, this was sufficient in itself to demonstrate a prima facie case of gross overcharging. While Mr Prescott might have rebutted that conclusion by demonstrating that the overall charging of clients was fair and reasonable in accordance with the Terms of Engagement, he did not endeavour to do this.
Mr Prescott’s conduct in relation to overcharging is exacerbated by the fact that he was put on notice by Piper Alderman and Mr Robertson in February 1998 of the need to put in place detailed procedures for billing. He was put on notice by another firm of solicitors by their letter of 27 May of the need to avoid “running up legal work in a general direction” and that work done generally may not be for the benefit of any particular client. In addition, on 16 June 1998, he wrote to a Victorian investor saying expressly that contributions constituted a deposit for future work rather than moneys to be used for expenses already incurred in rounding up investors to join. By rendering bills, Mr Prescott did charge very substantial amounts for rounding up investors to join.
We uphold the finding of the Tribunal that Mr Prescott was responsible for grossly overcharging clients in respect of the seven standard letters. While overcharging in itself does not necessarily represent unprofessional conduct, the extent and scale of the overcharging is such that it violated, to a substantial degree, the standard of professional conduct observed by members of the profession of good repute and competency. It comprised unprofessional conduct within the meaning of the Act at the relevant time.
Count 4: Failure to communicate
Count 4 of the charge alleged that between March 1998 and September 2000 the practitioners failed to maintain communications as agreed, or any adequate communication with clients.
The Tribunal held that solicitors have an ethical and legal obligation to report regularly to clients about the progress of their matter and to provide timely advice about anticipated steps required to be taken to progress a matter, the likely time frame, costs, prospects of success, and where the matter may be at. The Tribunal concluded that Mr Prescott failed to carry out this obligation in respect of most of the clients in accordance with the Terms of Engagement or at all.
On appeal, Mr Prescott acknowledges that inadequate communication was maintained with clients who had joined in the Lateral Investors matter but contends that his conduct was not so serious a failing as to be unprofessional conduct. He refers to the communications which were maintained with the Schilling family, who were the biggest contributors to the fund, and characterises those communications as extensive. The Board did not allege that the communications with the Schillings were inadequate, and that can be put to one side. Mr Prescott contends that the real nature of the failure was a failure to institute a system of regular circular letters to clients and no detriment resulted to clients from the failure to keep them up to date with the progress of the matter.
In relation to the Fuss family, Mr Fuss provided a statement to the Board in November 2001 which was tendered before the Tribunal. Mr Fuss was interviewed by ASIC in June 1998 in company with Mr Prescott. Mr Prescott took notes and prepared a witness statement based on that interview. In August, Mr Prescott sent to Mr Fuss his ASIC statement and the draft witness statement prepared by Mr Prescott and in September he sent a final version of that witness statement. Beyond these steps, Mr Prescott did not substantially communicate with Mr Fuss after receiving his contribution of $11,000 in February 1998. Mr Fuss was not given Mr Robertson’s opinion, despite the fact that Mr Robertson separated his initial combined opinion into three separate opinions, one of which addressed potential claims by the Fuss family. Mr Fuss said in his statement that he found it extremely difficult to make contact with Mr Prescott. Mr Prescott never returned his phone calls and he hardly received any letters from him. He did not receive progress reports or bills, or any substantive advice about his prospects of success.
In general terms, the South Australian investors who contributed moneys between February and May 1998 received no written or verbal communications by way of report or otherwise initiated by Mr Prescott after Mr Prescott’s letter dated 29 January 1998. Similarly, the Victorian investors who made contributions between June and August 1998 received no written or verbal communications from Mr Prescott after his letter dated 29 May 1998.
The South Australian and Victorian contributors were not told the number or value of the total contributions made to the “fighting fund”, whether any further steps were taken to constitute the group proceeding jointly, what work was being undertaken by Townsends, what work was intended to be undertaken in future, that counsel’s opinion had been obtained, counsel’s views as to prospects of success or what differences there were as between investors in the group as to the identity of potential defendants and the nature or prospects of success of claims.
In the case of Mr Wetherall, Mr Prescott did not respond adequately in his answers to Mr Wetherall’s letters and later did not respond at all. Mr Prescott did not respond to Ms Schlemmer’s letter.
As observed above, in assessing whether, and the degree to which, Mr Prescott’s failure to communicate with clients fell short of the standard observed by members of the profession of good repute and competency, it was relevant and appropriate for the Tribunal to assess it against the background of what the clients had previously been told, or not told, by Mr Prescott. As found by the Tribunal, Mr Prescott’s letters to investors (specifically his letters dated 11 February, 4 March and 29 May 1998) objectively conveyed that there had been a greater commitment to contribute funds than was actually the position. By his letters dated 24 December 1997, 13 January and 11 February 1998, Mr Prescott led investors to believe that the pro-rata contribution would only be set once Townsends knew how many investors were participating. This would have led investors to expect that Townsends had later established the total amount committed by investors and that it was sufficient to undertake the investigation and advice which Mr Prescott foreshadowed. In fact, only a relatively small amount was committed by investors, and Mr Prescott failed to inform investors generally and clients contributing funds specifically of that fact. In those circumstances, it was incumbent on Mr Prescott to inform those clients who made contributions of the level of contributions made by all investors and in particular that it was not as high as had been conveyed by those letters.
As the Tribunal found, it was apparent to Mr Prescott by early March 1998 that the contributions received were less than 10 per cent of the amount he had assessed as necessary to undertake the investigation and provide the advice contemplated. He owed a duty to clients to inform them of this fact but failed to discharge that obligation.
As found by the Tribunal, Mr Prescott’s letters did not inform clients that it was proposed to charge for work canvassing potential clients or for work undertaken before clients had received any communications from or engaged Townsends. When Mr Prescott prepared bills charging for such work, it was incumbent on him to inform clients accordingly.
As was found by the Tribunal, clients who contributed moneys were led to believe that substantive investigatory and advisory work was being undertaken. In those circumstances, it was incumbent on Mr Prescott to inform them that no such work had been or was undertaken until June. Mr Prescott did not tell the clients in June or July 1998 that he was taking statements from three groups of investors but not others. Nor did he tell them in September 1998 that he was seeking an opinion from counsel on claims by those three groups of investors but not others. Nor did he tell them of Mr Robertson’s opinion in January 1999.
As the Tribunal found, Mr Prescott ought to have given to investors some detail in advance as to the proposed investigation and advice and in due course about what actual steps were being taken to investigate and provide advice.
An important aspect of communicating with clients was to send to them bills raised from time to time. Mr Prescott never took steps to send bills to clients over the period from January 1998 to March 1999 over which he raised numerous bills.
Mr Prescott ought to have made a clear distinction between investors according to the identity of their professional advisors. Prospects of success against one advisor (such as Mr Askwith) were likely to be very different to prospects of success against another advisor (such as a professional investment advisor). In addition, prospects of recovery might well vary depending upon the identity of the defendant. Mr Prescott owed a duty to clients to inform them of the differences between potential defendants. Mr Prescott told one investor on 19 February 1998 that he proposed to send to investors a questionnaire but he did not follow through on that proposal.
In each of these respects, while it was not open to the Tribunal given the content of the charge to find that Mr Prescott was guilty of unprofessional conduct by misleading clients, the Tribunal was entitled to find, and correctly found, that Mr Prescott’s communications were objectively misleading and that his subsequent failures to communicate needed to be assessed in that context.
Mr Prescott’s failure was much more than a failure to institute a system of regular circular letters to clients. In reality, he abandoned Mr Fuss after September 1998 and abandoned the other contributors (excluding the Schilling family) after receiving their contributions.
It is not accurate to say that Mr Prescott’s failure to keep clients up to date with progress of their matter did not result in any detriment to the clients. Leaving aside the Schilling family, clients who contributed moneys effectively received no benefit in return for their contribution. Their own claims were never investigated, their prospects of success were never assessed and they never received advice concerning their claims. In the case of the Fuss and Schubert families, while their claims were investigated and Mr Robertson did assess their prospects of success, Mr Robertson’s opinion was never provided to them. The limitation period for proceedings for misleading conduct against individuals such as Mr Askwith was three years in the 1990s pursuant to section 56 of the Fair Trading Act 1987 (SA). That limitation period expired after the clients provided instructions to Townsends and while they were still notionally clients of Townsends (although Townsends were undertaking no substantive work on their behalf). No proceedings were instituted by Mr Prescott on behalf of any of the clients. While the prospects of successful proceedings for those South Australian investors who might otherwise have sued Mr Askwith were not high, it appears that the Victorian investors (and possibly a handful of South Australian investors) had been positively advised by professional investment advisors and may well have had a good claim against them which was never pursued. The clients are likely to have suffered considerable distress as a result of the manner in which they were treated by Mr Prescott, which compounded the initial distress they suffered as a result of losing their investment in the Lateral Investors Group.
Mr Prescott’s conduct violated, to a substantial degree, the standard of professional conduct observed by members of the profession of good repute and competency. It was unprofessional conduct within the meaning of the Act at the relevant time.
Unprofessional conduct
The Tribunal correctly concluded that Mr Prescott was guilty of unprofessional conduct in each of the six respects alleged by the Board considered independently of each other.
All of the conduct charged related to the same clients and the same matter. In these circumstances, it was appropriate for the Tribunal to consider collectively Mr Prescott’s conduct in the six various respects to assess whether collectively it amounted to unprofessional conduct. The Tribunal correctly concluded that it did.
Conclusion
We dismiss Mr Prescott’s appeal. We will proceed to hear submissions on appropriate orders under section 89 in the disciplinary proceedings.
Appendix A

Date Bill Transfer Trust Balance Depositors and Contributors to Transfer

$ $ $

30/1/98 12,025.95 (F98496)

2/98 $12,840.00 Deposits in February
Mercurio $400, Williams $200, Fuss $11,000, Hartman $1,240

9/3/98 First Appropriation 12,025.00
Acct F98466
Cheque signed by Townsend $814.05
Paid from Williams, Mercurio, Fuss
Hartman (part)

11/3/98 Second Appropriation 140.00
Disb – Harvey Bruce
Requisitioned by Prescott.
No bill. $674.05 Hartman (part)

27/2/98 10,588.69
(F98566)

3/98 to
5/98
$2,461.55 Deposits March to May Schlemmer $200,
Ramsey $200,
Welsh $1,357.60

29/5/98 12,298.32
(F98748) $22,461.65 Deposit by Schilling -
$20,000.00

5/6/98 Third Appropriation 22,461.65
Acc 98566-98748
Requisition by secretary completed by Reynolds Nil Paid by - Hartman (part),
Welsh, Ramsey, Schlemmer, Schilling

22/6/98 Acc F98805
111.00
Disbursement travel
Signed

26/6/98 Acc F98829
111.00
Disbursement travel
Unsigned

16/6/98 to
2/7/98 $6,114.00 Deposits by Jury $200, Edwards $600,
Strathconen $480,
Moger $204, Neil $1000, Wetherall $3830

6/7/98 Fourth Appropriation 222.00
Requisition by Prescott
Reynolds signs cheque $5,892.00 Paid by Jury/Edwards
(part)

6/7 to 20/7
$6,692.00 Deposits by Hall $440, Felton $360

21/7/98 (Accommodation)
No bill.
Fifth Appropriation 141.90
Prescott Requisition Reynolds signs cheque
No bill $6,550.10 Paid by Edwards (part)

28/7/98 Sixth Appropriation 6,550.00
Cheque signed by Townsend .10 cents Paid by Moger, Edwards (part), Strathconen, Neil, Hall, Felton

(F number. = Firm bill by numerical reference.)

Bill	Letter Date	Number Charged	Amount
30.1.98	24.12.97	70 letters	$ 3,934.50
13.1.98	43 letters	$ 1,386.75
27.1.98	29 letters	$ 935.25
27.2.98	11.2.98	353 letters	$ 6,812.90
29.5.98	2.3.98	11 letters	$ 638.55
29.5.98	278 letters	$ 5,521.96
10.8.98	29.7.98	12 letters	$ 232.32
TOTAL	$19,462.23

Date	Bill	Transfer	Trust Balance	Depositors and Contributors to Transfer
$	$	$
30/1/98	12,025.95 (F98496)
2/98	$12,840.00	Deposits in February Mercurio $400, Williams $200, Fuss $11,000, Hartman $1,240
9/3/98	First Appropriation	12,025.00 Acct F98466 Cheque signed by Townsend	$814.05	Paid from Williams, Mercurio, Fuss Hartman (part)
11/3/98	Second Appropriation	140.00 Disb – Harvey Bruce Requisitioned by Prescott. No bill.	$674.05	Hartman (part)
27/2/98	10,588.69 (F98566)
3/98 to 5/98	$2,461.55	Deposits March to May Schlemmer $200, Ramsey $200, Welsh $1,357.60
29/5/98	12,298.32 (F98748)	$22,461.65	Deposit by Schilling - $20,000.00
5/6/98	Third Appropriation	22,461.65 Acc 98566-98748 Requisition by secretary completed by Reynolds	Nil	Paid by - Hartman (part), Welsh, Ramsey, Schlemmer, Schilling
22/6/98	Acc F98805 111.00 Disbursement travel Signed
26/6/98	Acc F98829 111.00 Disbursement travel Unsigned
16/6/98 to 2/7/98	$6,114.00	Deposits by Jury $200, Edwards $600, Strathconen $480, Moger $204, Neil $1000, Wetherall $3830
6/7/98	Fourth Appropriation	222.00 Requisition by Prescott Reynolds signs cheque	$5,892.00	Paid by Jury/Edwards (part)
6/7 to 20/7	$6,692.00	Deposits by Hall $440, Felton $360
21/7/98	(Accommodation) No bill. Fifth Appropriation	141.90 Prescott Requisition Reynolds signs cheque No bill	$6,550.10	Paid by Edwards (part)
28/7/98	Sixth Appropriation	6,550.00 Cheque signed by Townsend	.10 cents	Paid by Moger, Edwards (part), Strathconen, Neil, Hall, Felton