R v Halfpenny
[2003] VSC 308
•27 June 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
CRIMINAL DIVISION
No. 1511 of 2002
| THE QUEEN |
| v |
| NEIL RAYMOND HALFPENNY |
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JUDGE: | REDLICH J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 24 February, 27 March and 19 June 2003 | |
DATE OF SENTENCE: | 27 June 2003 | |
CASE MAY BE CITED AS: | R v Halfpenny | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 308 | |
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CRIMINAL LAW – Sentence – Defalcation deficiency solicitor’s trust account – Depressive Illness
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Elston | Ms Kay Robertson, Solicitor for Public Prosecutions |
| For the Defendant | Mr E.F. Hore-Lacy S.C. | Galbally & O'Bryan |
HIS HONOUR:
Neil Raymond Halfpenny, you have pleaded guilty to eight counts of theft and two counts of defalcation arising from a deficiency in your trust account. The counts of theft arise under s. 74 Crimes Act1958 and each carries a maximum sentence of 10 years imprisonment. Count 1, being the first count of defalcation, arises under s. 42 Legal Profession Practice Act 1958 and carries a maximum sentence of seven years imprisonment. Count 3, being the second count of defalcation arises under s. 188 Legal Practice Act 1996 and carried a maximum sentence of 10 years imprisonment, the maximum sentence being increased to 15 years imprisonment on 1 September 1997. In sentencing you I shall, as the Crown submitted, view the maximum sentence as 10 years.
The counts on the presentment span a period from 28 October 1996 to 22 December 1999 whilst you were a sole practising solicitor conducting practice known as Law-Power Barristers and Solicitors.
Counts 1 and 2 are concerned with the theft of money from your client, Elsie May Connelly and a deficiency in your trust account arising from such theft. Elsie May Connelly, by her will, appointed you trustee of her estate and executor of her will. The sole beneficiary under the will was the Victorian Conservation Trust, now known as Trust for Nature (Victoria). You also held Miss Connelly's power of attorney, being an enduring power of attorney, dated 30 September 1996. Miss Connelly was 91 years old when she died on 17 January 1999.
Elsie Connelly held an investment account with Macquarie Investment Bond Fund. On 30 September 1996, with her assistance as the signatory, you made a request for the withdrawal of $41,000 from her investment account. That amount was deposited into the Law-Power trust account on 17 October 1996. On 28 October 1996 you signed a cheque in the sum of $40,600 drawn on the Law-Power trust account. The cheque was payable to the ANZ Bank and the trust cheque butt falsely records that the payment was for E. Connelly, being the release of insurance moneys. A letter dated 18 October 1996 on her file outlines that the cheque was to be sent to Miss Connelly.
At this time you were a part-owner with your wife, Elvira, of a gift shop situated at the Fountain Gate Shopping Centre, Narre Warren. The business was known as the "Gift Affair" and was associated with the retail sale of giftware and homeware. That business commenced on 11 July 1994 and your involvement in it ceased on 30 June 2000.
The cheque for $40,600 drawn on the Law-Power trust account was used to purchase a bank cheque in the sum of $40,600 which on 7 November 1996 was deposited into the Gift Affair business account operated by you and your wife. The deficiency in the trust account constitutes Count 1 on the presentment. You stole this and other amounts from Miss Connelly between 7 November 1996 and 24 February 1999 totalling $210,186.09 as referred to in Count 2.
On 31 January 1997 you signed a trust cheque for $99,301.73 payable to the ANZ Bank, the cheque butt falsely recording that it was payment for the release of insurance moneys for Miss Connelly. On the same day you purchased an ANZ bank cheque with those funds and deposited the amount into the Gift Affair business account. On 6 August 1997, using your authority as power of attorney for Miss Connelly, you withdrew all of the money in Miss Connelly's Commonwealth Bank Pensioner Security account totalling $54,844.27, purchasing a bank cheque payable to Law-Power trust account, but those funds were deposited in the Gift Affair business account. On the following day you withdrew $55,000 from the Gift Affair business account and deposited it into the Law-Power trust account on 8 August 1997 where it was credited to the trust ledger card for Mrs E. Connelly – and was falsely described as "Investment Bebbington". On the same day you transferred $55,000 via a ledger entry from Mrs E Connelly to your client Jeanette Peterson to make up for a shortfall in the Peterson trust ledger card. This trust account deficiency is part of Count 3.
In October 1997 you acted for Miss Connelly on the sale of a property and received a number of cheques which you requested be separately prepared for settlement. One such cheque was in the sum of $12,316.03 payable to Law-Power, but it was not credited to the Law-Power trust account for Miss Connelly nor was it entered in the trust ledger. That cheque formed part of a large deposit which was paid into the Law-Power office account. This amount comprises part of the theft in Count 2. A cheque for $21,000 was diverted into the account of another of your clients Leigh Norgate, and was used on the settlement of the purchase of a property in Williamstown. A third cheque you received on settlement for the benefit of Miss Connelly was an amount of $16,597.84 payable to Barclays Bank which was never credited to the account of Miss Connelly, the funds ultimately being deposited into Barclays Bank in London but the details are unknown.
Miss Connelly died on 17 January 1999 and you wrote to the Macquarie Investment Bond Fund Investment Group seeking to redeem Miss Connelly's investment policy on behalf of her estate. On 9 February 1999 all of the funds in the investment policy were surrendered and the account closed. A cheque in the sum of $3,124.06, payable to the estate of Miss Connelly, was sent to you. That sum was deposited into the Law-Power trust account and credited to a trust ledger concerning an unrelated client and transaction. "I Nankervis: purchase from Ward." On 24 February 1999 you signed a cheque payable to the Law-Power office withdrawing this amount from your trust account and depositing them into the Law-Power office account. This amount also comprises part of the theft in Count 2.
As a consequence of these thefts, the beneficiary under Miss Connelly's estate made a claim through the Law Institute Fidelity Fund. You have subsequently made full restitution to the beneficiary in the circumstances which I shall hereafter refer to.
Count 3 is a compendious count of the deficiencies in your trust account between 31 January 1997 and 22 December 1999. The count spans 38 transactions in which you improperly manipulated your trust account and on the occasions the subject of separate counts on this presentment, stole money belonging to your clients. I have already referred to the various thefts of moneys belonging to Miss Connelly which resulted in a deficiency in your trust account and comprise part of Count 3 and to settlement cheques from the sale of Miss Connelly's land, which you stole, or wrongly applied to the benefit of other clients.
Deficiencies in your trust account also arose as a consequence of the manner in which you handled the affairs of your client, Jeanette Peterson, who was the trustee for her son, John Douglas Peterson, who had been injured in 1981 and awarded a sum of $100,000 which was held on trust for him through the Senior Master's Office in the Supreme Court of Victoria. Part of those funds were used to acquire a property and in 1997 Mrs Peterson decided to sell the property. On completion of the sale, $113,000 was to be paid back to the Supreme Court for further investment. You acted for Mrs Peterson in relation to the sale of the property. On 4 August 1997 the Master wrote to Law-Power asking you for the outstanding funds. You responded on 6 August 1997 advising that you had instructions from Mrs Peterson that part of the funds were to be used on the short term interest loan market. You attached a copy of the loan agreement. A mortgage of land document dated 23 July 1997 recites that $63,000 was loaned from the mortgagee, Jeanetter Peterson, to Mr and Mrs Frank Bebbington. At no time did Mrs Peterson ever authorise or sign any such documentation.
The Bebbingtons were in fact clients of yours having engaged you as solicitor after Westpac Bank threatened to sell their property unless a mortgage was repaid by 30 June 1997. You sought to raise finance from various sources without success. Following a threat of legal action, you paid $61,000 to the Westpac Bank in discharge of the Bebbingtons' loan. That money was part of the $63,000 that was in the Law-Power trust account from the Peterson ledger. The Bebbingtons believed that you had obtained legitimate finance for them. On 23 July 1997 you transferred $61,000 from the Peterson trust ledger card and on 6 August 1997 the balance of $2,000 from the Peterson ledger was transferred to the Law-Power office account for your legal costs in using Mrs Peterson's money to pay the Bebbingtons' mortgage. These trust deficiencies comprised part of Count 3. Following ledger transfers from the Connelly Trust Account (see para 6), the Senior Master's Office in the Supreme Court received the outstanding funds.
As a result of your manipulation of the affairs of your client, Mrs Christine Campbell, you caused a number of deficiencies in your trust account which are the subject of Count 3. You were engaged by Mrs Campbell to administer the estate of her son, Matthew Campbell, who had died in August 1994. Mrs Campbell had been contacted by a superannuation fund regarding an unclaimed benefit relating to her son, Matthew. You were instructed to make an application for the benefit. On numerous occasions Mrs Campbell contacted you enquiring as to whether payment had arrived. You informed her that there had been a delay by the superannuation company and that you had not received the money. When Mrs Campbell contacted the superannuation fund directly she was informed that the funds had been forwarded to you. The trust ledger card shows that the superannuation payment of $45,379.54 was received by you on 12 June 1998, but Mrs Campbell did not receive her payment until several months later. In the interim on 19 June 1998, a trust cheque for $17,200 was drawn on the trust account and was falsely described as a partial distribution from the estate. This amount was deposited into the National Australia Bank into an account which has not been identified. On 29 June 1998, a cheque for $24,693.31 was withdrawn from the trust account, again being falsely described as a partial distribution from the estate. This amount was lent by you to one, Patrick Byrne, as bridging finance on a property purchased by him.
On 8 September 1998, you withdrew $2,200 from the trust account by way of cheque and paid the State Revenue Office for stamp duty falsely recording that it was a payment in relation to Mrs Campbell's account. On 9 September 1998 you drew a trust cheque in the sum of $336 made payable to the Land Titles Office, falsely recording that it was a payment for Land Titles Office registration re Campbell. On 29 October 1998, you drew a trust cheque for $950.23 which was paid into the Law-Power office account although it was falsely recorded as part settlement money for M. Grainger & Assoc. re the Campbell estate. This theft is Count 4.
On 19 February 1999 you drew a trust cheque in the sum of $45, 536.18 which was paid to Mrs Campbell. This money was debited from the trust ledger card of the estate of Lawrence E. Frazer.
Lawrence Frazer, who was your uncle, passed away on 13 October 1998. By his will you were appointed the executor and trustee of your uncle's estate. Between December 1998 and March 1999, your management of the estate resulted in a number of deficiencies in the trust account which forms part of Count 3. You stole various amounts belonging to the estate as alleged in Count 5.
The trust ledger card of the Frazer estate had a value of $111,727.17. On 7 December 1998 you commenced to deal with the funds in the estate drawing a cheque for $5,000 on the trust account which was paid to the Law-Power office account. The payment was falsely recorded as a distribution to a beneficiary under the estate. This theft is Count 5. On the same day you drew a trust account cheque in the sum of $1,000 which was made payable to the Law-Power office account and again recorded the false explanation that it was a partial distribution from the estate to a beneficiary. This theft is part of Count 5. On 10 December 1998, you drew three trust cheques on the estate for $22,798.12, $1,298.52 and $689.45 falsely recording that the amounts were required for a property settlement connected to the Frazer estate. In fact, the property settlement was for another client, one Allin, unrelated to the Frazer estate. Each of these transactions created a trust account deficiency which is included in Count 3.
On 23 December 1998 you drew a trust cheque for $4,000 on the Frazer estate falsely recording the amount as being for headstone costs of Mr Frazer. The money was in fact used as payment to another client one Gibson, of moneys which that client was owed from the settlement of a civil claim. This amount is included in Count 3.
On 20 January 1999, you drew a trust cheque for $700 which was made payable to the Law-Power office account but falsely recorded that it was a payment to the Deputy Commissioner of Taxation re the Frazer estate. This is the final theft covered by Count 5.
Between 22 January 1999 and 1 March 1999 you drew a further nine cheques on the trust account debiting the ledger of the Frazer estate for purposes unrelated to the Frazer estate and falsely recorded these transactions. You used such funds in relation to other clients, totalling approximately $76,000 which includes the amount of $45,536.18 to repay Christine Campbell the moneys to which she was entitled. As you did not repay the estate any of the moneys owed to it, the estate made a claim through the Law Institute Fidelity Fund.
You acted for Marilyn Willmott in relation to the sale of her property and on 5 and 6 October 1999 you drew trust cheques debiting her ledger account in the sums of $9,850 and $738 for stamp duty and transfer fees but used those funds for other clients' purposes. Those trust account deficiencies form part of Count 3. Mrs Willmott received no funds from you and was obliged to make a claim through the Law Institute.
Mr John McCann died on 18 August 1998. His daughters were joint executors of his estate and you were engaged to assist them. After a grant of probate you came into possession of the trust funds of the estate and drew a trust cheque on 9 March 1999 in the sum of $20,000 payable to the ANZ Bank. You wrote to one of the executors and falsely advised her that the sum was to be placed in an interest-bearing account pending a final assessment of tax payable on the estate. On the same day a bank cheque for $20,000 was purchased from the ANZ Bank and was paid into the Gift Affair business account. This theft is Count 6. Ultimately you paid the beneficiaries the amount which had been stolen from the estate. The trust account deficiency also forms part of Count 3.
You acted on behalf of Helen Henkes, the administratrix of the estate of her son who died on 24 April 1999. The Supreme Court had funds invested for her son since 1976 amounting to $25,795.89. Helen Henkes was your cousin and you were very close. The funds were released to you and on 9 September 1999 you drew a trust cheque for $19,139.24 which you deposited in the Law-Power office account. This theft is Count 7. After receiving the funds you falsely told your cousin that you had invested the money which would be released in March 2000. She did not receive any funds from you and made a claim through the Law Institute Fidelity Fund. This deficiency in the trust account also comprises part of Count 3.
Mr Ronald Jones, who is the sole executor and trustee of the estate of Florence Elizabeth Jones, engaged you to act on his behalf. The estate included an investment unit which was sold and after the completion of the sale a balance of $10,414.20 was held by the real estate agent. This amount was forwarded to you as the balance owing to Ronald Jones. You received this amount on 14 October 1999 but did not deposit it in the Law-Power trust account for the benefit of the Florence Jones estate but deposited it in the Law-Power office account. This theft is Count 8. On 16 November 1999, a trust cheque for $21,352.94 was drawn on the Florence Jones estate and appears to have been used for the purposes of other clients P & C Yaxley. This trust account deficiency comprises part of Count 3. A further cheque for $4,000 drawn on the trust account on the same day was also dealt with by you in the same manner and also forms part of the trust account deficiency of Count 3. You again created false records to conceal this transaction.
Mr Alwyn Sargeant retained your services in relation to the purchase of a property in Watsonia. An amount of $5,499 was required for stamp duty and title fees and Mr Sargeant provided you with a Bank of Melbourne cheque in that sum. You did not deposit the money into the Law-Power trust account but on the same day deposited it into the Law-Power office account. Mr Sargeant subsequently ascertained that the stamp duty and land title fees had not been paid and in order to obtain title on his home was required to pay that sum. This theft is Count 9. Mr Sargeant has made a claim through the Law Institute Fidelity Fund. The trust account deficiencies also comprise part of Count 3.
You acted for Mr Bruno Ferella in the purchase of real estate, and following settlement requested an amount of $6,123 for stamp duty and land title fees. Mr Ferella provided you with a bank cheque for the said sum but you did not deposit it into the trust account but paid it into the Law-Power office account. This theft is Count 10. Mr Ferella subsequently learnt that the stamp duty and title fees had not been paid. As there has been no restitution of these funds Mr Ferella made a claim to the Law Institute.
On 16 February 2000, the Law Institute referred the investigation of your trust account to the Victoria Police Major Fraud Group. The investigation took some months. In June 2000, investigators took possession of your client files and other records that had been previously seized by the Victorian Lawyers’ Professional Standards Group during their investigation. Search warrants were executed on a number of financial institutions, and bank accounts held by both Law-Power and by the Gift Affair business were seized. In October of 2000 your solicitors contacted the Major Fraud Group, but initial discussions were not productive. The difficulty in progressing the matter was in part attributed to your psychological problems. During 2001 you were involved in civil litigation with your wife who had by then separated from you and there were also civil proceedings being taken against you by the Law Institute. On 4 October 2001, there was a mediation which resulted in the resolution of the civil litigation and you agreed to reimburse the Law Institute Fidelity Fund in the sum of $500,000 comprising the amounts that you had stolen plus costs and disbursements. By this time you clearly acknowledged both your guilt and your responsibility to make restitution. It appears that by March 2002 the criminal proceedings were being prepared by way of a plea brief. Despite your psychological difficulties it is evident that you acknowledged your guilt and responsibility for these offences at an early stage of the investigation.
At the commencement of the plea, the Crown tendered a schedule which was not the subject of dispute which revealed that the trust account deficiency covered by Counts 1 and 3 amounted to $565,162.75 and the total amount stolen by you was $279,011.67 constituted by Count 2 and Counts 4 to 10. On the first day of your plea, I was told that on four separate occasions between 28 October 1996 and 9 March 1999 you stole sums of money from your practice totalling approximately $215,000 which were paid into the Gift Affair business but the disposition of those funds was otherwise unknown. $55,000 was returned to the practice and passed on to a client. On the third hearing of this matter, it emerged that $292,328 had been paid out of your trust account or was otherwise stolen from a client and paid by you to the Gift Affair business. I shall return to some further analysis of this amount.
You told Mr Cummins that you directed about $100,000 out of the practice trust account to the purchase of your holiday house in Lorne. No other information was initially forthcoming as to how you financed the purchase of your holiday home, but I was eventually told that the holiday house was purchased through funds diverted to the Gift Affair business. Upon the thefts and defalcations being discovered, you readily agreed to the sale of the matrimonial home and the holiday home, and from your share of the proceeds of sale, provided the Law Institute receiver with $500,000 to meet all of the claims made upon the Solicitors Fidelity Fund.[1] I was told on the first hearing that there was thus a trust account deficiency of approximately $240,000 in excess of the money you actually stole from clients. It was said on your behalf on the plea that that money had not been lost despite it being described as a trust account deficiency. All that had occurred was that you had taken money from one client and paid it to another as there was a need to do so and that eventually all the money was repaid. It was not disputed that a substantial number of the trust account deficiencies arose in circumstances where you diverted trust account funds from one client to another.
[1]See Exhibit 2 – letter dated 20 February 2003 from the receiver of the trust property to the Director of Public Prosecutions.
Following the conclusion of the first hearing on 24 February 2003, I reviewed the Victoria Police Fraud Squad report which had been part of the hand-up brief which contained additional details of each transaction which had been opened by the Crown. The report confirmed that it had become necessary for you to divert funds from one client to another. At a further hearing on 27 March 2003, I drew to the parties' attention the detail of those transactions which raised the prominent hypothesis that you had initially improperly used funds of a client for unknown purposes and had thereafter found it necessary to steal or divert funds from another (second client) client to make up the deficiency in the first client's account or to make a payment on behalf of the first client. Each party was asked to obtain further instructions and to endeavour to reach some agreement about the matters that I had raised. I requested that the matter be addressed quickly.
Despite a number of inquiries of the parties through my Associate the matter had not progressed so it was listed again for hearing on 19 June 2003. I was then informed that there had been no agreement reached between the parties. Your counsel informed me that it had not been possible to trace the individual amounts that I had drawn to the parties' attention on the previous hearing. Your counsel again submitted on your behalf that save for the amounts which you acknowledge you stole, the trust account defalcations did not result in any loss. Mr Hore-Lacy, who appeared on your behalf, called your wife's accountant and your wife's solicitor who, together with you, had been involved in reaching terms of settlement with the Law Institute over the losses that had been sustained. Mr Grice, your wife's solicitor, confirmed in evidence that the Law Institute's claims were fully repaid. Your wife's accountant, Mr Allen, testified as to his examination of your books of account prior to attending the mediation. The summary of his calculations was tendered in evidence and became Exhibit 12. Mr Allen's calculations revealed that you had diverted $292, 328.93 from your trust account to the Gift Affair business. This was substantially more than had been referred to at the first hearing. Included within this figure were a number of payments which constituted thefts which were not the subject of counts on the presentment. The third item in Exhibit 12 under the items paid to the Gift Affair business is an amount of $16,596.84 which was stolen from Miss Connelly. A like amount appears as a trust account deficiency on 14 October 1997, the funds being deposited into an account at Barclays Bank in London. This was one of the transactions to which I had drawn attention on the second hearing. Mr Allen also identified an amount of $28,000 diverted from the trust account of your client Mr Norgate on 5 September 1997 into the Gift Affair business. This was probably also a theft though this amount was not reflected in any Count on the presentment. It explains why you took Mrs Connelly's settlement cheque of $21,000 to which I have referred and used it on behalf of Mr Norgate. This amount was also referred to on the second hearing. There were other amounts which Mr Allen identified in Exhibit 12 involving the transfer of funds from clients to the Gift Affair business which were not the subject of any Count on the presentment. I shall not take into account any of those thefts which are not the subject of a specific Count to which you have pleaded guilty, but Mr Allen's analysis confirms that in addition to the specific thefts counts on the presentment, you committed other thefts which led you to commit some of the offences to which you have pleaded.
Mr Allen also set out in Exhibit 12 the amounts which he found that you had paid back to clients from your Law-Power office account totalling $80,986.09 and from the Gift Affair business totalling $262,364.77. The break up of the amounts paid back to clients from the Gift Affair business shows that some clients were paid directly while in other cases the funds were transferred from the Gift Affair business to the Law-Power Trust Account. Whilst Mr Allen conceded that none of your clients' money should have found its way into the Law-Power office account or the Gift Affair business he had satisfied himself that all of the money that you had taken had been repaid. Mr Allen's calculations show that all of the monies paid back to clients from the Gift Affair business occurred during the period November 1996 to March 1998 prior to the time when the investigation of your activities commenced. The amounts paid to the Law Institute were in addition to the amount of $343,350.86 repaid to clients from the Gift Affair business or your office account prior to the investigation. The Crown did not challenge Mr Allen's testimony nor did the Crown challenge your counsel's submission that the trust account defalcations did not result in any losses.
On the first mention I directed the attention of both your legal representatives and the Crown to the use that you had made of funds taken from clients. Some months later when this matter was again mentioned your counsel informed me that it was nigh impossible to obtain answers to the questions that I had raised whilst the learned prosecutor informed me that those instructing him did not have access to information which would enable them to answer such questions. As Mr Allen confirmed the submission that there had been no losses to clients as a result of the general defalcation, and despite reservations arising from the lack of evidence concerning the movement of funds and the reasons for it, I propose to sentence you on the basis that Exhibit 1 correctly reflects the trust account deficiency to the amount which you stole.
Plea of guilty
As the learned prosecutor informed me, you indicated your intention to plead guilty at the earliest stages of the investigation and you have now done so. Your plea has saved the State a trial and reflects your remorse for your conduct. I take into account your plea of guilty both for its own sake and because of its beneficial consequences.[2]
[2]Cameron v R (2001) 22(19) Leg Rep HCt 25 October. Also see R v Donnelly [1998] 1 VR 645; R v Duncan [1998] 3 VR 208 at 215 per Calloway JA.
Full restitution
A reduction in the sentence which I would otherwise impose should be made because you have made full reparation. Your decision to make restitution was voluntary and required you to sell the only existing family assets, namely the matrimonial home and your holiday house, leaving you and your family in a state of impoverishment. This circumstance contributed to the final breakdown of your marriage, resulting in separation. Your willingness to make full restitution from the earliest stages of the investigation indicates genuine remorse and must be taken into account in mitigation of penalty.[3]
[3]R v Raymond John Mickelberg& Ors (1984) 13 A Crim R 365 at 370; O'Keefev R (1992) 60 A Crim R 201; Radjevic v Police (1997) 67 SASR 478.
Personal circumstances
Mr Halfpenny, you are aged 56 years, having been born on 2 December 1946. You lived with your parents until age 26 years in Housing Commission accommodation in Reservoir. You have a brother, Thomas Halfpenny, who attended Court during the plea and you had a sister, Marlene Patricia Halfpenny, who was murdered in 1979. This tragedy had a profound effect upon you to which I shall subsequently refer. Your parents both worked in a hat factory in Collingwood until your father took up a position as a union secretary, continuing in this position until his late fifties. You attended the local primary school and then Northcote High School, entering Monash University where you studied and completed your law degree. You then undertook articles with John Cain in his law practice at Preston where you remained for some 18 months. You then joined another law firm, E. A. Newman & Associates, and it was there that you met your wife who was employed as a secretary.
In 1973 you married and shortly thereafter you accepted a position with the Aboriginal Legal Aid Service and relocated to Darwin. Mr Hore-Lacy, who appeared on your behalf, informed me that you were one of the inaugural solicitors who commenced the Northern Australian Aboriginal Legal Aid Service in Darwin. It is evident that from your earliest pioneering days in establishing the Aboriginal Legal Aid Service your workload was substantial and stressful. After approximately 18 months you determined to establish your own practice, Halfpenny & Associates, and continued in practice in Darwin until 1983. It was a busy, successful practice requiring the services of other legal practitioners, your primary work being legal aid criminal work. At first your wife was your secretary, but as your children were born her involvement in the practice diminished. It is not without significance that she continued to work on a part-time basis in your practice as manager and bookkeeper and financial controller, functions which you were required to perform at the time of the commission of the offences which brings you before the Court. Not only did you work long hours but you did a great deal of appearance work which you found extremely stressful. Mr White, who gave evidence on your behalf, described you as a "workaholic" and he referred to the obvious work stress that you suffered. You were well liked and well respected amongst the legal fraternity and Mr White opined that had you remained in Darwin you may well have been appointed to the bench as you were highly regarded by the Court in which you appeared. As I have already mentioned, your sister died in the most tragic circumstances in 1979 and you were caught up as a loyal brother in the criminal trial in which her husband was convicted of manslaughter. Your counsel on the plea before me had appeared in that criminal trial and has explained how traumatic that period of your life was. It appears that this event precipitated your decision to leave Darwin and return to Melbourne to be with your family.
You sold what was a very profitable practice in 1983. The demands of your practice had taken their toll and you were feeling "burnt out". By this time you had three children, Vanessa, Marlene and Chase, all of whom were present in Court during the plea made on your behalf. Upon your return you invested money in several ventures including a land subdivision in Greenvale and a coffee shop. None of those investments proved successful. You undertook some private locum work as a solicitor for approximately 18 months and, at about the time that your father died in 1986 from lung cancer, you commenced to do locum work for Victoria Legal Aid and voluntary work for the Coburg Legal Service. This you continued to do for the next 10 years. In about 1993, your wife opened her own shop called Gift Affair and it was at this time that you opened the coffee shop. After the failure of the coffee shop as a venture you commenced to work for your wife, helping her with odd jobs around the business.
In 1996 you purchased the law practice at Eltham, renaming it Law-Power Barristers and Solicitors. You were the sole practising solicitor in the practice. Although it was a small practice the volume of work required two solicitors. You employed a secretary and your eldest daughter, Vanessa, assisted you on a part-time basis. Within a few months of the commencement of that practice you committed the first offence to which you have pleaded guilty. It is apparent that by this time, you were experiencing some financial hardship and the practice did not generate the income that you had hoped for. You told Mr Geoffrey Cummins, psychologist, who gave evidence before me and whose report was tendered, that you felt you had been out of the law for too long and no longer knew how to make money and did not have the hunger to succeed in the business. Whether it was from generosity of spirit or lack of experience, it appears that up to 40 per cent of your time was not charged to clients. A pro bono practice of such proportions contributed substantially to your financial difficulties.
Shortly after the investigation into your practice commenced, you separated from your wife and spent several months with your parents-in-law in Lakes Entrance before moving to reside with your eldest daughter, where you presently live. Your hope is that you will eventually be able to resume co-habitation with your wife although both of you are quite emotionally fragile.
Mental condition
Shortly after the investigation into your practice commenced you were referred by your general medical practitioner to Professor George Mendelson for psychiatric treatment and assessment. You saw him regularly for approximately 18 months. You were assessed as suffering from depression and received treatment with anti-depressant medication and supportive psychotherapy. Professor Mendelson was of the opinion, based on the history which you gave him, that you had been suffering from depression for a period of perhaps 18 months prior to your first consultation with him. It was the opinion of the psychiatrist, Dr Angelique Zimmerman,[4] that when she first had contact with you in 1989 you were in a depressed state and suffering from "burnout" from your practice in Darwin. Your stress tolerance was very low, but you suffered from a lack of awareness of your condition. It is unnecessary that I recount all of the observations that she has made in her letter to your solicitors, but I understand that Mr Cummins has drawn some of those matters to your attention in the course of his consultation with you. I am satisfied on the evidence that has been placed before me that your depressive illness has been of a much longer duration.
[4]Exhibit 8 – letter 14 February 2003.
Professor Mendelson was of the opinion that you have a general inability "to say no to anybody" and have a "basic drive to help people you identify with from your own background". This view was confirmed by the evidence and report of Mr Cummins. I accept as accurate the opinion of Professor Mendelson and Mr Cummins that your behaviour in using the funds from your trust account to provide loans to clients arises from your attempts to counter your feelings of depression and lowered self-esteem and to present yourself in a more positive light. You were able to maintain this image until you were confronted with the wrongfulness of your conduct and you came to recognise that what you had done had been "irrational". You came to realise the extent of your depression and accepted the need for psychiatric treatment.
The evidence before me suggests that there has been a marked improvement in your state of mind and in the manner in which you can relate to your family since you underwent psychotherapy, received medication and developed a better awareness of your condition. You are receiving meaningful emotional support from all of your children. When Mr Cummins saw you however on 20 February 2003, you were still moderately depressed and you are in need of ongoing psychiatric treatment and some mood stabilising medication. You were very probably depressed for at least the last few years while practising as a solicitor in Darwin and I accept Mr Cummins' opinion that you have most probably been suffering from a major depressive disorder since the early 1980s. That condition remained untreated until May 2000 when you first received medical attention and psychotherapy.
I accept Mr Cummins' evidence that it is a clinical fact that a person who is depressed is likely to have more difficulties in making rational, sensible and coherent decisions and will have more difficulty in making accurate perceptions. "Burnout" is, as Mr Cummins said in cross-examination, an insidious sort of phenomenon and you did not appreciate you were burnt out by the early 1980s nor did you appreciate the extent and the numerous ways in which it may have impacted on your psychological state. In short, you were unable to appreciate the extent of your psychological demise.
Prior to ceasing work in Darwin you had also become more dependent on alcohol as a form of self-medication to manage work-related stress. On your return to Melbourne your alcohol consumption decreased somewhat but then increased significantly shortly after you purchased the law practice in Eltham. Since attending Professor Mendelson your alcohol intake has moderated significantly. You have acknowledged that you were quite irrational in your thinking that you could borrow money from the trust account and use it for the various purposes that you did, believing that you could put the moneys back into the practice at will. I accept Mr Cummins' opinion that you engaged in such delusional thinking in a context where you were significantly depressed and dependent on alcohol.
I am satisfied that there was a relationship between your depressive condition and the offences which you committed and I accept the submission made on your behalf that it should reduce your moral culpability for the offences to which you have pleaded guilty.[5] While I accept that your depressive illness affected your judgement in the way described by Mr Cummins so that there was "very definitely" a nexus between your depressive state and the offences which you committed, he expressly disavowed any suggestion that you did not, at all material times, know what you were doing. Your depressive condition is not a mental disorder of the kind that impacts upon the question of general deterrence. It could not be said in your case that you are not an appropriate medium for making an example to others.[6] I shall take into account your depressive illness in considering your level of moral culpability for the offences to which you have pleaded guilty, conscious also that a given sentence may weigh more heavily on you that it would on a person in normal health.[7]
[5]Fox, Richard and Freiberg, Arie (1999), Sentencing: State and Federal Law in Victoria (2nd ed.), South Melbourne, Oxford University Press at paragraph 3.723.
[6]R v Howse [2002] VSC 197; R v Tsiaras [1996] 1 VR 398.
[7]See R v Tsiaras Footnote 6 at 400.
You have already been dealt with by the Legal Profession Practice Tribunal and your licence to practice has been suspended for eight years. Such a suspension almost certainly means the end of your career as a practising lawyer. Your genuine remorse, shame and embarrassment has been made more acute as the family assets have been sold and your chosen means of livelihood has been removed. Your work history, which I have recounted, reveals that you are not a greedy person and did not pursue the practice of the law to make your fortune.
Mr Hore-Lacy has drawn my attention to three Unreported decisions of this Court, namely R v Jeffrey Jacobs John,[8] Director of Public Prosecutions v Williams Michael Serong[9] and R v Peter Howse.[10] It was submitted on your behalf that there are similarities between these cases and your own and that adopting the approach taken in Howse and John's case, any period of imprisonment that I impose should be wholly suspended.
[8][2001] VSC 416.
[9][2001] VSC 213.
[10]See Footnote 6.
It has been submitted on behalf of the Director of Public Prosecutions that there are a number of circumstances about your case that require the imposition of an immediate custodial sentence, some of which distinguish your case from those on which your counsel relied. You committed these offences over a period slightly in excess of three years and it cannot be said that your conduct was spontaneous or the immediate consequence of some specific incident. The amount that you stole together with defalcations appears to be in the order of $500,000 and the magnitude of your offence distinguishes your circumstances from many others. The importance of general deterrence in the case of a solicitor who breaches his position of trust was emphasised. Although there is a causal connection between your depressive illness and the offences which you committed and in that sense it bears upon your culpability, general deterrence remains an appropriate purpose of punishment in your case, having regard to the nature and condition of your depressive illness.[11]
[11]See R v Yaldiz (1998) 2 VR 376 at 381 per Batt JA. 383 per Winneke ACJ.
I have referred to many of the considerations which justify my taking a lenient approach in sentencing you. I do not regard the issue of personal deterrence as of any relevance as there is no risk in my view that you will commit any offence in the future. As Eames J. said however in the case of Director of Public Prosecutions v Serong:
"Breaches of trust by solicitors involving substantial sums of money are matters which the appellate courts have repeatedly said prima facie justify a sentence of imprisonment notwithstanding the fact which is common in all such instances that the offender has no prior convictions and invariably has an exemplary previous reputation."[12]
[12]See DPP v Serong Footnote 9 at 12.
In R v Howse Flatman J. said:
"The community is entitled to expect high standards of integrity and responsibility from the legal profession. It is perhaps well expressd in Cole, unreported 10 May 1974:
'Defalcations by persons in a position of trust have to be regarded by the courts as much more serious than other types of defalcations. In this regard the solicitor stands in the particular position. He is an officer of this court, he is filled out by it as a fit and proper person to practise his profession and to receive his client's money and to be the recipient of their justified financial trusts and confidence. It is not possible for the courts to regard likely the defaulting solicitor whose actions tend to undermine the security of ordinary people and the fabric of a profession on which and on whose integrity the public are to such an extent dependent. This is particularly the type of case in which the court is entitled to express on behalf of the community its disapproval of a particular type of breach of trust involved.'"[13]
[13]See R v Howse Footnote 6 at paragraph 35.
The course you took was a disastrous one. Having taken the step into dishonesty by stealing from a very elderly and vulnerable client, you stole from her again on four more occasions. You stole from other vulnerable clients including family members and, in all instances, they were people who trusted you implicitly. You manipulated your trust account and misrepresented the purpose of transactions in an attempt to conceal your conduct. You caused substantial losses to various clients who initially had to make claims on the fidelity fund. The loss of your practice and reputation, the impoverishment of you and your family and the breakdown of your marriage constitute a profound punishment, but solicitors who abuse the trust of the clients repeatedly, involving large sums of money, must recognise that the likely outcome of such conduct is imprisonment. Despite the powerful personal factors and mitigating circumstances to which I have referred, considerations of general deterrence must remain paramount. I intend to substantially reduce the sentence which I would otherwise have imposed had there not been a number of personal and other mitigating factors to which I have referred. I am conscious of the hardship which any sentence that you are required to serve will impose on you and your family, but I do not consider it appropriate, however, that your sentence be wholly suspended. Having regard to all of the mitigating circumstances, I have fixed a period of immediate imprisonment which is the lowest that I consider to be consistent with the gravity of the offences. Neil Raymond Halfpenny –
On Count 1 of theft you will be sentenced to 12 months' imprisonment.
On Count 2 of theft you will be sentenced to 2 years' and 6 months.
On Count 3 for a deficiency in your trust account you will be sentenced to 2 years and 6 months.
On each of Counts 6 and 7 of theft you will be sentenced to 6 months' imprisonment.
On each of Counts 5, 8, 9 and 10 of theft you will be sentenced to 3 months' imprisonment.
On Count 4 of theft you will be sentenced to one months' imprisonment.
I order that three months of Count 1 and three months of Count 6 be served cumulatively upon the sentence on Count 2, making a total effective sentence of three years' imprisonment. I order that 2 years and 7 months of that sentence be suspended for a period of 24 months. That leaves an immediate sentence of imprisonment of five months to be served. I am required by the Sentencing Act1991 to explain to you that if you commit another offence punishable by imprisonment during the operational period of the sentence you may be liable to actual imprisonment for the whole or part of the sentence imposed but suspended.
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