The Council of the Law Society of New South Wales v Oliveri

[2007] NSWADT 246

CITATION:	The Council of the Law Society of New South Wales v Oliveri [2007] NSWADT 246
DIVISION:	Legal Services Division
PARTIES:	APPLICANT The Council of the Law Society of New South Wales RESPONDENT Emanueli Oliveri
FILE NUMBER:	062026
HEARING DATES:	17-18 September 2007
SUBMISSIONS CLOSED:	18 September 2007
DATE OF DECISION:	10 October 2007
BEFORE:	Molloy GB - Judicial Member; Riordan M - Judicial Member; Fitzgerald R - Non Judicial Member
CATCHWORDS:	Solicitor – Disciplinary application
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Legal Profession Act 1987
CASES CITED:	Bringinshaw v. Bringinshaw (1938) 60 CLR 336 Re: Hodgekiss [1962] SR (NSW) 340 at 352-3 Johns v. Law Society of NSW [1982] 2 NSWLR 1 Law Society v. Conn [1992] NSWLST 4 Law Society v. Green [2001] NSWADT 142 Law Society v. Foreman (1994) 34 NSWLR 408 at 412(B-D) Re: Mayes and the Legal Practitioner’s Act [1974] 1 NSWLR 19
REPRESENTATION:	APPLICANT N C T Bilinsky, barrister RESPONDENT B W Rayment QC & D T Kell, barrister COMPENSATION CLAIMANT M Gallego, solicitor
ORDERS:	The Tribunal makes the following Orders:; 1. The practitioner is cautioned.; 2. No order for costs.; 3. The practitioner pay the compensation claimant (Suttor) $1,290.00. ; 4. Leave granted to the compensation claimant to re-list these proceedings should she seek to argue that she is entitled to an order for interest on the compensation amount and/or an order for costs in relation to her compensation claim. Should no relevant application be made within 28 days of the date of this Judgment the Order of this Tribunal will be (relevantly) that no interest be paid in respect of the compensation amount and/or no order for costs in relation to the compensation application (as may be applicable).

Principles Pertaining to Trust and Controlled Money

1 It is axiomatic, in the conduct of the practice of a legal practitioner, where a practitioner holds trust or controlled moneys, those moneys are to be held exclusively for the person on whose behalf the moneys are held and can only be paid out or disbursed in accordance with the quite specific directions of that person. The moneys so held are not the property of the legal practitioner but rather are the property of the person on whose behalf they are held. The practitioner is the trustee and the beneficiary is the person whose money it is.

2 That is a very simple yet elementary principle that is enshrined in the ordinary law of trusts and really is so elementary that it does not require further explanation.

3 The legislature has seen fit to include specific statutory requirements, both under the Legal Profession Act 1987 and under the Regulations made thereunder, which not only enshrine the basic trust principle but also require a legal practitioner holding trust and/or controlled money to comply with certain administrative requirements, designed to provide transparency with respect to all dealings with trust and/or controlled money.

4 The statutory requirements that were in force at the time of the events in question are, relevantly, to be found in Legal Profession Act 1987 Section 61. This Section, coupled with Section 62, provides the absolute basics for the conduct of a legal practitioner with respect to trust and controlled money. There is no reason in this Judgment to trawl through those sections other than to observe that a legal practitioner (in this case a solicitor) who, in the course of practicing as a solicitor in NSW, receives money on behalf of another person, must pay that money either into a general trust account in NSW or (relevantly) if the person on whose behalf the money is received directs that it be paid otherwise than into a general trust account or to a third party, must pay the money as directed and, if the money is to be held under the direct or indirect control of the solicitor, must hold the money in accordance with the regulations relating to controlled money (Section 61(1)(a)(c)). “Controlled money” is defined in sub-section (9) to mean money required to be dealt with in accordance with sub-section (1)(c) in that while under the direct or indirect control of the solicitor by whom or on whose behalf it is received, is for the time being held otherwise in a general trust account at an approved financial institution.

5 The key to understanding the issue in this case is Section 61(2) which states (relevantly):

“The solicitor must hold the money exclusively for, and must disburse the money in accordance with the directions of, the person on whose behalf it is held”.

6 That is, in our view, an axiomatic requirement, both of the general law of trusts and the holding of trust moneys by legal practitioners under the statute.

7 Section 61(8) provides that “it is professional misconduct for a solicitor to wilfully contravene sub-section (1) or (2)”. This sub-section probably states the obvious – a wilful contravention would, no doubt, be generally categorised as professional misconduct under the general law.

8 The Law Society submits that the actions taken by the legal practitioner in this case amounted to a wilful contravention of sub-section (2) such that, in all the circumstances, the legal practitioner is guilty of professional misconduct. This is a serious allegation because findings of professional misconduct, or findings of any form of unsatisfactory professional conduct, should be made only where the Tribunal is satisfied to the Briginshaw standard. Issues of the nature pleaded are serious, grave and weighty and require attention to detail and comfortable satisfaction before an adverse finding should be made against a legal practitioner.

The Pleadings

9 The Law Society originally commenced its proceedings against the Respondent legal practitioner (“the practitioner”) by Application filed 6 October 2006. It later refined its application by filing an Amended Application on 15 February 2007 and that, in turn, was further refined by a Further Amended Application filed 23 May 2007, the last of which was the Application before this Tribunal for hearing.

10 In its original application the Law Society sought the practitioner be fined, reprimanded, ordered to pay its costs and indicated that the complainant, a Ms S. R. Sutton, not a client of the practitioner, was seeking a compensatory order. In the pleadings before the Tribunal at the hearing the Law Society did not seek an order that the practitioner be fined but rather that he be reprimanded and pay its costs. The Law Society asserted that the practitioner had “wilfully breached Section 61” but, and in the alternative, the practitioner was guilty of unsatisfactory professional conduct in that he “failed to reached a reasonable standard of competency and diligence resulting in his breach of Section 61 …”. The complainant, Ms Suttor, also filed a claim for compensation.

Background Facts

11 The practitioner, who conducted his practice under the name “Oliveri Legal Pty Limited” trading as “Oliveri Attorneys”, acted for a Mr K C Grizonic (“Grizonic”) the plaintiff in Supreme Court proceedings against Ms Suttor (“Suttor”). In the course of those proceedings, and with the consent of the then solicitor for Suttor (Mr Dimock), the practitioner opened a controlled moneys account with the Commonwealth Bank styled “Oliveri Legal Pty Limited ITF E. Oliveri and C. Dimock as joint trustees”.

12 There is no need to go into the details of the Supreme Court proceedings between Grizonic and Suttor other than to observe that they were hard fought, acrimonious, generally involved a partnership dispute and were multi-layered. By about November 2004 Consent Orders had been made that provided for the opening of a controlled money account and depositing therein the sum of $85,000.00 on 9 November 2004. On the evidence this controlled money account, although in the joint names of the practitioner and Mr Dimock, could be operated only on the signature of the practitioner. No complaint is made with respect to the operations of that controlled money account by the practitioner in relation to the $85,000.00.

13 On 1 April 2005 Grizonic commenced proceedings in the Supreme Court seeking orders restraining the Commonwealth Bank from paying out certain moneys in a term deposit held by the Commonwealth Bank in the name of Suttor and Grizonic. The balance of that term deposit, after the bank exercised a claim right of set-off for certain interest and charges, was $12,234.97. It was argued, on behalf of Grizonic, that the term deposit moneys “related to a bond in favour of the landlord who owned the restaurant business and, while it was jointly owned by (Grizonic and Suttor) it was not partnership funds that were within the reach of the receivers” who had been appointed in the first set of Supreme Court proceedings. These were important proceedings because had they not been commenced there was a fair likelihood that the moneys in question would be caught up in the partnership dispute and dealt with as a partnership asset.

Events on 6 May 2005

14 At the outset the Tribunal wishes to make this observation: although detailed submissions were made regarding the veracity of the various witnesses before the Tribunal, the failure of the Law Society to cross examine one of the practitioner’s witnesses and the conclusions that this Tribunal was invited to make, this Tribunal has formed the very clear view that all witnesses gave their evidence to the best of their recollection and that, having regard to the issue that was before this Tribunal, ie whether there was a breach of Section 61 and, if so, whether it was or was not wilful, the differences in evidence are not such that would encourage this Tribunal to make any adverse findings as to credit at all but rather the evidence fairly put before us by both parties and all witnesses must inevitably result in a finding that the practitioner had breached Section 61(2).

15 On 6 May 2005 the practitioner attended at the Supreme Court with Grizonic and his defacto partner Ms D. Wade. Ms Suttor was represented by Ms L Georgakis (“Georgakis”), an employed solicitor from Dimocks Family Lawyers, who were then acting for Suttor. A lawyer from the solicitors acting on behalf of the receivers in the original Supreme Court proceedings also attended.

16 The practitioner’s evidence was that a discussion took place on Level 7 of the Law Court Building in or to the following effect:

Georgakis: “The Commonwealth Bank is paying the money into Court and neither it nor the receivers will contest the injunction.”

Practitioner: “My client is happy to settle the proceedings on the basis that his costs are paid and the balance split 50:50”.

Georgakis: “My client is not at court. I will call her and get instructions”.

17 The practitioner says that during this time both Ms Wade and Grizonic were standing close by him and Grizonic was also stating to him, but so loudly that Georgakis could also hear, words to the effect that he wanted his costs paid before the moneys (ie the $12,234.97) were paid out, otherwise the moneys could stay in court “until the main proceedings were completed”. Georgakis then walked away and then appeared to speak to somebody on her mobile. She then returned and a conversation ensued to the following effect:

Georgakis: “I could not get in contact with my client. We should enter consent orders with no mention of costs and place the funds in your controlled money account”.

Practitioner: “That’s OK but my client insists that his legal costs be paid before the funds are divided”.

Georgakis: “It seems like a reasonable solution, instead of having the matter brought back for further directions”.

18 The evidence of Ms Wade is to similar effect. Her version of the discussion is as follows:

Georgakis: “I understand that the Bank are going to pay this money into Court”.

Practitioner: “Fine, the money can be paid into court until the partnership accounting proceedings are finalised”.

Grizonic: “I am happy to split the money 50:50 as long as Suzanne (Suttor) agrees to pay half the costs”.

Georgakis: “That sounds like a good idea – both our clients probably need some money. I’ll see if I can get my client’s consent.”

Grizonic: “Unless Suzanne agrees to pay half the legal costs then the money can stay in the Supreme Court until the accounting has been done. There is no way I am going to be responsible for all the costs if Suzanne is going to take half”.

19 Ms Wade then says that Georgakis walked away and used her mobile. She did not hear the telephone conversation but when Georgakis returned there was a further conversation in or to the effect:

Georgakis: “We’re not able to contact Suzanne but let’s get consent orders today”.

Grizonic: “I’m only agreeing to this if Suzanne pays half the costs”.

20 Ms Wade was not cross examined on her evidence.

21 The parties then hand-wrote a form of Consent Orders in the following terms:

“The Court orders that:

1. The monies held in the Court’s registry be released to the controlled monies account held in the joint names of the solicitors for the Plaintiff and Third Defendant (ie Grizonic and Suttor).

2. It is noted that the Receivers and Managers neither oppose or consent to Order 1 and leaves it in the Court’s hands”.

22 The Short Minutes were signed by the practitioner, the solicitor for the receivers and managers and Georgakis on behalf of Suttor. They were then filed in Court and became the orders of the Court.

23 Georgakis in her affidavit, and to all intents and purposes having regard to the issue that the Tribunal is called upon to decide, does not challenge the general thrust of the evidence given by the practitioner and Wade. Her primary dispute with the evidence of Oliveri (and neither in her affidavit nor in her oral evidence does she make any reference to Wade or Wade’s evidence) was on the question of costs. It is Georgakis’ evidence that the practitioner made no reference to the issue of costs. In her affidavit she states:

“At this point of the proceedings I was not sure of the basis of the division of the moneys; I thought the CBA deposit should be divided on a 50:50 basis but I could not get instructions from my client … (f)or much of the time I was on my mobile attempting to get instructions from our client in the first instance and then from my Principal (Mr Dimock) when I was unable to contact our client. I do not recall overhearing Mr Grizonic say anything about the moneys, either generally or specifically, nor did I attempt to listen in on any conversation between Mr Oliveri and his client.”

24 She deposes to being unable to contact Suttor, then speaking to Mr Dimock and following that conversation “there was no mention whatsoever of costs by Mr Oliveri”.

25 She cavils with the practitioner when he attributed to her, after speaking on her mobile the words: “I could not get in contact with my client. We should enter consent orders with no mention of costs and place the funds in your controlled money account”; but rather Georgakis says that the conversation was to the effect of:

“I could not get instructions from my client. For now I think the best thing to do is enter into Consent Orders and place the money into the controlled moneys account so that it doesn’t go to the Receivers. We can then split the money equally between our clients, subject of course to me receiving such instructions from my client”.

26 Georgakis denies entirely the words attributed to her to the effect that the payment of the legal costs of Grizonic before the funds were to be divided seemed “like a reasonable solution instead of having the matter brought back for further directions”. She is adamant that she “certainly did not indicate my approval or agree with any statement of Mr Oliveri’s purportedly made on the subject of his legal costs. My concern was to ensure that the matter did not come back for further directions in case the Receivers changed their minds and positively opposed the proposed consent orders”.

27 Both the practitioner and Georgakis were cross examined at length in relation to their particular versions of these two conversations. In our view there was nothing in the cross examination that would change in any way the nature of the deposed conversations. Sterling efforts were made by leading counsel for the practitioner in an attempt to somehow paint Georgakis as a witness upon whose evidence this Tribunal could not rely, with quite specific reference to detailed file notes that the practitioner made on 9 May 2005 and in some subsequent correspondence. However, it seems to us that all of those documents only pointed clearly to the fact that whatever may have happened at Court on 6 May 2005 did not result in an agreement for the payment of the costs of Grizonic. For example, in her file note 9 May 2005, a conversation with Suttor, Georgakis writes that Suttor “wants us to divide $12,000.00 from the CBA” and that Suttor “also would like us to get $4,000.00 that he (Grizonic) owes her re “Certificate of Costs””. And later “I will try to write to Oliveri re: $6,000.00 (our client’s 50% of CBA money)”. All of those notes, and the cross examination of Georgakis on those notes, only seems to support her version, and indeed, the practitioner’s version, of the conversation 6 May to the effect that there was no binding agreement reached for the disbursement of the $12,234.97.

28 If the only evidence before us was the “conflicting” versions of the conversation at Court 6 May 2005 then we would clearly conclude that there was no such binding agreement.

Subsequent Events

29 The Commonwealth Bank apparently attempted to pay the $12,234.97 into Court. It was unsuccessful simply because the Consent Orders and resultant Court Order made no provision for the moneys to be deposited with the Registry. In order to short-cut the procedures and in the interest of the parties Georgakis arranged for the bank cheque to be sent to her. The cheque was received (payable to “Supreme Court of NSW”) and then sent to the practitioner. There was a serious dispute between the parties on how in fact the cheque was received. Georgakis says she sent it was sent under cover of letter 13 May 2005 addressed to the practitioner at “161 Palmer Street East Sydney” (ie his brother’s office from which address the practitioner had moved). The practitioner says that his firm received that letter on or about 16 May 2005 “enclosing the cheque in $12,234.97 (practitioner’s affidavit 27 March 2007, para.27) but in oral evidence he stated that he received the cheque with a “with compliments” slip. This slip was not produced.

30 This was an important conflict between the parties because the letter 13 May 2005 referred to a telephone conversation between either Mr Dimock (who gave no evidence) or Georgakis on 13 May 2005 and then stated:

“We enclose cheque made payable to the Supreme Court of New South Wales in the sum of $12,234.97 and confirm that you will deposit this cheque into the Controlled Monies Account held in the joint names of our respective firms.

We further confirm that once the money has been deposited into that Account you will draw two cheques in favour of each of our firms, each cheque in the sum of $6,117.48.

We look forward to receiving the above mentioned cheque within 7 days.”

31 The cheque was deposited into the said account on 16 May 2005 (14-15 May being a weekend).

32 On 23 May 2005 the practitioner wrote to Dimocks Family Lawyers stating that the cheque had been cleared and then stating:

“We note that the cheque from the Commonwealth Bank is to be divided between our respective clients. In this regard we advise that as our client took out the action and incurred costs in doing so. We are instructed to pay his costs out of the said amount.

We advise that our clients costs are $2,580.00 leaving a balance of $9,654.87.

We will pay $4,827.49 to your firm and the balance to our client to day.”

33 No reference was made herein to any asserted prior agreement nor to any bill of costs sent in total $2,580.00. The practitioner’s evidence was that when writing this letter and drawing the cheques he did “not recall being aware of the terms of” the letter from Georgakis 13 May and did “not recall appreciating the terms or effect of that letter as at 23 May 2005”. He said he believed that if he “had been fully aware of the Dimocks 13 May letter as at 23 May 2005 (he) would have made enquiry of Ms Georgakis rather than simply having drawn the three cheques without any such enquiry … (such that if Suttor did not agree then) no cheques at all would have been drawn – and the moneys would simply have remained in the controlled money account until subsequent agreement was reached … or the Court dealt with the matter …”.

34 Georgakis telephoned the practitioner on 25 May complaining that he had deducted the costs of his client and stated that was “not agreed. You have done without consent”, and her file note states that the practitioner said, “Well, it’s done now, I had my client’s consent”. Her evidence was also that at a later point of time (6 June 2005) she had a further conversation with the practitioner who said that he would not be refunding any moneys to the account, that he did the right thing and that was in accordance with its instructions. He further said that he had dealt with other firms who thought it was “fine” to take money in this fashion; and upon being asked the source of that right to take the money (for his costs) the practitioner replied “It’s a natural right”. The practitioner denied that conversation.

35 There was some evidence by way of a letter from Mr M. Gallego, solicitor, to the Law Society 25 November 2005 (admitted without objection) to the effect that on or about 15 July 2005 Mr Gallego said to the practitioner: “if you thought that you were entitled to be paid your costs from the bank’s money, why didn’t you ask the Court for an Order?” and the practitioner replied: “That was my mistake”; whereupon Mr Gallego “further suggested that Mr Oliveri might approach the Court again for an order entitling him to the monies in question, if it be the case that he insisted he was entitled to same”. Mr Gallego did not give evidence in these proceedings and although the letter in those terms formed part of the material before the Tribunal this Tribunal is of the opinion that the conversation referred to in this letter is not a conversation upon which it should rely in making findings in this matter.

36 Georgakis was heavily cross examined in relation to her written complaint to the Law Society 8 June 2005 in respect of the paragraph therein, referring to the 6 May 2006 Consent Order, where she wrote “At the same time, there was an oral agreement between Leah Georgakis of our firm and Mr Emanuel Oliveri that the amount of $12,234.97 would be divided between our respective clients on an equal basis”, such that it was suggested that that statement was in fact false because there was in fact no agreement at Court on 6 May 2005. We accept the statement is incorrect. It formed the basis of the, at least initial, formulation of opinion by the Law Society that the practitioner may have deducted his costs from the controlled moneys without the authority or direction of one of the persons on whose account the moneys were held, namely Suttor.

37 However, we do not make any adverse finding as to credit simply because in the following paragraph Georgakis refers to the letter 13 May 2005 (set out above) and the terms of which she assets, quite correctly, contained clear directions regarding the disbursement of those moneys.

Further Events

38 On 27 May 2005 Georgakis wrote a fairly stiff and robust letter to the practitioner. She made quite specific reference to Section 61(2), asserted that the disbursement of $2,580.00 was never authorised by her firm or her client; noted “from our conversation that you (the practitioner) believed the disbursement to be appropriate, given that you had your client’s instructions”; asserted that the money “was to be equally divided” between the respective clients and asserted “an oral agreement reached at Court between yourself and our Leah Georgakis on 6 May 2005 and which agreement we confirmed in writing to you on 13 May 2005”; noted that at “no point did you dispute that agreement nor did you write back to indicate your intentions to disburse the amount of $2,580.00 for your client’s benefit. Your actions were clearly without consent from us or our client”; noted that the Court “did not make an Order in relation to your client’s costs of the Application and therefore your client was not entitled to receive any costs”; and later stated that subject to instructions Suttor “may, of course, require us to report the matter to the Law Society …”.

39 She called upon the practitioner to “immediately” “either reimburse the Controlled Moneys Account with the amount of $2,580.00 or alternatively, we request that a cheque for that amount be issued to us in favour of our client within 24 hours”. Although she suggested that the $2,580.00 be put back into the controlled moneys account, the request for $2,580.00 to be paid to Suttor was clearly wrong. There was no evidence of the practitioner’s rely to this letter save that the practitioner asserted a prior conversation on 25 May 2005 in or to the effect: “Let’s refund the money and I will not disburse any of it until we agree on the costs issue” and a further telephone conversation on or about 6 June 2006 where he “again stated that the parties should each return the withdrawn moneys to the account pending further agreement on distribution or application to the court”. Similarly, Suttor complained to the Law Society 13 October 2005 stating that so far as she was concerned “Mr Oliveri has stolen $2,580.00 of my money”.

40 The practitioner’s evidence was that he “had come to arrangements with other firms to agree to the deduction of a party’s costs from a fund when it was clear that the costs were incurred by one party on behalf of others”; and that he told Georgakis this in that same telephone conversation. His evidence was further to the effect that he did not offer to reimburse only the $2,580.00 because that “would be inconsistent with the arrangement reached between the parties on 6 May 2005 and also inconsistent with (the instructions of Grizonic) namely that unless his costs were first paid out there would be no present distribution of the funds in the controlled money account. I did not believe I could, consistent with the arrangement and my client’s instructions, simply arrange to refund the $2,580.00 by itself (notwithstanding that, but for these factors, I would otherwise be quite willing to do so).”

Practitioner’s State of Mind

41 The practitioner gave lengthy evidence regarding his state of mind when he deducted his client’s costs. His view is eloquently and clearly set out in his detailed letter to the Law Society 15 July 2005. It is appropriate to firstly observe that there is nothing in that detailed letter that would demonstrate a clear authority or direction from Suttor. His argument was that he was entitled to draw the costs “on the basis of my instructions” but if the instructions of Suttor did “not allow me to deduct those costs then (Suttor should) return the cheque and I will refund all the moneys taken on this end and continue to hold the full amount pending determination by the court on the question of costs”. He says that he had a further conversation with Georgakis in June 2005 to the effect that “It could all be reversed … let’s refund the money and I will not disburse any of it until we agree on the costs issue … I have come to these sorts of agreements with other firms when it was clear that costs were incurred by one party on behalf of others”. He then went on to state that the deduction of costs was “on the assumption that there would naturally be agreement for the deduction of costs …” and that “it follows that no moneys at all should have been disbursed from the account and that accordingly all moneys should be reimbursed”.

42 He then states:

“The agreement to disburse the funds from the Controlled Moneys Account, at least on the part of my client, was made conditional upon his costs being deducted from those funds. Without such conditions being met, there was no agreement to disburse those funds.

I am prepared to accept that I may have acted precipitously in disbursing the moneys from the account but that was on my understanding that, acting reasonably Ms Georgakis’ firm would have had no problem in agreeing to the costs, which were after all, incurred for the benefit of both parties, being deducted.

Accordingly, either the parties agree to the status quo, or all money should be returned to the account pending agreement or a decision from the Court. This course would put the parties back to the position that they were in before any moneys were disbursed”.

43 In his affidavit and in oral evidence the practitioner stated that no reference to costs was put in the Minutes “because the court was not being asked to deal then with the question of costs. Thus, for example, the short minutes did not include the oft-used formula of “No order as to costs”. Rather Ms Georgakis had indicated to me that she regarded it as reasonable for Mr Grizonc to be paid his costs from the funds and I understood that she was agreeable to this course unless she subsequently notified me that she had instructions from the client, Ms Suttor, to take a conflict position”.

44 Importantly, the practitioner’s evidence went further: “I also thought it was very unlikely that Ms Georgakis would notify me to that effect, given that my client had made his position clear that if his costs were not paid out then the money could stay in court (or the controlled money account) until the substantive proceeding was finalised. On this basis, if the costs were not to be taken out, my firm instructions (which I relayed to Ms Georgakis) were that there was to be no present division of any of the funds being received from the Commonwealth Bank”. In oral evidence the practitioner made it plain that his “understanding” was that unless Georgakis “came back to me with a contrary position then my client’s costs would be paid” from the $12,234.97 before it was divided equally.

45 There is no need to refer further to the evidence in this regard. The clear evidence of the practitioner was that he understood that unless Georgakis “came back with a contrary position then (his) client’s costs would be paid”. That was his clear “understanding”. He accepted the propositions put to him by counsel for the Law Society that he could not foretell what Suttor’s instructions to Georgakis might have been. He agreed that it was possible that Suttor may have adopted a different stance and may have disagreed with the division of the proceeds. He agreed “that anything was possible” but that he “didn’t appreciate” a negative possibility.

46 One of the problems with the practitioner was the issue raised by Judicial Member Riordan during the course of the practitioner’s evidence that, as a matter of law, he could not deduct his costs from trust or controlled money without having first rendered a Bill of Costs (see Legal Profession Regulation 2002, Section 78). The practitioner had stated that he had sent to Georgakis a Bill of Costs before withdrawing the money but that Bill was not initially in evidence. On the second day of the hearing he produced the Bill, which was a Bill dated 13 May 2005, addressed only to Grizonic and in the sum of $2,596.00 which was the sum withdrawn from the controlled moneys account before payment out was made to Grizonic and Suttor. There were a number of other problems as well – firstly, this Bill was not addressed to Suttor; secondly, it was not led in chief as part of the practitioner’s case; thirdly, the question of whether a copy of the Bill had been sent to Georgakis had not been put to her. The practitioner accepted, as was clearly the case, that the controlled moneys were held on behalf of Suttor as well his own client Grizonic. It must follow, one would think, that a Bill that was going to be paid (in the view of the practitioner) as to one-half by Suttor should also have been addressed and sent to her care of Dimocks Family Lawyer in compliance with the Regulation. In addition, a statement of account should also have been similarly sent in compliance with Regulation 77.

47 Another, and perhaps final, problem that confronted the practitioner was, as we observed above, that his letter to Georgakis 23 May 2005 (and set out above) makes no reference at all to any agreement to deduct the costs of Grizonic, simply the bald statement “we are instructed to pay his costs out of the said amount”. And there is no reference to any Bill of Costs, either in this letter or elsewhere having been sent to Georgakis and/or to Suttor.

Is the Practitioner’s conduct “wilful”?

48 There are numerous decisions of various Courts and Tribunals on the nature of wilfulness in Section 61(8) with reference to Section 61(2). In summary, we think that the words used by Hardie J in Re: Hodgekiss [1962] SR (NSW) 340 at 352-3 correctly describe conduct that is wilful as being where the person “knows what he is doing and intends to do what he is doing … (where the practitioner) knows he is committing and intends to commit, a breach of his duty or is recklessly careless in the sense of not caring whether his act or omission is or is not a breach of duty … (and) a person wilfully misconducts himself who knows and appreciates that it is wrong conduct on his part in the existing circumstances to do, or to fail or omit to do (as the case may be) a particular thing, and yet intentionally does, or fails or omits to do it, or persists in the act, failure or omission regardless of consequences … or acts with reckless carelessness, not caring what the results of his carelessness may be”. In His Honour’s opinion (at 353-354) “the section deals with personal breaches of the statutory provisions in question on occasions when the solicitor knew or believed he was committing such breaches or was recklessly careless in that regard … (such that it is) essential in an enquiry as to whether or not there have been wilful breaches by a solicitor … to examine the facts and circumstances relevant to his state of mind, knowledge and intention at the material dates”

49 Re:Hodgekiss was followed in Re: Mayes and the Legal Practitioner’s Act [1974] 1 NSWLR 19. Johns v. Law Society of NSW [1982] 2 NSWLR 1 reinforced the clear law (one would have thought) that the mere fact that a solicitor holds money for a client (in the case before us the money was held on behalf of the practitioner’s client and the client of another practitioner) in his trust account (or, in this case, his controlled money account) the practitioner’s entitlement to a general lien for his costs does not mean that the money is not beneficially the money of the client. The practitioner merely has the right to retain the money until his costs are paid and cannot pay any part of it to himself unless and until the practitioner complies with the laws pertaining to the rendering of Bills of Costs and the subsequent transferring of moneys from trust/controlled money on account of those costs.

50 In Law Society v. Conn [1992] NSWLST 4 the Law Society there complained that the practitioner, without his client’s authority, deducted a sum of money from the client’s trust fund and, despite his being informed that the client protested to such withdrawal, did not replace those funds in the trust account pending resolution of the ensuing dispute. In that case the practitioner formed a belief that he was authorised by his client to withdraw trust money in satisfaction of costs and disbursements. His belief was based on an assumption by the practitioner that an employed solicitor (who had the day to day conduct of the relevant file) had obtained the client’s authority and the practitioner’s reliance upon a practice, which he believed to be in operation in the firm, (at 4) “that files which had been finished to the extent that they had been settled or verdicts given, were only given to the managing clerk for payment of disbursements if the written or oral consent of the client had been obtained”. The Tribunal (at 4) examined, in considerable detail, the discussions which took place at the relevant time and whether those discussions gave rise to an implied authority by the client for the solicitor to make the subject withdrawal from trust money. The Tribunal carefully examined the discussions that took place and was (at 5) “satisfied that no such authority as claimed by the solicitor, either express or implied was given by (the client) during the course of those discussions”. There was further detailed evidence about subsequent attendances and the practitioner’s understanding and (at 7) the Tribunal said that the practitioner “relied on the practice which provided a chain of events in which each staff member in the chain carried out an action or a check designed to ensure that appropriate authority existed for the transfer of trust money in payment of costs and disbursements. Sadly (the Tribunal observed), as the evidence disclosed, at virtually no point in the chain was there any effective check. Furthermore, there was no evidence before the Tribunal that any steps had been taken from time to time to ensure that the practice was intact and operating effectively”.

51 The Tribunal looked at a considerable body of evidence on the question of whether the practitioner’s breach was wilful and (at 9-10) concluded “that the conduct of the solicitor was sufficiently careless and reckless as to constitute wilful failure on his part”. Consequently, the Tribunal found that the conduct of the solicitor “amounted to professional misconduct”.

52 However, in determining penalty, the Tribunal (at 10) took “into account the circumstances surrounding the events giving rise to the complaint, and the evidence as to the character of the solicitor … There was no evidence of dishonesty on behalf of the solicitor. Indeed, dishonesty was not even alleged. His good character and high standing in the community was supported by many declarations admitted in evidence on his behalf. There was no evidence to suggest that he was not fit to continue in practice as a solicitor. While those matters certainly come to the solicitor’s aid on the question of the orders which should be made, the Tribunal is bound to consider the serious nature of the complaint … The legislature has seen fit to impose stringent requirements on the handling of trust moneys by solicitors, and for good reason. The Act goes so far as to declare certain breaches to be professional misconduct, and the subject breach is one of them. Consequently the Tribunal is of the view that the subject breach is not one which should be taken lightly, and it has reflected this view in the orders to be made”.

53 In Conn the Tribunal found that the breach was wilful because the actions of the practitioner were “sufficiently careless and reckless”.

54 Each case needs to be looked at in its own particular circumstances. Although guidance can be obtained from other decisions (for example Law Society v. Green [2001] NSWADT142, this Tribunal needs to form an opinion on the particular facts that are before it.

55 Leading counsel for the practitioner submitted that the practitioner was, to all intents and purposes, in a “Hobson’s Choice” position because the practitioner thought – understood – that it was very likely that Suttor’s instructions would have been to pay his client’s costs and that, in any event, in all the circumstances of the case, the proceedings being brought Grizonic for the purposes of Grizonic and Suttor, costs would have been awarded as a matter of course in favour of Grizonic such that the Court was almost one hundred percent likely to have granted the order to enable the practitioner to deduct Grizonic’s costs from the jointly held money. The difficulty with that argument is simply this: the transfer of the moneys on account of costs sought (perhaps without conscious intent) to deprive the Court from considering whether or not a costs order should be made. Although it was not argued that a costs order would not have been made in all the circumstances, one cannot conclude at this hearing that a costs order would have been made as a matter of one hundred percent certainty. To “jump the gun”, even with the very best of intentions and presumably to save further costs of arguing the costs question, is at the very least presumptive.

56 There was no need (as we have stated above) for us to form views as to the credit of the various witnesses. It is plain in our view that the practitioner formed an understanding which, in his opinion, was reasonable in the circumstances. Whether that opinion, looked at objectively, was an opinion that he could reasonably have formed at the time is a difficult question to answer. However put, it is clear to us that the practitioner should have clarified and confirmed his understanding before he withdrew the moneys. Prudent practice would have demanded that. However, in all the circumstances we are not prepared to make a finding that his conduct was wilful, such that there is no finding of professional misconduct against this practitioner.

57 Rather, we are of the view that his conduct fell below the standard reasonably expected of a practitioner such as to constitute unsatisfactory professional conduct.

58 That having been said however, there are two particular matters about which we should make reference. Firstly, there was more than adequate evidence of good character and the practitioner’s high standing in the community. There was no evidence of dishonesty on his part. There was no evidence to suggest that he was, or is, not fit to continue in practice. As the Legal Services Tribunal observed in Conn [at 10] these are “matters that certainly come to the practitioner’s aid on the question of the orders which should be made …”

59 We agree with the observations of that Tribunal that the “legislature has seen fit to impose stringent requirements on the handling of trust money by solicitors, and for good reason”. However, in the case now before us, not only is there no finding of professional misconduct but in the view of this Tribunal the conduct of the practitioner is on the very lowest end of the unsatisfactory professional conduct scale. In this regard we acknowledge and respectfully agree with the observations of Kirby P in Law Society v. Foreman (1994) 34 NSWLR 408 at 412(B-D) but also agree that this Tribunal (at D-E)” must make its own orders in the light of its findings and the impressions it derives from the evidence, including the evidence of the solicitor”; and our view is clearly as we have stated.

60 It is important to observe that the practitioner offered, very early in the piece, to refund the costs, return the moneys held by Grizonic and submitted to Georgakis that Suttor should return the moneys paid out to her, thereby returning all the controlled moneys that had been paid out to the same controlled moneys account and then leaving it up to the Court to decide how those controlled moneys should be disbursed. We confess we are at a loss to understand why it was that Suttor refused that offer. We recognise, as was the evidence, that the proceedings between Suttor and Grizonic were acrimonious but, that having been said, the logical and rational course of action that should have been adopted by all parties was, in the case of this dispute and in the face of the clear offer made by the practitioner, all moneys should have been returned to the controlled moneys account to await, either a quite specific clear agreement by the parties, alternatively an order to be made by the Court.

61 We agree entirely with the submission made by leading counsel for the practitioner in or to the effect that had that course of action been adopted then the proceedings in this Tribunal would not have been brought, the matter would have been resolved to everyone’s satisfaction in a logical and rational way, without everybody getting “streamed up” about what was in reality a very minor breach of Section 61 which could have been rectified with a little goodwill and commonsense by all parties. That did not happen, this practitioner has been dragged through this Tribunal, no doubt at considerable expense and trauma to him, in circumstances where, in our respectful opinion, the whole issue could have been defused, returned to its original state and deal with without troubling the Law Society and this Tribunal.

62 In all the circumstances we are of the view that the practitioner should be cautioned. With regard to costs we are not inclined to make a costs order, basically for the reasons set out above. We are clearly of the view that only serious matters should be brought to this Tribunal. This was not one of them. The disputant parties could have easily resolved their differences in the manner suggested by the practitioner and with which we approve.

Compensation

63 The Complaint Suttor has, by separate application, applied to this Tribunal for an order for compensation. Her original letter of complaint to the Law Society sought a payment to her of $2,580.00 (see [35] above). Clearly that sum was double the amount that Suttor could reasonably claim because on any view one half of that sum represented moneys owed by Grizonic to the practitiner. What the practitioner had done was transfer into his office or general account the whole of the costs of Grizonic. Grizonic may well have owed the practitioner the whole of those costs but it is plain that one-half of the controlled moneys held by the practitioner was owned by Suttor. So, to that extent, the practitioner transferred from Suttor’s money one-half of the costs owed to him by Grizonic. In those circumstances the practitioner owes Suttor the moneys that he transferred from the portion of the controlled moneys owed by Suttor (ie $1,290.00). Clearly a compensation order should be made to reimburse Suttor for the moneys transferred to the practitioner’s office or general account.

64 If that means that the practitioner is out of pocket in $1,290.00 and has to render an amended account to Grizonic and if that in turn results in further proceedings in the Supreme Court in relation to the costs of the proceedings against the Commonwealth Bank and no doubt additional costs being incurred as a consequence, then so be it. But in whatever way one views the transfer of costs the plain fact is, looked at dispassionately, and not withstanding the practitioner’s accepted understanding of his entitlement, the $1.290.00 was removed from the moneys owed to Suttor without her consent and she is entitled to the return of those moneys.

65 There will be an initial compensation order against the practitioner in favour of Suttor.

66 We reserve (however) the issue of Suttor’s claim for interest and Suttor’s claim for the costs of her compensation application. Leading counsel for the practitioner made it plain that he wished to be heard, certainly on the question of costs, and this Tribunal would wish to be addressed by counsel for the complainant if the complainant sought to agitate an argument in favour of an award of interest and/or an award of costs. We grant leave to the complainant to re-list this matter at a convenient time (by approach to the Registry) should the complainant wish to agitate either or both of those issues. Should the complainant not seek to agitate either or both of those issues within 28 days of the date of this Judgment then the orders of this Tribunal will be that there be no award of interest on the compensation amount and there be no order for costs in relation to the compensation claim.

Orders

67 The Tribunal makes the following Orders:

1. The practitioner is cautioned.

2. No order for costs.

3. The practitioner pay the compensation claimant (Suttor) $1,290.00.

4. Leave granted to the compensation claimant to re-list these proceedings should she seek to argue that she is entitled to an order for interest on the compensation amount and/or an order for costs in relation to her compensation claim. Should no relevant application be made within 28 days of the date of this Judgment the Order of this Tribunal will be (relevantly) that no interest be paid in respect of the compensation amount and/or no order for costs in relation to the compensation application (as may be applicable).