The Council of the Law Society of NSW v Doherty (No 2)

[2009] NSWADT 296

CITATION:	The Council of the Law Society of NSW v Doherty (No 2) [2009] NSWADT 296
DIVISION:	Legal Services Division
PARTIES:	APPLICANT The Council of the Law Society of New South Wales RESPONDENT Peter John Doherty
FILE NUMBER:	082029
HEARING DATES:	25 September 2009
SUBMISSIONS CLOSED:	25 September 2009
DATE OF DECISION:	30 November 2009
BEFORE:	Molloy G - Judicial Member; Riordan M - Judicial Member; Bennett C - Non-Judicial Member
CATCHWORDS:	Dispositive Orders
LEGISLATION CITED:	Legal Profession Act 2005
CASES CITED:	Bolster v. Law Society of NSW (unreported, 20 September 1982) CA 233/1982 Council of the Law Society of NSW v. Doherty [2009] NSWADT 155 Dupal v. Law Society (unreported, NSW Court of Appeal, 26 April 1990 Incorporated Law Institute of NSW v. Meagher [1909] 9 CLR 655 International Finance Trust Company Ltd v. NSW Crime Commission [2009] HCA49 Johns v. Law Society of New South Wales (1982) 2 NSWLR 1 Law Society of New South Wales v. Bannister (CA 40714/1990, 27 August 1993, BC 9301831 Law Society of NSW v. Jones (27 July 1978 CA333 of 1977) Law Society v. McNamara [2007] NSWADT 162 Law Society v. Witherdin [2004] NSWADT 237 Ex parte Macaulay (1930) 30 SR (NSW) 193 Totani v. State of South Australia [2009] SASC 301 Trust Company of Australia Limited v Skiwing Pty Ltd [2006] NSWCA 185
REPRESENTATION:	APPLICANT The Council of the Law Society of New South Wales RESPONDENT Peter John Doherty
ORDERS:	Orders: 1.The practicing certificate of the Respondent Peter John Doherty be cancelled for a period of twelve (12) months from 25 September 2009, concluding 25 September 2010 2.During the period of such cancellation the Respondent is to attend (and pass if appropriate) appropriate courses in trust accounting and ethics 3.At the end of the period of cancellation, and subject to compliance with Order 2 above, the Respondent is to be issued with a practicing certificate that would entitle him to practice as a employed solicitor only for a period of six (6) years commencing 26 September 2010, with such additional restrictions as to areas of practice as may be agreed between the Law Society and the Respondent or, failing agreement, determined by this Tribunal 4.The Law Society is directed to bring forward appropriate conditions that may be imposed consistent with the terms of this decision. The Law Society is to provide those conditions to the Respondent with a view to the Law Society and the Respondent agreeing to the terms thereof. In the case of agreement the Tribunal should be moved to make final orders consistent therewith. In the case of non-agreement the terms of conditions can be the subject of a further decision and liberty is granted to apply 5.The Respondent is to pay the costs of the Law Society as assessed or as agreed.

REASONS FOR DECISION

Background

1 The Tribunal delivered its Decision on 23 June 2009 on the complaint brought by the Law Society - Council of the Law Society of NSW v. Doherty [2009] NSWADT 155.

2 The Tribunal found that the Respondent did not, in all the circumstances, breach Sections 14(1) and/or 15(1) Legal Profession Act 2004; that the Respondent breached Rule 12 Legal Profession Conduct and Practice Rules and s.67(2)(a) of the Legal Profession Act 2004 but in both of those circumstances no adverse finding should be made in relation thereto.

3 However, the Tribunal found that the Respondent was guilty of professional misconduct in that the Respondent:

a) breached s.255 Legal Profession Act 2004; and

b) misappropriated the sum of $35,000.00 belonging to Geoffrey Rafter (“Rafter”); and

c) knowingly misled Rafter; and unreasonably delayed in advising Rafter of the misappropriation/misapplication of Rafter’s funds; and

d) failed to account to Rafter in respect of Rafter’s funds.

4 The full details are set out in the Tribunal’s Judgment 23 June 2009. There is no need to repeat them here. But, in short compass, the Respondent became involved with various persons (including Rafter) in two joint ventures (drafted by the Respondent) in circumstances where the primary funding obligation rested upon the Respondent’s company Lloyd Lancaster Pty Limited, and in circumstances where Rafter was obligated to contribute $35,000.00 in respect of one only joint venture. When that joint venture did not eventuate at all such that the $35,000.00 should have been returned to Rafter, yet the Respondent used that $35,000.00 (which was in the trust account of the Respondent’s firm Lloyd Lancaster Lawyers) to meet the financial obligations of Lloyd Lancaster Pty Limited.

5 The Respondent asserted an agreement between himself and Rafter in or to the effect that the $35,000.00 was to be used for all the joint ventures. Rafter’s evidence was to the contrary and, although the Tribunal formed a less than impressive view of the evidence of both the Respondent and Rafter, it was plain that there was in fact no agreement between the Respondent and Rafter and that the Respondent simply used the $35,000.00 to meet the financial obligations of Lloyd Lancaster Pty Limited.

6 The $35,000.00 was passed through the Respondent’s trust account. Of this sum $16,000.00 was used to pay a deposit on exchange of certain property in Queensland (“the Haven property”) and $19,000.00 went towards $40,000.00 required to be paid by Lloyd Lancaster Pty Limited to meet the option price on the Tourist Park Caravan Park at Byron Bay (another part of the joint ventures).

7 It is important to recognise that this $19,000.00 went from the Respondent’s trust account into his office account and then somehow made its way into or for the benefit of Lloyd Lancaster Pty Limited towards meeting its obligations.

8 The Tribunal pointed out that there was no documentation, loan agreement, book entry or whatever that would have supported the Respondent’s contentions. The Tribunal also pointed out that there was really no benefit to Rafter, except perhaps some speculative benefit, and the Tribunal was unable to understand the logic behind the Respondent’s assertions and was “of the opinion” that the Respondent’s evidence and case on this point made no sense logically or as a matter of economics.

9 The Tribunal had no particular difficulty in finding the misappropriation as asserted by the Law Society. The Tribunal relied upon primarily the documentation and the lack of documentation, ie the joint venture agreements and their quite specific terms and the failure by the joint venturers and the Respondent (as the responsible solicitor for the joint venturers) to document anything that would have supported the Respondent’s case. The Tribunal pointed out [115] that in “order to succeed in his argument the Respondent would have had to assert a loan contract/agreement between Lloyd Lancaster Pty Limited and Rafter/Rafter Developments in or to the effect that Rafter/Rafter Developments would lend to Lloyd Lancaster Pty Limited $16,000.00 so that Lloyd Lancaster Pty Limited could make the deposit on the Haven property. No such assertion was made, either in evidence or by way of submission”. A similar observation can be made in respect of the $19,000.00.

10 The Tribunal also concluded [115] that any “belief that the Respondent may have had relating to his/his company’s use of the $35,000.00 or the joint venture use of that money would be a belief not rooted in contract nor in any side agreement”. The Tribunal also expressed the view that although it found “much to criticise in the evidence of Rafter, taking into account the whole of the material before it, the Tribunal (was) clearly of the view that it (preferred) the evidence of Rafter to the evidence of the Respondent”. The Tribunal made it plain throughout its decision that in forming that opinion it relied upon the documentation, or lack of documentation, that would have supported the Respondent’s evidence, noting (importantly) that it was the Respondent himself who drafted both joint venture agreements and in which he reserved unto himself the obligation to enforce the terms of the agreements and in the case of non-compliance by the other joint venturers the benefit of the agreements vested in his company.

11 As a consequence of the Decision 23 June 2009 the matter came back before the Tribunal for the purposes of argument/submissions on what Dispositive Orders the Tribunal should make. It is important to recognise that no party has challenged the findings of fact that the Tribunal made in its decision 23 June 2009. Consequently, it is upon those facts and findings that the submissions are based.

Submissions of the Law Society

12 The Law Society made it plain - crystal clear - that it seeks an order that the Respondent’s name should be removed from the Roll – indeed, the Law Society submitted that there was no leeway available to the Tribunal in light of its findings.

13 The Law Society submitted, correctly, that “the Tribunal must bear in mind that is function is to protect the public, not to punish the practitioner”. There was, after all, a finding of professional misconduct and a finding of misappropriation.

14 The Law Society relied upon Dupal v. Law Society (unreported, NSW Court of Appeal, 26 April 1990, Appeal No. 40611 of 1989). In Dupal there was a finding of misappropriation and an analysis of Dupal shows that, not only was there a finding of misappropriation but there were also other serious findings against the solicitor. It is important to set these out:

a) Firstly, the solicitor’s sister opened an interest bearing account in which she deposited $83,000.00 and the solicitor was given authority to operate on that account. The solicitor did not disclose to this sister (at pp 4-5) that “he was in some financial difficulties or would have any need to use the money himself for investment or other purposes”. His sister, not having the benefit of that information, told the solicitor that “he could borrow any part or all of the funds so long as they would be made available to her on about three month’s notice”. The solicitor used his sister’s money to discharge the mortgage over his own house. The Court of Appeal observed (at p 6 ff) that it was “clear that the funds did not pass through the (solicitor’s) trust account. The (solicitor) did not disclose this use of her funds to his sister or seek her authority for the transaction. No documentation was brought into existence at that time, or until three years afterwards to record the “investment”, no security was created for the protection of his sister, and the rate of interest was not fixed or agreed”. In any event, the solicitor clearly was in breach of the terms of the arrangement under which he was authorised to borrow against the $83,000.00. His sister’s instructions (at p.4) were that “she wanted $25,000.00 of the money kept at short call and the balance at three months call. She wanted the money placed in safe investments at appropriate rates of interest. The interest was to remain in Australia until she asked for it to be remitted (to France)”.

b) It transpired that between October 1983 and December 1985 the solicitor paid to his sister various sums of money representing repayment of the moneys misappropriated “together with accrued interest at an average rate of seventeen percent per annum with which (the solicitor) charged himself” (at p.7).

c) Court of Appeal concluded (Handley JA at 8-10) that the “relationship between (the solicitor) and his sister was clearly a fiduciary one. The absence of any legally enforceable contract of retainer far from establishing the absence of fiduciary duty owed to the sister in this case demonstrates the opposite. The (solicitor) and his sister were not dealing with each other at arm’s length. She was trusting him to look after her money and her interests. There is in general no contract between trustee and beneficiary but the fiduciary relationship in such a case is clear and so it is in the present case, although of course (the solicitor) was not a trustee of his sister’s funds while they remained in the bank account.

Mrs Dash did not make a gift of these moneys to the (solicitor). On the contrary, he was given clear instructions to manage these funds on her behalf and for her benefit.

Instead of the funds being invested safely at interest for her they were used for his own purposes without authority and without the informed consent of his sister. On the evidence he must have spoken and written to his sister many times between 1982 and 1985 without ever disclosing this use of her funds.

It is clear that (the solicitor) committed a gross breach of his fiduciary duty when he withdrew the $80,000.00 from his sister’s bank account and used it for his own purposes...

The (solicitor) was given clear and specific instructions to manage and invest the funds on his sister’s behalf and for her benefit. She trusted her brother to exercise his authority to withdraw the funds from the bank for her benefit. Accordingly, when he withdrew the funds and used them for his own purposes and benefit he misappropriated them and acted dishonestly in doing so …

Of course the (solicitor) was not a trustee of the funds in the bank account and until he operated on the account he had not collected or received any part of the funds. However, when he did operate on the account and withdrew the sum of $80,000.00 in the form of a bank cheque he received money or a valuable security on terms which required him to account for the same to his sister. Thereafter he fraudulently misappropriated the cheque and its proceeds to his own use. Prima facie therefore the (solicitor) was guilty of (a crime) … in any event I am clearly of the view that the (solicitor) was guilty of a dishonest act in using his sister’s money in this way and that his conduct in that regard can properly be viewed as misappropriation of the funds for purposes relevant to disciplinary proceedings for professional misconduct”.

d) The solicitor also appeared to attempt to cover up the misappropriation by preparing a draft mortgage (Handley JA at14). The solicitor in evidence conceded ‘that the major purpose of creating this document “was to try and put off the Law Society”. The document is incomplete on its face and the Schedule referred to in it was never executed or attached. Moreover it was never stamped …”.

e) The solicitor then, in order to meet his sister’s call to transfer certain moneys to her in France, and because (at p.15) his “financial position had not improved”, took money from moneys owned by another person in his trust account. The Disciplinary Tribunal had found, and the Court of Appeal accepted, that the solicitor “misappropriated moneys (held in trust) when he used them to make payments to his sister”. The mortgage that he purported to create was with his own family company. What the solicitor attempted to do was create “false documents and entries” and some sort of a figment in order to create the impression that the moneys taken from his trust account and owned by another person were in fact a loan. However, it was plain that such a figment did not survive rigorous examination such that there was a clear finding by the Disciplinary Tribunal and the Court of Appeal that the solicitor misappropriated the trust funds.

f) The solicitor in that case submitted (at p.19 ff) that the appropriate order was suspension rather than removal from the Roll. Argument was put forward that the solicitor “had been perfectly frank and candid in his evidence before the Tribunal and in his dealings with the Law Society … that the (solicitor) not only expressed but genuinely felt contrition and remorse for what he had done, that full restitution had been made to all parties concerned and that the shock and shame of his exposure was such that he would never offend again. He also relied upon a considerable body of impressive character evidence from practitioners of good standing and eminence who had personal knowledge of and contact with, (the solicitor) while he was in active practice” (Handley JA at 20). However, His Honour concluded that “these favourable aspects cannot possibly obliterate the sad but fundamental fact that the (solicitor) has been found guilty of misappropriation, first of funds entrusted to him by his sister and then of trust funds. Moreover these misappropriations were associated with or in due course resulted in the production of false records, and attempts to deceive the Law Society which succeeded for a time in putting off the inevitable day. Those attempts at deception involved deliberate lies by the (solicitor) in correspondence with the Society. Again and again when the (solicitor) was put to the test between May 1982 and October 1988 he preferred his interest to his duty and the lie and the cover-up to frank and honest disclosure. While (the solicitor) is entitled to point out to the frankness and candour of his dealings with the Law Society after (a certain date in 1986) his preference for his interest over his duty continued for some considerable time thereafter. Complete restitution (of the trust moneys) was not made until October 1988, some five years after the misappropriation of (the trust funds) commenced. No doubt immediate restitution (of the trust funds) would have been inconvenient if not painful, expensive and on any view difficult. In the result (the solicitor) continued to enjoy the use of (the trust funds) as bridging finance for a further two years and four months after he made proper disclosure to the Law Society …

When a solicitor gets into financial difficulties, the temptation to use funds under his control whether in his trust account or otherwise as a source of bridging finance or working capital must be extremely strong. However, the problem in this case, as in so many others which have reached this Court, arose in two stages. The (solicitor) was living beyond his means and attempting to build up capital assets in a rising market at a rate faster than he could honestly or prudently sustain. When he ran into financial difficulties he was not prepared to take the hard but honest way out of involving disclosure to and informed consent by his sister, or the sale of assets. He chose the soft option of dishonesty involving misappropriation of the funds of others to maintain appearances and retain living standards and capital assets”.

Handley JA concluded (at 22) that the “Court cannot possibly be satisfied at this early stage that the (solicitor’s) candour and contrition are any more than a virtue borne of present necessity and the inevitably of close scrutiny. Nor can it be satisfied that the (solicitor’s) character has undergone a dramatic and irreversible change for the better since the sad and unhappy events covering the period between 1982 and 1988 disclosed in the evidence.

This Court would be departing from a long course of authority if it were to allow the appeal and substitute a period of suspension for the order of the Tribunal removing the (solicitor) from the Roll. Counsel were not able to refer us to any case where a solicitor found guilty of misappropriation or wilful contraventions of s41(1) (Legal Practitioner’s Act 1898, the equivalent of which is s61(1) Legal Profession Act 1987 and s255 Legal Profession Act 2004) has not been struck of the Roll. Any decision to the contrary would signal to the profession and the community that this Court was no longer insisting on solicitors maintaining the highest standards of personal honesty and integrity in their dealings with clients and the public and in the handing of monies entrusted to their charge. The maintenance of those standards and the public interest require, in my judgment, that this appeal be dismissed. It is well established that the jurisdiction being exercised in this case is not penal but disciplinary and that it must be exercised for the benefit of the public. Sympathy for the (solicitor) and for the tragedy that he has brought upon himself and his family by his inability to live up to the high standards which this Court and the profession demand of solicitors cannot be allowed to deflect this Court from doing its duty.

Handley JA pointed out (at 23) that “an order removing the name of a solicitor from the Roll is not final and is not … a sentence of “professional death””.

And, (at 24) His Honour observed that there may be other firms operating in the particular country region which may be willing to employ the solicitor as a managing clerk, “to take advantage if his expertise (in the area of Family Law) and to satisfy the demand from the public for access to solicitors willing and able to accept instructions in Family Law matters. In such a case the solicitor … could seek the leave of the Law Society Council to employ(him) as a Managing Clerk .. such employment if it were available to (the solicitor) may help him to rehabilitate himself and to demonstrate the reality and permanence of such rehabilitation. In due course it may be possible for the (solicitor) to secure re-admission perhaps at least initially, subject to the issue of a restricted practicing certificate ... in some cases of this type it may be appropriate for the practicing certificate of the re-admitted solicitor to remain permanently subject to conditions which would prevent him from practicing otherwise as either an employee or a partner. At the present time, however, these are matters for the future to be decided on the merits if and when appropriate application is made”.

15 The Judgment of Handley JA was supported by Priestley JA although His Honour in respect of the findings felt constrained to say (at p.1) that the solicitor’s “actions, as a solicitor, in regard to his sister and to (the trust moneys) were dishonest and indefensible to a degree requiring that his name to be struck off the roll of solicitors”. However, His Honour made it plain that he supported entirely that portion of Handley JA’s observations relating to re-admission and resumption of practice and that “an order removing the name of the solicitor from the Roll is not final and is not … “professional death””.

16 The other Judgment was that of Kirby P who agreed with the facts as found by Handley JA and the standards that Handley JA set out “which the Court requires of legal practitioners”. Kirby P said (at p.1 ff) “in an appeal such as the present the Court disposes of the case before it by reference to criteria of general application. These should be clear and simple. They should not be such as to leave no doubt in the mind of a practitioner in financial difficulties, exposed to the temptation of using without clear authority the funds of another, the consequences that will flow from the right to practise when such misuse of funds is discovered … I am prepared to accept that the very close relationship between the (solicitor) and his sister might possibly have given rise to an implied or tacit understanding about the use by him of the funds which she entrusted to him upon conditions of which he was left in no doubt. But it is a feature of the case that when (the solicitor) was confronted with an unexpected financial predicament by the decision of his mortgagee, he did not candidly disclose his urgent needs to his sister, to whom he was so close. He simply went ahead and raided his fund for his own purpose. He did so without disclosure to her. His subsequent actions, far from reflecting his stated assumption of her implied or tacit approval for what he did, demonstrate the pains he took to try to cover his tracks and keep his actions from her notice until it became absolutely necessary to disclose him. This conduct may be explained by sibling pride. But it suggests to my mind that (the solicitor’s) own assessment of what his sister would have thought of his actions had they been disclosed to her. Had they truly been within her implied or tacit authority to him, there would not have been such a need to pretend at first that he had regularly invested her moneys in accordance with their agreement.

The use by (the solicitor) of (the trust funds of others) to permit him to meet his sister’s call for repayment of her moneys was quite improper. The belated attempt to justify it as being within the powers conferred upon him as trustee of those funds is quite unconvincing. The funds were not invested by him as the trust instrument contemplated. They were simply purloined to meet a sudden liquidity emergency with which (the solicitor) was confronted. He did not act in relation to them as a trustee would have done, without an interest of his own to serve.

The result in both of the cases complained of, the Society has shown misuse by (the solicitor) of the moneys received by him on behalf of other persons”.

17 His Honour went on then to consider whether a finding of misappropriation of trust funds or wilful contravention of s.41(1) (of the 1898 Act) would result in a removal from the Roll. His Honour referred (at pp 3-4) to an unreported decision of the Solicitor’s Statutory Committee in the matter of Colin Water Peck (23 April 1981) where a solicitor experienced severe financial difficulties and in order to “keep functioning” he “withdrew various amounts from his trust account which he was unable to make good from his own resources. There was a deficiency in his trust account of almost $2,750.00. He himself drew this to the notice of the Law Society. He disclosed a number of health problems and had numerous character witnesses”. The Statutory Committee found a breach of 41(1) but “in the circumstances it reprimanded the solicitor and suspended (him) from practise for two years. It did so “having regard to his frankness with the Law Society and (the) Committee and his contrite approach” and its finding that “he will be a fit and proper person to practise as an employed solicitor”.”

18 Kirby P found the decision in Peck “wholly exceptional”. His Honour conceded (at p.4) that “each case must depend upon its unique facts … (but) … the normal consequences of the misuse of entrusted funds by a solicitor, and a finding of wilful breaches of the statutory prohibition in that regard, is removal of the name of the solicitor from the Roll … to the extent that Peck suggests otherwise, I dissent from its holding”.

19 However, it is plain from the decisions of all three Judges of the Court of Appeal that, where a legal practitioner has been proved guilty of misappropriation of trust funds his/her name can be restored to the Roll and His Honour Kirby P made this observation [at 6]: “If a court is of the opinion that a practitioner is not probably permanently unfit to practice again, it should pause before ordering removal of that practitioner’s name from the Roll. It should consider the appropriateness of suspension”. But in the circumstances of Dupal, “suspension in this case is not appropriate. Removal must follow”.

20 However, His Honour went on to say that he could “contemplate circumstances in which, in the future, this (solicitor’s) name might be restored to the Roll upon proof of satisfactory conduct in the meantime and the good opinion of his professional colleagues to whom full details of the facts as found by this Court have been made known … there are a number of matters that stand to the (solicitor’s) credit … “.

21 The Law Society also relied upon an earlier unreported decision of the Court of Appeal in Law Society of NSW v. Jones (27 July 1978 CA333 of 1977). In that case the Statutory Committee severely reprimanded the solicitor and ordered that he be suspended form practice. The Law Society appealed.

22 There is no need for this Tribunal to plough through the detailed facts in Jones. Suffice it to say that the solicitor withdrew “$8,400.00 from (his) trust account … to meet the requirements of the company owned by (the solicitor) and his wife (and this) was a misapplication of moneys in the trust account” (p. 5). Indeed, there were a “series of irregular dealings with trust funds and the affairs of clients … compounded by (the solicitor’s) lack of frankness - indeed, by his positive untruthfulness - towards the investigating accountant (appointed by the Law Society) when questioned about the transactions …”. At pp. 5-6 the Court of Appeal observed that the solicitor had “a long-standing and irregular practice of withdrawing moneys from his trust account and crediting them to his general account, allegedly to cover the liabilities of the trust account clients to him for professional costs” in circumstances where plainly that was at least a “irregularity” in circumstances where his “general account was an overdraft account” and Street CJ observed at [6] that “the significance in the present case of this long-standing course of practice continued after the solicitor became aware of its wrongfulness, is that it marks the absence (on the solicitor’s) part of any proper regard for the fiduciary obligations owned by him to clients whose money he held in his trust account”.

23 A third matter that came to the attention of the Court of Appeal was a series of transactions where there was a “misapplication by the (solicitor) of moneys held by him on trust for (a client)”. The Court at [8] noted that in relation to this transaction the solicitor had told a lie to the investigating accountant and perpetuated that before the Statutory Committee such that Street CJ observed at [8] that this was “disturbing evidence of his lack of that degree of integrity which is to be expected of a solicitor … (and that) it is strongly to his discredit that he positively and deliberately sought to mislead the Statutory Committee”.

24 This is an interesting case because at p.9 the Court observed that normally the “finding of the Statutory Committee will ordinarily be entitled to great weight on an appeal of this nature” but in the present case “due to the (solicitor’s) own course of deception, the Statutory Committee had less than the full factual pattern exposed to it for assessment”. The Court went on to observe that the “evidence in its entirely leads almost inevitably to the conclusion that the (solicitor) cannot be regarded as a fit and proper person to be held out to the community as a solicitor. The nature of the defalcations and irregularities established against him, the length of time during which they continued, the lack of frankness in his dealings with the investigating accountant, and finally the perpetuation of his deception before the Statutory Committee itself, make it impossible for this Court to permit the (solicitor’s) name to remain on the roll and thus to be accredited to the public at large as a fit and proper person to practise as a solicitor”.

25 So, what happened in Law Society v. Jones is that the material before the Statutory Committee may well have been sufficient for it to make the finding that it did (ie severe reprimand and suspension from practise) but when the matter came before the Court of Appeal additional material was put before the Court that required the Court to re-open the conclusion of the Statutory Committee and reach another conclusion on “the evidence in its entirety”.

26 At p.10 the Court said this:

“Reliability and integrity in the handling of trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor. Members of the public many of them wholly inexperienced and unskilled in matters of business or of law, inevitably must put great faith and trust in the honesty of solicitors in the handling of moneys on their behalf. The Court must ensure that this trust is not misplaced. It is in recognition of this duty upon the Court that (it has) reached the conclusion that the finding of the Statutory Committee in this fell short of what was required in the light of the repeated and long-standing defalcations and the subsequent conduct of the present (solicitor).”

27 The Law Society submitted that it was in the context of those remarks that reference should be made to [112] of the Tribunal’s Judgment where the Tribunal made this observation:

“… we agree with the Law Society when it submits that Rafter not being a legally qualified person, was reliant upon the Respondent as a solicitor. It was “not open to Mr Doherty to shift his professional responsibilities away from himself by asserting that a legally – unsophisticated person such as Mr Rafter acquiesced in his conduct. Quite so.”

28 The Law Society submitted that the Respondent was “at all times an experienced practitioner (and that he could not) raise ignorance or inexperience as an excuse”. It submitted that there were no circumstances in this case that could be regarded as “wholly exceptional” and if it be suggested that the Respondent’s depositing trust funds into Mr Piperides’ trust account pending the Tribunal’s decision on “the Rafter matter” was a sign of good faith on his part it was submitted that “the Tribunal should bear in mind that the deposit was made only a day or so before the commencement of the hearing and the Respondent contended before the Tribunal that he had authority to use Rafter’s funds as he had done nothing wrong”.

29 The Law Society also relied upon Law Society of New South Wales v. Bannister (CA 40714/1990, 27 August 1993, BC 9301831). In this case the solicitor misappropriated to his own use the sum of $3,000.00 for “costs” from an award of $43,000.00 made to his client by the Compensation Court, knowing that he was not entitled. The solicitor later claimed costs from the client’s employer and this was not revealed to the client. The Legal Profession Disciplinary Tribunal made a finding of professional misconduct and imposed a fine of $10,000.00. The Court of Appeal held that the solicitor’s conduct “showed him to be unfit to practise (and that) the protection of the public required that his name be removed from the Roll”.

30 The decision of the Court was delivered by Sheller JA. At [10] His Honour said that it “is sometimes said that the jurisdiction of the Tribunal and of this Court invoked by complaint against a solicitor is not to punish the solicitor but to protect the public. In New South Wales Bar Associate v. Evatt (1968) 117 CLR 177 at 183 to 184 the Court referred to Clyne v. New South Wales Bar Association (1960) 184 CLR 186 at 201 to 202 and said: “The power of the court to discipline a barrister is, however, entirely protective and, notwithstanding that its exercise may involve a great deprivation to the person disciplined, there is no element of punishment involved”. However the distinction between the two stated objectives of protection and punishment is blurred and can be misleading. Obviously where a barrister or a solicitor has been convicted and punished for a serious offence the jurisdiction of the court to disbar the barrister or remove the name of the solicitor from the roll can be said to have nothing to do with punishment.”

31 His Honour then referred to a number of cases and then said (at [10]) “It follows that if a solicitor is shown not to be a fit and proper person he or she should be removed from the roll. The order for removal is not punitive but protective. Accordingly it is no answer for a solicitor to say that he or she has already been punished for the conduct which shows unfitness”… (and at [11]) but the supervisory jurisdiction of the Court and the Tribunal is also directed to protecting the public generally by maintaining and encouraging appropriate standards of professional behaviour … the matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor’s duty to ascertain with accuracy may suffice… It is impossible to enumerate the various contingencies which may call into operation the exercise of this jurisdiction. It need not involve personal obliquity. The term professional misconduct has often been used to describe the ground on which the Court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on behalf of the solicitor to fulfil his duty to the Court and to realise his duty to aid in promoting in his own sphere the cause of justice (quoting from Lord Wrights’ speech in Myers v. Elman [1940] AC 282 at 319).

32 His Honour then went on to quote from Ex parte Macaulay (1930) 30 SR (NSW) 193 where Street CJ speaking for himself and the other members of the Full Court said :

“… unless the Court insists on a high standard of conduct on behalf of solicitors – unless the Court punishes severely any lapse from the proper standard – the public will never be properly safeguarded and the profession will never retain the respect it ought to have in the community”.

Reference was also made to other decided cases.

33 His Honour went on to say at[12] that these “statements need to be understood as applicable within the context of a protective jurisdiction … The exercise of the power to remove from the roll, suspend or fine a solicitor is directed to protecting the public by ensuring that those unfit to practice do not continue to hold themselves out as fit to practice and that high standards are maintained. Maintenance of such standards involves deterring the offender from repeating the offence and deterring others who might be tempted to offend … the primary consideration is to protect the public by preventing a person unfit to practise from holding himself or herself out to the public as a legal practitioner in whom members of the public might have confidence. But the Tribunal must also act to deter the offender in the future and any other practitioner minded to behave in like manner”.

34 His Honour then referred to the Judgment of Moffitt P in Johns v. Law Society of New South Wales (1982) 2 NSWLR 1 at 9-10 where the President said that:

“Where there is misconduct prima facie involving at some time past a striking off order on the basis of then unfitness, the substance of the question whether a strike off order should be made when the matter comes for decision some years later is not dissimilar to the question arising upon an application for re-admission, namely whether it appears that there is material before the court to lead it to conclude that the past unproven fitness had been changed to fitness. But even so in allowing a solicitor to continue to practise where he has been shown in the past to be unfit to do so the court is giving … the sanction of the court for saying that, prima facie at least, the solicitor is worthy to stand in the ranks of an honourable profession in whose members people ignorant or otherwise might resort for assistance in the conduct or management of their affairs and in whom they are in the habit of reposing confidence. The normal consequence of the misappropriation by a solicitor of client’s money is that his name be removed from the roll”.

35 His Honour again referred to Ex parte Macaulay (at 194) where the Full Court said that:

“Where a solicitor had been proved guilty of theft he should not, in very exceptional circumstances, ever be allowed again to be held out to the public to be a solicitor in whom confidence might be reposed … this is not only to protect the public in need of assistance in managing their affairs from reposing confidence in the person concerned on the basis that he is a solicitor but also to deter others from behaving in the same way in the future.”

36 The Court of Appeal held in Bannister that the money received by the solicitor into his trust account belonged to the client, the claiming by the solicitor of $3,000.00 for his costs (at p.13) “could not be justified as costs but taking advantage of the client’s ignorance to believe that the solicitor was entitled to this amount for his costs, the solicitor’s contemporaneously making a separate claim for costs from the solicitors for the employer, making false entries in to the trust account ledger to conceal the wrongful dealing with the client’s money and misappropriating the proceeds in cash so that the moneys would go into his own account, not the account of the partnership, demonstrated that the solicitor “to be unfit to practise”.

37 The Court quoted with approval Dupal and stated that in Bannister the Court could not “possibly be satisfied at this stage that the solicitor’s candour and contrition are any more than a virtue born of present necessity and the inevitably of close scrutiny”. His Honour repeated that the solicitor in Bannister was not one “who misappropriated his client’s money and then within a short time overcome by remorse, made good the misappropriation. This is a case of premeditated and carefully planned misappropriation”. The solicitor’s name was removed from the roll.

38 The Law Society submitted that the Respondent in the current matter has “no insight into his misconduct and does not appreciate his duty as a solicitor”.

39 The Law Society then referred to Bolster v. Law Society of NSW (unreported, 20 September 1982) CA 233/1982 in support of the proposition that there is a “fundamental requirement that a solicitor appreciate the duties owed to clients”. In Bolster the solicitor borrowed moneys from his clients placing them into a finance company in which he had an interest and which then made advances to himself and his family and companies in which he or they had an interest. He acted as solicitor for his clients in these transactions without making a full and proper disclosure of his interest and without advising his clients to take independent legal advice. The solicitor conceded that his conduct was “improper” but submitted that it was not unprofessional. He submitted that “after certain matters published in a Law Society Journal came to his notice in early 1979 … he became aware that his conduct in the investment of clients’ money, so they were used for his benefit, was contrary to what appeared in the Journal (and that as a consequence) no further lending in the same fashion of clients’ money occurred (and) that about two years later by the time the proceedings before the (Statutory) committee were pending, all clients moneys so lent had been repaid (such) that no client lost any money and that the transactions were not unfair to clients and that clients’ investments were not at risk because he was a very wealthy man and his ventures were financially secure”. Here the solicitor had practiced as a sole practitioner for 30 years and from about 1960 he had been engaged in the conduct of a finance company “dealing in total with some millions of dollars”.

40 Moffit P observed: “The more his case based on claims of ignorance is pressed in defence of him, as it has been in respect of the period up to 1979 and to some degree thereafter, to the point where the ignorance is of the elementary but critically important obligations of a solicitor and person in a position of trust in relation to his clients, the more his case establishes that he has such a lack of appreciation of his duty as a solicitor that he is unfit to be such .. in so far as his case cannot be pressed that far so he did have the understanding of these elementary matters that one would expect of a solicitor, particularly one of thirty years standing, then he is left in a position that he must have knowingly disregarded the standards in order to serve his own financial interests by large sums of moneys of his clients being made available for his ventures, by such moneys being advanced to the finance company and then by it to him, his family and his companies without security at either step so that he as a borrower had a reservoir of money without being put to the expense of meeting the cost of providing proper securities or having the inconvenience and restriction of securities upon his assets or affairs”.

41 His Honour dismissed the solicitor’s claim ‘that if the clients had independent advice, it would have made no difference to what had occurred (for the reason that the solicitor) is in no position to make such an assertion. In any event, it is difficult to think that a responsible solicitor giving independent advice would not have required a guarantee in respect of an unsecured loan to a private company which in turned lent money unsecured to the solicitor … Further, if another solicitor gave advice, it would most likely be that (the) client would shop around to see if a better rate of interest was available. Such advice would also be important on whether, having regard to the client’s estate of affairs, he would be better off lending the money for a term rather than at call and thereby securing the higher rate of interest and whether he should insist upon the money being lent on a security basis”.

42 His Honour went on to observe that the solicitor either “lacked the most elementary knowledge and understanding of his duty as a solicitor or, being aware of it, he disregarded it because clients’ money provided a convenient source of finance for his own ventures. Many decisions of this Court in recent years … make it clear that the solicitor’s case is quite untenable, whatever way it be put and whatever be the precise conclusion proper to be come to as to the state of awareness of the solicitor of his duty…”.

43 The President then referred to Law Society of NSW v. Harvey (1976) 2 NSWLR 154 and observed that “Harvey’s case laid down no new law. The decision and views expressed in that case do not depend on some prior pronouncement of the Court of Appeal or some directive bulletin from the Law Society or a solicitor having knowledge of them. A solicitor cannot justify failure to perform his duty to his clients, including that not to intermingle his affairs with theirs, by claiming that he was ignorant of Harvey’s decision or the elementary principles there stated or that he misunderstood or was unaware of the many warnings to solicitors by the Law Society in its publications since Harvey’s case. A claim such as the solicitor makes, even if fully accepted, is a confession of ignorance of his fundamental duty as a solicitor and hence of his unfitness to be a solicitor. Any solicitor should acquaint himself concerning his duty as a solicitor. There is no excuse at all for not doing so for a solicitor so long as in practice as the solicitor in the present case, who has had such extensive dealings. A breach of duty does not cease to be such because the solicitor is ignorant of his duty. Lack of awareness of what he does is misconduct does not make it otherwise”.

44 The President said further, “the fact that the solicitor did not act fraudulently or that clients did not lose money does not prevent the solicitor of being found guilty of professional misconduct. .. true it is that no client in fact lost his capital and that the risk of that occurring was small. … for reasons which earlier appear I am quite unpersuaded by the case sought to be made (by the solicitor) that the advances were in terms which the client would have accepted, if they had had independent advice”. The President said that the solicitor “was guilty of a sustained course of conduct deliberately embarked on and pursued for his own advantage which was professional misconduct which rendered and renders him unfit to be a solicitor”.

45 The Law Society made a number of further oral submissions which the Tribunal will deal with below.

Discretion

46 During the course of its written submissions the Law Society made reference to various extracts from the cases to which we have made reference above. We have, in the consideration of the instant matter, expanded upon those extracts by making more detailed references to the facts and the decisions. Although that may appear verbose it was, in our opinion, so necessary simply because the Law Society submitted, and submitted very strongly, that this Tribunal had no alternative but to remove the name of the Respondent from the Roll. That submission, if accepted, would deprive this Tribunal and presumably any appellant court from exercising any form of discretion.

47 In our view that is not what the cited decisions say. It is plain from a careful review from those decisions that each case depends upon its own particular facts and peculiarities. To simply say: “the solicitor is guilty of misappropriation, therefore his name is removed from the roll” is, in our respectful opinion, not the law.

48 The law gives to this Tribunal, and to any appellate court, a discretion; a discretion to be exercised carefully, judicially and within the principles enunciated but, that having been said, it is still a discretion.

49 To deprive this Tribunal or any appellant court of such a discretion would be offensive to fair play and justice. Although said in different contexts, the requirement for judicial discretion has been underlined in two recent decisions, namely Totani v. State of South Australia [2009] SASC 301 (with reference to Kable v. Director of Public Prosecutions for the State of New South Wales [1996] HCA 24) and International Finance Trust Company Ltd v. NSW Crime Commission [2009] HCA49.

50 Although this Tribunal may not be a court (see Trust Company of Australia Limited v Skiwing Pty Ltd [2006] NSWCA 185) the principle of fairness, fair play and fair hearing equally applies to this Tribunal as it does to a court. The principle is set out in Totani by Bleby J. as follows:

[162] “A court exercising judicial power which is required by statute not to observe that fundamental rule of law (ie the “essential requirement of a fair hearing”), regardless of the justification for the requirement will inevitably be acting in a manner incompatible with proper discharge of juridical responsibilities, and will have its institutional integrity as a court severely impaired or undermined. It will no longer exhibit in a relevant aspect those defining characteristics which make a court apart from other decision making bodies”.

[167] “The statutory requirement .. that the court must act without question on a declaration which represents the finding of the Attorney-General on matters critical to the making of the order and without the right to a fair hearing means that the judicial function performed by the Magistrates Court is significantly impaired in a manner which is incompatible with its institutional integrity. The difficulty is not removed by providing a right of appeal to this court. The Attorney-General’s certificate is equally binding on this Court which has its own institution integrity impaired in the same way”.

51 White J, in a separate Judgment expressed similar views as to principle. At [199] His Honour, although strictly speaking, making specific reference to various sections of the Control Act that was the subject of the proceedings, made it plain that it was “open to the court to reach its own independent and possibly different, conclusion .. on the evidence adduced before it. At [206] His Honour said that there was nothing in the Control Act “which modifies the ordinary obligation of the Magistrates Court to satisfy itself that its jurisdiction has been properly invoked”.

52 Importantly, White J said at [224]: “The requirement of procedural fairness that parties be given an opportunity to be heard before orders adverse to their interest are made is an entrenched common law principle. In the absence of clear words, or necessary implication, Parliament should not be taken to have intended to abrogate that fundamental principle”.

53 In International Finance French CJ [at 54] “procedural fairness or natural justice lies at the heart of the judicial function”. He then referred to “the Federal constitutional context” (but it seems to us that the principles apply equally in the state context) and then said “It requires that a Court be and appear to be impartial, and provide each party to proceedings before it with an opportunity to be heard, to advance its own case and to answer, by evidence and argument, the case put against it. According to the circumstances, the content of the requirement of procedural fairness may vary”. His Honour held (at [56]) that the particular Act in question deprived “the Court of the power to determine whether procedural fairness, judged by reference to practical considerations of the kind usually relevant to application for interlocutory freezing orders, requires that notice be given to the party affected before an order is made. It deprives the Court of an essential incident of the judicial function. In that way directing the Court as to the manner of the exercise of its jurisdiction, it distorts the institutional integrity of the Court and affects its capacity as a respositive of federal jurisdiction”.

54 Their Honours Gummow and Bell JJ expressed similar views. At [97] Their Honours observed that the NSW Supreme Court “is conscripted for a process which requires in substance the mandatory ex parte sequestration of property upon suspicion of wrong doing, for an indeterminate period, with no effective curial enforcement of the duty of full disclosure on ex parte applications. In addition, the possibility of release of that sequestration is condition upon proof of a negative proposition of considerable legal and factual complexity”. And at [98] the relevant section of the Act in question “engages the Supreme Court in activity which is repugnant in a fundamental degree to the judicial process as understood and conducted throughout Australia.

55 Their Honours Hayne, Crennan and Kiefel JJ in a separate Judgment, firstly identified the statute in question as permitting at [101] “a law enforcement authority to seek from the State’s Supreme Court, without notice to anyone, an order preventing any dealing with specified property. The Supreme Court must make that restraining order if a law enforcement officer suspects that the person who owns the property has committed one of a broad range of crimes, or the officer suspects that the property is derived from criminal activity, and the Court considers there are reasonable grounds for the suspicion. The statute make no express provision for any subsequent contested hearing about whether a restraining order should be made”. At [103] Their Honours asked the question “Do the statute’s requirements that the Supreme Court freeze dealings in any property of a person on ex parte application by the executive, and proof of mere suspicion that the person has committed a crime (based on articulated grounds and found by the Court to be reasonable) require the Supreme Court to engage in activity repugnant to the judicial process to such a degree that the statute is beyond the legislative power of the State?” Their Honours answered the question with a clear “no”. However, their Honours were in the minority. The majority view (of French CJ, Gummow, Bell and Haydon JJ) was that the removal of the discretion was in fact “repugnant to the judicial process as understood and conducted in Australia”.

56 Haydon J delivered a separate Judgment commencing at [139]. He, like the Supreme Court of South Australia in Totani, referred to Kable v. Director of Public Prosecutions (NSW) (at [46] above). His Honour at [140] stated that Kable had been criticised but that whatever “the force of (the) criticisms, there is no doubt the decision has had extremely beneficial effects. In particular, it has influenced governments to ensure inclusion in otherwise a draconian legislation of certain objective and reasonable safeguards for the liberty and the property of persons affected by that legislation”. His Honour noted that the “case stands. It must be applied if circumstances which attract its operation arise. One central proposition in the Kable case which has never been challenged is Gummow J’s statement that a provision in a State statute conferring an authority on a State court capable of exercising federal jurisdiction which is “repugnant to the judicial process in a fundamental degree” is not constitutionally valid”.

57 His Honour then went (at [143]) to observe the fundamental inefficiency and injustice of ex parte applications, supported the “rules of natural justice” even “when something is obvious”, referred to the “justification of the practice of hearing both sides is that it respects human dignity and individuality” (at [144]), and made the powerful observation (at 146]) to the effect that courts are “extremely solicitous about the interest of persons who have not been given an opportunity to be heard either at all or in respect of particular questions before judicial orders of a substantive kind are made against them”. His Honour thought that the repugnance in the legislation arose because (at [159]) “there is no facility for the Court to entertain an application to dissolve an ex parte restraining order once the defendant has received notice of its grant …”. His Honour referred (at [164]) to, with approval, a decision of the Supreme Court of the United States which said “Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right they must first be notified”.

58 Although Totani and International Finance are decisions based upon the quite draconian terms of certain statutes, the golden thread that runs through them is that there is a discretion that resides in courts and tribunals. Contrary to the submission of the Law Society in or to the effect that this Tribunal has no alternative but to remove the name of the Respondent from the Roll having regard to its findings, we are clearly of the view that submission must be rejected. That is not the law.

59 If the principle were otherwise such that a finding of misappropriation necessarily led to a removal of the legal practitioner’s name from the roll, then there would be no need for any hearing on dispositive orders. But that is clearly not the law. It may well be that the hurdle to be overcome by the Respondent is high and it may well be that he would need to demonstrate “exceptional circumstances”, but the plain fact is that there is a discretion in this Tribunal and in any appellant court and that discretion ought not to be played down but rather, as in the case of Totani, elevated to a principle that is axiomatic in our democratic society where the rights of individuals ought properly to be protected by the judicial system.

60 Thus it falls to this Tribunal to determine whether or not, in the exercise of its discretion, and taking into account the relevant principles and all the facts that are put before it by the parties, and the findings it has already made, this Respondent’s name should be removed from the roll.

61 In order to determine this question it is now necessary to turn to the evidence of the Respondent.

The Respondent’s Evidence

62 The Respondent relied upon a sworn affidavit 11 September 2009, various affidavits as to character and gave oral evidence.

63 The first important point is this: in his affidavit, paragraph 3, he stated “I have acted upon the Tribunal’s findings concerning my accountability to Mr Geoffery Rafter in the sum of $35,000.00 which was (originally) provided by him and banked into my firm’s trust account on 4 October 2006. Following the Tribunal’s decision I instructed Mr Mario Piperides to make payment to Mr Rafter’s solicitors of the sum of $35,000.00 which Mr Piperides had retained in his trust account at my direction pending the outcome of these proceedings. That sum was paid to Mr Rafter in July 2009.”

64 The affidavit evidence noted that the Respondent’s practicing certificate was suspended on 11 September 2008 and that he has not practiced as a solicitor since that date. His practice was sold to Mr Piperides, subject to legal costs incurred prior to the sale being retained by the Respondent, and it was from these moneys that he paid the $35,000.00 to Mr Rafter and his own legal costs.

65 He gave detailed evidence relating to the financial consequences of his suspension from practice. It is bleak, to say the least. There is no need at this point to deal with that evidence in detail.

66 More importantly, he then makes reference to the findings of the Tribunal in paragraphs [17-22]. The Tribunal quotes relevant portions as follows:

130 In Jones there was a clear misappropriation of $8,400.00 taken from the solicitor’s trust account to meet the requirements of the solicitor’s own company in circumstances where the solicitor had a “long standing and irregular practice of withdrawing moneys from his trust account and crediting them to his general account allegedly to cover the liabilities in the trust account clients to him for professional costs”. There the court observed a “disturbing evidence of (the solicitor’s) lack of that degree of integrity which is expected of a solicitor” and that the solicitor “positively and deliberately sought to mislead the statutory committee”. There is no doubt that “reliability and integrity in the handling of trust moneys are fundamental prerequisites determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor” – see the full quotation above at [26].

131 In Bannister that was a clear case of misappropriation of $3,000.00 for “costs” knowing that the solicitor was not so entitled. In that case (the full quotation is above at [31]) the court made this observation: “a mere mistake or error of judgment is not necessarily sufficient but a gross neglect in a matter which it is a solicitor’s duty to ascertain with accuracy may suffice… It is impossible to enumerate the various contingencies which may call into operation the exercise of (supervisory jurisdiction of the Court) it need not involve personal obliquity … (it is perhaps) more accurate to describe it as conduct which involves a failure on behalf of the solicitor to fulfil his duty to the Court and to realise his duty to aid in promoting in his own sphere the cause of justice”.

132 Reference was made above )at [35]) to Ex Parte Macaulay and the statement: “where a solicitor has been proved guilty of theft he should not, in very exceptional circumstances, ever be allowed again to be held out to the public to be a solicitor in whom confidence may be reposed … this is not only to protect the public in need of assistance in managing their affairs from reposing confidence in the person concerned on the basis that he is a solicitor but also to deter other from behaving in the same way in the future”.

133 The importance of that quotation is the reference to “theft” and also the fact that the Court made it plain that there could be “exceptional circumstances” such that it does not follow, as a matter of law, that a finding of misappropriation inevitably leads to a removal from the roll. Otherwise, as we have pointed out above, there would be no need for a hearing on dispositive orders. There must be a discretion that resides in the Tribunal to fashion an order that is consistent with its duties as specified and set out in detail above.

134 In Bolster the solicitor borrowed moneys from his clients, placing them into a finance company in which he had an interest and which then made advances to himself and his family and companies in which he or they had an interest, without full and proper disclosure of his interest and without advising his clients to take independent legal advice. The court concluded that he had “such a lack of appreciation of his duty as a solicitor that he is unfit to be such … (and) knowingly disregarded the standards in order to preserve his own financial interests by large sums of money of his clients being made available for his ventures, by such moneys being available to the finance company and then by it to him, his family and his company without security at either step ..” (above at [40]). The court correctly said that it really did not matter whether the client would have acted differently had he/she received independent advice because the solicitor was “in no position to make such an assertion”, and otherwise for the reasons set out above at [41].

135 The point of that dissertation is that, not only does each case depend upon its own individual circumstances but the principles that have been properly set out in cases in this Tribunal and in the Court of Appeal have arisen in circumstances where there has been a deliberate misappropriation of trust moneys, coupled with other activities designed (speaking generally) to hide or justify the misappropriation. Misappropriation is a type of theft and if the theft is done deliberately with intent to deprive the owner permanently, then the Tribunal will have absolutely no alternative but to remove the name of the Respondent from the roll.

136 That is not the case here. This is not a case where, on any view of the evidence, the Respondent engaged in a deliberate attempt to his knowledge to permanently deprive Mr Rafter of his funds. The Tribunal has reached the very clear conclusion that the Respondent at all times believed that he had the authority of Mr Rafter to appropriate in the manner that he did Mr Rafter’s $35,000.00. That conclusion is not at variance by any means with the conclusion of the Tribunal in its decision 23 June 2009 to the effect (at [115.5]) that any “belief that the Respondent may have had with regard to his company’s use of the $35,000.00 or the joint venture use of that money would be a belief not rooted in contract nor of any side agreement”. There was no finding that the Respondent’s opinion as to his entitlement to use that money was a fraudulent opinion or an opinion not genuinely held.

137 There is no doubt that the Respondent was a novice when it came to joint venture agreements. There is also no doubt that, not only was he well out of his depth (as also was Mr Rafter), but they both had stars in their eyes and could only see riches coming to them from the various property transactions. However, it is to the Respondent’s credit that he could see the total hopelessness of the Hill End venture but it is not to his credit that he did not understand the joint venture contracts that he himself had prepared. Neither did he understand (even though he held an economics degree) that even if he had Mr Rafter’s approval the transactions with regard to the $35,000.00 had to be properly documented in a commercial/accounting fashion. Perhaps it was all done in a rush – there is no doubt about that – and there is no doubt that the Respondent acted for Rafter, Rafter’s company, the joint venturers and the joint venture companies. As we observed at [107] it was the Respondent who “drafted the agreement, had charge of administration of business but, at the relevant times, was apparently insolvent or at least under severe personal financial pressure at the time Rafter paid into his trust account the $35,000.00”.

138 When one looks at the Decision 23 June 2009 there were significant and serious findings against the Respondent. These findings were based upon the evidence and are not challenged. It is important, however, to observe that there was no finding against the Respondent of fraud and no finding that he did not genuinely believe that what he was doing with regard to the joint ventures was not proper. In order to reach its conclusions the Tribunal spent considerable time in analysing the joint venture contracts; then examined the course of conduct of the various parties; concluded that the course of conduct was at variance with the contractual obligations of the parties; and consequently the evidence of Mr Rafter was to be properly preferred as against that of the Respondent. However, that is not to say that the Respondent’s opinions were not genuinely held. Indeed, we have concluded that they were – such that it cannot be properly said (in our opinion) that the Respondent embarked upon a course of action which was designed to deprive Mr Rafter of his moneys. Rather, the course of action was based upon a misunderstanding of the joint venture documents, a misunderstanding of his role as a lawyer and a misunderstanding of his duties to Mr Rafter.

139 All that having been said, however, the misunderstandings arose in unusual (one might almost say “one-off”) circumstances where the Respondent and Mr Rafter were both engaged in speculative real estate transactions such that the distinction between lawyer and client was clearly blurred and clearly not recognised by the Respondent. This is not a case where the Respondent embarked upon a course of action designed to deprive Mr Rafter of his money but rather where the Respondent formed a certain opinion, misunderstanding the joint venture contracts and not understanding his duties as a solicitor in the commercial hot-house of the property transactions. There is, in our view, a significant distinction between this case and the case, one might almost say “the ordinary case”, of a solicitor who simply puts his hand in the till to satisfy his own personal obligations or desires. That is an important point because the Respondent’s evidence was that there would ultimately be an accounting to Mr Rafter and his opinion on the need for that accounting was not challenged. The Respondent therefore formed a view (wrongly, but genuinely) that Mr Rafter was part of the joint venture deals and ultimately there would be an accounting between the joint venturers of his $35,000.00. In our opinion that puts this matter into a different perspective which falls outside the “ordinary” case and therefore requires this Tribunal to bring to the task a perspective consistent with its findings and consistent with its duties to the public.

140 It is our respectful opinion that this is not a black and white case. It is plain to us, having heard the Respondent and having carefully examined the facts and circumstances, that the Respondent was overwhelmed by the commercial aspects of the matters; that he exhibited a degree of arrogance and somehow convinced himself that he could use Mr Rafter’s money for “joint venture purposes”. He clearly failed to recognise his relationship with Rafter, not only as a co-joint venturer but also as a client – a conclusion which, if he had paused to think about it, had clearly arisen by the terms of the joint venture agreements which he, the Respondent, had himself drafted. It is quite likely that the Respondent somehow convinced himself that he had Rafter’s authority but in this regard he was clearly influenced by his perceived appreciation of the future commercial prospects of the joint ventures. But the Tribunal wishes to emphasise that in all of his 10 years of legal practice it has not been said that in any other ordinary legal practice activity the Respondent has not acted with propriety and correctness. The only matter that has come to attention and from which a negative finding has been made against the Respondent arises, not from his “ordinary” legal activities but this quite extraordinary and “one off” commercial venture and we are satisfied that it is unlikely - extremely unlikely - that this Respondent will offend again; and it is likely – extremely likely – that this Respondent, with appropriate conditions, can resume his place in the legal profession with the public being assured that his professional conduct can be relied upon. There is not the slightest suggestion that in any matter relating to the Respondent’s trust account that he fell by the wayside and there is not the slightest suggestion that in any of his other ordinary legal activities acting for clients and in his relationship with fellow practitioners that he has acted in any way other than properly.

141 As we have pointed out there are occasions where even in the “ordinary case” a strike off order is thought to be not appropriate. One must tailor the cloth to suit the circumstances. In our opinion this Respondent has learned his lesson, is very contrite, understands his duties and is unlikely to offend again. In this regard it is significant that in his 10 years of practice he has not come to attention other than for the matters referred to in our Decision 23 June 2009 and in which findings were made in his favour. To take his practicing certificate away from him is, in our view, an over-reaction not warranted in the peculiar and unusual circumstances of this case.

142 That is not to say, by any means, that this Respondent should be permitted to continue to practice with an unrestricted practicing certificate. This Tribunal is of the opinion that appropriate restrictions should be placed upon the Respondent to enable him to re-enter the practicing legal profession and we adopt the general view of the Tribunal in Witherdin at [124].

Restrictions/Conditions

143 At the hearing on dispositive orders 25 September 2009 there was a discussion at T.25ff on whether there should be a practice in this Division, similar to the practice in the former Local Government Appeals Tribunal, where the relevant Council provided draft conditions in the event that it lost the appeal. In those circumstances the relevant Council would draft conditions and then, if the Tribunal upheld the appeal, it could look at those draft conditions and decide which were applicable and make them part of the appeal decision granting consent.

144 This was always done on the basis that the Council did not thereby be held to have resiled from its position that the appeal should not be upheld; but rather on the basis that it would assist the Tribunal if in fact the appeal was upheld. This Tribunal wishes to express a perhaps tentative view that the Law Society might consider the adoption of a similar regime. It would almost certainly avoid a further hearing in those circumstances where the Tribunal is of the opinion that something less than a strike-off order is appropriate, yet preserves the position of the Society in circumstances where it submits that such an order should be made.

145 At the moment this Tribunal is “left up in the air” (so to speak) because when seeking to formulate conditions its Members may not be personally up-to-date with what courses and so on may be available from time to time that would satisfy the Tribunal as part of the conditions that ought to be imposed upon a respondent when formulating orders that do not require his/her name to be removed from the Roll.

146 No material has been put before this Tribunal of that nature. However, the Society stated at [T.27] that “if the Tribunal at some stage reaches a particular point and then gives a direction then the Society will deal with that at the time”. This was so notwithstanding its submission that “any attempt to construct in this case some form of regime of conditions would be doomed to failure”; but that is not the view that this Tribunal has formed.

Conclusions

147 This is a case where, in our view, the practicing certificate of the Respondent should be cancelled for a period of twelve (12) months from the date of the hearing on dispositive orders (25 September 2009); the Respondent should pay the costs of the Law Society as assessed or agreed; during the period of cancellation the Respondent should attend (and pass if appropriate) appropriate courses in trust accounting and ethics; and at the end of the period of cancellation a restricted practicing certificate should be issued to the Respondent which would entitle him to practice as an employed solicitor only for a period of six (6) years with, perhaps, additional restrictions as to the areas of practice (in any event favoured by him in his evidence) and (importantly) in which he is clearly proficient and able to discharge his professional duties.

148 These provisions will not stop him from maintaining legal employment as, for example, a managing clerk, and to use the words used by the Tribunal in Witherdin at [124], during the period of cancellation and thereafter holding a restricted practicing certificate the Respondent will not be subject to the significant responsibilities within legal practice that only a sole practitioner/partner can undertake. In our opinion the 12 month cancellation will satisfy the principles in Witherdin at [124] and the restricted practice certificate period will more than adequately satisfy the requirements for the protection of the public.

149 The Law Society will be directed to bring forward appropriate conditions that may be imposed consistent with the terms of the decision of this Tribunal. The appropriate course of action, may we venture, is that the Law Society should circulate those conditions to the Respondent. We understand that he is now no longer represented, but hopefully agreement can be reached so that the Tribunal can make appropriate final Orders by consent.

Orders

1. The practicing certificate of the Respondent Peter John Doherty be cancelled for a period of twelve (12) months from 25 September 2009, concluding 25 September 2010.

2. During the period of such cancellation the Respondent is to attend (and pass if appropriate) appropriate courses in trust accounting and ethics.

3. At the end of the period of cancellation, and subject to compliance with Order 2 above, the Respondent is to be issued with a practicing certificate that would entitle him to practice as a employed solicitor only for a period of six (6) years commencing 26 September 2010, with such additional restrictions as to areas of practice as may be agreed between the Law Society and the Respondent or, failing agreement, determined by this Tribunal.

4. The Law Society is directed to bring forward appropriate conditions that may be imposed consistent with the terms of this decision. The Law Society is to provide those conditions to the Respondent with a view to the Law Society and the Respondent agreeing to the terms thereof. In the case of agreement the Tribunal should be moved to make final orders consistent therewith. In the case of non-agreement the terms of conditions can be the subject of a further decision and liberty is granted to apply.

5. The Respondent is to pay the costs of the Law Society as assessed or as agreed.