The Law Society of Tasmania v J B Walker

[1988] TASSC 57

Serial No 56/1988
List “A”

COURT:  SUPREME COURT OF TASMANIA (FULL COURT)

CITATION:              The Law Society of Tasmania v J B Walker [1988] TASSC 57; A56/1988

PARTIES:  THE LAW SOCIETY OF TASMANIA
  v
  J B WALKER, D B WALKER and J R HURBURGH

FILE NO/S:  16, 17 and 18/1988
DELIVERED ON:  30 November 1988
DELIVERED AT:  Hobart
JUDGMENT OF:  Nettlefold and Cox JJ

Judgment Number:  A56/1988
Number of paragraphs:  71

Serial No 56/1988

List "A"

File Nos 16, 17, 18/1988

THE LAW SOCIETY OF TASMANIA v J B WALKER
D B WALKER AND J R HURBURGH

REASONS FOR JUDGMENT  FULL COURT:

NETTLEFOLD J

COX J

30 November 1988

ORDER OF THE COURT:

Appeals dismissed.

Serial No 56/1988

List "A"

File Nos16, 17, 18/1988

THE LAW SOCIETY OF TASMANIA v J B WALKER
D B WALKER AND J R HURBURGH

REASONS FOR JUDGMENT  FULL COURT:

NETTLEFOLD J

30 November 1988

1. The facts and a general indication of the principal submissions are contained in the reasons for judgment prepared by Cox J which I have had the advantage of studying. It is not necessary to set them out again and I feel free to go directly to a statement of the reasons why the appellant's submissions are not accepted.

1. The appellant's submissions were dominated by an exhaustive analysis of what the appropriate legal direction to the tribunal of fact would have been in litigation between a client of the respondents and the respondents, the former seeking to recover the interest earned on his money. That was not the proceeding which was before the learned Chief Justice. In fact, I do not recollect any statement that any client has ever complained and certainly I do not recollect any suggestion that any client has sued the firm. There are quite a few good reasons why a reasonable client would not complain. But my recollection may be at fault and that precise point is not of critical moment. What is of importance, and is the point presently being developed, is that we are concerned with an appeal in punitive proceedings not debt proceedings. In punitive proceedings most elementary notions of justice direct us as follows:

(1)As the learned Chief Justice pointed out, in punitive proceedings he who asserts must prove and prove to a degree of persuasion appropriate to the gravity of the allegations and the gravity of the consequences which might ensue if the assertions are established.

(2)The law's long established abhorrence of double jeopardy has led it to follow a very restrictive policy towards appeals by those seeking to have punishment inflicted. I draw attention to the law's attitude to appeals by the prosecution against an acquittal by a jury at a criminal trial and its attitude to appeals against an acquittal by a magistrate on a question of fact in quasi–criminal proceedings, as to which see Richardson v Shipp [1970] Tas S R 105. The task of the appealing prosecutor in the latter type of proceeding is even more onerous where the criterion of liability for application in the court below contained a necessary appeal to the value system of the tribunal below. That observation is particularly relevant to an allegation of professional misconduct with its necessary resort to notions of what is dishonourable or disgraceful.

(3)The maxim that there must be an end to litigation has particular application in an appeal where punishment is the aim and the criterion for punishment has a large value judgment element. The process of substituting one reasonable opinion for another in a case of that kind is not one to be encouraged. The fact that no expert evidence was called on the question whether the facts disclose professional misconduct adds greatly to the strength of the call for restraint which flows from that line of reasoning. By way of analogy I refer to a very different area of the law and the need, in many cases, for expert evidence before an established system of work in an industry is condemned (see for example Neill v N S W Fresh Food and Ice Pty Ltd (1962 – 63) 108 CLR 362). In other words to allow a tribunal of fact, whether composed of judges or jurors, to roam at large without expert guidance is not infrequently unacceptable. That comment has particular application to an appeal by an unsuccessful accuser in a case involving ethical and normative elements.

(4)It will be seen that my view is that the lot of an appellant on a question of fact in a proceeding of this character, the appellant being the accuser, is not a happy one. Although some particular rules have undergone some restatement in the intervening years, it is valuable to remind ourselves that in Dearman v Dearman (1908) 7 CLR 549 at 553 Griffith CJ said "But if the tribunal of first instance, having seen and heard the witnesses, comes to a conclusion in favour of the party upon whom the burden of proof does not lie, it is almost hopeless to try to induce a Court of Appeal to interfere with that finding unless it has clearly proceeded upon a wrong principle. That is the general rule of law which prevails in Courts of Appeal."

1. These general considerations incline my mind strongly against vague general complaints about a "failure to find" such as grounds 11 and 12. They constitute a mere complaint at large about a refusal to find some fact which, at best, was peripheral to the true case. In any event, if the non–specified acts were done as part of a "scheme" they could not constitute professional misconduct unless the acts themselves constituted professional misconduct. Ground 13 is really not a ground of appeal at all and, as I understand it, was not pursued.

1. Bearing in mind the general considerations stated above, and emphasising particularly the nature of the test of professional misconduct, I would reject each of the grounds of appeal 7, 8, 9 and 10. The test is so general, so basic, so value permeated, that I find it impossible to say that the learned trial judge could not find those factual matters relevant and entitled to substantial weight. The failure of the appellant to give firm and clear guidance on this matter of principle for 17 years was, of course, relevant and entitled to substantial weight. The respondents obviously conferred a benefit on their clients by a diligent and well informed use of investment opportunities. To ignore that aspect of the matter and confine one's consideration of their conduct to the retention of a small profit – and considering each client's case separately the amount is small – would be unfair. A reasonable person in the position of a fully informed client would not take that attitude and his Honour was not obliged to take it. That the clients' funds were secure is a relevant fact as is the respondents' practice in relation to the charging of costs.

1. I do not overlook that grounds 7 – 10 inclusive allege either error of law exclusively (ground 7) or error in law and fact (grounds 8, 9 and 10) . I reject the notion that his Honour in applying the broad and settled test of professional misconduct which emerges from the cases cited was bound to treat as irrelevant any of the four matters adverted to in these grounds. It is a remarkably broad test positively demanding a consideration of all the surrounding circumstances of the impugned conduct. One of those circumstances is that, on a question containing an ethical element and a normative element the leaders in this field did not give clear guidance at any time over a long period. Another relevant circumstance surely is that the procedure was followed without risk to the funds, without charging costs for the specific work and with the result that a benefit was conferred. None of those circumstances precluded a finding of misconduct. But they had their place in the broad assessment involved. For one thing, I would have thought that it requires some reflection before a mind exercising due restraint would find misconduct in a process which, on balance, had a beneficial effect for the people affected by it.

1. As I understand it, grounds 3 and 4 of the notices of appeal are misconceived.

1. What remains in the notices of appeal are grounds 1, 2, 5 and 6.

1. It should be clear from what I have already written that I accept the following submission by learned counsel for the respondents. The appellant's arguments confuse two issues. One issue is the issue whether or not a solicitor may retain interest earned on clients' funds as his property without the appropriate consent of the client. The respondents did not contend that a solicitor could lawfully retain interest on clients' funds without the clients' agreement. On this issue, which is not the critical issue, the argument for the respondents was that such agreement was made. The other issue is whether or not at the relevant times it constituted professional misconduct in the State of Tasmania for a solicitor to derive and keep portion of interest derived on clients' funds without the informed consent of the client. I accept the further submission by counsel for the respondents to the effect that the critical issue is the broad issue of whether or not, in the whole of the circumstances and having regard to the events which had occurred, it was open to the learned trial judge to conclude that the retention by the respondents of part of interest derived on the investment of clients' funds did not constitute professional misconduct or unprofessional conduct.

1. I am satisfied that it has not been established that the learned trial judge's findings on the issues of disclosure and consent should be disturbed. The ultimate and critical point is that his Honour's categorisation of these cases, arrived at with the advantage of a detailed appreciation of the circumstances derived from presiding at a lengthy and detailed hearing, has not been shown to have been wrong.

1. It follows that I do not accept the following central submission by learned counsel for the appellant:

(1)He should have found professional misconduct because there was a clear breach of fiduciary duty.

(2)If not, certainly he should have found unprofessional conduct which is treated as a lesser category.

(3)       It is unsatisfactory to leave it at such a low place having found breaches of duty as a solicitor.

1. The term "unprofessional conduct" was used without much attention to the true meaning of it. I am not at all satisfied that it was coined to provide a less heinous category of conduct. It was certainly coined to cover some cases not covered by the usual term "professional misconduct". And the content of the two terms overlap in many cases. It has been said that unprofessional conduct is "such as to render him unfit to be an officer of the court" (Cordery: Solicitors, 7th ed, 336; and see Halsbury: Laws of England, 4th ed, vol 44, pars[297] – [304]). I am not persuaded that, in this case it provided some kind of soft option or that it would have been a proper use of it to see it as relieving the appellant in any way of the heavy onus which it carried.

1. I should add in conclusion that I am aware that, no doubt, in a case like this the true nature of the jurisdiction which the court exercises is that of supervision of its own officers. But that characterisation does not persuade me that the general considerations concerning penal proceedings adverted to at the beginning of these reasons have less force.

1. For these reasons the appeals should be dismissed.

List "A"

File Nos 16, 17, 18/1988

THE LAW SOCIETY OF TASMANIA v J B  WALKER,
D B WALKER AND J R HURBURGH

REASONS FOR JUDGMENT  FULL COURT:

COX J

30 November 1988

1. These are appeals from the decision and findings of the learned Chief Justice in three separate proceedings brought by the Law Society against each of the respondents who are members of a Hobart firm of solicitors, Clerk, Walker and Stops ("the firm"). Pursuant to s76 of the Legal Practitioners Act 1959 the appellant by its Executive Director made allegations against each of the respondents and two other members of the firm, one of whom retired in 1983, while the other, Mr P B Walker, was a respondent to a fifth set, of proceedings which were heard at the same time as the other proceedings, but which abated in consequence of his death before judgment was given. In respect of Mr P H T Stops, the member who had retired, the learned Chief Justice said that he was not satisfied that the respondent was guilty of professional misconduct and he made no adverse findings in respect of any of the allegations made against him. His Honour's findings in respect of Mr Stops are not challenged before us. Although the proceedings against Mr P B Walker had abated, his Honour noted that had they not abated he would likewise have found that he was not satisfied that that respondent was guilty of professional misconduct and would have made no adverse findings in respect of any of the allegations against him.

1. The following allegations are subject to the present appeals (the method of numbering is that taken by the affidavit of the Executive Director of the appellant and was that used by the Chief Justice):

Group 1.1 (a)    That each respondent was guilty of professional misconduct in that on or about the 16th day of October 1985 the firm of Clerk, Walker and Stops (of which he was then a member) withdrew from the trust account of one H P  Quinn, a client of that firm, the sum of $2,000 without the authority of that client and deposited the same in an interest bearing account with the Savings Bank of Tasmania and in respect of that sum whilst it was so deposited paid to the said client interest at the rate of 8% per annum when the firm received interest from the Savings Bank of Tasmania substantially in excess of 8% per annum which the firm retained for its own benefit and without disclosure to the said client.

1. Similar allegations were made in respect of the following clients:

(b)             Dicker – 2 October 1985

(c)             Readett– 2 December 1985

(d) and (e)  Rayner (deceased) – 4 and 5 December 1985

(f)             Eaves and Conrades – 21 November 1985

(g)             Churchill – 20 September 1985

(h)             Beveridge – 8 October 1985

(i) and (j)    Barnett (deceased) – 23 August 1985 and 6 September 1985

(k)             Paul – 8 October 1985

(m)            Bielowski – 13 November 1985

(n)             Stevens – 31 August 1985

(o)             Kelly – 12 November 1985 (this was an error and should be 1984)

(p)             Dare – 25 August 1983

(q)             Moore – 23 March 1982.

1. Group 1.4 (hd) – that each respondent was guilty of professional misconduct in that the firm of Clerk, Walker and Stops (of which he was then a member), having profited from the sum of $2,000 held by the firm on trust for H P Quinn, the firm failed to account to the said H.P. Quinn for such profit and failed to disclose it to him. Similar allegations are made in respect of the following clients:– (he) Dicker, (hf) Readett, (hg) and (hh) Rayner (deceased), (hi) Eaves and Conrades, (hj) Churchill, (hl) and (hm) Barnett (deceased), (hn) Paul, (hp) Bielowski, (hq) Stevens, (hr) Kelly, (hs) Dare, (ht) Moore.

1. The learned Chief Justice found that it was the firm's practice to place monies received by it for or on behalf of clients in the firm's trust account at the ANZ Bank and have an appropriate credit entry made in the client's ledger card. If the monies were for mortgage investment, but no suitable mortgage security was immediately available, the firm would nevertheless undertake to the client that he would he paid interest from the date of the payment to the firm at the same rate as that which he would eventually receive when the money was allocated to a specific mortgage, namely 1% less than the rate paid by the mortgagor. Entries reflecting the payment would be made in two related accounts in the firm's trust ledger known as the HLIC Investment Account and the HLIC Advance Account. That amount was then credited to another account called the SBT Deposit Account. The entry effecting that transfer would show that the transfer was from the HLIC Advance Account, but would not identify the client. If the monies were being left by the client for some purpose other than mortgage investment the amount would be credited directly to the SBT Deposit Account and the entry would identify the client. The clients the subject of these allegations fell into the latter category. A cheque would be drawn on the ANZ Trust Account and a payment made into a passbook account No 69142 which the firm maintained with the Savings Bank of Tasmania which was designated as a "trust holdings" account and the customer was shown as "Clerk, Walker and Stops' trust account". Interest was paid on the account depending on the amount of the balance from time to time. During the period from 23 March 1982 to 26 February 1986 the rate as shown in the passbook varied from 10.75% to 13%.

1. As the result of a decision made by the partners of the firm in March 1985, amounts of money were from time to time transferred by direct withdrawal from the Passbook Account and invested in interest bearing deposits (IBD) with the Savings Bank of Tasmania. Interest was paid on such deposits at rates which varied from 14.75% to 19% during the period July 1985 to 21 February 1986. Those rates of interest would only be payable if the amount invested was left in for a specified term. However, an I.B.D. was repayable on demand, in which event a lower rate of interest was payable. The IBD certificates were in the name of Clerk, Walker and Stops' trust account. Upon redemption of an IBD the capital was credited to the Passbook Account. Interest on the Passbook Account which was payable in February and August each year and the interest on IBDs was paid by cheque from the Savings Bank of Tasmania which was paid into the ANZ Trust Account and credited to an account in the firm's trust ledger called the SBT Interest Account. The following payments were made out of the SBT Interest Account: interest which was credited to the trust ledger cards of those clients who were entitled to interest, but who were not mortgagees or prospective mortgagees (including those named in the allegations set out above), payments to another account within the Trust Ledger Account called the HLIC Interest Received Account and payments to the SBT Deposit Account for reinvestment in the Savings Bank of Tasmania. Twice each half year, after making allowance for contingencies and expected payments which would have to be made out of the HLIC Interest Paid Account, an amount was transferred to the HLIC Interest Received Account to an account within the firm's trust ledger called the commission account, out of which payments were made from the ANZ Trust Account to a bank account outside the Trust Account which was owned beneficially by the respondents.

1. In respect of the clients named in the above allegations, funds were placed by one or other of the respondents to this appeal or (in two cases) by solicitors employed by the firm in the SB. Deposit Account for varying periods of time (seven days in the case of Paul – a little over four months in the case of Dicker) and on their withdrawal they were accounted for to the client together with interest at a rate in most cases agreed in advance with the client, but which was less than the rate of interest paid by the Savings Bank on that Passbook Account and of course less than the rate payable on that portion of the funds taken from that account and placed on IBD The firm retained the balance using some of it to subsidise the shortfall in respect of clients receiving full mortgage interest on funds deposited for that purpose, but which while not immediately allocated to a specific mortgage were also deposited in the SBT Deposit Account, and appropriating some to an account owned beneficially by the partners.

1. The short term investment of clients' funds not intended for mortgage purposes in the Savings Bank account on the basis that the client would be paid something less than the passbook rate was a practice accepted by the members of the firm. A memo setting out specific rates of interest ranging from 8% to 10.75% and noting that for amounts over $50,000 for investment in excess of 30 days was "negotiable" was placed in evidence. His Honour found that the rates appearing in the memo were adopted by the partners as guidelines and that the firm's accountant Mr Morris, who was the author of the memo, was asked to convey the rates to the Accounts Department.

1. The learned Chief Justice made a number of findings of fact in respect of the allegations the subject of these appeals which I condense as follows:

Quinn

1. On the 19 August 1985 the firm received an amount of $2,000 from the City– of Hobart which the firm had previously tendered to the City on behalf of the client. On the 16 October 1985 Mr D B Walker wrote a letter to Mr Quinn in which he informed him of the fact of and the circumstances of the payment and "that we are holding $2,000 returned to us in trust on your behalf". No mention was made nor were any instructions sought about investing the money. Mr Walker received no reply to that letter and wrote two more letters dated the 4 November and the 25 November. On the same day as his first letter Mr D B Walker arranged for the $2,000 to be paid into the SBT Deposit Account. On about the 25 November 1985 the client rang him and sought payment of $500. The first named respondent told him that he had placed the sum of $2,000 in an interest bearing account which the firm maintained with the SBT in which the funds of a number of clients were placed, that the firm earned a rate of interest which varied depending upon the balance in the account, that Mr Quinn would receive a rate of interest which would depend upon how long his money remained in the account, but that the rate would be less than the rate which the bank was paying on the account. Mr Quinn said something to the effect that he was happy with the arrangement. On the 18 December 1985 $500 was paid to Mr Quinn and on the 26 February 1986 the balance of $1,500 was paid to him. Mr Quinn was paid interest at the rate of 9.75% on the balances of $2,000 and $1,500. During the period 16 October 1985 to 26 February 1986 the passbook interest paid on the Savings Bank of Tasmania account ranged from 11.75% to 13% and the interest paid on the interest bearing deposits varied from 16.25% to 19%.

Dicker

1. An employed solicitor acted for this client in the sale of a property. He sent the client a cheque for $8,443.05 on the 7 September 1985, but was informed by telephone a few days later that Mr Dicker had died. His informant (the client's stepson, Mr Maher) returned the cheque and the solicitor suggested that the money be put on a short term interest bearing investment "through the office" with the Savings Bank of Tasmania and that the interest which the client would receive would be "slightly less" than that which the firm received from the bank. The solicitor explained to Mr Maher that the investment was "basically a service" to the client and was provided at no cost to the client. Mr Maher instructed him to make the investment and the money was deposited on the 2 October 1985. The matter was ultimately taken over by the respondent J.B. Walker who, on the 6 February 1986, sent Mrs Dicker a cheque for an amount representing her entitlement to the estate and including interest at the rate of 8% in respect of the sums placed in the Savings Bank. During the relevant period the passbook interest rate ranged from 11.5% to 12.75% and I.B.D. interest rates ranged from 15% to 19%.

Readett

1. The son of this client was employed by the respondents as a solicitor and had been authorised by his father to "deal with" any of his business matters which may arise while his father was out of Tasmania. Whilst the client was overseas a cheque for $5,665 was sent to him through the mail. The client's son discovered the cheque and on the 2 December 1985 it was paid into the firm's Savings Bank of Tasmania account pursuant to instructions given by the son "to attend to it at the S.B.T. on a short term basis". The money was withdrawn on the 17 December 1985 and that amount, together with interest of 9%, was paid to the client. During the relevant period the passbook interest rate varied from 12.25% to 12.75% and the IBD interest rate varied between 18.1% and 19%.

Rayner

1. Monies were payable from this estate to Mrs Rayner. She was uncertain as to what she wanted to do with it and Mr J B Walker said to her that in the meantime he could invest the money in an account the firm had at the Savings Bank of Tasmania and that she would receive a rate of interest which was less than that being paid to the firm, but that the firm made no charge. Mrs Rayner instructed him accordingly and Mr Walker deposited two amounts totalling $5,400 on 4 and 5 December 1985 and withdrew them on 17 December 1985. Interest at 8% was paid to the client. During the relevant period the rate of interest payable on the passbook account varied between 12.25% and 12.75% and the IBD interest rate varied between 18.1% and 19%.

Eaves and Conrades

1. Mr JB Walker acted for these clients. He deposited $4,200 in the Savings Bank of Tasmania pursuant to Mr Eaves' instructions to invest the funds "as before". Mr Walker had previously deposited funds for the clients for short periods and he said that he had on those earlier occasions explained to them the arrangement which the firm had in the same terms as he had already given evidence about in relation to other clients. $4,200 was deposited from 21 November 1985 to 9 December 1985. During the relevant period the rate of interest payable on the passbook account varied between 11.75% and 12.25% and the rate of interest payable on the IBDs was 18.1%.

Churchill

1. The firm held $17,155 to the credit of this client. Mr J B Walker gave evidence that, as it was likely that the money was going to be needed for another matter, he told Mr Churchill that the firm had a pool of clients' funds and because there was a pool the firm was able to obtain a higher rate of interest than if each deposit was made individually. Mr Churchill asked what rate he would receive and Mr Walker quoted him either 9% or 10.75%. $17,155 was deposited from 20 September 1985 to 8 November 1985 when $6,000 was withdrawn and the balance was withdrawn on the 22 November 1985. Interest was paid to the client at the rate of 10.75%. During the relevant period the rate of interest payable on the passbook account varied from 11.25% to 12.25% and the rate of interest payable on the IBDs varied between 15% and 18.1%.

Beveridge

1. Mr J B Walker acted for Mrs Beveridge who asked Mr Walker to temporarily invest the proceeds of a sale pending the possible purchase of another property. He told her of the firm's arrangement in his usual terms but did not quote her a rate. $30,865 was deposited from the 8 October 1985 to the 12 November 1985. Interest was paid at the rate of 10.75%. During the relevant period the rate of interest payable on the passbook account varied between 11.75% and 12.25% and the rate of interest payable on the IBDs varied between 15% and 16.35%.

Barnett

1. Mr J B Walker was an executor and solicitor for the other executor of this estate. Mr G P Barnett was a beneficiary and became entitled to payment of $3,862. Mr Walker was told that Mr Barnett was serving in the Sinai Desert and that there would be a delay of four to six weeks before he could expect to receive a release and instructions from Mr Barnett. On the 23 August 1985 Mr J B Walker wrote to Mr Barnett and deposited $3,800 in the S B T account. Subsequently an additional $65 was deposited. The firm did not have authority from anyone to make the deposit, or to receive any part of the interest which it attracted. On the 1 October 1385 Mr Walker received the release and instructions from Mr Barnett as to the payment of his entitlement and on the 2 October Mr Walker sent a cheque for the amount payable, together with interest at 8%. During the relevant period the rate of interest payable on the Passbook Account varied from 11.25% to 11.75% and the rate of interest payable on the IBDs varied between 14.75% and 16.75%.

Paul

1. The firm held the proceeds of a sale amounting to $55,920 on behalf of these clients. Mr J B Walker informed them in his usual terms of the firm's arrangement and pending a decision as to the investment of the money they instructed Mr Walker to deposit the monies accordingly. No particular rate of interest was mentioned or quoted to the clients. The monies were deposited from the 16 October 1985 to 23 October 1985 and interest of 9% was paid on it. During the relevant period the rate of interest payable on the Passbook Account was 11.75% and the rate of interest paid on the IBDs varied between 16.25% and 16.35%.

Bielowski

1. An amount of $67,000 being the proceeds of a sale was deposited on instructions from 13 November 1985 to 21 November 1985 after Mr J.B. Walker had explained the arrangement in his usual terms. No particular rate of interest was mentioned or quoted. Interest was paid at the rate of 10%. During the relevant period the rate of interest payable on the Passbook Account varied from 11.75% to 12.75% and the rate of interest payable on the IBDs varied between 16.35% and 18.1%.

Stevens

1. Mrs Stevens was Mr J B Walker's grandmother, but it was not suggested that her relationship with him and the firm was not an ordinary solicitor/client relationship. Mrs Stevens asked Mr Walker to retain the proceeds of a sale pending her making a decision about their long term investment. Mr Walker said that he could put the funds on a form of investment that was intended for short term funds and that he quoted her a figure of approximately 10.5% or 11% as the rate of interest she would receive. He disclosed to her that the firm would receive a higher rate of interest from the Savings Bank of Tasmania. Mrs Stevens deposited $23,860 on 31 August 1985 and an additional amount to bring it up to $26,830 on 6 September 1985. The total amount was drawn on the 19 September 1985. Interest was paid at a little over 10%. During the relevant period the rate of interest payable on the Passbook Account was 11.25% and the rate of interest payable on the IBDs varied between 14.75% and 16.75%.

Kelly

1. Mr J R Hurburgh and Mr P B Walker were trustees of the estate of T O Kelly deceased. The deceased's second wife was a principal beneficiary and the firm was holding money from the estate to her credit pending final distribution. Although Mr Hurburgh was a trustee, he and the firm treated Mrs Kelly as the client Mr Hurburgh told Mrs Kelly that the firm could place money with the Savings Bank of Tasmania as part of a total account in the name of the firm, that it was a trustee security, that she would be paid 8% and that any additional amount earned by the firm on the money would be taken by the firm in lieu of a fee. He said Mrs Kelly indicated that she was happy for him to do that. An amount of $8,500 was deposited from 12 November 1984 to 5 December 1984. Interest was paid at the rate of 8%. During the relevant period the firm was receiving 12% in its Passbook Account but had no interest bearing deposits.

Dare

1. Mr D B Walker acted in the administration of this estate. Mr F W Dare was the sole beneficiary. The sum of $5,170 representing the proceeds of the realisation of some of the assets of the estate was deposited in the Savings Bank of Tasmania account from 25 August 1983 to 21 October 1983. Interest was paid to Mr Dare at the rate of 9%. During the relevant period the rate of interest payable on the Passbook Account varied between 12% and 12.25%. The firm had no interest bearing deposits during this period.

1. Mr Walker received no instructions or authority from anyone to make the deposit.

Moore

1. The firm had received on Mr Moore's behalf $8,357.21 which he intended to use a little later. Mr J R Hurburgh suggested to him that the money be placed with the Savings Bank of Tasmania in a trustee security in one account in the name of the firm. He said the firm would pay him 11% and that the firm would "get a bit more than that from the bank" and that the firm would take the difference in lieu of a fee. Mr Moore accepted the suggestion and instructed Mr Hurburgh to deposit $7,500. The amount was deposited from the 23 March 1982 to 16 April 1982. Interest was paid at the rate of 11%. During the relevant period the rate of interest paid on the Passbook Account varied between 12.5% and 12.75%. During that period the firm was receiving 15.8% on its interest bearing deposits.

1. The learned Chief Justice in considering whether the respondents were guilty of professional misconduct as alleged in the affidavit of the Executive Director held that he must be satisfied that the respondent in question had personally done something with regard to his profession which would reasonably be regarded as disgraceful or dishonourable by practitioners of good repute and competency. (His Honour cited In re a Solicitor [1912] 1 KB 302; In re Three Solicitors [1949] VLR 72 and Re a Solicitor [1960] VR 617).

1. His Honour found that the firm withdrew money belonging to clients from the A N Z Current Account and paid it into the SBT account where it earned interest either as part of funds deposited in the Passbook Account or as part of the funds in the interest bearing deposits. Part of the interest earned in these accounts was paid to clients and part was paid to the firm. Relying on the decision of Brown v The Inland Revenue Commissioner [1965] AC 244, his Honour held that the respondents being in a fiduciary relationship with their clients were not entitled to make a profit out of their trust and that on his findings, prima facie, the respondents who were concerned in each transaction were in breach of their fiduciary duty. However, he acknowledged that the responsibilities and obligations of a fiduciary can be varied by agreement, provided of course that the essentials of the transaction are disclosed by the fiduciary. His Honour held that the degree of particularity with which the disclosure must be made will vary with the circumstances.

1. In respect of all the transactions listed above, other than Quinn (a), Dicker (b) and (he), Readett (c) and (hf), Barnett (i) and (j) and Dare (p) and (hb) the learned Chief Justice held that the essential elements of the transaction were that:

(1)The client's money was to be transferred out of the trust account and deposited in a savings account in which other clients' funds were also deposited.

(2)     That the interest earned on the account was higher than that which the client would receive.

(3)     That the firm managed the fund.

(4)That the members of the firm profited from having the use of the client's money by retaining the additional interest which it earned for their own benefit.

1. He expressed himself satisfied that the clients the subject of these allegations were informed or were aware of all these elements.

1. Notwithstanding however that the disclosures so found were sufficient in his Honour's view to satisfy the relevant respondent's obligations as a fiduciary and to relieve him of any liability to account for the interest. he or the firm retained, the learned Chief Justice held that the scope and nature of the duties which a solicitor owes to his client as a solicitor are not necessarily co–extensive with those he owes to his client as a fiduciary, and that it is possible for a solicitor to be in breach of his fiduciary duty but not guilty of professional misconduct and likewise for him to be in breach of his duty as a solicitor notwithstanding that he is not in breach of his duty as a fiduciary. In the circumstances of this case his Honour found that in relation to the following clients mentioned in the transactions presently being considered, one or other of the respondents, while not acting without good faith, nonetheless by failing to give his client the best indication he could of the rates of interest which the Savings Bank of Tasmania deposits were likely to yield had not made as complete a disclosure to his client as his duty as a solicitor required him to make. These adverse findings were incorporated in his Honour's formal orders. The clients, their transactions and the respondents in question were as follows:

Rayner (d) and (e) – J B Walker

Eaves and Conrades (f) – J B Walker

Churchill (g) – J B Walker

Beveridge (h) – J B Walker

Paul (k) – J B Walker

Bielowski (m) – J B Walker

Stevens (n) – J B Walker

Kelly (o) – J R Hurburgh

Moore (q) – J R Hurburgh

1. Having made these adverse findings his Honour said that in considering whether he was satisfied to the necessary degree that the respondents had been guilty of professional misconduct he was especially influenced by the following considerations:

(1)The Law Society at first condoned the practice of practitioners taking interest on their clients' funds; it then referred to the practice without condemning or condoning it; the Society did not explicitly disapprove of the practice until 1986.

(2)Some other firms had also been engaging in the practice of retaining interest on their clients' funds.

(3)Had the respondents not deposited the money but left them in the ANZ bank account the clients would have received no interest at all.

(4)     The clients were informed of the essentials of the transaction.

(5)     The funds were secure.

(6)     The firm did not charge the client any costs.

1. He concluded that he was not persuaded that a reputable and competent member of the profession could reasonably characterise the respondents' conduct as dishonourable or disgraceful. His Honour said also that he was not satisfied that it was appropriate or necessary to characterise the respondents' conduct by the use of some phrase such as "unprofessional conduct" and that he did not think it necessary to attempt to characterise or categorise their conduct more precisely than he had in the above findings.

1. The remaining allegations in groups 1.1 and 1.4 were determined by his Honour as follows:

Quinn

1. Mr D B Walker withdrew Mr Quinn's funds from the ANZ Trust Account without authority. However, as the alternative would have been to have left the money in the Current Account in which event Mr Quinn would not have received any interest and as Mr Quinn ratified Mr Walker's action, his Honour said that he could not regard this as a serious breach of duty and made the same findings in respect of the non–disclosure of the rates of interest that he had already made in respect of the other allegations in group 1.1.

Dicker

1. His Honour was not satisfied that the employed solicitor was authorised or directed by any of the respondents to tell Mr Maher that the interest which the client would receive would be "slightly less" than that which the firm would receive. As there was no allegation that any respondent was guilty of misconduct by failing to exercise adequate supervision over the solicitor, his Honour was not satisfied that any respondent had been shown to have been guilty of misconduct in respect of the allegations concerning Dicker.

Readett

1. His Honour was not satisfied that Dr Readett's son's general authority from his father did not extend to dealing with this money in the way in which he did and that Mr Readett was not shown to have been acting on the direct authority or with the knowledge of any of the respondents. His Honour was not satisfied that any respondent had been shown to have been guilty in respect of misconduct in respect of this allegation.

Barnett

1. His Honour was not satisfied that it had been shown that Mr Barnett had sufficient knowledge of the way in which the money had been invested to justify the conclusion that his acceptance of the payment of interest amounted to a ratification of Mr J B Walker's action. His Honour was satisfied that Mr Walker withdrew the money without authority and retained part of the interest which it earned without authority. He regarded this as a slightly more serious breach of duty than those breaches which he had found established in respect of the main group of allegations. The essence of the breach of duty was placing the money in a bank account without authority and using part of the interest it generated for the benefit of other clients and the members of the firm. However, in the light of considerations 1, 2, 3, 5 and 6 which I have recently set out, his Honour was not satisfied that Mr J B Walker's conduct amounted to professional misconduct.

Dare

1. His Honour made the same findings in respect of this allegation against Mr D B Walker as he made against Mr J B Walker in respect of the Barnett matter.

1. In the result his Honour made some further adverse findings. In respect of the respondent J.B. Walker he found that he was in breach of his duty as a solicitor by withdrawing his client Barnett's funds from the Trust Account without authority and retaining part of the interest earned on those funds and in respect of the respondent D B Walker his Honour made a similar formal finding in respect of his client Dare.

1. The appellant does not challenge his Honour's statement that the responsibilities of the respondents as fiduciaries vis–à–vis their clients could be varied by agreement provided that the essentials of the transaction were disclosed to the clients, but does submit that his Honour did not exhaustively identify the essential elements and that in consequence of their failure to disclose one such element the respondents did not relieve themselves of their responsibilities and remained in breach of the fiduciary relationship. That element, it is submitted, was the amount of the difference between what interest was earned by the funds in the Passbook Account and on interest bearing deposits and the rate actually paid to the clients. Alternatively, as the appellant recognised the difficulties of precisely identifying that differential at any given time (either prospectively or retrospectively), it was submitted that the respondents were under a duty to disclose at least their best estimate of the differential. As I understand the submission this really required the disclosure of the method by which the differential was achieved. It seems clear from the evidence that none of the clients was ever told what the differential was, or that a proportion of the mixed funds in the Passbook Account was periodically invested in higher interest bearing deposits.

1. The learned Chief Justice in his adverse findings expressed his disapproval of the failure of the respondents to give their respective clients the best indication they could of the rates of interest which the Savings Bank of Tasmania deposits were likely to yield. His Honour however regarded this as a breach of duty owed by each respondent in his capacity as a solicitor rather than as a fiduciary. For my own part I regard it as a rather academic exercise to determine in which capacity the respondents failed to make the disclosure, a disclosure which I respectfully agree was required of them. The mere fact that a solicitor breaches his duty as a fiduciary does not necessarily make him guilty of professional misconduct, nor does the fact that the same act or omission constitutes a breach of his duty as a solicitor lead to the same result. Whether or not a breach of duty amounts to professional misconduct depends upon the nature of the act or omission taken in all its circumstances. Whether the breach is qua fiduciary or qua solicitor the client would be entitled to call for the return of any profit.

1. The appellant has not challenged the learned Chief Justice's characterisation of professional misconduct already cited as something personally done by a solicitor with regard to his profession which could reasonably be regarded as disgraceful or dishonourable by practitioners of good repute and competency. This was the formulation given by Darling J in In Re a Solicitor [1912] 1 KB 302 at 311 – 312 (although the word "personally" does not appear therein) and in turn is an adoption of the definition of professional misconduct in respect of the medical profession given in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750. It has frequently been applied: by the Privy Council in Grahame v Attorney General of Fiji [1936] 2 All ER 992 at 1002; by the House of Lords in Myers v Elman [1940] AC 282 (per Viscount Maugham at 288 – 289); by Herring CJ in In Re Three Solicitors [1949] VLR 72 at 73; by Dean J in Re A Solicitor [1960] VR 617 at 620; and Hardie J in Re Hodgekiss [1962] SR(NSW) 340 at 351.

1. The consequences of a finding may vary from striking off to an order that the practitioner pay the costs of the proceedings (see eg In Re a Solicitor [1913] TLR 354 where the respondent had no idea that in what he did he was acting unprofessionally and desisted when taken to task, and Re a Solicitor (1910) 55 Sol J 49 where the solicitor's conduct in failing to pay counsel's fees already received from the client was due "not to wickedness, but to poverty"). Nonetheless, the conduct in question must be grave indeed before deserving the epithet "professional misconduct". The appellant has never suggested that the respondents' conduct was deserving of penalties such as striking off or suspension. The fact that some lesser penalty is sought does not however reduce the need to establish that the conduct said to be professional misconduct would be regarded as disgraceful or dishonourable by other solicitors of good repute and competency.

1. In determining whether that could be said of the respondents' use of and profit from clients' monies in the circumstances indicated above, including the failure of the respondents to disclose to their clients the interest differential, the learned Chief Justice took into account six factors which I have already set out. The first of them was that the appellant at first condoned the practice of practitioners taking interest on their clients funds, later referred to it without condemning it or condoning it, and did not explicitly disapprove of it until 1986. The appellant submits that his Honour erred in law in taking that fact into account in determining the nature and quality of the respondents' conduct.

1. In March 1965 the Council of the Law Society of Tasmania resolved as follows:

"The Council having considered Brown's case and correspondence from the U.K. Law Society sees no reason to vary existing practice namely the depositing of a moderate and reasonable proportion of a solicitor's trust account either in a savings bank or at interest in a trading bank ...... at call."

1. The case referred to was that of Brown v The Inland Revenue Commissioners [1965] AC 244. By way of background, in 1959 before the formation of a unified Law Society of Tasmania, a meeting of the Southern Law Society recorded that one practitioner had written enquiring into the possibility of a ruling by a Tasmanian Law Society to the effect that trust monies in the hands of solicitors might be invested and the income retained by the solicitor and that the Secretary had written to the Northern Law Society which advised that its Council had decided that there was no objection to a solicitor receiving for his own use interest on monies which formed part of his client's account and which are placed on deposit subject to certain safeguards. Some members of the Southern Law Society Council expressed disapproval of such a scheme and a motion was passed that a sub–committee be formed to investigate the whole matter and report back. Later that year the sub–committee reported that the views of the English Law Society had been requested and the matter was deferred pending a reply. In early 1960 a letter was received from the English Law Society and it was resolved to find out the position in other States. The next mention of the subject appears in minutes of the Council of the Law Society of Tasmania on the 8 February 1965 when it is noted that "The meeting dealt with a report on a U.K. decision that appeared to affect the present position. It was agreed that the decision concerned should be copied and sent to all members of Council and placed on the agenda for the next meeting." The decision was obviously that of Brown (supra) and the next meeting in March 1965 passed the resolution I have set out.

1. The practice condoned was not identical to that the subject of these proceedings, for it related to the use of a core of funds in the trust accounts of solicitors in respect of which it would be almost impossible to identify the persons whose monies had been availed of and to account to them for the interest earned thereon. Later this kind of core fund was to be made subject to a legislative scheme pursuant to Part VIB of the Legal Practitioners Act 1959 introduced by Act No 72 of 1970. Nevertheless, there were some similarities. Clients' monies were used without express authority to generate a profit which was retained by the solicitors. It is difficult to understand, with respect, how the Council of the Law Society could have read into Brown's case (supra) any warrant for such a practice, for Lord Upjohn at 265 – 266 had said:

"One of the most settled principles of the law of Scotland, as of the law of England, is that a person who is in a fiduciary relationship to another may not make a profit out of his trust, and the contrary was not argued. A professional adviser, whether he be solicitor, factor, stockbroker or surveyor is of course in a fiduciary relationship to his client, and if and when he is entrusted with his client's money he can make no profit out of it. He may make proper charges to his clients for the professional services he renders to them, including, no doubt, the investment of their money, but he cannot without his clients' agreement, make indirect charges by way of retaining interest on the investment of his clients' money. It avails him not to say that he retains such interest either in lieu of or in reduction of such charges or in addition thereto because of the extra time and trouble in which he may be involved in handling his clients' affairs."

1. In 1972 when questions arose as to what funds should be deposited with the Solicitors' Trust consequent upon the 1970 legislation, a letter was sent by the Law Society to approved accountants noting that two situations appeared to exist:

"l.        Firms take from their trusts account part of the general balance and, without identifying any part of that money as belonging to any client or clients, deposit the same at interest (usually in the name of the firm or in the name of one or more of the partners of the firm).

2.        Firms place on deposit from their trust account, (and in doing so debit a particular client or clients) monies standing to a client's credit. Sometimes the deposit is made in the name of the client and sometimes in the name of the firm or of one or more of the partners of the firm."

1. Instructions were given as to how the accountant should deal with such funds in calculating the amount to be deposited with the Solicitors' Trust. A copy of this letter was sent by the Secretary of the Law Society to all firms of practitioners with a covering letter, the relevant parts of which read:

"The attached letter relating to deposits on interest from trust accounts, has gone to all 'approved accountants'.

The Council of this Society has directed me to inform the legal profession that the abovementioned letter is not to be construed as approbation by the Council of the practice, followed by some firms, for placing on interest bearing deposit part of the 'general balance' in the trust account and of treating the interest as belonging to the firm.

The Council proposes to consider that practice and will, in due course inform members of its conclusions."

1. No further formal pronouncements were made by the Law Society or its Council before 1986 when the practice was expressly disapproved.

1. In determining what fellow practitioners of good repute and competency might think of the practice adopted by the respondents prior to 1986 I have no doubt that the views of the professional body would be highly relevant. In Brown's case it is noted that the Council of the Law Society of Scotland in a report dated 1951 had stated:

"The council have also been asked for their views regarding the question of the disposal of interest on deposit receipts or deposits with savings banks for unnamed clients. They have expressed the opinion that if the allocation of interest on a general sum taken out of the client account and placed on deposit receipt or with the savings bank is so difficult or involves so much work as to be substantially impracticable, the solicitor is entitled to retain the interest in the form of a general charge against clients for the work involved in keeping the clients' banking account(s)."

1. This passage is cited in the judgment of Lord Reid who at 258 said of it:

"This opinion, coming from so responsible a body, negatives any possible suggestion of professional malpractice by the appellant or any other solicitor who has acted in accordance with it."

1. It was submitted that in 1970 the introduction of the statutory scheme for the investment of part of clients' current accounts in a Solicitor's Trust intended to cover defalcations by solicitors with any surplus funds being used for such purposes as legal aid, law reform and legal research, put a different complexion on the Law Society's 1965 pronouncement and, together with the more stringent provisions regarding trust accounts (s32B) introduced in the same legislation, should have alerted practitioners to their obligations. However, the Law Society in the circular letter signed by its secretary in 1972 and set out above expressly reserved consideration of the merits or otherwise of the old practice and would have thereby led most practitioners in my view to have reasonably entertained a belief that in the absence of any definitive ruling by the Society the practice was not regarded as a serious departure from the ethics of the profession. In my opinion the learned Chief Justice quite properly took those facts into account in determining the nature and quality of the respondents' conduct.

1. The next factor taken into account by the Chief Justice which is the subject of a ground of appeal is that had the respondents merely left the monies in their ANZ bank account the clients would have received no interest at all. This, it was submitted, was an irrelevant consideration and the case of Keech v Sandford 25 ER 223 was cited. This case confirms that the trustee must account to his beneficiary for any profit made by his use of the trust property, notwithstanding that the beneficiary might not have been able to make the same investment. It has no direct application to the bona fides of the trustee (indeed the Lord Chancellor in Keech v Sandford expressly disclaimed any suggestion of fraud on the part of the trustee), nor does it touch on the gravity of such conduct on the part of a solicitor. In the present circumstances there was evidence that the transactions were intended by the respondents who made them as a service to their clients, some profit being retained by them in lieu of professional charges. The fact that had the monies been left in the ANZ bank account no benefit would have accrued to the client does not authorise the respondents to retain any part of the profit, but in my opinion the procurement of a profit to the client was relevant to the respondents' general bona fides and was relevant to the gravity of their action and to the question of professional misconduct.

1. The other two relieving considerations challenged by the notices of appeal are that the money was secure and that no other professional charges were rendered in respect of the transactions. In the same way, in my opinion, these factors were relevant to the question of bona fides and the gravity of the respondents' failure to carry out their obligations as solicitors. Although not a separate ground of appeal, a further consideration mentioned by the learned Chief Justice was attacked by the appellant in argument, namely that some other firms had also been engaging in the practice of retaining interest on their clients funds. If a practice is wrong, then the fact that some other persons engage in it does not make it right. Nor does it necessarily affect the gravity of the conduct. If the practice is widespread among the profession, however, that is some indication that it is not regarded at least as disgraceful and dishonourable by reputable and competent members of the profession. The practice referred to by his Honour was not identical to the one under consideration, but had similar features which in my mind justified the Chief Justices reference to and reliance upon it. There was evidence that the practice referred to in the 1965 motion of the Council of the Law Society was common and counsel for the appellant conceded that it was widespread but not universal. In my opinion the learned Chief Justice was quite right to take into account each of the factors which I have mentioned.

1. The remaining factor was that "The clients were informed of the essentials of the transaction". These his Honour had defined as I have earlier set forth, namely that the client's money was to be transferred from the current trust account and deposited in the savings account with other clients' funds, that the interest to be earned would be higher than that received by the client, that the firm managed the fund and would profit from the transaction by retaining the interest differential. As I have said his Honour did express disapproval of each respondent's failure to give the best indication he could of the rates of interest the savings bank deposits were likely to yield. His Honour acknowledged therefore that there was a high but nonetheless incomplete level of disclosure. In my opinion he was entitled to take into account the extent of the disclosure in determining the seriousness of the non–disclosure. There was no evidence of any attempt to conceal anything from the clients who, armed with the facts which were revealed, could easily have asked for the missing information if they had been concerned to know it.

1. In relation to each appeal, complaint is made that his Honour erred in fact and in law in finding that G P Barnett and H M Dare were informed or were aware of all the elements of the transactions involving the deposit of their funds. The learned Chief Justice made no such finding. Those two clients' transactions were excluded from his findings on p33 of his reasons for judgment that "the clients the subject of these allegations were informed of or were aware of all those elements" (see p29 thereof where he defined the allegations to which he then gave attention). He made the specific adverse findings which I have already set out that these clients' funds were withdrawn without authority.

1. The notices of appeal also complain that each respondent should have been the subject of an adverse finding in respect of those transactions which his partner or employee conducted and which in the case of a respondent partner was made subject to an adverse finding. In other words, it is said that these transactions were all conducted in pursuance of a scheme determined by the members of the firm in which each respondent was a partner. But for the failure to disclose the differential the transactions authorised by the clients in question could not have been assailed. There is no evidence requiring a conclusion that it was an essential part of the scheme agreed upon by the partners that the clients would not be given this information. Where a client was not given it, the respondent having carriage of the matter must bear the responsibility as his Honour found. But on the evidence the other respondents had no part in that default. His Honour's findings concerning the actions of the employed solicitors in respect of the Dicker and Readett transactions were not the subject of challenge.

1. In my respectful opinion the learned Chief Justice has not been shown to be in error in failing to be satisfied that the conduct of any of the respondents amounted to professional misconduct. In the few instances where they departed from the standard required of a solicitor, he made adverse findings in respect of which an appropriate penalty could have been imposed. His Honour expressly left open to the appellant the course of moving for some admonitory, disciplinary or punitive step. I agree that having failed to be persuaded that there was any professional misconduct his Honour was not required to characterise the failings he found by any other epithet. In my opinion the appeals should be dismissed.