Walter v Council of Queensland Law Society Inc

[1988] HCA 8

HIGH COURT OF AUSTRALIA

Mason C.J., Wilson, Deane, Toohey and Gaudron JJ.

GLENN ROBERT WALTER v. THE COUNCIL OF THE QUEENSLAND LAW SOCIETY INCORPORATED

8 March 1988

Decision

MASON C.J., WILSON, DEANE, TOOHEY AND GAUDRON JJ. The appellant is a solicitor of the Supreme Court of Queensland. In April 1986, in accordance with s.6(2)(c) of the Queensland Law Society Act 1952-1985 (Q.) ("the Act"), the respondent referred to The Statutory Committee of the Queensland Law Society Incorporated ("the Committee") a large number of allegations touching the conduct of the appellant. The context of all the allegations against the appellant was a mortgage business conducted by the firm of solicitors of which he was a partner and for which business he was responsible. In the course of that business the firm received from a number of clients moneys to be lent on mortgage through a company, controlled by the firm, which acted as the mortgagee. The general nature of the allegations was later described succinctly by Williams J. in the Full Court of the Supreme Court of Queensland in the following terms:

"(i) charges alleging conflict of interest and preferring the interest of one client to that of another;

(ii) charges of failing to adopt and follow proper conveyancing practices for the protection of lenders;

(iii) breaches of the Trust Accounts Act 1973-1978, breaches of the Trusts Act 1973-1985, and breaches of the Queensland Law Society Rules dealing with inter-client loans;

(iv) charges involving failing to manage properly the loans and neglecting the interests of lenders;

(v) charges involving the incorrect accounting for and disbursement of interest received for various lenders."

2. The Committee found that a prima facie case was shown by the allegations and it called upon the appellant to answer them. The matter came on for hearing on 19 and 20 August 1986. Both the appellant and respondent were represented by senior counsel; the appellant pleaded not guilty to the allegations; evidence was led from an accountant, Mr Austin, who was appointed by the respondent to investigate the trust accounts of the firm; the appellant also gave evidence. At the conclusion of the evidence both counsel addressed the Committee. The Committee found a substantial number of the allegations to have been proved. It found further that the appellant was guilty of professional misconduct and suspended him from practice as a solicitor of the Supreme Court of Queensland for a period of twelve months.

3. The respondent then appealed, in accordance with s.6(4) of the Act, to the Full Court, seeking, inter alia, an order that the appellant's name be struck off the roll of solicitors maintained pursuant to s.37 of the Act. The grounds of appeal were confined to one only of the allegations found by the Committee to have been proved, namely, the allegation set out in par.15(c)(vii) of the affidavit outlining the complaint of the respondent. That allegation read as follows:

"15. In the period commencing on or about 23 December 1982 Mr. Walter acted as solicitor for or, alternatively, caused or permitted his firm to act as solicitors for, Philip Geoffrey Durand and Peter McKay (the lender used being Murlen Nominees Pty. Limited) in a transaction in which Mr. McKay advanced money to Mr. Durand in circumstances of conflict between the interests of Mr. McKay and Mr. Durand and in so doing:

...

(c) He acted in or, alternatively, caused or permitted his said firm to act in the transaction contrary to interests of Mr. McKay, particulars whereof are as follows:

...

(vii) he paid or, alternatively, he caused or permitted to be paid, to persons other than Mr. McKay or other than at Mr. McKay's direction, amounts totalling $7,960.00 from amounts totalling $10,050.00 received by his firm into its trust account on behalf of Mr. McKay as payments of interest by Mr. Durand".

It was contended that in relation to that allegation the Committee must have found (although it did not say so) that the appellant's conduct in the circumstances was dishonest and that consequently the penalty imposed was inadequate. The Full Court, by majority (Williams J., with whose judgment Connolly J. agreed; Shepherdson J. dissenting in this respect), accepted the first part of this proposition. Williams J. concluded that in finding the allegation in question proved the Committee necessarily found that the appellant treated trust moneys as being disposable at his will and that consideration, in his Honour's opinion, was sufficient to make his conduct stealing within the meaning of s.391(2)(f) of the Criminal Code (Q.). In approaching the question of penalty his Honour had regard to the other allegations which the Committee found to have been proved, saying:

"Whilst none of the other charges would have warranted striking the respondent's name from the roll of practitioners, such matters cannot be ignored when one is determining the appropriate penalty to impose with respect to a finding of professional misconduct based on dishonesty - a fortiori where the finding of necessity involves a finding that the practitioner has told untruths to the Law Society and to the Statutory Committee."

Shepherdson J. was "not prepared to find stealing arising out of the facts found in paragraph 15(c)(vii)" but nevertheless his Honour considered that the appellant's conduct, including the conflicting explanations which he gave to the respondent and the Committee, was such that the Court was no longer justified in holding him out as a solicitor. In the result, therefore, the Court unanimously allowed the appeal, set aside the penalty imposed by the Committee and ordered that the appellant's name be struck off the roll.

4. The case advanced for the appellant in this Court may be stated shortly as embracing two propositions. The first is that the appellant was not charged with stealing or with wrongful conversion; neither in the charge set out in par.15(c)(vii) nor in the conduct of the case with respect to that charge by counsel for the respondent was there any explicit allegation of dishonesty. It follows, so this proposition runs, that the Committee, in limiting its relevant finding to the bare statement that the facts alleged in par.15(c)(vii) were proved, did not make a finding of dishonesty and the majority of the Full Court were not justified in concluding that it had done so. The second proposition is that if the majority were correct in their conclusion that the element of dishonesty was necessarily implicit in the Committee's finding, then the appellant was denied natural justice because the true significance of the allegation contained in par.15(c)(vii) was never properly identified with the result that he was denied a fair opportunity of meeting it. In this regard, the appellant relied on the following authorities: The King v. Associated Northern Collieries (1910) 11 CLR 738, at p 740; Annamunthodo v. Oilfields Workers' Trade Union (1961) AC 945, at p 955; Lau Liat Meng v. Disciplinary Committee (1968) AC 391. For its part, the respondent submits that the Committee's finding that the charge in question was proved was consistent only with a conclusion of dishonesty against the appellant or, alternatively, that the evident untruthfulness of the appellant's evidence before the Committee alone warranted his being struck off.

5. The material before the Committee relating to the allegation contained in par.15(c)(vii) was summarized by Williams J. as follows:

"The material before the Statutory Committee

established that on 23rd December, 1982 Peter McKay lent $60,000.00 to Mr. Durand through the trust account of the firm of solicitors of which the respondent was a partner. Durand gave a second bill of mortgage over a unit property at Tweed Heads as security for that loan; the mortgagee was Murlen Nominees Pty. Limited. The principal sum was due for repayment on 23rd December, 1983. The rate of interest payable pursuant to that bill of mortgage was 18.75 per cent per annum, reducible to 16.75 per cent per annum provided the payments were made within 14 days of the due dates. The due dates were 23rd March, 1983, 23rd June, 1983, 23rd September, 1983, and 23rd December, 1983.

It can be ascertained by arithmetical

calculation that the amount of interest payable, adopting the lower rate, was $2,512.50 each quarter. Though payments were not made on the due dates (and therefore the mortgagor was not entitled to the lower rate) amounts of $2,512.50 were paid each quarter; the dates of payment were 11th April, 1983, 7th July, 1983, 11th October, 1983, and 31st January, 1984. The trust account ledger cards which were before the Statutory Committee showed those amounts being deposited to the relevant account in the name of McKay on the dates I have specified. Those four payments of interest were the only amounts credited to that trust account during the relevant period. But the ledger cards evidence disbursements as follows:

'16 August - Ronald McKay - Advance moneys - $2,000.00 30th November - K.A. Costello - Interest - $687.50

30th November - B. &E. Luscombe - Interest -

$800.00 2 December - B.G. Roberts - Interest moneys - $261.25 10 January - K. Costello - Interest moneys - $687.50

12 January - B. &E. Luscombe - Interest -

$800.00 31 January - B.G. Roberts - Interest - $261.25 1 February - K.A. Costello - Interest - $687.50

2 February - B. &E. Luscombe - Interest -

$800.00 2 March - K.A. Costello - Interest - $687.50

6 March - B. &E. Luscombe - Interest -

$800.00 29 March - Murlen Nominees P.L. - Interest Costello - $687.50

30 March - B. &E. Luscombe - Interest -

$800.00'

It is clear that those moneys could not have

been disbursed from the trust account were it not for the interest payments being credited as indicated above.

When the respondent was called upon to give an

explanation to the appellant of such matters he did so in the following terms, which were set out in a letter to the appellant:

'As explained to your Mr. Austin, the interest accounts for Luscombe, Costello and Roberts, Johnson, McFarlane, Kidd and McKay became mixed due to clerical and accounting error. ... Regarding the mixing of the interest of funds, we advise that the Borrower used to forward cheques to our Office payable usually to Murlen Nominees. The cheques were receipted into our Trust Account and unfortunately, from time to time interest cheques were drawn from the wrong ledgers due to clerical error.... The error was as between respective Lenders and at no time were any moneys paid out to this firm or any pecuniary gain made by our firm. In other words, we received no benefit at all from the error.'

During cross-examination he admitted that he

was the person who provided the information recorded in that letter; it was his signature on the letter. However, in the respondent's affidavit before the Statutory Committee he gave an entirely different explanation for the transactions particularised above. He said relevantly:

'... I say that, when the sum of Ten thousand and fifty dollars ($10,050.00) was paid by Durand, he directed me to appropriate that amount firstly towards interest due to Luscombe, Costello and Roberts and appropriate any balance to McKay. In the circumstances, I say that all the moneys were not received into the trust account on behalf of McKay. At the time I received those funds, I acted on the appropriation given at the time of the payment. However, I accept that the receipt of those moneys into one trust account was incorrect accounting procedure.'

That paragraph should be read as a reference

to the four separate payments of interest totalling $10,050.00; there was, of course, no one payment of that amount. The respondent made it clear in his evidence-in-chief before the Statutory Committee that he received the oral instructions as to appropriation on more than one occasion - inferentially on each occasion a payment was received."

6. Williams J. was satisfied that the findings of the Committee made it clear that each of the appellant's explanations was rejected in its entirety. With all respect, while that conclusion may well be true with respect to the explanation contained in the appellant's affidavit it is not so clear to us so far as concerns the explanation proffered in the appellant's letter to the respondent. The relevant finding was a bald statement, without reasons, that the facts alleged in par.15(c)(vii) were proved. The paragraph alleged no more than that the appellant paid or caused or permitted to be paid, to persons other than Mr McKay or other than at Mr McKay's direction, moneys which had been received into the firm's trust account on behalf of Mr McKay. The Committee found those facts to be proved. While in his affidavit the appellant denied that all the moneys in question were received into the firm's trust account on behalf of Mr McKay, a denial which is quite inconsistent with the Committee's finding, it does not appear to us that the finding necessarily involves the rejection of the explanation which the appellant offered in his letter to the respondent. The substance of that explanation, as appears from the extract which we have cited from the judgment of Williams J., was that the interest accounts of various clients who had provided money to the firm to be lent out on mortgage "became mixed due to clerical and accounting error"; the error was "as between respective Lenders and at no time were any moneys paid out to (the) firm or any pecuniary gain made by (it)." The letter of explanation included the further statement:

"These errors were, in fact, remedied before our recent audit by Messrs. Austin and Franklin (the respondent's investigating accountants) and the Society's Auditors were readily able to trace the mixing of the Accounts, and, we believe, are satisfied that all Lenders have received their due entitlement. The Auditors Report in your possession should reveal this to be the true position."

Mr Austin's affidavit, after setting out the facts on which the allegation is based, commented:

"Matters of concern arising in relation to

these payments are as follows:

(a) The misapplication of the interest payments received on behalf of Mr McKay is disturbing. It happened over a period of four months from 30 November 1983 to 30 March 1984 and involved twelve payments totalling $7,960.00. The money was used to pay interest due on three other loans, which makes an explanation of clerical or administrative error difficult to accept, particularly as in some cases there were payments to different lender clients on the same or nearly successive days.

(b) There is nothing in the papers I inspected at the firm's offices to indicate why no payments of interest were made by the firm within a short time after it had received payment of interest from Mr Durand on 11 April 1983 and 7 July 1983."

There is no allegation that the firm's lender clients have not received from the firm all the interest payments to which they are entitled.

7. It is against this background that we now return to the submissions advanced for the parties. There are a number of considerations which go to support the first submission of the appellant. The allegation in question appears as one of ten paragraphs particularizing an allegation that the appellant acted in the McKay-Durand transaction in a manner contrary to the interests of Mr McKay, that last-mentioned allegation forming part of a broader allegation that the appellant acted as solicitor for McKay and Durand in circumstances of conflict between their respective interests. The impression created by the broader allegation, viewed in its entirety, is one of procedural irregularity and incompetent management of the transaction. The particular paragraph (par.15(c)(vii)) says nothing about the intention with which the actions described therein were taken. There is no mention of stealing or of wrongful conversion. The overall impression of incompetent management is confirmed by the manner in which counsel for the respondent conducted the cross-examination of the appellant before the Committee. There is no allegation of stealing or of intentional wrongdoing contained in the questions of counsel; indeed, when counsel turned, in his cross-examination of the appellant, to the McKay ledger account, his questions were confined to seeking an explanation for what he described as an "extraordinary series of payments". Later, when he turned to the explanation the appellant had made in his letter to the respondent, counsel put the question:

"What have you said to the Law Society about this particular mess of McKay?"

Later again, when counsel came to allegations concerning the transactions relating to Luscombe, Costello and Roberts, transactions in the course of which the disbursements of interest from McKay's trust account occurred, he summed them up with the question:

"That is all just sloppy conveyancing, is it? Just shoddy work, is it?"

to which the appellant answered

"It certainly could have been a lot tidier."

There the matter was left.

8. We digress to note two other allegations, each of which was found proved by the Committee. They were both associated with a transaction involving Auto Wholesalers (Central Coast) Pty. Ltd. as borrower and Mr and Mrs Luscombe as the lenders. The first is contained in par.16(c)(xviii). It alleges conduct contrary to the interests of the lender clients in that -

"he (the appellant) misappropriated or, alternatively, caused or permitted the misappropriation of certain moneys held by the firm in its trust account by paying or, alternatively, by causing or permitting to be paid, without any authority therefor, to the lender clients as interest due in respect of the loan, sums of money held by the firm in its trust account on behalf of parties not related to the lender clients, there being at the times of such payments, as he well knew, no funds held by the firm specifically available for the purpose of paying to the lender clients interest due to them in respect of the loan" (our emphasis).

The second, par.16(d), repeats those facts in the context of an allegation that the appellant breached certain statutory and like requirements in respect of the transaction; specific mention is made of the fact that the payments were made "without any written authority for the making of such payments, as required by Section 8(2) of the Trust Accounts Act 1973-1978."

9. Allegations such as these heighten the impression that the gravamen of the complaint against the appellant was of procedural impropriety and incompetent management of lending transactions. In this context, in the absence of express assertion before or during the hearing, the allegation contained in par.15(c)(vii) should not be read as necessarily involving an allegation of stealing or other fraudulent conduct. It follows that the bare finding of the Committee that the allegation was proved falls short of a finding of dishonesty. In substance, we take the same view of the case in that regard as was taken by Shepherdson J. It should be noted that s.6(3)(b) of the Act expressly requires that every order made by the Committee be "prefaced by a statement of the findings of the statutory committee in relation to the facts of the case". As we have indicated, the findings of the Committee contain no mention of an allegation, let alone a finding, that the appellant was guilty of stealing or dishonesty.

10. In the light of this conclusion, it is unnecessary to deal with the appellant's second proposition. However, there remains the submission for the respondent that the evident untruthfulness of the appellant's evidence before the Committee was sufficient in itself to support the orders of the Full Court. Without wishing in any way to minimize the importance of that consideration, in the absence of any assessment by the Committee of the appellant's demeanour and generally of his credibility we do not think it would be right on the materials before the Court to accede to the submission.

11. The question remains as to how we should dispose of this appeal. As we have seen, the majority of their Honours in the Full Court took the view that none of the other charges found proved by the Committee would have warranted striking the appellant's name off the roll of solicitors, although it is apparent that Shepherdson J. may have taken a different view. The appellant asks that the order of the Committee be restored. We are not prepared to accede to that request. The matter cannot be resolved simply on the basis of an adversarial proceeding in which the appellant has been successful, with the consequence that the decision under appeal be set aside and the original order restored. The public interest is an important factor in disciplinary proceedings because a primary object of such proceedings is to protect members of the public from professional misconduct. See New South Wales Bar Association v. Evatt (1968) 117 CLR 177, at pp 183-84; Weaver v. Law Society of New South Wales (1979) 53 ALJR 585, at p 587; 25 ALR 359, at p 363. In the present case, we consider that the materials before the Court give rise to grave suspicion touching the appellant's fitness to practise. The public interest requires that further consideration be given to the culpability of the appellant in respect of the facts alleged in par.15(c)(vii) and also to the question of the veracity of the appellant's evidence to the Committee in that regard. The respondent should be at liberty to particularize further its allegations against the appellant.

12. It would be open for us to remit the matter to the Full Court in order that these matters may be further explored. An appeal from an order of the Committee is in the nature of a re-hearing: s.6(4) of the Act; see also Mellifont v. The Queensland Law Society Incorporated (1981) QdR 17, at p 29. Alternatively, we could remit the matter to the Committee in order that it continue the hearing, receive further evidence if tendered by the appellant or the respondent and give further consideration to the orders that should be made. We prefer to take the latter course, believing that it may lead to a saving of time and costs and generally be more expedient.

13. We would therefore allow the appeal, set aside the orders of the Full Court and the order of the Committee suspending the appellant and remit the matter to the Committee to be dealt with according to law. The appellant should have his costs of the appeal to this Court. Having regard to the remission of the matter to the Committee for further consideration, there should be no order for the costs of the appeal to the Full Court.

Orders

Appeal allowed with costs.

Set aside the orders of the Full Court of the Supreme Court of Queensland dated 22 May 1987 and the order of the Statutory Committee of the Queensland Law Society Incorporated suspending the appellant from practice as a solicitor of the Supreme Court of Queensland. Remit the matter to the Statutory Committee for further consideration.