Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83
• Hearing dates: 7 March 2011
• Decision date: 20 April 2011
• Before: M Chesterman, Deputy President; M Riordan, Judicial Member; C Bennett, Non-judicial Member

Decision

1. The Respondent is guilty of professional misconduct.

2. The matter is set down for further directions at 9.30 a.m. on 4 May 2011.

• Catchwords: Solicitor - disciplinary application - breach of provisions regulating trust accounts - overcharging - misappropriation
• Legislation Cited: Administrative Decisions Tribunal Act 1997; Legal Profession Act 1987
• Cases Cited: Bolster v Law Society of New South Wales, Unreported, Court of Appeal, 20 September 1982 (BC8211696); Brereton v Legal Services Commissioner [2010] VSC 378; Law Society of New South Wales v Carvan, Unreported, Court of Appeal, 14 May 1981 (BC8111397); Law Society of New South Wales v Jones, Unreported, Court of Appeal, 29 July 1978; Stewart v Strevens [1976] 2 NSWLR 321; Veghelyi v Law Society of New South Wales, Unreported, Court of Appeal, 8 February 1995 (BC9505459); Re Veron; Ex parte Law Society of New South Wales (1966) 84 WN (NSW) (Pt 1) 136; Walsh v Law Society of New South Wales (1999) 198 CLR 73
• Category: Principal judgment
• Parties: Council of the Law Society of New South Wales (Applicant); William Daniel Clapin (Respondent)
• Representation: Counsel; R Stitt QC (Applicant); T Lynch (Respondent)
• File Number(s): 092034

reasons for decision

Introduction

1 In a Disciplinary Application filed on 11 December 2009, the Council of the Law Society ('the Law Society') claimed that William Daniel Clapin, a solicitor (hereafter 'the Solicitor'), had engaged in professional misconduct. The Application set out a number of Grounds for this claim, together with supporting Particulars.

2 The orders sought in the Application were:-

1. That the name of William Daniel Clapin be removed from the Roll.

2. That William Daniel Clapin pay the costs of the Law Society.

3. Such other order as the Tribunal deems fit.

3 The Solicitor filed a Reply on 4 May 2010 and an Amended Reply on 7 March 2011. In the Amended Reply, he admitted most of the Grounds advanced by the Law Society, but denied the remaining Grounds and added some assertions about his conduct.

4 In this decision, we set out our conclusions regarding the Grounds of the Application and the Law Society's claim that the conduct of the Solicitor described in the Grounds and the Particulars amounted to professional misconduct.

The evidence in these proceedings

5 The hearing of the Application took place before us on 7 March 2011. The Law Society, for whom Mr Stitt QC appeared, tendered a number of affidavits, which were admitted without objection. The Solicitor, for whom Mr Lynch of counsel appeared, did not tender any evidence.

6 An affidavit sworn by Mr Raymond Collins, solicitor for the Law Society, on 10 December 2009 included the following information: (a) the Solicitor was admitted to practice in New South Wales on 22 November 1968; (b) on 14 September 2007, the Law Society made the complaint against the Solicitor from which these proceedings originate; (c) on 25 September 2007, the Supreme Court appointed Ms Jean Sayer, Chartered Accountant, as Receiver of a Law Practice of which the Solicitor was the sole principal, known as W D Clapin; and (d) on 18 June 2009, the Professional Conduct Committee of the Law Society, pursuant to its delegated authority, resolved that these proceedings should be instituted.

7 The principal evidence on which the Law Society relied was a report annexed to Ms Sayer's affidavit, in which she set out the facts found by her and the opinions that she held as a result of her appointment as Receiver. This report, dated 16 June 2008, was accompanied by a substantial quantity of documentation. A second report, dated 1 December 2008, was also annexed to her affidavit.

8 The Law Society also relied on an affidavit sworn on 9 November 2009 by Frederick House, an Investigator employed by the Law Society in its Trust Accounts Department. In an annexed report by him dated 30 August 2007, Mr House set out the facts found by him and the opinions that he held as a result of investigating the Solicitor's practice pursuant to instructions from the Law Society.

9 The relevant parts of three further affidavits tendered by the Law Society are outlined below.

Relevant statutory provisions

10 As indicated below, much of the relevant conduct of the Solicitor occurred before 1 October 2005, the date of commencement of the Legal Profession Act 2004 ('the LP Act 2004'). The complaint from which these proceedings originate was, however, made after this date. By virtue of clause 17(3) of Schedule 9 to this Act, the complaint itself and these proceedings are therefore governed by Chapter 4 and other relevant provisions of this Act. By virtue of clause 17(4), however, the Tribunal may not make any determination or order of a disciplinary nature against the Solicitor that is 'more onerous' than could have been made under the statute that preceded and was repealed by this Act, namely, the Legal Profession Act 1987 ('the LP Act 1987').

11 Most of the allegations made against the Solicitor related to his handling of funds in his trust account. In ascertaining his obligations regarding his trust account during the period before the commencement of the LP Act 2004, we must have regard to relevant provisions of the repealed Act of 1987 and the accompanying regulations, also repealed (the Legal Profession Regulation 2002 - hereafter 'the LP Regulation 2002').

12 For the purposes of this decision, the legislative provisions of relevance are as follows:-

Legal Profession Act 1987

61 Money received by solicitor on behalf of another

(1) A solicitor who, in the course of practising as a solicitor in this State, receives money on behalf of another person:

(a) must pay the money, within the time prescribed by the regulations, into a general trust account in New South Wales at an approved financial institution and must hold the money in accordance with the regulations relating to trust money, or

(b)..., or

(c)....

(2) In any of those three cases, the solicitor must hold the money exclusively for, and must disburse the money in accordance with the directions of, the person on whose behalf it is held.

(3) This section:...

(b) does not prevent a solicitor from withdrawing or receiving, from trust money or controlled money:

(i) reimbursement for disbursements paid by the solicitor, or

(ii) money for disbursements to be paid by the solicitor, or

(iii) money due, or to accrue due, to the solicitor for costs,

so long as the procedure prescribed by the regulations is followed...

(f) does not affect an authority that a solicitor has and that, apart from this section, is irrevocable.

(8) It is professional misconduct for a solicitor to wilfully contravene subsection (1) or (2).

62 Keeping of accounts

(1) A solicitor shall keep:

(a) in the case of trust money (within the meaning of section 61)-accounting records...

that disclose at all times the true position in relation to money received by the solicitor on behalf of another person...

(4) A wilful contravention of subsection (1), (2) or (3) is professional misconduct.

Legal Profession Regulation 2002

77 Statements of account

(1) A solicitor who is required to maintain a trust ledger or a controlled money ledger must deliver to each person for whom, or on whose behalf, money is held or controlled by the solicitor, a separate statement of account in respect of each ledger account maintained for the person.

(2) A statement of account is to contain particulars of the following:

(a) the money received and held or controlled by the solicitor for or on behalf of the person,

(b) the disbursement of the money,

(c) the remaining balance (if any) of the money.

(3) A statement of account is to be delivered as soon as practicable after:

(a) completion of the matter to which the ledger account relates, or

(b) the solicitor receives a written request for the statement from the person for whom, or on whose behalf, the money is held or controlled, or

(c) except as provided by subclause (4), 30 June in each year.

78 Receipt and withdrawal of money for costs and disbursements

(1) For the purposes of section 61 (3) (b) of the Act, the prescribed procedure to be followed by a solicitor for withdrawing or receiving, from trust money or controlled money:

(a) reimbursement for disbursements paid by the solicitor, or

(b) money for disbursements to be paid by the solicitor, or

(c) money due, or to accrue due, to the solicitor for costs,

is the procedure set out in this clause.

(2) A solicitor who has disclosed information about the costs of legal services in accordance with section 175 of the Act to a person from whom the solicitor has received trust money or controlled money, or who can reasonably claim, in terms of section 180 of the Act, that the disclosure was not required because, in the circumstances, it was not reasonably practicable, may withdraw or receive, from that money, money for a purpose referred to in subclause (1) if any of the following circumstances apply:

(a) the solicitor has delivered to the person a bill of costs in accordance with Part 11 of the Act and the person has authorised the withdrawal or receipt,

(b) the solicitor has delivered to the person a bill of costs in accordance with Part 11 of the Act, together with written notice that, unless the person objects, the solicitor intends to withdraw the money and to apply it towards payment of the bill at the expiration of 30 days after the delivery, and that period has expired without an objection being made to the solicitor,

(c) an objection has been made in the circumstances referred to in paragraph (b), neither the person nor the solicitor has referred the bill of costs for assessment within the time limited by section 192 (1) or 201 (2) of the Act and at least 30 days have passed since the objection was made to the solicitor,

(d) a determination of the solicitor's costs has been made under Part 11, a certificate setting out the determination has been served on the person and all review and appeal rights in relation to the determination have been exhausted or can no longer be exercised.

(3) In any case other than a case referred to in subclause (2), a solicitor must not withdraw or receive, from trust money or controlled money, money for a purpose referred to in subclause (1) unless a determination of the solicitor's costs has been made under Part 11, a certificate setting out the determination has been served on the person and all appeal and review rights in relation to the determination have been exhausted or can no longer be exercised.

Legal Profession Act 2004

255 Holding, disbursing and accounting for trust money

(1) A law practice must:

(a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and

(b) disburse the trust money only in accordance with a direction given by the person....

261 Dealing with trust money: legal costs and unclaimed money

(1) A law practice may do any of the following, in relation to trust money held in a general trust account or controlled money account of the practice for a person:...

(b) withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by this Act and the regulations are complied with...

498 Conduct capable of being unsatisfactory professional conduct or professional misconduct

(1) Without limiting section 496 or 497, the following conduct is capable of being unsatisfactory professional conduct or professional misconduct:

(a) conduct consisting of a contravention of this Act, the regulations or the legal profession rules,

(b) charging of excessive legal costs in connection with the practice of law...

Legal Profession Regulation 2005

82 Trust account statements

(1) A law practice must furnish a trust account statement to each person for whom or on whose behalf trust money (other than transit money) is held or controlled by the law practice or an associate of the practice...

(5) A trust account statement is to contain particulars of:

(a) all of the information required to be kept under this Part in relation to the trust money included in the relevant ledger account or record, and

(b) the remaining balance (if any) of the money.

(6) A trust account statement is to be furnished:

(a) as soon as practicable after completion of the matter to which the ledger account or record relates, or

(b) as soon as practicable after the person for whom or on whose behalf the money is held or controlled makes a reasonable request for the statement during the course of the matter, or

(c) except as provided by subclause (7), as soon as practicable after 30 June in each year....

88 Withdrawing trust money for legal costs-section 261 (1) (b) of the Act

(1) This clause prescribes, for the purposes of section 261 (1) (b) of the Act, the procedure for the withdrawal of trust money held in a general trust account or controlled money account of a law practice for payment of legal costs owing to the practice by the person for whom the trust money was paid into the account.

(2) The trust money may be withdrawn in accordance with the procedure set out in either subclause (3) or (4).

(3) The law practice may withdraw the trust money:

(a) if:

(i) the money is withdrawn in accordance with a costs agreement that complies with the legislation under which it is made and that authorises the withdrawal, or

(ii) the money is withdrawn in accordance with instructions that have been received by the practice and that authorise the withdrawal, or

(iii) the money is owed to the practice by way of reimbursement of money already paid by the practice on behalf of the person, and

(b) if, before effecting the withdrawal, the practice gives or sends to the person a request for payment, referring to the proposed withdrawal....

The matters alleged against the Solicitor

13 Because the Solicitor did not contest the factual matters set out in the lengthy and detailed Particulars to the Application, it is sufficient for present purposes to provide an outline of these matters. In this outline, we also identify the Grounds that the Solicitor admitted and those that he denied, and we indicate which of these Grounds are, in our opinion, supported by the evidence. The outline makes use of the headings and numbering to be found in the Particulars.

14 The Grounds of the Application made reference to four of the legislative provisions already quoted: section 61 of the LP Act 1987, clause 77 of the LP Regulation 2002, section 255 of the LP Act 2004 and clause 82 of the Legal Profession Regulation 2005 (hereafter 'the LP Regulation 2005'). In the ensuing outline, these are referred to respectively as section 61 (1987), clause 77 (2002), section 255 (2004) and clause 82 (2005).

A. Estate late Ida Potier and Estate late Philip Lawrence Potier

15 The Solicitor acted in the administration of the deceased estates of a wife and her husband: Ida Potier, who died on or about 15 February 2005, and Philip Lawrence Potier, who died on or about 18 September 2006. Philip Potier was the sole beneficiary under his wife's will.

16 1. Estate late Ida Potier . The estimated value of this estate was $1,087,638.31. The Solicitor sent a costs disclosure document to Mr Potier, who was then the executor, on or about 24 March 2005. It contained a clause authorising the Solicitor to withdraw amounts on account of costs from funds held in trust, 'immediately on raising an invoice/account in respect thereof'.

17 Between 13 July 2005 and a date in May 2006, the Solicitor made eleven withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $53,909.23.

18 Interim bills purportedly relating to some of these costs, but not providing any details, were located in the Solicitor's file by the Receiver. But the Solicitor did not send them to the executor or to any other relevant party. There was no other evidence suggesting that Mr Potier or the executrix replacing him after his death was made aware of any amounts withdrawn on account of costs until 22 September 2006.

19 On 22 September 2006, after administration of the estate had been completed, the Solicitor sent a bill of costs and disbursements totalling $63,288.09 to the executrix. It did not state that any amounts had been withdrawn progressively as interim costs. The executor wrote 'Approved' on this bill of costs, added her signature and returned it to the Solicitor.

20 The Law Society alleged wilful breach of section 61 (1987) and breaches of clause 77 (2002), section 255 (2004) and clause 82 (2005). The Solicitor admitted these breaches, but also asserted in his Amended Reply that 'statements of account were issued at the conclusion of the matter which represented an accounting for all funds received and disbursed'.

21 The evidence before us sufficiently establishes the breaches admitted by the Solicitor. It also supports the accompanying assertion made by him.

22 2. Estate late Philip Lawrence Potier . The value of this estate was $269,022.94. A costs disclosure document sent to the executrix on or about 29 January 2007 contained a clause authorising the Solicitor to withdraw amounts on account of costs from funds held in trust, but only in accordance with the LP Act 2004 and the LP Regulation 2005.

23 Between 18 October 2006 and 31 May 2007, the Solicitor made five withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $9,670.78.

24 The only interim bill relating to these costs that the Solicitor sent to the executrix was an interim bill for $2,177.56, dated 23 April 2007 and relating to the last two of the five withdrawals.

25 The Law Society alleged wilful breach of section 61 (1987) and breaches of clause 77 (2002), section 255 (2004) and clause 82 (2005). The Solicitor admitted these breaches, but also asserted in his Amended Reply that 'statements of account were issued at the conclusion of the matter which represented an accounting for all funds received and disbursed'.

26 The evidence before us sufficiently establishes the breaches admitted by the Solicitor. It does not, however, substantiate the accompanying assertion made by him.

B. Ranjula Devi Sharma

27 In this matter, the Solicitor acted for Ms Ranjula Sharma in claiming victims compensation under the Victims Support and Rehabilitation Act 1996 with respect to the death of her husband as a result of fatal wounding by a shotgun.

28 In the determination of this claim on 1 June 2005, an award of $5,404.86 was made to Ms Sharma, together with $825.00 on account of costs.

29 In a letter to Ms Sharma dated 20 July 2005, the Solicitor indicated that the amount charged by him for costs was $1,825, that a further amount of $907 was also payable to him as costs due in the administration of her late husband's estate and that the net amount payable to her was therefore $3,947.86. He asked her to sign an accompanying form authorising him to deduct and pay these two items of costs from the proceeds of her victims compensation claim.

30 On 22 July 2005, Ms Sharma returned this form bearing her signature.

31 By virtue of section 35 of the Victims Support and Rehabilitation Act 1996, the Solicitor was not entitled to claim from Ms Sharma any costs over and above the amount of $825 that had been included in the determination of the claim.

32 The Law Society alleged that the Solicitor had charged costs not permitted in a victim's compensation matter. The Solicitor admitted having done so.

33 The evidence before us sufficiently establishes the matter alleged by the Law Society and admitted by the Solicitor.

C. Estate late Thelma Eileen Rankin

34 The Solicitor acted in the administration of the estate of Thelma Eileen Rankin, who died on 31 March 2004. The value of this estate was $623,603.37.

35 The Solicitor sent a costs disclosure document to the executrix on 6 May 2004. It contained a clause authorising the Solicitor to withdraw amounts on account of costs from funds held in trust, 'immediately on raising an invoice/account in respect thereof'.

36 Between 5 October 2004 and 22 February 2006, the Solicitor made nine withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $29,150.

37 Interim bills purportedly relating to these costs were located in the Solicitor's file by the Receiver. But the Solicitor did not send them to the executrix or to any other relevant party. There was no other evidence suggesting that the executrix was made aware of any amounts withdrawn on account of costs until 1 March 2006.

38 On 1 March 2006, after administration of the estate had been completed, the Solicitor sent to the executrix a distribution statement and a bill of costs totalling $29,150. Neither of these documents stated that any amounts had been withdrawn progressively as interim costs. The Solicitor did not prepare or send a trust account statement.

39 The Law Society alleged wilful breach of section 61 (1987) and breaches of clause 77 (2002), section 255 (2004) and clause 82 (2005). The Solicitor admitted these breaches, but also asserted in his Amended Reply that he provided a 'distribution statement which constituted a full accounting for all funds received and disbursed'.

40 The evidence before us sufficiently establishes the breaches admitted by the Solicitor. It also supports the accompanying assertion made by him.

D. Estate late Mathew Miles Davidson

41 The Solicitor acted in the administration of the estate of Mathew Miles Davidson, who died on 2 August 2005. The estimated value of this estate, which included substantial assets outside New South Wales, was $1,283,349.17.

42 The Solicitor sent a costs disclosure document to the executrix on 7 February 2006. It contained a clause authorising the Solicitor to withdraw amounts on account of costs from funds held in trust, 'upon sending you a request for payment referring to the proposed withdrawal'.

43 Between 29 September 2005 and 11 April 2006, the Solicitor made twelve withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $24,750.

44 Interim bills purportedly relating to some of these costs were located in the Solicitor's file by the Receiver. But the Solicitor did not send them to the executrix or to any other relevant party. There was no other evidence suggesting that the executrix was made aware of any amounts withdrawn on account of costs until 12 April 2006.

45 On 12 April 2006, before administration of the estate had been completed, the Solicitor sent to the executrix a trust account statement dated 11 April 2006 and a bill of costs totalling $38,500. Neither of these documents stated that any amounts had been withdrawn progressively as interim costs.

46 On 12 May 2006, Alexander & Associates, Solicitors, wrote to the Solicitor advising as follows: (a) the executrix, who was also one of the two beneficiaries, and the other beneficiary had instructed them to take over the administration of the estate; (b) the beneficiaries considered the amount being charged for costs to be excessive; and (c) they were prepared to offer the sum of $20,000 in full and final settlement of his claim for costs.

47 In further correspondence between the Solicitor and Alexander & Associates, it was agreed between the parties that the amount of $24,750, being the total of the amounts that the Solicitor had already withdrawn, should be chargeable to the estate on account of costs.

48 On 31 May 2006, the Solicitor sent to Alexander & Associates a revised trust account statement reflecting this agreement and a cheque representing the final distribution from the estate.

49 The Law Society alleged the Solicitor had wilfully breached section 61 (1987) and had breached section 255 (2004). The Solicitor admitted these breaches.

50 The evidence before us sufficiently establishes the breaches admitted by the Solicitor.

E. Estate late Helen Mary Crowe

51 The Solicitor acted in the administration of the estate of Helen Mary Crowe, who died on 16 November 2000. The estimated value of this estate was $493,646.09.

52 The Solicitor did not send any costs disclosure document to the executrix and did not obtain any authorisation to withdraw amounts on account of costs from funds held in trust.

53 Between 13 March and 29 June 2001, the Solicitor made thirteen withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $17,045.45.

54 The sums withdrawn in this way between 23 March and 29 June 2001 amounted to $7,545.45. Yet all of the assets of the estate had been realised by 23 March 2001. The only task performed by the Solicitor between that date and 10 September 2001 was the preparation of a distribution statement.

55 No interim bills relating to these costs were sent to the executrix or to any other relevant party. There was no other evidence suggesting that the executrix was made aware of any amounts withdrawn on account of costs until 10 September 2001.

56 On 10 September 2001, after administration of the estate had been completed, the Solicitor sent to the executrix and the beneficiaries a distribution statement, accompanied by cheques for $5,219.77 in favour of each of the three beneficiaries, showing that costs and disbursements totalling $23,239.91 had been withdrawn. This statement did not indicate that any amounts had been withdrawn progressively as interim costs. The Solicitor did not prepare or send a trust account statement or a bill of costs.

57 After this distribution of funds to the beneficiaries, the sum of $6,203.24 remained in the trust account. The distribution statement stated, however, that there was a nil balance.

58 Following a suggestion by one of the beneficiaries that the Solicitor had made an error in calculating the costs, the Solicitor sent on 17 October 2001 and a revised distribution statement and a bill of costs, in which the total amount charged by him was shown as $14,029.93. He sent a further distribution cheque for $3,006.73 to each beneficiary, producing the outcome that the amount retained by him on account of costs and disbursements was $14,029.93.

59 At the instigation of Ms Sayer, the file on this matter was costed by specialist costs assessors. They assessed the Solicitor's costs at $6,194.71. The amount by which he overcharged, according to their calculations, was accordingly $6,868.89.

60 The Law Society alleged wilful breach of section 61 (1987), breach of clause 77 (2002), failure to disclose costs, providing a false distribution statement and overcharging. The Solicitor denied providing a false distribution statement and did not admit 'failure to provide statements which fairly and correctly accounted for funds received and disbursed'. Save in these respects, he admitted the matters alleged.

61 The evidence before us sufficiently establishes the matters alleged by the Law Society. The distribution statement of 10 September 2001 was false in a material particular, though the Solicitor may not have intended this. The evidence also supports his claim that ultimately he 'accounted for funds received and disbursed'.

F. Estate late Anna Daude

62 The Solicitor acted in the administration of the estate of Anna Daude, who died on 19 January 2007. The estimated value of this estate was $361,972.67.

63 On 13 February 2007, the Solicitor sent a costs disclosure document to the executrix. It contained a clause authorising him to withdraw amounts on account of costs from funds held in trust in accordance with clauses 88(3)(a)(i) and 88(3)(b) of the LP Regulation 2005.

64 The Solicitor's file contained an undated form signed by the executrix that authorised him to 'deduct and pay from funds held in your trust account your costs and disbursements incurred and to be incurred of and incidental to acting in connection with the administration of the Estate'.

65 Between 30 May and 27 June 2007, the Solicitor made four withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $4,582.36.

66 No interim bills relating to these costs were sent to the executrix or to any other relevant party. There was no other evidence suggesting that the executrix was made aware of any amounts withdrawn on account of costs until a date on or about 13 August 2007.

67 On 8 August 2007, the Solicitor sent to the executrix a further form of authority to withdraw amounts for costs and disbursements, requesting that she sign it and return it to him.

68 On or about 13 August 2007, after administration of the estate had been completed, the Solicitor sent to the executrix a trust account statement and a distribution cheque. The statement indicated that on 30 May and 27 June 2007 he had withdrawn amounts of $2,582.36 and $2,000 respectively from the trust account to pay costs and disbursements.

69 The trust account statement also revealed that on 6 August 2007 the Solicitor had withdrawn a further $6,100 for this purpose. He provided a bill of costs relating to this last withdrawal. The total amount retained by the Solicitor for costs and disbursements was accordingly $10,682.36.

70 The total amount that the Solicitor withdrew for costs alone was $10,577.36.

71 At the instigation of Ms Sayer, the file on this matter was costed by specialist costs assessors. They assessed the Solicitor's costs at $6,171. The amount by which he overcharged, according to their calculations, was accordingly $4,406.36.

72 The Law Society alleged breach of section 255 (2004), overcharging and misappropriation. The Solicitor denied misappropriation and did not admit any breach of section 255. He admitted overcharging.

73 The evidence before us sufficiently establishes the alleged breach of section 255. Even if it is assumed in the Solicitor's favour that he received the undated form of authorisation back from the executrix before 30 May 2007 (the date of the first of his four withdrawals from the trust account), the fact remains that he did not comply with the requirement, stated in clause 88(3)(b) of the LP Regulation 2005, that before any funds are withdrawn from a trust account to pay costs a request for payment be given or sent to the person for whom the trust money was paid into the account. The costs disclosure document that he sent to the executrix on 13 February 2007 made express reference to this provision.

74 The evidence also establishes the overcharging alleged by the Law Society.

75 For reasons set out below at [221 - 228], we reject the Law Society's claim that the Solicitor's conduct in this matter included acts amounting to misappropriation.

G. Estate late Antony James Kerrigan

76 The Solicitor acted in the administration of the deceased estate of Antony Kerrigan, who died on 21 June 2000. The estimated value of this estate was $146,465.52.

77 On or about 29 January 2003, the Solicitor sent a costs disclosure document to the executor. It did not contain any clause authorising him to withdraw amounts on account of costs from funds held in trust.

78 Between 28 April 2003 and 29 April 2004, the Solicitor made fifteen withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $19,586.17.

79 Interim bills relating to some of these costs were prepared but were not sent to the executor or to any other relevant party. There was no other evidence suggesting that the executor was made aware of any amounts withdrawn on account of costs until 31 August 2004.

80 On 31 August 2004, when administration of the estate was virtually complete, the Solicitor sent to the executor a trust account statement, a bill of costs for the sum of $19,586.17 and a distribution cheque. The trust account statement did not reveal that any amounts had been withdrawn progressively as interim costs. It merely indicated that the total amount of $19,586.17 had been withdrawn.

81 At the instigation of Ms Sayer, the file on this matter was costed by specialist costs assessors. They assessed the Solicitor's costs at $5,139.51. The amount by which he overcharged, according to their calculations, was accordingly $14,446.66.

82 The Law Society alleged wilful breach of section 61 (1987), breach of clause 77 (2002) and overcharging. The Solicitor admitted these matters, but also asserted in his Amended Reply that 'there was a full accounting for funds received and paid in relation to the matter at its conclusion.'

83 The evidence before us sufficiently establishes the matters alleged by the Law Society and admitted by the Solicitor. It also supports the Solicitor's accompanying assertion.

H. Estate late Brian James Kennedy

84 The Solicitor acted in the administration of the deceased estate of Brian James Kennedy, who died on a date between 23 and 28 February 2001. The estimated value of this estate was $280,215.79. The assets included a property at Lakemba, which had an estimated value of $150,000.

85 The Solicitor was one of the executors named in the will. Ms Joan Chisholm, the sister of the deceased, was his co-executrix and the sole beneficiary. Probate was granted to Ms Chisholm on 26 November 2001.

86 Between 11 December 2001 and 29 April 2004, the Solicitor made twelve withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $18,396.82.

87 Outline bills relating to these costs were raised, but were not sent to Ms Chisholm or to any other relevant party. There was no other evidence suggesting that she was made aware of any amounts withdrawn on account of costs until 27 June 2007.

88 On 1 August 2006, the Solicitor sent a costs disclosure document to Ms Chisholm. It contained a clause authorising him to withdraw amounts on account of costs from funds held in trust in accordance with clauses 88(3)(a)(i) and 88(3)(b) of the LP Regulation 2005.

89 The property at Lakemba was transmitted to Ms Chisholm on or about 14 December 2001, but as at October 2007 had not been realised. Distribution cheques were sent to her on 19 December 2001, 18 December 2002, 14 December 2005 and 15 October 2007.

90 On 27 June 2007, shortly after the Law Society's investigation of the Solicitor's practice had commenced, the Solicitor sent to Ms Chisholm a trust account statement showing a balance of $6,116.60 in the account. The statement recorded each of the twelve withdrawals of funds, totalling $18,396.82, that he had effected to pay his costs. In a covering letter, he confirmed instructions from her to retain the balance of $6,116.60 because it 'could come in handy in relation to the eventual sale of the property... at Lakemba'.

91 On 1 September 2007, in response to a request by the Solicitor, Ms Chisholm sent to him a signed form acknowledging that she had received the trust account statement and that she wished him to retain the balance of $6,116.60. On 19 September 2007, however, she asked him to remit this balance to her. The Receiver complied with this request on 15 October 2007.

92 At the instigation of Ms Sayer, the file on this matter was costed by specialist costs assessors. They assessed the Solicitor's costs and disbursements at $8,500. The amount by which he overcharged, according to their calculations, was accordingly $9,786.82.

93 The Law Society alleged wilful breach of section 61 (1987), breach of clause 77 (2002), failure to disclose costs, delay in realising estate property, delay in finalising estate and overcharging. The Solicitor denied delay in realising estate property and delay in finalising estate, but admitted the other matters alleged.

94 The evidence before us sufficiently establishes the four matters that were alleged by the Law Society and admitted by the Solicitor. As to the two allegations of delay that the Solicitor denied, our conclusion is that although a very substantial period of time (nearly six years) elapsed between the grant of probate to Ms Chisholm and the final distribution of estate funds to her, the evidence does not establish that responsibility for this delay can be sheeted home to the Solicitor.

I. The Sisters of the Holy Family of Nazareth

95 In the first four of the five matters now to be outlined, the Solicitor was retained by the Sisters of the Holy Family of Nazareth ('the Sisters'). The fifth matter concerned a deceased estate that had been bequeathed to the Sisters to be applied to specified purposes.

96 Between 1998 and 2004, the Provincial Superior of the Congregation of the Sisters was Sister Helen Tereba. Since 2005, this position has been held by Sister Josita Paczowska.

97 Affidavits sworn by Sister Tereba and by Sister Paczowska were admitted in these proceedings. They were not required for cross-examination. They both gave unchallenged evidence to the following effect: (a) they did not have qualifications or experience in legal or accounting matters; (b) during their respective periods as Provincial Superior, they relied on the Solicitor alone to act for the Congregation and to protect its interests; (c) they trusted him completely and did not query or check any statement that he made; (d) at no time did they receive any costs disclosure document, costs agreement or estimate of costs from him; (e) they never signed any form authorising him to withdraw funds on account of costs; (f) they never received any interim bills for costs from him; and (g) when asked by him to signify their approval in writing to memoranda for costs submitted at the conclusion of a matter, they complied with his request without raising any queries because of their total reliance on him and the trust that they reposed in him.

98 Sister Tereba's affidavit included the following passage:-

I did enquire of Mr Clapin from time to time about his costs and how they were to be paid. He told me words to the effect:

In accordance with a prior arrangement with the congregation, prior to you taking leadership, I will take my costs out of an existing account.

I did not know what that account was although he may have identified the name of an estate. I did not know any details of that estate nor did I know how much money was in that account. He never told me.

99 The foregoing evidence given by Sister Tereba and by Sister Paczowska is relevant when considering each of the four matters next outlined.

100 (a) Estate late Tadeusz Maguda. The Solicitor acted in the administration of the estate of Tadeusz Maguda, who died on 5 October 1999. The trustees for the Sisters were named as executors in the will and probate was granted to Sister Tereba. The principal asset of the estate was a property at Bass Hill and the total value of the estate was $266,013.40.

101 Between 30 November 1999 and 21 February 2000, amounts totalling $3,500 were transferred from the trust ledger for the Laczny estate (this was another estate of which the Sisters were named as executors) in order to pay expenses incurred in connection with the Maguda estate.

102 Between 14 April 2000 and 2 April 2003, the Solicitor made fifteen withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $25,326.72.

103 There was initially a delay in selling the property at Bass Hill because the certificate of title to it could not be located. But it was eventually sold on 6 April 2001.

104 On 11 August 2001, the Solicitor sent a distribution cheque for $235,328.49 to the residuary beneficiary, who lived in Poland, together with a distribution statement made up to July 2001. This statement indicated that costs totalling $20,500 had been withdrawn.

105 The distribution statement also indicated that the Solicitor had repaid the amount of $3,500 that he had transferred to the Maguda estate from the Laczny estate. This was not the case, as the Solicitor had instead drawn out this sum to pay his costs.

106 Although the Solicitor did virtually no work on the estate after August 2001, six of the fifteen withdrawals on account of costs occurred subsequently. The total of these six withdrawals was $14,503.19.

107 As at 26 March 2003, the balance in the trust account was $637.34. On 2 April 2003, he withdrew this sum to pay his costs. This was the last of the fifteen withdrawals made by him on account of costs.

108 On 15 June 2007, shortly after the Law Society's investigation of the Solicitor's practice had commenced, the Solicitor transferred the sum of $3,500 from his office account into the trust account, then transferred the same amount into the account of the Laczny estate.

109 On 17 September 2007, the Solicitor sent to Sister Paczowska a bill of costs, made up to 11 August 2001, in which the total amount charged for costs and disbursements was $21,425.80. He also sent a trust account statement showing, as already indicated, that the only transactions occurring after 10 August 2001 were his own withdrawals of costs, his dealings with the sum of $3,500 originally transferred from the Laczny estate and the payment of a final distribution of $400.92 to the residuary beneficiary on 13 September 2007.

110 On 25 October 2007, in response to a request made by the Solicitor to Sister Paczowska, Sister Tereba returned to him the bill of costs and the trust account statement bearing her signature under the word 'Approved'.

111 At the instigation of Ms Sayer, the file on this matter was costed by specialist costs assessors. They assessed the Solicitor's costs and disbursements at $8,481.99. The amount by which he overcharged, according to their calculations, was accordingly $12,943.81.

112 The Law Society alleged wilful breach of section 61 (1987), breach of clause 77 (2002), failure to disclose costs, delay in realising estate property, delay in administering estate, delay in accounting to client and overcharging. The Solicitor denied delay in realising estate property, delay in finalising estate and delay in accounting to client. He admitted the other matters alleged, but also asserted in his Amended Reply that 'a statement was provided on completion of the matter'.

113 The evidence before us sufficiently establishes the four matters that were alleged by the Law Society and admitted by the Solicitor.

114 In our judgment, the evidence also establishes the three allegations of delay that the Solicitor denied. A very substantial period of time - more than six years - elapsed between the principal distribution made to the residuary beneficiary (on 10 August 2001) and the final distribution of estate funds to her (on 13 September 2007). There is sufficient evidence to satisfy us that during that period the Solicitor took no step in the administration of the estate other than to withdraw amounts in payment of his own costs and to repay funds borrowed from another estate. There was nothing to prevent him making a final distribution of estate funds and winding up the affairs of the estate during or soon after August 2001.

115 The Solicitor's claim that 'a statement was provided on completion of the matter' may well be literally true, but for reasons just given the date when completion took place was some six years later than it should have been.

116 (b) Estate late Tekla Gibki. The Solicitor acted in the administration of the estate of Tekla Gibki, who died on 5 October 1999. The trustees for the Sisters were named as executors in the will and probate was granted to Sister Tereba. The estimated value of the estate was $103,443.38.

117 Between 30 May and 19 December 2003, amounts totalling $1,284.20 were transferred into the Gibki estate account from a trust account of the Sisters relating to the estate of the late Josephine Milkow. This was done in order to pay expenses incurred in connection with the Gibki estate. On 13 July 2005, the Solicitor transferred this amount back from the Gibki estate to the Milkow estate. Further matters relating to the latter estate are outlined below.

118 By 26 February 2004, the assets of the estate had been realised.

119 The Solicitor's office ledger indicates a disbursement of $1,925 incurred on 30 June 2004 as fees due to a named barrister. This disbursement was not, however, included in any outline bills prepared by the Solicitor and his time ledger contains no reference to any correspondence of any nature with this barrister.

120 Between 30 July 2003 and 31 August 2005, the Solicitor made twelve withdrawals from the trust account for the Gibki estate on account of costs. The total of these withdrawals was $14,052.50.

121 Interim bills relating to some of these costs were prepared, but were not sent to Sister Tereba or to any other relevant party. There was no other evidence suggesting that the executor was made aware of any amounts withdrawn on account of costs until 17 October 2006.

122 The Solicitor's file contained a trust account statement dated 17 October 2006, which may or may not have been sent to Sister Tereba. This statement recorded that costs and disbursements amounting to $14,052.50 had been charged, but did not indicate that any amounts had been withdrawn progressively as interim costs.

123 The Solicitor's file also contained a file note, dated 15 June 2007, including the following passage:-

I indicated to Sister Josita [Paczowska] that I would be sending her a letter to her re the Gibki Estate and also bringing up to date the position re the overall account. Sister Josita was not concerned, as I have a very long standing arrangement with the Sisters for payment/deduction of amounts to be paid for disbursements/costs in connection with any one or more of their matters from funds held in any of their other matters.

124 The Law Society alleged wilful breaches of sections 61 and 62 (1987), breach of clause 77 (2002), failure to disclose costs, delay in accounting to client and misappropriation. The Solicitor denied misappropriation but admitted the other matters alleged. He also asserted in his Amended Reply that 'a statement was provided on completion of the matter'.

125 The evidence before us sufficiently establishes the five matters that were alleged by the Law Society and admitted by the Solicitor.

126 We also uphold the Law Society's claim that the Solicitor's conduct in this matter included conduct amounting to misappropriation. The relevant allegation, which is supported in the evidence, is that he transferred amounts totalling $1,284.20 into the Gibki estate account from a trust account of the Sisters relating to the estate of the late Josephine Milkow. In the absence of sworn testimony from him and of supporting evidence from any other source, we are not prepared to make a finding that, as he claimed in the file note just quoted, he had 'a very long standing arrangement with the Sisters for payment/deduction of amounts to be paid for disbursements/costs in connection with any one or more of their matters from funds held in any of their other matters'. Contrary to a submission by Mr Lynch, the fact that Sister Tereba recalled a statement by him to this effect (see [98] above) is not enough to bear out this claim. Further discussion of this matter appears below at [221 - 228].

127 The Solicitor's claim that 'a statement was provided on completion of the matter' may well be literally true, but as he himself admitted, completion took place distinctly later than it should have.

128 (c) Sale of 40/134 Grand Parade, Brighton-le-Sands. On or about 7 February 2001, the Sisters retained the Solicitor to act for them on the sale of a property at Brighton-le-Sands. The sale price was $440,000.

129 On settlement of the sale on 17 August 2001, a cheque for $358,289.00 was paid into the Solicitor's trust account. On 11 September 2001, a further cheque for $38,049.98, representing the deposit less commission, was also paid into the trust account.

130 Between 29 August 2001 and 3 October 2001, the Solicitor made five withdrawals from the trust account on account of costs. The total of these withdrawals was $6,066.45.

131 The Solicitor issued a bill of costs, dated 31 August 2001, and a trust account statement, dated 13 September 2001. These documents recorded that costs and disbursements amounting to $6,066.45 had been charged, but did not indicate that any amounts had been withdrawn progressively as interim costs.

132 The Law Society alleged wilful breach of section 61, breach of clause 77 (2002) and failure to disclose costs. The Solicitor admitted these matters, but asserted in his Amended Reply that 'a full statement of account was provided on completion of the matter'.

133 The evidence before us sufficiently establishes the matters alleged. It also supports the accompanying assertion made by the Solicitor.

134 (d) Estate late Josephine Milkow. The trustees for the Sisters were the sole beneficiaries under the will of Josephine Milkow, who died on 2 April 1999. The Solicitor acted for them in relation to their entitlement.

135 On 4 August 1999, following the sale of a property in Balmain which was the principal asset of the estate, the Solicitor received a cheque for $53,000 payable to the trustees. He forwarded it to Sister Tereba.

136 On 25 August 1999, the Solicitor raised an interim bill of costs in the sum of $600 and transferred this amount from the trust account of the Laczny estate (being an estate of which the Sisters were the trustees).

137 On the same day, the Solicitor also sent a copy of the interim bill of costs to Sister Tereba, stating in a covering letter that it could be 'paid by deduction from funds held'. There were however no funds in the trust account relating to this matter. In a letter of reply dated 27 August 1999, Sister Tereba stated: 'Payment of this account for $600 may be deducted from funds held.'

138 On 18 October 2000, the Solicitor received and deposited in the trust account a cheque for $54,803.97, representing the final distribution from the estate. On 23 October 2000 and again on 13 June 2001, the Solicitor raised an interim bill for costs in the amount of $500 and withdrew this amount from the trust account. He did not forward either of these interim bills to Sister Tereba.

139 Between 2 July 2001 and 15 November 2006, the Solicitor transferred sums totalling $64,040.93 to other accounts relating to matters in which he acted for the Sisters. Out of this total, only $12,421.08 was refunded. The balance applied by the Solicitor to these other matters was accordingly $51,619.85. The balance in the trust account at 15 November 2006, and at the time when the Receiver was appointed, was only $2,184.12.

140 The amount of $600 transferred from the Laczny estate to the trust account in this matter was never repaid.

141 The Solicitor's file contained a trust account statement covering the period from 25 August 1999 to 9 December 2002. It showed a balance remaining of $38,543.34. There is no evidence that it was forwarded to Sister Tereba or to anyone else on behalf of the Sisters.

142 The Law Society alleged wilful breach of section 61 (1987), breaches of clause 77 (2002) and section 255 (2004), and 'misleading Sister Helena Tereba in stating that $600 was to be deducted from funds held when there were no funds held'. The Solicitor denied this last allegation and denied that his breach of section 61 was wilful. In other respects, he admitted the Law Society's allegations.

143 The evidence before us sufficiently establishes the matters alleged by the Law Society. We see no grounds for concluding that the Solicitor's breach of section 61 was other than wilful. We also regard the statement made to Sister Tereba as obviously misleading. Although the phrase 'funds held' in the Solicitor's letter of 25 August 1999 to her could be interpreted as referring to funds held on behalf of the Sisters in some other trust account, it would evidently be assumed by a person in her position to refer specifically to funds received from the Milkow estate.

144 (e) Holy Family Polish Aged Care Services and Estate late Zofia Obolska. Zofia Obolska, who died on 28 May 2001, bequeathed the whole of her estate to the Sisters, for the general purposes of Brother Albert's Home for the Aged. The estimated value of the estate was $136,701.13.

145 Mr Kevin Rocks was the Chief Executive Officer of a religious order called the Holy Family Polish Aged Care Services (which subsequently changed its name to the Holy Family Services). Before Ms Obloska's death, this order had taken over the management of Brother Albert's Home for the Aged from the Sisters. Mr Rocks retained the Solicitor to act in relation to Ms Obolska's bequest.

146 On 11 May 2005, the Solicitor received a distribution cheque for $98,550.53 from the solicitors for the executor. On 19 December 2005, he received a further distribution cheque for $1,266.40. He paid these cheques into his trust account.

147 Between 4 May 2005 and 20 February 2006, the Solicitor made three withdrawals from the trust account on account of costs. The total of these withdrawals was $2,846.88.

148 No authority to make these withdrawals was given to the Solicitor. Interim bills relating to them were prepared, but were not sent at that time to Mr Rocks or to any other relevant party. There was no other evidence suggesting that Mr Rocks was made aware of any amounts withdrawn on account of costs until a date on or about 13 June 2007.

149 On or about 13 June 2007, shortly after the Law Society's investigation of the Solicitor's practice had commenced, the Solicitor sent to Mr Rocks a trust account statement and a bill of costs. These documents recorded that costs and disbursements amounting to $2,846.88 had been charged, but did not indicate that any amounts had been withdrawn progressively as interim costs.

150 A covering letter from the Solicitor included the following passage:-

Of course, subject to your instructions (and I gather you may be so intending), the available funds can be applied towards costs/disbursements in connection with the various other matters currently in train.

151 In a further letter to Mr Rocks dated 15 June 2007, the Solicitor wrote:-

Further to your phone call to me yesterday afternoon, I note your confirmatory instructions to retain the funds from the estate of the late Zofia Obolska, for application towards payment of disbursements, fees/costs in relation to other matters generally of Holy Family Services (including in connection with matters associated with the current and/or proposed development and subdivision of the Marayong site, owned by the Sisters' corporation).

Subject to further instructions/agreement, no doubt any necessary adjustments/apportionments can be made at the appropriate time.

152 On 17 July 2007, the Solicitor sent a cheque for the balance of $91,102.91 in the trust account to Mr Rocks. A covering letter included the following passage:-

I know you instructed that I could deduct any other outstanding costs accrued in connection with Holy Family Services, or the Sisters ( sic ) affairs, prior to the transfer of operations to the then Holy Family Polish Aged Care Services (now Holy Family Services) but, having regard to time constraints in preparing any accounts, I prefer to just remit the balance. Any necessary adjustments can be made later.

153 An affidavit sworn by Mr Rocks on 24 August 2010 was admitted in these proceedings. He was not required for cross-examination. He gave unchallenged evidence to the following effect: (a) it was not until a brief phone call, mentioned in the Solicitor's letter of 15 June 2007, that the Solicitor suggested to him that he had given instructions to the Solicitor to retain the funds received from the Obolska estate to pay costs and disbursements in other matters; (b) he did not give instructions of this nature to the Solicitor, nor was he previously asked to do so; (c) he was made aware that the Solicitor had in fact used these funds to pay costs in four other matters, although those costs 'would normally form part of the original arrangements'; (d) after receiving the letter of 15 June 2007, he instructed the Solicitor to pay these funds to Holy Family Services, indicating that he would pay the Solicitor's costs when invoices were submitted; (e) he did not receive any trust account statement from the Solicitor before the statement of 13 June 2007; (f) he believed that the Solicitor, in so behaving, had been 'careless and possibly sloppy' rather than dishonest; and (g) he still retained the Solicitor to provide conveyancing services to Holy Family Services.

154 This evidence provided by Mr Rocks generally conformed with statements that he made to the Law Society's Investigator.

155 The Law Society alleged wilful breach of section 61 (1987), breaches of clause 77 (2002), section 255 (2004) and clause 82 (2005), and delay in accounting to client. The Solicitor admitted these matters, but also asserted in his Amended Reply that 'a full accounting for all funds received and disbursed was provided'.

156 The evidence before us sufficiently establishes the matters alleged by the Law Society and admitted by the Solicitor. It also supports the accompanying assertion made by him.

J. Estate late Eric Dickson Patterson

157 The Solicitor acted in the administration of the estate of Eric Dickson Patterson, who died on 14 January 1998. Initially, other solicitors were retained, and the Solicitor did not receive instructions until 5 September 2004. Those instructions came from Ms Judith Jones, who was the daughter of the deceased and held a power of attorney from her mother, Ms Marjorie Patterson. Ms Patterson was both the executrix and the sole beneficiary.

158 The inventory for the estate disclosed property (including some Telstra shares) estimated only at $13,510. But ultimately the amounts that the Solicitor received from the realisation of assets and paid into his trust account reached a total of $28,695.05.

159 On 18 August 2004, the Solicitor sent a costs disclosure document to Ms Jones. It contained a clause authorising him to withdraw amounts on account of costs from funds held in trust, 'immediately on raising an invoice/account in respect thereof'.

160 Between 24 November 2004 and 4 May 2005, the Solicitor made five withdrawals from the trust account for the estate on account of costs. The total of these withdrawals was $3,008.10.

161 Interim bills purportedly relating to some of these costs, but not providing any details, were located in the Solicitor's file by the Receiver. But the Solicitor did not send them to Ms Jones or to any other relevant party. There was no other evidence suggesting that Ms Jones was made aware of any amounts withdrawn on account of costs until 13 July 2005.

162 On 13 July 2005, in response to a request by Ms Jones for 'details regarding the [trust] account, monies deposited and balance', the Solicitor sent a trust account statement to her. It revealed that the amount of $3,008.10 had been withdrawn on account of costs, but did not provide any details and did not state that any amounts had been withdrawn progressively as interim costs.

163 In a letter dated 17 August 2005 to the Solicitor, Ms Jones asked whether it was 'possible' for him to 'issue an account summary for the costs and to issue the same when further costs are going to be incurred'.

164 In a further letter dated 21 April 2006, she referred to this request, observed that he had not responded to it and stated that she 'would appreciate this matter being addressed'.

165 On 1 May 2006, the Solicitor sent to her a current trust account statement. It provided the same limited information regarding costs as its predecessor.

166 On 24 October 2007, the Solicitor sent a bill of costs to Ms Jones, covering the period since 11 August 2004. It quoted a total of $13,805 for costs, indicating that since the amount of $3,008.10 had already been withdrawn, the balance remaining was $10,976.

167 On or about 6 November 2007, the Solicitor sent to Ms Jones a trust account statement indicating that this balance of $10,976 had been transferred to his office account as 'payment account rendered 24.10.07'. On the same date, he also sent to her for signature a form of authority to pay costs from funds held in the trust account.

168 The assets of the estate included an amount of $7,603.03 held by the deceased in a bank account at the St George Bank. On 15 September, the Bank advised the Solicitor regarding the procedure for obtaining these funds. On 28 November 2005 and again on 7 March 2006, the Solicitor received statements relating to this account from the Bank. The Bank closed the account on 4 March 2006 and paid the funds into an unclaimed monies account.

169 On 14 November 2006, the Solicitor received a letter from an agency purporting to recover unclaimed monies and offering to obtain these funds for the estate on payment of a small fee. On 12 July 2007, he received a similar letter from another agency.

170 The Solicitor did not, however, take any steps to recover this asset of the estate until 10 August 2007. He also took steps to recover some dividends from the estate's Telstra shares that had been paid into the Victorian Office of State Revenue as unclaimed monies.

171 At the instigation of Ms Sayer, the file on this matter was costed by specialist costs assessors. They assessed the Solicitor's costs and disbursements at $9,677.46. The amount by which he overcharged, according to their calculations, was accordingly $4,127.54.

172 The Law Society alleged wilful breach of section 61 (1987), breach of clause 77 (2002) and clause 82 (2005), failure to provide itemised accounts, delay in recovering unclaimed monies and overcharging. The Solicitor admitted all these allegations.

173 The evidence before us sufficiently establishes the matter alleged by the Law Society and admitted by the Solicitor.

K. Estate late Mary Lillian Pugliese

174 The Solicitor acted in the administration of the estate of Mary Lillian Pugliese, who died on 4 June 2004. The amount received by him from realisation of the assets of the estate was $836,789.85.

175 On or about 21 October 2004, the Solicitor prepared a costs disclosure document. But he did not send it to the executor, Mr Gregory Cannon, until 26 June 2006. It contained a clause authorising him to withdraw amounts on account of costs from funds held in trust, 'immediately on raising an invoice/account in respect thereof'.

176 Between 24 November 2004 and 9 August 2006, the Solicitor made 24 withdrawals from the trust account for the estate on account of costs. Disbursements were charged separately. The total of these withdrawals of costs had reached $26,545.28 by 8 March 2006 and $53,832.53 by 28 June 2006. The final total was $63,571.28.

177 In addition, withdrawals of $2,760.10 and $276.01 respectively were made on 13 October 2005 and 15 November 2006, with reference to 'affairs' preceding Ms Pugliese's death.

178 Interim bills relating to some of these costs were prepared, but were not sent to Mr Cannon or to any other relevant party. There was no other evidence suggesting that Mr Cannon was made aware of any amounts withdrawn on account of costs until 28 June 2006.

179 On 28 June 2006, at Mr Cannon's request, the Solicitor sent to him and to the two beneficiaries a trust account statement and a memorandum of his costs. In both these documents the amount that the Solicitor quoted for costs was $63,571.28.

180 These two documents also stated that the amount drawn thus far for costs was $26,545.28 and that the balance remaining to be paid was therefore $37,026. As at 28 June 2006, however, the amount withdrawn for costs was $53,832.53. The figure of $26,545.28 was correct as at 8 March 2006, but subsequent withdrawals, commencing on 26 April 2006, had taken place.

181 On 28 June 2006, the two beneficiaries signed a copy of the memorandum of account, indicating their approval.

182 After receiving these documents, however, Mr Cannon objected to the amount charged for costs, terminated the Solicitor's retainer and appointed another firm of solicitors to act for the estate.

183 Before his retainer was terminated, the Solicitor, at Mr Cannon's request, arranged for Costacomp Pty Ltd to review the file and provide advice as to what amount for costs would be reasonable. In its report dated 6 September 2006, Costacomp Pty Ltd expressed the opinion that a reasonable amount would be $55,485.10.

184 In this report, Costacomp Pty Ltd recorded that, according to advice received from the Solicitor, the total of the amounts that he had withdrawn for costs was, as shown in his trust account and memorandum of costs, $26,545.28. This was incorrect, as he had already withdrawn $53,832.53.

185 A letter dated 27 September 2006 from the Solicitor to Mr Cannon, written in response to a letter from Mr Cannon maintaining his objections to the amount of costs and drawing attention to this incorrect statement, included the following passage:-

Costacomp Pty Ltd was asked to report on the reasonableness of my charges only. The comment volunteered that I had been paid only $26,545.28 was obviously incorrect and arose simply because an up-to-date copy of my trust ledger was not with the file/s Costacomp had.

186 As a result of the opinions expressed by Costacomp Pty Ltd and the further objections by Mr Cannon to the amount of costs being charged, the Solicitor indicated that he would reduce this amount from $63,571.28 to $30,000. On 14 May 2007, he accordingly refunded $33,571.28 to the trust account and remitted this amount to the solicitors now acting for the estate. Mr Cannon and the two beneficiaries accepted this substantial discount in the costs charged.

187 The Law Society alleged as follows: (1) wilful breach of section 61 (1987); (2) failure to disclose costs; (3) breach of clause 77 (2002); (4) breach of section 255 (2004); (5) providing false information to Costacomp Pty Ltd; (6) failure to inform executor and beneficiaries of the true position regarding the trust account until June 2006; (7) issuing memorandum of costs dated 28 June 2006 for endorsement by beneficiaries knowing that it contained false information as to the amount of costs drawn to that date; (8) breach of clause 82 (2005); (9) issuing false trust account statement; and (10) issuing false memorandum of account dated 28 June 2006.

188 In his Amended Reply, the Solicitor admitted allegations (1), (2), (3), (4), (6) and (8), asserting also that 'a full accounting for all funds received and disbursed was provided'. In relation to allegations (5), (7), (9) and (10), he implicitly admitted that in each case he had provided false information, but denied intending to provide false information or knowing that the information was false.

189 The evidence before us sufficiently establishes the matters stated by the Law Society in allegations (1), (2), (3), (4), (6) and (8) and admitted by the Solicitor. It also supports the accompanying assertion made by him.

190 As to the remaining matters, we observe that in allegations (5), (9) and (10) the Law Society did not claim that Solicitor intended to provide false information or knew that the information provided was false. In allegation (7), it did claim that the Solicitor knew the relevant information to be false. We are not satisfied, however, that the evidence establishes such knowledge on his part.

L. Estate Laczny

191 The Particulars set out under this heading in the Disciplinary Application are as follows: 'The Solicitor misappropriated the sum of $600 from the Laczny Estate and paid it in respect of a bill raised in the Milkow Estate [see (1)(d) above].'

192 The facts relied on in this connection are set out above at [136] and [140].

193 The Law Society alleged misappropriation. The Solicitor denied this allegation.

194 The evidence before us establishes the facts alleged by the Law Society. In our judgment, the relevant conduct of the Solicitor amounted to misappropriation. This conclusion on our part is discussed below at [221 - 228].

Discussion

195 Mr Lynch did not contest Mr Stitt's contention that we were bound to conclude that the conduct admitted by the Solicitor amounted to professional misconduct. He acknowledged at the commencement of his submissions that this would be the inevitable outcome of our deliberations.

196 For reasons elaborated in the ensuing paragraphs, this is indeed our conclusion. The Solicitor's conduct would clearly be regarded as 'disgraceful and dishonourable' by reputable members of the legal profession and therefore amounted to professional misconduct at common law. In addition, we find that his numerous breaches of statutory requirements relating to the management of his trust account constituted professional misconduct under section 498(1)(a) of the LP Act 2004 and that the instances of overcharging that he admitted amounted to professional misconduct under section 498(1)(b).

197 Mr Stitt relied on six cases: Re Veron; Ex parte Law Society of New South Wales (1966) 84 WN (NSW) (Pt 1) 136; Stewart v Strevens [1976] 2 NSWLR 321; Law Society of New South Wales v Jones , Unreported, Court of Appeal, 29 July 1978; Law Society of New South Wales v Carvan , Unreported, Court of Appeal, 14 May 1981 (BC8111397); Bolster v Law Society of New South Wales , Unreported, Court of Appeal, 20 September 1982 (BC8211696); and Veghelyi v Law Society of New South Wales , Unreported, Court of Appeal, 8 February 1995 (BC9505459).

198 In Stewart v Strevens , a ruling of particular significance for the present proceedings is that a solicitor has no implied authority from a client to withdraw funds of the client held in a trust account, for the purposes of paying the solicitor's costs and/or disbursements. Helsham J held that the statutory predecessor of section 61(2) of the LP Act 1987 required a solicitor to hold such funds 'exclusively for' the client and to disburse them according to the client's directions. He also ruled that provisions relating to solicitors' liens for costs (now to be found in section 61(3)(c) and (d) and section 61(4)) did not confer authority to withdraw funds in order to pay costs or disbursements.

199 In citing Law Society of New South Wales v Jones , Mr Stitt placed particular emphasis on the following statement of principle by Street CJ, with whom Reynolds and Samuels JJA concurred:-

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.

200 In Law Society of New South Wales v Carvan , the respondent solicitor improperly used trust funds for his personal benefit, consistently allowed debit balances to remain in his trust account, concealed a deficiency in his trust account by falsely entering in the trust records the receipt of funds that had not in fact been received and consistently drew against cheques lodged in the trust account before they had been cleared. The Statutory Committee found that this behaviour was the consequence of 'gross carelessness' on the respondent's part, not of deliberate dishonesty. While not disturbing this finding, the Court of Appeal held nonetheless that his conduct amounted to professional misconduct and that his name should be removed from the Roll. After citing the above passage from Jones , Reynolds JA indicated that the Court had taken into account the fact that the amounts involved were not large and that no client ultimately suffered loss.

201 In Bolster v Law Society of New South Wales , the Court of Appeal confirmed an order of removal from the Roll made against a solicitor whose conduct was described by Moffitt P as follows (BC8211696 at p 1):-

... he mixed his own affairs with those of his clients, principally by his participation, as their solicitor, in the lending by them of money to a finance company in which he had an interest and which then made advances to himself and his family and companies in which they had an interest. He acted as solicitor for these clients in these transactions without making a full and proper disclosure of his interest and without advising his clients to take independent legal advice.

202 As it had done in Carvan , the Court characterised this conduct as professional misconduct even though the solicitor did not act fraudulently and his clients did not lose money. Moffitt P stated also that a claim by the solicitor that he was ignorant of the fiduciary principles that he had violated amounted to 'a confession of ignorance of his fundamental duty as a solicitor and hence of his unfitness to be a solicitor' (BC8211696 at p 8).

203 As Mr Stitt pointed out, the case of Re Veron; Ex parte Law Society of New South Wales stands for the general proposition that the charging of excessive costs by a solicitor may amount to professional misconduct at common law.

204 In Veghelyi v Law Society of New South Wales , the Court of Appeal elaborated upon this proposition. In a passage given particular emphasis in Mr Stitt's submissions, Mahoney JA said (BC9505459 at pp 7 - 9):-

It is, in my opinion, settled for this Court that gross over-charging may of itself constitute professional misconduct. It was in earlier times sometimes suggested that gross over-charging did not justify a summary application against a solicitor for professional misconduct unless there was involved, as it was described, an element of "wilful fraud"... It is, in my opinion, now established that gross over-charging as such may constitute professional misconduct and that, on an application such as this, it is not necessary to prove in addition that the lawyer was guilty of fraud or the like: see, eg, Ray v Newton (1913) 1 KB 249 at 255. These principles, in my opinion, have been established by the Veron and the Evatt cases: see Law Society of New South Wales v Veron (1966) 84 WN (Pt 1) (NSW) 136; and Evatt v Bar Association of New South Wales (1968) 117 CLR 177; 67 (NSW) 236....

In deference to Mr Roberts' submissions, it is, I think, relevant to consider first the reason why gross over-charging, as such, may be held professional misconduct. The Court has traditionally and for centuries exercised control over "the excessive fees and other unnecessary demands" made by solicitors of the court: see, eg, Holdsworth's History of English Law, 2nd ed, Vol 6, 434; Vol 12, 56-62. Clients are, or may frequently be, in a vulnerable position vis-a-vis their solicitors; the presumption of undue influence is, I think, based at least in part upon the fact that when making decisions clients ordinarily or at least frequently place trust in their solicitors. They ordinarily are not in a position to know without investigation what work must be done and what charges are fair and reasonable; they ordinarily assume that the solicitor will make only such charges.

Solicitors are, on the other hand, informed, or in a position to inform themselves, of what work may be required and what are fair and reasonable charges. They are, in that sense, in a position of advantage and trust is placed in them. Clients are entitled to be protected against the abuse of such an advantage. It is, I am inclined to think, the fact that that advantage has been misused which may, in a particular case, warrant what the solicitor does being categorised as professional misconduct.

205 Having regard to this case law and to the statutory and regulatory provisions relating to trust accounts that we have reproduced above, the most important features of the Solicitor's misconduct are as follows.

206 During a period of about eight years (from 1999 to 2007), the Solicitor extracted funds to pay his own costs and (in some instances) disbursements from no less than fifteen trust accounts without at any time observing the requirements of the relevant legislation. For withdrawals occurring before the commencement of the LP Act 2004, these requirements were referred to in section 61(3)(b) of the LP Act 1987 and set out in clause 78 of the LP Regulation 2002. For withdrawals occurring after the commencement of the LP Act 2004, they are referred to in section 261(1)(b) of that Act and set out in clause 88 of the LP Regulation 2005.

207 In some instances - for example, in the matters of Rankin, Davidson and Daude - the Solicitor obtained authorisation from the client to withdraw funds on account of costs. But this was not enough to relieve him of the statutory obligation to notify the client - for example, by sending an invoice - of his intention to take this step. He consistently failed to comply with this obligation.

208 All these withdrawals accordingly amounted to breaches of section 61(2) of the LP Act 1987 or of section 255(1) of the LP Act. Under section 498(1)(a) of the latter Act, they were capable of amounting to professional misconduct. In the circumstances of the present case we hold that they in fact did so.

209 Their significant effect was in each case to deprive the client of the opportunity to give consideration to, and possibly raise questions about, the scale of the costs being charged at the time when they were charged.

210 The detriment to his clients' interests thereby inflicted by the Solicitor was compounded in many cases by his failure to provide his clients with trust account statements at the times required by the legislation (i.e. by clause 77 of the LP Regulation 2002 or clause 82 of the LP Regulation 2005). Under section 498(1)(a) of the latter Act, these breaches of the Regulations were capable of amounting to professional misconduct. In the circumstances of the present case we hold that they in fact did so.

211 In some of the statements that the Solicitor did provide, he did not give sufficient details of the costs that he had withdrawn and he frequently did not acknowledge that over a period of time he had made a number of withdrawals of interim costs. In consequence, the withdrawals of significant amounts for costs was presented to clients as a fait accompli well after - in fact, sometimes years after - the withdrawals occurred. As the matters of Crowe, Davidson and Pugliese illustrated, it was then still possible for clients to argue successfully that the amounts charged to them should be reduced. But the Solicitor's failures to provide them with full information periodically, as required by the legislation, was likely to make any challenge much more difficult for them.

212 We will mention here our acceptance of the Solicitor's assertions in his Amended Reply to the effect that in a number of matters he ultimately provided his client with a full account of moneys received and disbursed. Mr Lynch pointed out that the matters in which the Solicitor could make this claim included all those in which he admitted overcharging. We agree with Mr Lynch that this is a relevant consideration when assessing the full implications of the Solicitor's misconduct. But as we have just pointed out, any significant delay in accounting for moneys withdrawn to pay costs is likely to be detrimental to a client's interest in ensuring that the amounts charged for costs are not excessive. We note too that in Law Society of New South Wales v Carvan , Unreported, 14 May 1981 (BC8111397) and in Bolster v Law Society of New South Wales , Unreported, 20 September 1982 (BC8211696), the Court of Appeal held that solicitor cannot escape responsibility for serious breaches of their duties to their clients by showing that the clients in question did not suffer any loss. We therefore cannot attach much weight to this consideration.

213 In our judgment, the Solicitor's culpability with regard to his breaches of statutory requirements relating to trust accounts was all the greater because of three further aspects of his behaviour.

214 First, in contrast to the respondent solicitor in Carvan , it would be difficult for him, to say the least, to claim with any conviction that he was ignorant throughout the relevant period of his duty to notify his clients of any impending withdrawals from their trust account. In many of the cases outlined above - see for example Rankin, Davidson and Daude - he sent a costs disclosure document to the client in which the authority conferred on him to withdraw funds in order to pay costs was expressly made conditional on his raising an invoice or sending a request to the client, or was to take place in accordance with clause 88 of the LP Regulation 2005. But even if we assume that through not reading the 'small print' of these documents he remained unaware of these requirements, we are bound to rule, in line with Moffitt P's statement in Carvan , that his failure to inform himself about such an important aspect of a solicitor's duties was itself an instance of professional misconduct.

215 In dealing in this way with the question whether the Solicitor violated the statutory requirements with full awareness of their contents or because he was ignorant of them, we are rejecting a submission put by Mr Stitt. He argued that because the Solicitor chose not to give evidence in these proceedings we should infer that he was fully aware of the nature of these requirements. In disciplinary proceedings such as these, however, we should not make findings of seriously improper conduct against the respondent unless they are affirmatively established by cogent evidence. We decline to draw the inference urged upon us by Mr Stitt.

216 Secondly, the clients adversely affected by his breaches of the statutory requirements included two clients at least - Sister Tereba and Sister Paczowska - who were 'vulnerable' in the way described by Mahoney JA in Veghelyi v Law Society of New South Wales , Unreported, Court of Appeal, 8 February 1995 (BC9505459). In this context, we fully endorse two submissions advanced by Mr Stitt: (a) that the Solicitor abused the trust that they placed in him through relying on him totally to protect the interests of the Sisters and (b) that he aggravated his misconduct by obtaining their signatures to documents purporting to signify their approval of the amounts that he had withdrawn to pay his costs.

217 Thirdly, the Solicitor's breaches of the statutory requirements in fifteen separate matters were accompanied by overcharging (as later found by specialist assessors and admitted by him) in six of these matters and by an acknowledgment by him in three further matters (Crowe, Davidson and Pugliese) that he had withdrawn excessive amounts and should make a partial reimbursement. This particular aspect of his conduct demonstrated all too clearly why his breaches of the statutory requirements amounted to serious dereliction of his responsibility as a solicitor handling funds committed to him in trust.

218 It is particularly noteworthy in this context that the matter of Crowe was one of the earliest of the matters described above. Because of what happened in that matter, the Solicitor knew as early as September 2001 that when a client discovered after the event that costs had been withdrawn without proper notification an objection might be raised and he might feel compelled to deal with it by repaying part of the total amount withdrawn. He nevertheless persisted for some six years in withdrawing costs without proper notification to his clients.

219 As well as being significant in the way just outlined, the Solicitor's admitted conduct in overcharging his clients in the six matters that were referred to costs assessors amounts, as we have said, to professional misconduct under section 498(1)(b) of the LP Act 2004. Mahoney JA's judgment in Veghelyi provides ample authority for this conclusion.

220 The six matters in question were Crowe, Daude, Kerrigan, Kennedy, Maguda and Patterson. The total of the amounts by which the Solicitor overcharged was the not inconsiderable sum of $52,590.08. In the matter of Sharma, he admitted having charged a further $1,000 contrary to the Victims Support and Rehabilitation Act 1996.

221 We turn now to the claims made by the Law Society that the Solicitor was guilty of misappropriation.

222 As the above outline indicates, the Grounds stated in the Application alleged misappropriation in the context of only three matters: Daude, Gibki and Laczny. But Mr Stitt argued that a claim of misappropriation was made implicitly in a number of other matters in which the Solicitor withdrew funds to which he was not entitled from a trust account: for example, Ida Potier, Davidson, Crowe, Maguda, Milkow, Obolska and Pugliese.

223 We agree, however, with a submission by Mr Lynch that the only matters in which we may properly make a finding of misappropriation are those in which the Law Society has alleged it. This follows, in our opinion, from the decision of the High Court in Walsh v Law Society of New South Wales (1999) 198 CLR 73: see in particular the judgment of McHugh, Kirby and Callinan JJ at 94-95.

224 As to the three matters in which there was an allegation of misappropriation, we have already held (see [75], [126] and [194] above) that this allegation is not established in the matter of Daude, but is established in Gibki and Laczny. Our reasons are as follows.

225 In Daude, the Solicitor withdrew funds on account of costs after having sent to the client a costs disclosure document authorising him to make such withdrawals in accordance with clauses 88(3)(a)(i) and 88(3)(b) of the LP Regulation 2005. In addition, his file contained an undated form signed by the client that authorised him to 'deduct and pay from funds held in your trust account your costs and disbursements incurred and to be incurred of and incidental to acting in connection with the administration of the Estate'.

226 Mr Lynch placed strong reliance on dicta in Brereton v Legal Services Commissioner [2010] VSC 378 to the effect that 'dishonesty' is a 'necessary element' in any charge of misappropriation (see the judgment of Bell J at [24], [31 - 33] and [47 - 59]). Having regard to these dicta and to our decision, explained above at [214 - 215], not to infer that the Solicitor's breaches of the statutory requirements occurred with full knowledge of the content of those requirements, we conclude that in this instance the necessary element of dishonesty was not made out. So to conclude is not, however, to suggest that the Solicitor's conduct in this and other similar cases was not seriously improper.

227 By contrast, what happened in Gibki was that the Solicitor transferred amounts totalling $1,284.20 into the Gibki estate account from a trust account of the Sisters relating to another estate. For reasons stated above at [126], we do not accept a submission by Mr Lynch that there was evidence of his being authorised to do so. In the absence of such authorisation, his conduct was patently dishonest.

228 Similar reasoning applies to the Laczny matter. As stated above at [136], [140] and [191 - 194], the Solicitor withdrew the sum of $600 from the Laczny estate, used it to pay a bill raised in the Milkow estate and never repaid it. In the absence of any authorisation, his conduct was patently dishonest.

229 Various other allegations made by the Law Society and found by us to have been established - for example, delay in accounting - might not of themselves amount to professional misconduct, but fall to be taken into consideration when assessing the overall impact of the Solicitor's misconduct.

230 For the foregoing reasons, our decision is that the Solicitor is guilty of professional misconduct. A further hearing is therefore required for the purpose of determining whether the orders sought by the Law Society should be made and, if not, what other course of action we should adopt under the relevant provisions (sections 562 and 566) of the LP Act 2004.

231 For the purpose of fixing a date for this hearing, the matter is set down for further directions at 9.30 a.m. on 4 May 2011.

 

 

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Decision last updated: 20 April 2011