Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of New South Wales v Vaughan [2011] NSWADT 118
• Hearing dates: 21 April 2011
• Decision date: 21 April 2011
• Jurisdiction: Legal Services Division
• Before: M Chesterman, Deputy President; N Isenberg, Judicial Member; R Fitzgerald, Non-judicial Member

Decision

1. The Respondent is reprimanded.

2. The Respondent is to pay the Applicant's costs of and incidental to these proceedings, as agreed or assessed.

• Catchwords: Disciplinary application - solicitor - failure to place client's monies in interest-bearing account - instrument of consent
• Legislation Cited: Family Law Act 1975 (Cth); Legal Profession Act 2004
• Cases Cited: Council of the New South Wales Bar Association v Butland [2009] NSWADT 177
• Category: Principal judgment
• Parties: Council of the Law Society of New South Wales (Applicant); Legal Services Commissioner (Intervenor); Michael John Vaughan (Respondent)
• Representation: J Conomos (Respondent); A Matalani (Applicant); L Muston (Intervenor)
• File Number(s): 102031
• Publication restriction: The names of the complainants are not to be published.

REASONS FOR DECISION

The course of these proceedings

1 On 26 November 2010, the Council of the Law Society of New South Wales ('the Law Society') filed an Application alleging that the Respondent, Michael John Vaughan ('the solicitor'), while practising as a solicitor, engaged in unsatisfactory professional conduct on the following Grounds: (1) failing to place monies in an interest bearing account (complaint by AB) and (2) failing to place monies in an interest bearing account (complaint by YZ). Particulars of the alleged conduct were supplied in a schedule to the Application.

2 In this description of the Application, the names of the two complainants have been replaced by the pseudonyms AB and YZ. The reason is that in the Particulars and in an Instrument of Consent (reproduced below) it was stated that they had been parties to Family Court proceedings. Publication of their names is therefore prohibited under section 121 of the Family Law Act 1975 (Cth).

3 The orders sought in the Application were that the solicitor be reprimanded and that he pay the Law Society's costs. The Application also indicated that one of the two complainants sought an order for compensation.

4 Also on 26 November 2010, the Law Society filed an affidavit in support of the Application, sworn by its solicitor, Ms Anne-Marie Foord, on 17 November 2010.

5 In this affidavit, Ms Foord stated that the solicitor was admitted to practice on 9 July 1982 and that between 15 September 1989 and 19 July 2010, he was the principal of the law practice known as Johnston Vaughan.

6 The solicitor did not file a Reply to the Application.

7 On 8 March 2011, an Instrument of Consent dated 1 March 2011, which included a statement of the two Grounds set out in the Application and a section headed 'Particulars of Agreed Facts', was filed in the Tribunal. It was executed by the Law Society, the solicitor and the Legal Services Commissioner. It indicated that the signatories gave their consent to the Tribunal making (a) a finding that the conduct of the solicitor described in the Particulars of Agreed Facts amounted to unsatisfactory professional conduct and (b) the following orders, by consent:-

1. That the solicitor be reprimanded.

2. That the solicitor pay the Society's costs of and incidental to these proceedings, as agreed or assessed.

8 At the hearing before us, which took place on 21 April 2011, Ms Muston represented the Legal Services Commissioner. Through so appearing, pursuant to an entitlement to intervene conferred by section 559(1)(c) of the Legal Profession Act 2004 ('the LP Act'), the Commissioner became a party to the proceedings under section 559(5).

9 Mr Matalani, appearing for the Law Society, tendered unopposed the affidavit sworn by Ms Foord and the Instrument of Consent. He requested and was granted leave to make a minor amendment to clause I of the Particulars of Grounds of Complaint in the Application and of the Particulars of Agreed Facts. He pointed out that the Particulars set out in these documents were identical.

10 The Solicitor, for whom Mr Conomos of counsel appeared, did not tender any evidence.

11 Mr Matalani requested us to make orders in terms of those set out in the Instrument of Consent. He submitted that members of the public were entitled to expect that a solicitor holding funds on their behalf would deposit those funds in an interest-bearing account and that the failure by the solicitor in this case to so accordingly amounted to unsatisfactory professional conduct under section 496 of the LP Act. He pointed out also that by virtue of section 569 of this Act the orders sought by the Law Society do not affect the claim for compensation being brought by one of the complainants.

12 Ms Muston and Mr Conomos indicated that they supported this request made on behalf of the Law Society.

13 At the conclusion of the hearing, we stated that we would grant this request. We made orders in the terms proposed in the Instrument of Consent, preceded by a finding that the Solicitor had engaged in unsatisfactory professional conduct. Those orders took effect on the date of the hearing and were incorporated in a Notice of Decision sent to the parties on the same day. We also gave directions relating to the disposal of the compensation claim.

14 In addition, we indicated that we would publish written reasons. The present decision constitutes those reasons.

The Particulars of Agreed Facts

15 In the following reproduction of the Particulars of Agreed Facts, the names of the two complainants have again been replaced by the pseudonyms AB and YZ:-

PARTICULARS OF AGREED FACTS

Re: MICHAEL JOHN VAUGHAN

In respect of the following grounds of complaint, the solicitor engaged in unsatisfactory professional conduct:

I. Failing to place monies in an interest bearing account (complaint by AB).

(refer to particulars A - W)

2. Failure to place proceeds of sale property into an interest bearing account (complaint by YZ).

(refer to particulars A - W)

Particulars of Grounds of Complaint

In these Particulars:

"the husband" means the complainant AB

"the law practice" means Johnston Vaughan, of 1120 Montgomery Street, in Kogarah NSW.

"the solicitor" means Michael John Vaughan, the Respondent.

"the Society" means the Law Society of New South Wales.

"the wife" means the complainant YZ, who was the client of the solicitor.

A. At all material times, the solicitor was the principal of the law practice.

B. The solicitor represented the wife in fami!y law proceedings against the husband.

C. On 29 November 2005 the Family Court ordered that, following the sale of the matrimonial property, the law practice is to "hold the balance of sale monies in trust pending further order of the Court" .

D. By letter dated 2 December 2005, the solicitor wrote to the husband requesting his tax file number "to open an account for the proceeds of the sale of the home" .

E. By order dated 30 March 2006, Federal Magistrate Sexton discharged the previous Family Court Orders of 29 November and made the following order by consent:

That pending further order the whole of the balance of sale monies be held in an interest-bearing account in the name of both parties, to be administered by Michael John Vaughan of Johnston Vaughan, Solicitors at 1/20 Montgomery Street, Kogarah.

F. The proceeds of sale of the property were received on 15 June 2006.

G. By letter dated 26 June 2006 the solicitor wrote to the husband as follows:

We advise that the property has been sold and there are monies to be invested in accordance with Order 2 of the Orders made on 29 November 2005 (sic).

We still have not received your tax file number. Would you please provide us your fax file number as a matter of urgency.

H. On 26 June 2006, the solicitor placed the balance of the sale proceeds, amounting to $83,785.88 into his trust account.

I. On the same date (26 June 2006), amounts of $7,586.05 and $10,205.09 were deducted to pay credit card debts, leaving an amount of $65,994.74.

J. The husband was legally represented, to the solicitor's knowledge, between 6 July 2006 and 30 August 2006. No request was made by the solicitor during this time for the husband's Tax File Number.

K. On 30 August 2006 the matter was mentioned before Registrar Sexton. The solicitor did not raise the issue of being unable to comply with the order referred to at particular E above, nor did he seek to vary or set aside that order.

L. On 8 February 2007, the wife (the solicitor's client) swore her affidavit. Annexure "I" to that Affidavit contained the husband's tax file number.

M. On 16 March 2007 the hearing of the matter was before the Federal Magistrates Court. The Solicitor did not raise the issue of being unable to comply with the order referred to at particular E above, nor did he seek to vary or set aside that order.

N. On 26 March 2007 the second and final day of the hearing was before the Federal Magistrates Court. The Solicitor did not raise the issue of being unable to comply with the order referred to at particular E above, nor did he seek to vary or set aside that order.

O. On 10 September 2007 Judgment was delivered and final orders made.

P. On 13 September 2007, $17,343.50 was paid to the husband in accordance with the final orders.

Q. On 20 September 2007, $15,703.65 was transferred as costs to the law practice.

R. Also on 20 September 2007, $32,947.59 was paid to the wife, leaving a nil balance.

S. At no time between 30 March 2006 and 20 September 2007 did the solicitor seek to vary or set aside the order referred to at E above by filing an Application or otherwise.

T. By letter dated 2 November 2007 the wife wrote to the Solicitor, enclosing a copy of the orders made on 30 March 2006, and noting as follows:

I enclose a copy of orders made on 30 March 2006. It states that the balance of the sales of monies from [the property] be held in an interest bearing account.

I also note that the orders made on 10 September state that the husband be paid 25% of accrued interest and the wife 75%.

l have already discussed this matter with you and to date I have not received this interest.

Because of the sale of this property 1 now have a tax debt of $8,000. Can you please forward this interest to me as a matter of urgency.

U. By letter dated 2 November 2007 the solicitor wrote to the wife, and explained that the monies were:

never kept in non-interest (sic) bearing deposit but was kept in trust account as the husband would not provide to us his tax file number, and we didn't know how long the money would be held as we expected that it would have been distributed more quickly than it turned out due to the length of time we had to wait for judgment.

Trust account,(sic) monies do not pay interest as the interest is sent to the Law Society of New South Wales. That is how they collect the huge amounts of money to run themselves, from all of the solicitors in New South Wales.

V. By letter dated 17 April 2009 to the Society, the solicitor stated:

It was always my position that the mere provision of the tax file number was one factor. The Husband had to do more in relation to opening the bank account, which he did not do.

W. The letters referred to at particulars D and G (to the husband), and U (to the wife), did not specify the further action that was required by the husband in relation to opening the bank account.

Relevant legal principles

16 Section 496 of the LP Act states that 'unsatisfactory professional conduct' includes 'conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner'.

17 Under the heading 'Consent orders', section 564 of this Act states:-

(1) The Tribunal may, with the consent of the Australian legal practitioner concerned contained in a written instrument, make orders under this Part without conducting or completing a hearing in relation to the complaint.

(2) Consent may be given before or after the proceedings were commenced in the Tribunal with respect to the complaint.

(3) If consent is given before the proceedings were commenced, the requirement to conduct an investigation of the complaint (whether commenced or not) may be dispensed with, and any investigation of the complaint already being conducted may be suspended or terminated.

(4) This section does not apply to consent given by the practitioner unless the practitioner, the Commissioner and (if applicable) the relevant Council have agreed on the terms of an instrument of consent.

(5) Without limiting what may be included in the instrument of consent, the instrument is to contain an agreed statement of facts (including as to the grounds of complaint) and may contain undertakings on the part of the practitioner.

(6) The instrument of consent must be filed with the Tribunal.

(7) Nothing in this section affects the procedures regarding the commencement of proceedings in the Tribunal where consent was given before the proceedings are commenced.

(8) If consent was given before the proceedings are commenced, the proceedings are nevertheless to be commenced with respect to the complaint in the same way as if the consent had not yet been given.

(9) The Tribunal is to be constituted in the same way as for the conduct of a hearing into the complaint.

(10) In deciding whether to make orders under this Part pursuant to an instrument of consent, the Tribunal may make such inquiries of the parties as it thinks fit and may, despite any such consent, conduct or complete a hearing in relation to the complaint if it considers it to be in the public interest to do so.

18 Under the heading 'Costs', section 566(1) states:-

The Tribunal must make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner, a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist.

19 The Tribunal's decision in Council of the New South Wales Bar Association v Butland [2009] NSWADT 177 (see [29 - 31], [33] and [35]) provides useful guidance as to the matters to be taken into account in deciding whether to make consent orders suggested in an instrument of consent filed under section 564.

20 An important principle stated in that case by the Tribunal (at [31]) is that where the parties have jointly proposed an order or orders by way of penalty, it will not be useful to investigate whether the Tribunal would have arrived at that precise outcome in the absence of agreement. The question is whether that outcome, in the Tribunal's opinion, is appropriate in the circumstances of the case. In answering this question, the Tribunal should not reject the agreed outcome simply because it would have been inclined to make some other order or orders. The outcome proposed will be appropriate if it is 'within the permissible range'.

Discussion and conclusions

21 On reviewing the evidence tendered and admitted at the hearing, we find that it adequately substantiates the matters outlined in the Particulars of Agreed Facts. We find also that these Particulars provide a sufficient factual basis for each of the two Grounds stated in the Application.

22 We are satisfied that the conduct of the solicitor described in these Particulars amounts to unsatisfactory professional conduct. It is not sufficiently serious to be characterised as professional misconduct.

23 We are further satisfied that the order by way of penalty proposed in the Instrument of Consent - namely, a reprimand - is 'within the permissible range'. It provides sufficient protection to the public and sufficiently promotes the important objective of general deterrence.

24 Finally, the evidence discloses no 'exceptional circumstances' such as to preclude a costs order in favour of the Law Society under section 566 of the LP Act.

25 The orders that we made at the hearing on 21 April 2011 are based on the foregoing considerations. They are reproduced on the cover sheet of this decision.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.

Registrar

Decision last updated: 01 June 2011