Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of NSW v Simpson [2011] NSWADT 242
• Hearing dates: 19 July 2011
• Decision date: 20 October 2011
• Jurisdiction: Legal Services Division
• 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 Respondent is reprimanded.

3. The Respondent is to pay a fine of $8,000 within six months of the date of this decision.

4. The Respondent is to attend two refresher courses offered by LawCover when they are next available: namely, 'Practice Management Risk' and 'Financial Management and Risk'.

5. The Respondent is to pay the Applicant's costs of and incidental to this Application

• Catchwords: Solicitor - disciplinary application - failure to supervise employees - delay in paying disbursements - meaning of 'misappropriation'
• Legislation Cited: Administrative Decisions Tribunal Act 1997; Legal Practice Act 1996 (Vic); Legal Profession Act 1987; Legal Profession Act 2004
• Cases Cited: Ex parte Clyne; Re Legal Practitioners Act (1969) 71 SR (NSW) 236; Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83; Council of the Law Society of New South Wales v Doherty [2010] NSWADT 155; Council of the Law Society of New South Wales v Doherty [2010] NSWCA 177; Gett v Tabet [2009] NSWCA 76; Harle v Legal Practitioners Liability Committee (2004) 13 ANZ Insurance Cases 61-605; Law Society of New South Wales v Davidson [2007] NSWADT 264; Law Society of New South Wales v McCarthy [2003] NSWADT 188; Ex parte Munro; Re Legal Practitioners Act (1969) 71 SR (NSW) 448; Myers v Elman [1940] AC 282; Peters v R (1998) 192 CLR 493; Re Robb & Anor (1996) 134 FLR 294
• Category: Principal judgment
• Parties: Council of the Law Society of NSW (Applicant); Peter Kaiser Simpson (Respondent)
• Representation: Counsel: C Webster (Applicant); C Adamson SC and J Sheller (Respondent); Council of the Law Society of NSW (Applicant); Greg Walsh & Co (Respondent)
• File Number(s): 102032

Reasons for decision

Introduction

1 (M CHESTERMAN (DEPUTY PRESIDENT), M RIORDAN (JUDICIAL MEMBER), C BENNETT (NON-JUDICIAL MEMBER): In this case, the Council of the Law Society of New South Wales ('the Law Society') filed on 2 December 2010 a Disciplinary Application alleging that the Respondent, Peter Kaiser Simpson ('the Solicitor'), while practising as a solicitor, had been guilty of professional misconduct.

2 The Law Society sought the following orders against the Solicitor: that he be reprimanded, that he pay a fine and that he pay the Society's costs of and incidental to the Application.

3 The Application claimed that the relevant conduct of the Solicitor amounted to professional misconduct on the following five grounds: (1) breach of section 254 of the Legal Profession Act 2004 ('the LP Act'); (2) breach of section 255 of this Act; (3) misappropriation; (4) delay in the payment of disbursements due to third parties; and (5) failure to supervise. But in Amended Particulars filed on 19 July 2011, the day of the hearing before us, the Society abandoned the fourth of these grounds.

4 In his Reply, as amended by his counsel at the hearing, the Solicitor admitted both the conduct described in the Amended Particulars and the Law Society's claim that this conduct constituted professional misconduct. He also consented to the orders sought by the Society. But he denied the third ground - misappropriation - claimed in the Application.

5 At the hearing, the parties handed up a folder containing a statement of Agreed Facts and copies of the affidavits tendered by each of them. We admitted this evidence by consent. None of the deponents was required for cross-examination.

6 Before we deal with the relatively few matters that need to be resolved, it is appropriate that we reproduce here the Amended Particulars and a substantial segment of the Agreed Facts. At the commencement of each of these documents, it is stated that 'the solicitor' (or 'the Solicitor') means Peter Kaiser Simpson; 'the Society' means the Law Society of New South Wales and 'the Investigator's Report' means the Report of Gary Napper dated 2 October 2009.

The Amended Particulars

7 The Amended Particulars were in the following terms:-

A In the matter of Christopher John Milgate

Grounds

I. Breach of Section 255 of the Legal Profession Act, 2004

2. Misappropriation

i. The solicitor acted for Christopher John Milgate

ii. On 3 February 2009 the solicitor's firm incurred a debt to H L Burns & Associates ("Burns") for an expert's report in the sum of $1,900.00.

iii. On 11 February 2009 the solicitor's firm incurred a debt to V Jurisich of Counsel ("Jurisich") in the sum of $5,455.00.

iv. On 16 February 2009 the solicitor received settlement monies of $135,000.00 which were deposited into his trust account.

v. On 19 May 2009 the solicitor transferred to his office account the sum of $34,529.40 on account of costs and disbursements.

vi. As at 8 September 2009 the amounts due to Burns and Jurisich had not been paid though Burns was paid by 15 September 2009, a delay of 111 days.

vii. On 27 November 2009 Jurisich was paid, a delay of 192 days.

B In the matter of Paul William Davenport

Grounds

1. Breach of Section 255 of the Legal Profession Act, 2004

2. Misappropriation

i. The solicitor acted for Paul William Davenport.

ii. On 26 June 2009 the solicitor's firm incurred a debt to V Jurisich of Counsel ("Jurisich")in the sum of $6,000.00.

iii. On 20 July 2009 the solicitor received part of the settlement monies in the sum of $14,714.00 and on 19 August 2009 he received the further sum of $117,000.00. Both amounts were deposited into his trust account.

iv. On 20 August 2009 the solicitor transferred to his office account the sum of $42,226.30 on account of costs and disbursements including Counsel fees.

v. As at 8 September 2009 the amount due to Jurisich had not been paid.

vi. On 27 November 2009 Jurisich was paid, a delay of 105 days.

C In the matter of Samir Yakub

Grounds

1. Breach of Section 255 of the Legal Profession Act, 2004

2. Misappropriation

i. The solicitor acted for Samir Yakub.

ii. On 25 March 2008 the solicitor's firm incurred a debt to Evidex for a report in the sum of $4,757.25.

iii. On 29 July 2008 the solicitor's firm incurred a debt to Dr E Matalani ("Matalani") in the sum of $1,181.82.

iv. On 19 June 2009 the solicitor received settlement monies of $471,422.86 which were deposited into his trust account.

v. On 29 June 2009 the solicitor transferred to his office account the sum of $112,760.28 on account of costs and disbursements.

vi. On 9 September 2009 the amounts due to Evidex and Dr Matalani were paid, a delay of 71 days.

D In the matter of Adam Homsi

Grounds

1. Breach of Section 254 of the Legal Profession Act, 2004

2. Breach of Section 255 of the Legal Profession Act, 2004

3. Misappropriation

i. The solicitor acted for Adam Homsi.

ii. On 30 April 2008 the solicitor's firm incurred a debt to Dr E Matalani ("Matalani") in the sum of $1,181.82.

iii. On 13 March 2009 the solicitor's firm incurred a debt to V Jurisich of Counsel ("Jurisich") in the sum of $10,000.00.

iv. On 13 March 2009 the solicitor's firm incurred a debt to Dr David Manohar ("Manohar") in the sum of $1,200.00.

v. On 24 June 2009 party/party costs in the matter were settled in the sum of $35,000.00 inclusive of GST with the amount due to Jurisich being reduced.

vi. On 1 July 2009 the solicitor received funds [$35,000.00] to pay costs and disbursement including the amounts due to Matalani, Jurisich and Manohar which were deposited into his office account.

vii. As at 8 September 2009 the amounts due to Matalani, Jurisich and Manohar had not been paid.

viii. By 15 September 2009 the amounts due to Matalani and Manohar were paid, a delay of 70 days.

ix. On 27 November 2009 Jurisich was paid, a delay of 149 days.

E In the matter of Antonietta Skoric

Grounds

1. Breach of Section 254 of the Legal Profession Act, 2004

2. Breach of Section 255 of the Legal Profession Act, 2004

3. Misappropriation

i. The solicitor acted for Antonietta Skoric with respect to a Workers Compensation matter and also a Common Law matter.

ii. On 29 May 2009 the solicitor's firm incurred a debt to V Jurisich of Counsel ("Jurisich") in the sum of $4,000.00 for the Common Law matter.

iii. On 16 July 2009 the solicitor raised an Invoice in the sum of $6,716.88 for Costs & Disbursements for the Common Law matter payable by the employer.

iii A. On 16 July 2009 the solicitor raised an Invoice in the sum of $9,112.30 for Costs 8 Disbursements for the Workers Compensation matter payable by the employer which included $3,416.00 due to three Medical experts.

iv. On 22 July 2009 the solicitor received settlement monies of $50,062.50 for the Common Law matter which were deposited into his trust account.

v. On 22 July 2009 the solicitor received the sum of $15,829.18 being $6,716.88 on account of costs and disbursements for the Common Law matter and $9,112.30 on account of costs and disbursements for the Workers Compensation matter. The amounts were deposited into his office account and credited to the ledgers for each of the matters.

vi. On 29 July 2009 the solicitor transferred to his office account the sum of $14,034.60 shown in his ledger for the Common Law matter as "Costs (Balance) & Barrister's fees" .

vii. As at 8 September 2009 the amount due to Jurisich had not been paid.

viiA. Between 27 October 2009 and 29 October 2009 moneys due to the three Medical experts were paid.

viii. On 27 November 2009 Jurisich was paid, a delay of 128 days.

F In the matter of Tracey Lee Hamilton

Grounds

1. Breach of Section 255 of the Legal Profession Act, 2004

2. Misappropriation

i. The solicitor acted for Tracey Lee Hamilton.

ii. On 3 June 2008 the solicitor's firm incurred a debt to H L Burns & Associates ("Burns") for an expert's report in the sum of $l,700.00.

iii. On 27 January 2009 the solicitor's firm incurred a debt to V Jurisich of Counsel ("Jurisich") in the sum of $6,000.00.

iv. On 30 January 2009 the solicitor received settlement monies of $90,000.00 which were deposited into his trust account.

v. On 11 February 2009 the solicitor's firm incurred a further debt to H L Burns 8 Associates ("Burns") for an expert's report in the sum of $1,600.00.

vi. On 26 February 2009 the solicitor received further settlement monies of $33,173.30 which were deposited into his trust account.

vii. On 27 February 2009 the solicitor transferred to his office account the sum of $57,534.73 on account of costs and disbursements including Counsel fees.

viii. The amount due to Burns was paid on 9 September 2009, a delay of 109 days.

ix. On 27 November 2009 Jurisich was paid, a delay of 273 days.

G In the matter of Mr T Mehmood

Grounds

1. Breach of Section 254 of the Legal Profession Act, 2004

2. Breach of Section 255 of the Legal Profession Act, 2004

3. Misappropriation

i. The solicitor acted for Tariq Mehmood ("Mehmood") who withdrew his instructions and instructed Keddies to act on his behalf.

iA. On 14 November 2008 the solicitor rendered his Schedule of Costs and Disbursements to Keddies in the sum of $20,240.00 including Counsel's fees in the sum of $3,100 [plus GST].

ii. On 8 December 2008 the solicitor received funds [$20,240.00] [from Keddies] on account of costs and disbursements which were deposited into his office account.

iii. On 8 December 2008 the solicitor's firm incurred a debt to V Jurisich of Counsel ("Jurisich")in the sum of $3,100.00.

iv. As at 8 September 2009 the amount due to Jurisich had not been paid.

v. On 27 November 2009 Jurisich was paid, a delay of 354 days.

H In the matter of Mr A Danford

Grounds

I. Breach of Section 255 of the Legal Profession Act, 2004

2. Misappropriation

i. The solicitor acted for Mr Alex Danford.

ii. On 23 March 2009 the solicitor's firm incurred a debt to Evidex for a report in the sum of $4,895.85.

iii. On 25 March 2009 the solicitor's firm incurred a debt to Petrie of Counsel in the sum of $10,000.00.

iv. On 23 April 2009 the solicitor received settlement monies of $298,412.47 which were deposited into his trust account.

v. On 29 April 2009 the solicitor transferred to his office account the sum of $87,937.04 on account of costs and disbursements including Counsel fees.

vi. The amount due to Petrie was paid on 7 July 2009 a delay of 69 days.

vii. On 23 July 2009 Evidex was paid a delay of 85 days.

J Further Particulars re Third Ground of Complaint -Misappropriation

i. The solicitor instructed Mr Vaughn Jurisich of Counsel ("Mr Jurisch") in a number of matters.

ii. Aside from that for 24 October 2007 [Ref 65 in the Investigator's Report] between 7 August 2008 [Ref 67] and 3 September 2009 [Ref 67] the solicitor issued Bills which included fees due to Mr Jurisich.

iii. Between 24 October 2007 and 3 September 2009 the Bills issued by the solicitor were paid.

iv. Between 24 October 2007 and 3 September 2009 the solicitor received monies on account of fees due to Mr Jurisich totalling $1,276,796.02 including the amounts referred in the particulars above.

v. The monies referred to in the preceding paragraph were deposited into the solicitor's office account.

vi. The solicitor retained the monies in his office account and failed to pay them to Mr Jurisich.

vii. As at 8 September 2009 the sum of $1,276,796.02 was owing to Mr Jurisich.

viii. On 27 November 2009 the solicitor paid Mr Jurisich the sum of $1,139,546.02.

K Fifth Ground of Complaint - Failure to supervise

i. The Applicant repeats the Particulars for the matters above.

ii. The solicitor failed to supervise his staff in that there was a delay in making payment to the firm's creditors although the solicitor was in funds to make payment.

iii. The solicitor failed to supervise his staff to ensure that Chapter 3, Division 2 of the Legal Profession Act, 2004 was complied with.

iv. The solicitor failed to ensure that directions to his staff as to the payment of the firm's creditors were complied with.

Agreed Facts

8 Paragraphs 1 to 36 of the Agreed Facts described the admitted conduct of the solicitor on which the Law Society's case is based. Excluding footnotes, they were as follows:-

Trust Account Inspection

1. On 7 September 2009, Gary Terence Napper a Trust Account Inspector attended the Solicitor's office to inspect the firm's accounts. This inspection continued on 8 September 2009.

2. Mr Napper identified unpaid disbursements, and delay in having paid such disbursements, where funds had been received by the firm into the office account, either by transfer from trust, from settlement monies or otherwise, or by payment of party/party costs directly into office on receipt.

3. On 8 September 2009 Mr Napper spoke to the Solicitor and informed him that there were unpaid disbursements that had not been paid in respect of paid memoranda of fees (MOF's). The Solicitor's evidence is that he informed Mr Napper "I'll have to check this" . The Solicitor says that he wasn't aware of such unpaid disbursements.

4. Mr Napper also raised with the Solicitor arrangements in respect of the payment of unpaid disbursements such as fees due to Mr Jurisich of counsel and Aspen Medical. The Solicitor's evidence is that he informed Mr Napper "I'll have to check with the staff about this."

5. The Solicitor says that he was not aware of arrangements relating to Mr Jurisich and Aspen Medical. There is now no issue in these proceedings that the Solicitor had not been aware of the arrangements with Mr Jurisich or Aspen Medical before being informed of them (as below) after Mr Napper's initial inspection.

6. Mr Napper provided to the Solicitor a letter in respect of his inspection of the firm's accounts dated 8 September 2009.

Discussions between Solicitor, Maybelline Cabansag and Bruce Bravo

7. On the afternoon of 8 September 2009 the Solicitor spoke to Maybelline Cabansag and Bruce Bravo. He informed them of the remarks of Mr Napper. Mr Cabansag informed the Solicitor that there were unpaid disbursements on paid memoranda of fees (MOF's) and there were arrangements in place for payment in two instances. The Solicitor informed her that he needed all the details.

8. The Solicitor was then informed by Ms Cabansag that in respect of monies transferred from Trust to Office in respect of the MOF's there was $196,476 in unpaid disbursements (not including fees due to Mr Vaughn Jurisich of Counsel and Aspen Medical).

9. Ms Cabansag informed the Solicitor that in respect of MOF's paid directly into the office account there were $187,558.24 of unpaid disbursements (not including fees due to Mr Vaughn Jurisich and Aspen Medical).

10. The Solicitor was informed by Ms Cabansag that there was an amount owing to Mr Vaughn Jurisich in the sum of $1,276,796.06. Ms Cabansag further informed the Solicitor that sometime in June 2008 she discussed the matter direct with Mr Jurisich and as the practice was having cash flow problems, she asked whether it would be in order for him to be paid $20,000 per week. The Solicitor said to Ms Cabansag, "This is the first time I have heard of this arrangement."

11. Ms Cabansag further informed the Solicitor that in June 2008 Aspen Medical was requesting an arrangement whereby they were paid $20,000 per week. Previously, Aspen Medical was only entitled to payment on completion of matters. The Solicitor was unaware of this arrangement.

12. The Solicitor was subsequently informed by Ms Cabansag that there was a credit in the Solicitor's firm's favour in the sum of $72,005.01 because of overpayment to Aspen Medical. That is Aspen Medical was being paid in advance of the previous arrangement whereby they were to be paid when matters were finalised.

13. The Solicitor raised with Maybelline Cabansag and Bruce Bravo who was also present, "You know the rules, we get paid last..." .

Authority to sign Office Account cheques

14. The Solicitor had delegated to the Chief Accountant, Maybelline Cabansag and Administration Manager, Bruce Bravo the authority to sign office account cheques. Approximately 70 office account cheques were issued daily.

15. The Solicitor signed trust cheques but if he was absent, with the permission of the Society, such cheques were signed by other authorised Solicitors in his employ.

Background and Nature of Practice

16. The Solicitor was born on 16 September 1944. He was admitted as a Solicitor of the Supreme Court of New South Wales on 16 July 1976. He has operated the firm PK Simpson & Co since 1977.

17. The Solicitor has had a particular interest in the practice of Personal Injury Law and employs 75 staff including 13 employed Solicitors and the practice has over 4,000 matters.

Accounts Staff

18. In 2002, the Solicitor employed Ms Cabansag as an Accountant. She became Head Accountant for the practice in January 2003. At about the same time the Solicitor employed Mr Bruce Bravo to assist Ms Cabansag. Mr Bruce Bravo was promoted to Administration Manager in February 2006.

19. The duties of Ms Cabansag were to operate the day to day financial accounts of the practice. Mr Bravo also was involved in such work but also oversaw the administrative side of the practice.

20. Ms Cabansag would show the Solicitor on a daily basis the cash balance in respect of the St George Bank. The Solicitor operated an overdraft with the St George Bank the upper limit of which is $1.5M. Each month the Solicitor went through the Trust Account Trial Balance with Ms Cabansag.

Aspen Medical and Ian Burn

21. In or about the mid 1990's the Solicitor commenced using a firm known as Aspen Medical operated by a Dr Andrew Walker. Aspen Medical provides medico-legal reports in respect of clients. The Solicitor understood that Aspen Medical would be paid amounts owing to them upon the settlement of the matter. Apart from Aspen Medical the Solicitor engaged experts such as Mr Ian Burn, Engineer who also was to be paid upon the settlement of matters.

Vaughn Jurisich

22. The Solicitor engaged Vaughn Jurisich, Barrister-At-Law in a large number of his client's matters. The brief to Mr Jurisich was on a no-win no fee basis. Mr Jurisich was to be paid on settlement of the matter.

Retainer Agreements

23. The Solicitor had in place a system whereby clients were provided with a disclosure document by way of a costs agreement. The matters required to be disclosed pursuant to the Legal Profession Act, 2004 were disclosed to each client and pursuant to the costs agreement there was an authority for the payment of costs, disbursements and outlays.

24. The Solicitor, depending on the particular matter, used the following documents:-

Documents 1 - Notice under Legal Profession Act (2004), Motor Accidents Compensation Act (1999), Workers Compensation Act (1987) and Workplace Injury Management and Workers Compensation Act (1998)

Document 2 - Costs Disclosure regarding Common Law Conditional Costs Agreement between Solicitor and Client

Document 3 - Common Law Conditional Costs Agreement Solicitor and Client

25. In respect of any settlement the solicitor having carriage of a particular matter obtained an authority from the client. Different scales or schedules of costs apply to matters involving Work Injury Damages and Workers Compensation. Each solicitor having the carriage of a particular matter was required to ascertain amounts owing by way of Centrelink, Medicare, CTP (Third Party). Client authorities stated:

"I consent to the above amounts being paid into trust and deducted from trust when judgment/settlement monies are received in accordance with this authority."

26. In each matter the Client authority referred to amounts payable to any expert and barrister's fees together with a total of the deductions payable.

27. It was the Solicitor's practice to send an authority to receive payment of verdict/settlement monies to the Defendant's Solicitor. A release indemnity was also often provided by the client as required by the Defendant's Solicitor. It was the Solicitor's practice to forward to the client a letter explaining the terms of any settlement and to particularise amounts outstanding, for instance, barrister or expert. Attached to that letter were copies of third party invoices such as fees payable to Counsel and medical providers.

28. In respect of Workers Compensation matters, the Solicitor would forward an assessment of costs to the Respondent's Solicitor and settlement would then be negotiated in respect of those costs. It was the Solicitor's practice that when monies were received from the Respondent that such monies including disbursements were paid into the Solicitor's office account as he understood that such monies were quite properly payable in that manner rather than into the Solicitor's trust account.

The Report

29. On 15 September 2009, Aspen Medical wrote to the Solicitor confirming requirement of the payment of $20,000.00 per week as per agreement and that the earliest invoice would be paid regardless of whether they were completed or not.

30. On 16 September 2009 the Solicitor forwarded to Mr Napper a response to the inspection report dated 8 September 2009 providing:

A schedule of completed matters containing outstanding balance enclosed;

An outstanding balance as at 8 September 2009 in the sum of $187,558.24

The monies paid from Trust to Office $196,476.03

An outstanding balance as at 15 September 2009 in the sum of $NIL.

31. These balances did not take into account outstanding amounts due to Vaughn Jurisich of Counsel and Aspen Medical.

32. On 17 September 2009 the Solicitor provided to Ms Cabansag and Mr Bravo a warning together with requirement to attend a work shop in respect of Trust Account Regulations referred to in the report of Trust Account Inspector, Gary Napper dated 8 September 2009 as a matter of urgency.

33. On 21 September 2009 the Solicitor attended the Society and spoke to Mr Napper. The Solicitor indicated to Mr Napper that he had looked up the Keefe matter and had given a copy to his staff. He also informed Mr Napper that Ms Cabansag was very upset. He further informed Mr Napper that it was his practice to ensure "... that disbursements get paid before the firm..." . He acknowledged that Ms Cabansag and Mr Bravo had not done this and he put in place steps to make sure it did not happen again and given them notices about it.

34. On 16 October 2009, the Solicitor rang Mr Napper in respect of the contents of his report and in particular the assertion that the Solicitor had told him of the arrangement in respect of Vaughn Jurisich or Aspen Medical. The Solicitor informed Mr Napper that he had not said any such thing.

35. As noted at 5 above, there is now no issue in these proceedings that the Solicitor was not aware of the arrangements with Mr Jurisich or Aspen Medical before Mr Napper's initial inspection.

36. On 28 September 2009 the Solicitor wrote to the Society confirming that when funds are received pursuant to memorandum of fees all unpaid disbursements are paid prior to the funds being banked and that existing arrangement with Aspen and the payment of earlier bills has been changed with the unpaid disbursements and settled matters should be paid on settlement. In any work where payments are less than $20,000.00 the balance up to $20,000.00 should then be used to pay earlier bills on matters not yet settled. The reconciliation should be completed monthly but not monitoring anomalies. As well, the Solicitor confirmed:

(a) In respect of Vaughn Jurisich the outstanding balance owing to Mr Jurisich as at 16 September 2009 would be paid at the rate of $20,000.00 per week. Subsequent future fees owing to Mr Jurisich on matters that settle should be paid on settlement.

(b) On a weekly basis 6.00pm Friday he will be shown a computer generated data sheet (Open Practice generated report) showing all unpaid disbursements and that they have been paid.

9 By way of addendum to paragraph 16 of the Agreed Facts, it should be mentioned that the Solicitor's firm was incorporated in 2003 as PK Simpson & Co Pty Limited t/as PK Simpson & Co, and that at all material times, the Solicitor has been the sole principal of this practice.

10 The remainder (paragraphs 37 to 67) of the statement of Agreed Facts was principally concerned with the investigation conducted by the Law Society.

Relevant statutory provisions

11 The following provisions of the LP Act (sections 7(3)(c), 140(1)-(5), 250, 254(1), 255(1), 497(1) and 498(1)(a)) bear upon this case:-

7 Terms relating to associates and principals of law

(3) For the purposes of this Act, a principal of a law practice is an Australian legal practitioner who is:...

(c) a legal practitioner director in the law practice (in the case of an incorporated legal practice)...

140 Incorporated legal practice must have legal practitioner director

(1) An incorporated legal practice is required to have at least one legal practitioner director.

(2) Each legal practitioner director of an incorporated legal practice is, for the purposes of this Act only, responsible for the management of the legal services provided in this jurisdiction by the incorporated legal practice.

(3) Each legal practitioner director of an incorporated legal practice must ensure that appropriate management systems are implemented and maintained to enable the provision of legal services by the incorporated legal practice:

(a) in accordance with the professional obligations of Australian legal practitioners and other obligations imposed by or under this Act, the regulations or the legal profession rules, and

(b) so that those obligations of Australian legal practitioners who are officers or employees of the practice are not affected by other officers or employees of the practice.

(4) If it ought reasonably to be apparent to a legal practitioner director of an incorporated legal practice that the provision of legal services by the practice will result in breaches of the professional obligations of Australian legal practitioners or other obligations imposed by or under this Act, the regulations or the legal profession rules, the director must take all reasonable action available to the director to ensure that:

(a) the breaches do not occur, and

(b) appropriate remedial action is taken in respect of breaches that do occur.

(5) A contravention of subsection (3) or (4) or both by a legal practitioner director is capable of being professional misconduct.

250 Liability of principals of law practice

(1) A provision of this Part or the regulations made for the purposes of this Part expressed as imposing an obligation on a law practice imposes the same obligation on the principals of the law practice jointly and severally, but discharge of the practice's obligation also discharges the corresponding obligation imposed on the principals.

(2) References in this Part and the regulations made for the purposes of this Part to a law practice include references to the principals of the law practice.

254 Certain trust money to be deposited in general trust account

(1) Subject to section 258A, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless:

(a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account, or

(b) the money is controlled money, or

(c) the money is transit money, or

(d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person.

Maximum penalty: 100 penalty units.

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.

Maximum penalty: 50 penalty units.

497 Professional misconduct

(1) For the purposes of this Act:

professional misconduct includes:

(a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and

(b) conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice.

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...

Our principal findings

12 We have reviewed the evidence regarding the relevant conduct of the Solicitor, taking into account a number of aspects of it drawn to our attention at the hearing by Ms Webster, counsel for the Law Society. This task was easier than is often the case because of the work done by the parties' legal representatives in putting all the evidence before us into a single folder. We are grateful to them for doing this.

13 This evidence, in our judgment, sufficiently supports the allegations made by the Law Society and admitted by the Solicitor.

14 We are satisfied also that the Law Society has established the three grounds that were both advanced in the Application and admitted by the Solicitor: namely, breach of section 254 of the LP Act, breach of section 255 of this Act and failure to supervise.

15 We are further satisfied that the relevant conduct of the Solicitor amounts, as he has admitted, to professional misconduct as defined in the LP Act. It includes breaches of section 254(1) and section 255(1) of that Act, for which he must be held responsible under section 250. It also includes breaches of section 140(3) and (4). By virtue of sections 140(5) and 498(1), these breaches are 'capable of being' professional misconduct. We find also that his conduct overall involved a 'consistent failure to... maintain a reasonable standard of competence and diligence' within the meaning of section 497(1).

16 This characterisation of the Solicitor's conduct is supported by the following statement of principle by the Supreme Court of the Australian Capital Territory in Re Robb & Anor (1996) 134 FLR 294, which was cited (at [125]) and applied by this Tribunal in Law Society of New South Wales v Davidson [2007] NSWADT 264:-

The point is that the delay in paying counsel to be attributed to the solicitors in the present case stems from their assumption that moneys in their office account, received on trust for the client and transferred to the office account for the very purpose of paying counsel, were not affected by their fiduciary duties to the client and were their moneys to pay counsel fees when they chose and that any delay was simply a matter between counsel and themselves.

The assumption was totally unjustified. On the contrary, every day of delay in paying counsel from the time of transferring the moneys from the trust account to the office account, was a day in which the solicitors were in breach of the fiduciary duty to the client.

17 As mentioned earlier, the Solicitor contested the Law Society's claim that the conduct by him described in each of sections A to J of the Amended Particulars included conduct properly described as 'misappropriation'. We will now discuss this question.

Did the Solicitor's conduct involve misappropriation?

18 The Law Society's submissions. Ms Webster relied principally in this context on the Tribunal's decision in Law Society of New South Wales v McCarthy [2003] NSWADT 198. In that case, the Law Society alleged that the respondent solicitor had engaged in professional misconduct. The Tribunal briefly outlined the relevant facts at [2 - 3]:-

2 The conduct in question involves one transaction. The following facts are not disputed. In 1999 the practitioner was practising as a solicitor, but (as is permitted) did not operate a trust account. He received a payment in settlement of a client's case which related to costs and disbursements incurred by him on the client's behalf. The amount of the payment was $4200, of which it was said by the practitioner and not disputed, that $3000 was in respect of counsel's fees and $1200 was in respect of his costs. A cheque for $4200 was drawn in favour of the practitioner. It was deposited into the practitioner's personal account on 24 June 1999.

3 The matter of non-payment of counsel's fees was drawn to the attention of the Law Society by the client on 8 March 2000. Counsel's fees were paid on 28 June 2000.

19 Under the Legal Profession Act 1987, which was then applicable, the equivalent provision to the current section 255 was section 61. It stated in subsection (8) that a 'wilful breach' of section 61 amounted to professional misconduct. Against this background, the Tribunal made the following observations on which Ms Webster relied:-

21... At hearing Mr Wales for the Law Society emphasised that the third of the charges, that of misappropriation, was seeking to refer to no more than the fact of the payment of the money into the personal account and the subsequent use of the money for purposes other than immediate payment to counsel. It was not seeking to suggest that the practitioner had been engaged in any more heinous conduct.

32 'Wilfulness' : The Tribunal is satisfied that there was a failure by the practitioner to comply with s 61 and s 62, and that the conduct amounted to a misappropriation of funds of the kind suggested by Mr Wales. We turn to the question of whether the practitioner wilfully breached s 61 and s 62.

39 We are satisfied that the Law Society has established to the requisite standard that the practitioner's contraventions of both s 61 and s 62 were wilful.

40 Accordingly the practitioner is guilty of professional misconduct in respect of the contraventions of s 61 and s 62. We are also satisfied that the Law Society has established to the requisite standard that the money was misappropriated, and that the practitioner is guilty of professional misconduct in that regard.

20 Ms Webster also relied on observations by the Court of Appeal in Council of the Law Society of New South Wales v Doherty [2010] NSWCA 177. In that case, the Law Society appealed against a decision of this Tribunal ( Council of the Law Society of New South Wales v Doherty [2010] NSWADT 155), on the ground that the Tribunal should have ordered that the name of the respondent solicitor be struck off the Local Roll of Lawyers, but did not do so. The principal allegation against the respondent, which the Tribunal found proven, was that the respondent had 'misappropriated' a sum of $35,000 that he had received from Mr Geoffrey Rafter, who was his client and a partner with him in two joint ventures, both involving the purchase of land. This sum, which the respondent paid into his trust account, was intended as the deposit on a purchase of land at Hill End, which subsequently fell through. Instead of repaying it to Mr Rafter, as he was obliged to do under the contractual arrangements between them, the respondent used it to pay the deposit on the other purchase, which was of land at Byron Bay. He did this because a cheque that he had drawn on his office account to pay this deposit had been dishonoured.

21 The respondent filed a cross appeal and foreshadowed the filing of a notice of contention, but did not proceed further with either of these measures. For these reasons, the Tribunal's finding that the respondent's conduct involved 'misappropriation' was not challenged before the Court of Appeal.

22 In his judgment, Young JA (with whom Tobias and Campbell JJA agreed) summarised as follows (at [37 - 38]) the respondent's characterisation of his conduct in paying the deposit and the Tribunal's findings as to his state of mind at the time when he made this payment:-

37 The respondent contended that, although "technically" there was a misappropriation of Mr Rafter's $35,000, he genuinely believed that he was entitled to use the money the way he did.

38 The remarks of the Tribunal on this point are not entirely consistent. It seems to have accepted that the respondent genuinely believed that he was able to employ Mr Rafter's $35,000 in the Byron Bay project. However, it took the view that there was no rational basis for such belief. At [105] of the first judgment, it indicated that if there was such a belief it was "not founded on the contract or on reality" and that the respondent in his own mind had constructed a scenario which he considered relieved him from refunding Mr Rafter's $35,000.

23 At [41 - 43], Young JA made the following comments on the meaning of 'misappropriation':-

41 There was discussion both before the Tribunal and before us as to the width of the word "misappropriation". The base meaning of the word is "wrongful conversion" ( Stroud's Judicial Dictionary , 7th ed, vol 12 at 1689). It must be noted that in most cases of appropriation of the property of another, claim of right is a good defence and to establish a claim of right, all the accused need show is that he or she had an honest belief in the claim and not also that that belief was based on logic or reason: R v Nundah (1916) 16 SR (NSW) 482, a proposition that has never been doubted.

42 Mr Lindsay complains that the respondent cannot both not cross appeal against the finding of misappropriation and take the view on "penalty" that there was no real misappropriation. He submits that the respondent's submissions are a collateral attack on the Tribunal's findings on "liability" which should not be permitted in the deliberate absence of a cross appeal.

43 I do not sustain that complaint. It seems to me that the respondent is saying that whilst he accepts the finding, it is wrong to class every finding of misappropriation in the same light when considering the proper order to be made and that that is within his rights. As the word "misappropriation" has a wide ambit of meanings, this must be correct.

24 While drawing to our attention Young JA's dictum that 'misappropriation' has a 'wide range of meanings', Ms Webster acknowledged that two decisions, which we will shortly describe, provided support for the proposition that the Solicitor's conduct in this case did not fall within the scope of this concept.

25 Ms Webster also indicated that if we rejected the Law Society's contention that the Solicitor had engaged in misappropriation, the Society would accept that no case of professional misconduct at common law had been made out against him.

26 Submissions on behalf of the Solicitor. In written submissions prepared by Ms Adamson SC and Mr Sheller of counsel, and in Ms Adamson's oral submissions, the main contentions advanced on this matter were that the Tribunal, in a recent decision made in disciplinary proceedings under the LP Act, had ruled that 'dishonesty' is a 'necessary element' in any charge of misappropriation and that we should follow this ruling in the present proceedings.

27 This decision, delivered on 7 March 2011, is Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83. By coincidence, the Tribunal was constituted by the same members as are sitting in the present proceedings.

28 Ms Adamson relied also on the principal authority on which our ruling in Clapin was based: namely, the judgment of Bell J in the Victorian Supreme Court case of Brereton v Legal Services Commissioner [2010] VSC 378.

29 In that case, the Victorian Civil and Administrative Tribunal ('VCAT'), in disciplinary proceedings brought under the Legal Practice Act 1996 (Vic), found the respondent, a legal practitioner, to be guilty of professional misconduct at common law on the ground that he had 'misappropriated' trust moneys in connection with a property development project. (The facts, as it happened, were similar in significant respects to those of Doherty .)

30 At [38], Bell J quoted what he described as an 'important passage' in VCAT's reasons. That passage included the following two sentences:-

Given the intermingling of his business interests and his role as a lawyer responsible for trust money, he well knew (or ought to have known) his legal and fiduciary responsibilities to those beneficially entitled to the invested funds, and on whose behalf he and GDK were ostensibly managing those funds. He also well knew (or ought to have known) his obligations to properly account for the trust money (emphasis added in the Supreme Court judgment.)

31 Bell J's judgment continued as follows at [39]:-

39 For reasons which I will give when I consider the issue of dishonest belief, it is a very different thing to say that a person had a dishonest belief or 'well knew' something on the one hand, and that a person 'ought to have known' something on the other. The two states of mind are of a different order and legal character and mark the boundary between incompetent or negligent administration on the one hand and misappropriation on the other.

32 This distinction provided the basis for a finding by Bell J at [43] that there was 'no evidence... in the tribunal's reasoning of it applying a dishonesty standard to the misappropriation charge'. This finding in turn provided the basis for his conclusion (at [59 - 60]) that VCAT had erred in law in finding the respondent guilty of misconduct at common law on the ground of having 'misappropriated trust moneys'.

33 As Ms Adamson pointed out, the important aspect of Bell J's judgment for present purposes was his insistence that at least in proceedings alleging professional misconduct at common law, 'dishonesty' was an essential element of 'misappropriation'. His Honour discussed this matter at length at [47 - 59] (in the following quotation from these paragraphs, most of the footnotes are omitted):-

47 A term like misappropriation can have a particular meaning depending on the context. In the present case, the term was used in charge 5 by which the commissioner alleged that Mr Brereton, a practising lawyer, had committed misconduct at common law in that he had 'misappropriated trust moneys'. Misappropriation has been used here to describe the legal character of conduct which, because it had that character, allegedly constituted misconduct at common law. The term is not used here in any special sense. No statutory definition of the term applies. Thus 'misappropriated' here refers to what would be misappropriation according to the ordinary meaning of that word.

48 The ordinary meaning of 'misappropriate' is to 'appropriate to wrong uses; chiefly, to apply dishonestly to one's own use (money belonging to another)' (OED). Likewise, 'misappropriation' is appropriation to wrong uses (OED).

49 The legal dictionaries define 'misappropriation' consistently with that ordinary meaning. According to Jowitt's Dictionary of English Law , misappropriation is:

the misdemeanour which is committed by a banker, factor, agent, trustee, etc., who fraudulently deals with money, goods, securities, etc., entrusted to him, or by a director or public officer of a corporation or company who fraudulently misapplies any of its property.

In Stroud's Judicial Dictionary of Words and Phrases , 'misappropriate' is defined to mean 'the wrongful conversion of or dealing with anything by the person to whom it was entrusted'.

50 It follows that the word 'misappropriation' in its ordinary sense involves a mental element. Misappropriation is dishonestly misapplying property, including money, held on behalf of another. In the criminal context, misappropriation by and to the trustee personally is not a crime at common law because the trustee already has the property; but it is conduct which, but for that, would be theft. It is 'stealing' in another guise because it is wrongful appropriation by the trustee of property being held for another.

51 Because dishonesty is a mental element of misappropriation in its common law sense, it is necessary to consider what dishonesty means, remembering here we will be doing so in a civil context. The Court of Appeal examined what dishonesty meant in that context in Harle v Legal Practitioners Liability Committee [(2004) 13 ANZ Insurance Cases 61-605]. At issue was whether a solicitor was entitled to indemnity under an insurance policy which did not cover the 'dishonesty or fraudulent act or omission of any insured'.

52 As to the meaning of 'dishonesty', Chernov JA (Callaway and Buchanan JJA agreeing) held [at [29 - 30]]:

It seems clear enough that where, as here, dishonesty is not used in a special sense in relation to statutory offences, it is not a term of art and is to be given its ordinary meaning. It embraces deliberate conduct which is considered to be dishonest by the standard of ordinary decent people, or, put another way, the ordinary standards of reasonable and honest people. Whether particular conduct amounts to dishonesty involves the consideration of the mental state - the knowledge, belief or intention - of the person whose conduct is impugned.

53 While an allegation of dishonesty requires consideration of the person's mental state, in neither the criminal nor the civil context is it necessary to establish that the person subjectively knew or believed that the actions concerned were dishonest. What must be established is that the person subjectively intended to do the acts which are said to be objectively dishonest by the ordinary standards of reasonable and honest people. Thus the course to be adopted in determining whether conduct is dishonest was explained by Toohey and Gaudron JJ in Peters v R [(1998) 192 CLR 493 at 504] as follows:

In a case in which it is necessary for a jury to decide whether an act is dishonest, the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest ... If the question is whether the act was dishonest according to ordinary notions, it is sufficient that the jury be instructed that that is to be decided by the standards of ordinary, decent people.

54 The steps involved in this formulation are: (1) identify the knowledge, belief or intent which is said to render the acts dishonest; (2) determine whether the accused (or defendant in the civil context) subjectively had that knowledge, belief or intent; and (3) determine whether, on that account, the acts were objectively dishonest according to the standards of ordinary and decent (that is reasonable and honest) people.

55 When applying these principles in a civil case, the civil standard of proof on the balance of probabilities applies. Of course, where the allegation in a civil case is of misappropriation, a high standard of probability is required, due to the gravity of the allegation. In a criminal case, the criminal standard of proof beyond reasonable doubt applies.

56...

57 In the present case, the tribunal did not address the dishonesty issue. It did not identify the knowledge, belief or intent said to render the making of the payments by Mr Brereton dishonest. It did not determine whether he subjectively had that knowledge, belief or intent. It did not judge his actions in making the payments against the objective standard of dishonesty of reasonable and honest people. It found that Mr Brereton was guilty of misconduct at common law by having 'misappropriated trust moneys' and that he 'well knew (or ought to have known)' what his responsibilities were. It is the alternative state of mind - 'ought to have known' - that is the problem.

58 Generally, professional misconduct at common law is conduct which 'would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency ... Mere negligence, even of a serious character, will not suffice' [ Myers v Elman [1940] AC 282 at 288-289]. Therefore the tribunal could not have found Mr Brereton guilty of misconduct at common law because he had failed to act in accordance with what he 'ought to have known'. There had to be more than that. Yet the tribunal did not base its misconduct finding only on what Mr Brereton 'well knew', but on that and the alternative finding about what he 'ought to have known'.

59 The state of knowledge, belief or intent associated with being negligent, incompetent and in reckless disregard of professional responsibilities is less than, and does not amount to, dishonesty, and is not sufficient to establish that a lawyer is guilty of misappropriation...

34 In Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83, our ruling, on which Ms Adamson relied, was in the following terms (at [226]):-

Mr Lynch [counsel for the respondent solicitor] 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.

35 Ms Adamson pointed out that the Law Society did not formally submit that we should depart from this recent ruling. She referred us to a detailed discussion by the Court of Appeal of the circumstances in which a court should depart from earlier authority, contained in Gett v Tabet [2009] NSWCA 76 at [274 - 301].

36 Our conclusions. In determining this question of whether the Law Society's claims of misappropriation by the Solicitor have been made out, it is useful to identify first what 'mental element' accompanied the relevant acts and/or omissions on his part.

37 According to paragraphs 3, 5, 10 and 11 of the statement of Agreed Facts, the Solicitor was unaware, until Mr Napper spoke to him on 8 September 2009, of three crucial aspects of his firm's management of funds received by it. These were as follows: (a) a number of disbursements that had become due and payable by his firm had not been paid, (b) there had been delay in the payment of other disbursements and (c) employees of his firm (Ms Cabansag and Mr Bravo) had entered into arrangements on the firm's behalf with Mr Jurisich and with Aspen Medical, each of which had the consequence that payments of fees to them were not made when they fell due.

38 In the case put before us, the Law Society has not disputed these assertions of lack of awareness by the Solicitor.

39 Authorities such as Re Robb & Anor (1996) 134 FLR 294 and Law Society of New South Wales v McCarthy [2003] NSWADT 198 establish that if these failures to attend to the proper payment of disbursements had occurred because the Solicitor himself took responsibility for such payments, or because he had instructed his staff not to make payments when they fell due, he could properly have been found guilty of misappropriation.

40 We do not consider, however, that even the broadest descriptions of 'misappropriation' cited in the cases that we have discussed include situations where a failure to ensure that funds are paid to a person entitled to them occurs without the knowledge of the person charged with misappropriation. In the two cases in which a definition of misappropriation that does not incorporate 'dishonesty' was suggested - namely Law Society of New South Wales v McCarthy [2003] NSWADT 198 and Council of the Law Society of New South Wales v Doherty [2010] NSWCA 177 - the respondent solicitor was directly responsible for the conduct (in the former case, an omission; in the latter, a positive act) that was held to amount to misappropriation. This was not the case in the present proceedings.

41 The 'mental element' of the Solicitor's conduct, in so far as it led to failures by his firm to pay disbursements when they fell due, was, as asserted in a separate Ground in the Application, his negligence and/or incompetence in failing to supervise the activities of members of his staff to whom he had entrusted the responsibility of making such payments. According to the Agreed Facts, he did not intend that these failures should occur or know that they had occurred. A fortiori , he did not act 'dishonestly', in the sense described by Bell J in Brereton v Legal Services Commissioner [2010] VSC 378.

42 A further aspect of the Solicitor's behaviour calls for separate consideration. In three of the matters described in the Amended Particulars - namely, Homsi, Skoric and Mehmood - one of the allegations made against the Solicitor and admitted by him is that he contravened section 254 of the LP Act by failing to deposit trust money in a general trust account of his practice 'as soon as practicable' after receiving it.

43 Paragraph 28 of the statement of Agreed Facts stated as follows, with specific reference to Workers Compensation matters:-

It was the Solicitor's practice that when monies were received from the Respondent that such monies including disbursements were paid into the Solicitor's office account as he understood that such monies were quite properly payable in that manner rather than into the Solicitor's trust account.

44 A consequence of so doing was that both the relevant client and any person to whom disbursements were owed lost the protection that payment of such monies into the Solicitor's trust account would have afforded them. This factor is mentioned in the broad definition of 'misappropriation' adopted by the Tribunal in Law Society of New South Wales v McCarthy [2003] NSWADT 198 (see at [21] and [32]): namely, 'the fact of the payment of the money into the personal account and the subsequent use of the money for purposes other than immediate payment to counsel' (our emphasis).

45 This specific element of the mismanagement of funds by the Solicitor's firm was directly attributable to the Solicitor's own conduct. But the Solicitor claimed, without opposition by the Law Society, that he engaged in this practice because he 'understood that such monies were quite properly payable in that manner'. Even according to the relatively broad description of 'misappropriation' accepted by Young JA in Council of the Law Society of New South Wales v Doherty [2010] NSWCA 177 at [41], this 'honest belief' of a 'claim of right' would seem to operate as a sufficient defence to a charge of misappropriation.

46 The outcome of this analysis of the facts of the present case is that the conduct alleged against the Solicitor did not amount to 'misappropriation', even if one applies a broad definition of this concept, along the lines suggested in McCarthy and Doherty .

47 We therefore reject this ground of the Law Society's Application and, as suggested by Ms Webster, we refrain from making any finding of professional misconduct at common law. The grounds for our finding of professional misconduct are limited to the statutory grounds set out above at [15].

48 This conclusion relieves us of the necessity to comment further on what would appear to be conflicting descriptions of 'misappropriation' in Doherty and Brereton . It is noteworthy that because the hearings of these two cases took place within five days of each other, during July 2010, neither of the discussions of misappropriation makes reference to its counterpart across the border.

49 A further consideration worth noting is that in Brereton the finding of misappropriation by the lower tribunal was explicitly challenged on appeal but this was not the case in Doherty. In the latter decision, the Court's observations on the concept of 'misappropriation' were obiter and for that reason briefer.

50 One observation that we will make on Bell J's discussion of the concept of misappropriation in Brereton is that in insisting on a 'dishonesty standard' he expressly took account (at [47] and [58 - 59]) of the fact that the context in which the concept was used was a disciplinary application alleging professional misconduct at common law. He referred to the need to show in such proceedings that the respondent's conduct 'would reasonably be regarded as disgraceful or dishonourable'. In our opinion, if in a disciplinary application the Law Society - or for that matter the Council of the New South Wales Bar Association or the Legal Services Commissioner - seeks to rely on misappropriation as a ground for establishing professional misconduct at common law, it should, at the very least, anticipate the possibility that a definition of misappropriation incorporating 'dishonesty' or some comparable mental element will be applied to the facts of the case.

51 In Clapin , which was heard early in 2011, we were referred to Brereton but not to Doherty . Since Doherty was a decision of the Court of Appeal, we do not think it is open to us, despite Ms Adamson's submissions to the contrary, to say that our ruling in Clapin should not be open for reconsideration. For reasons already given, however, we do not need to determine this matter in the present proceedings.

Our orders

52 As stated above, the orders sought by the Law Society were a reprimand, a fine and payment of the Society's costs. The Solicitor consented to the making of these orders.

53 During the hearing, a further order suggested by us was that the Solicitor should also be required to attend one or more courses on legal practice management. Ms Webster and Ms Adamson, having taken instructions, indicated that their respective clients supported such an order. In a supplementary note prepared in accordance with discussions at the hearing and delivered to the Tribunal on the following day, Ms Webster submitted that two refresher courses currently offered by LawCover would be appropriate: Practice Management Risk and Financial Management and Risk. She indicated that counsel for the Solicitor agreed with this suggestion.

54 One of the factors prompting us to propose this additional order was our realisation that the two employees to whom the Solicitor entrusted many aspects of the management of the firm's accounts had relatively low-level qualifications in accountancy and relatively little experience. This adds weight to the contention that his failure to supervise their work adequately amounted to a serious abdication of his professional responsibilities. He could indeed be considered fortunate in that the resulting damage was confined to delays in the payment of disbursements

55 In addressing us on this part of the case, Ms Adamson drew our attention to a number of indications in the statement of Agreed Facts that from the time when the Solicitor was advised by Mr Napper on 7 September 2009 about the irregularities in his firm's handling of funds received by it, he did all that could reasonably be expected of him to prevent any further irregularities and he co-operated fully with the Law Society's investigation. The steps that he took included the following: (a) advising Ms Cabansag and Mr Bravo immediately of what he had discovered; (b) stressing to them the importance of the rule that 'we get paid last'; (c) making arrangements whereby all the unpaid disbursements, except the fees due to Mr Jurisich, were paid by 15 September 2009 and the fees to Mr Jurisich were paid by 27 November 2009; (d) ensuring that by the end of 2009 a revised financial management system was operative within his firm, designed so as to prevent any recurrence of irregularities; and (e) complying promptly, either directly or through his solicitor Mr Walsh, with Mr Napper's initial request for information (as Mr Napper expressly acknowledged in his report) and with a number of later requests by the Law Society for further particulars.

56 Ms Adamson relied also on nine testimonials in the Solicitor's favour. Four of these were supplied by solicitors and three by barristers. The authors of all of them stated that they were aware of the allegations made against the Solicitor, that they nonetheless believed him to be of good fame and character and that in their opinion he should be permitted to remain in practice.

57 A further submission put to us by Ms Adamson was that in determining what orders we should make we were bound to give significant weight to the opinion of the Law Society, in its role as a representative of the legal profession. She relied here on dicta of the Supreme Court in Ex parte Clyne; Re Legal Practitioners Act (1969) 71 SR (NSW) 236 at 244 and Ex parte Munro; Re Legal Practitioners Act (1969) 71 SR (NSW) 448 at 452.

58 In the light of these submissions, we are satisfied that neither removal of the name of the Solicitor from the Local Roll nor suspension of his right to practise is required. The orders requested by the Law Society, supplemented by the order that we proposed, are appropriate.

59 The only matter remaining for consideration is the amount of the fine to be imposed. Ms Webster pointed out that in Robb the respondent was fined $6,000 and was also suspended from practice and that in Davidson a fine of $5,000 was imposed with respect to each of four counts. She submitted that since the gravamen of the present case was a failure to supervise, a single 'global' fine would be preferable.

60 Ms Adamson submitted that the maximum fine of $75,000 permitted by the LP Act should be reserved for the most serious cases only. This case, she maintained, was of a very different order because it essentially involved only a failure to supervise, the Solicitor did not engage in misappropriation for his own benefit and he had fully co-operated with the Law Society.

61 In our judgment, a fine of $8,000 is appropriate, to be paid within six months.

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Decision last updated: 20 October 2011