Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of NSW v Bradfield [2012] NSWADT 49
• Hearing dates: 5 March 2012
• Decision date: 05 March 2012
• Jurisdiction: Legal Services Division
• Before: M Chesterman, Deputy President; N Isenberg, Judicial Member; J Butlin, Non-judicial Member

Decision

1. John Gordon Bradfield is guilty of professional misconduct.

2. The name of John Gordon Bradfield is to be removed from the Roll of Local Lawyers.

3. John Gordon Bradfield is to pay the costs of the Applicant Society.

• Catchwords: Disciplinary application - solicitor - failure to invest funds on clients' behalf - issue of false mortgage documents - misappropriation - failure to account - breach of regulatory requirements - not 'fit and proper'
• Legislation Cited: Administrative Decisions Tribunal Rules 1998; Legal Profession Act 1987; Legal Profession Act 2004; Revised Professional Conduct and Practice Rules (Solicitors' Rules) 1995
• Cases Cited: Allinson v General Council of Medical Education and Registration [1894] 1 QB 750; New South Wales Bar Association v Hamman [1999] NSWCA 404; Prothonotary v P [2003] NSWCA 320 at [17(2)]
• Category: Principal judgment
• Parties: Council of the Law Society of New South Wales (Applicant); John Gordon Bradfield (Respondent)
• Representation: Counsel; R Stitt QC and S Barnes (Applicant); Council of the Law Society of NSW (Applicant); No appearance (Respondent)
• File Number(s): 112023

decision

Introduction

1 (M CHESTERMAN (DEPUTY PRESIDENT), N ISENBERG (JUDICIAL MEMBER), J BUTLIN (NON-JUDICIAL MEMBER)): This case was concerned with massive fraud and deception practised by the Respondent, a solicitor, lasting over many years and inflicting huge financial losses on numerous clients. The period of time over which he engaged in fraudulent conduct was at least sixteen years. The total amount of the losses that his clients claimed to have suffered has been estimated at about $29 million.

2 On 31 August 2011, the Council of the Law Society of New South Wales ('the Law Society') filed a Disciplinary Application ('the Application') under section 551 of the Legal Profession Act 2004 ('the LP Act 2004') in the Tribunal. It named John Gordon Bradfield ('the Solicitor') as the Respondent.

3 The Law Society alleged that the Solicitor had engaged in professional misconduct, on grounds set out and particularised in the Application. The orders that it sought were that his name be removed from the Roll and that he should pay the Society's costs.

Our orders made at the hearing

4 The hearing of the Application took place before us on 5 March 2011. Mr Stitt of Queen's Counsel appeared, together with Mr Barnes of counsel, for the Law Society. There was no appearance by or on behalf of the Solicitor.

5 Having considered evidence indicating that the Solicitor had received due notice of the proceedings and of the nature of the case brought against him, we decided that we could proceed to hear and determine the Application in his absence.

6 Having also considered voluminous written evidence tendered by the Law Society and heard oral testimony from Ms Sayer, we recorded a finding of professional misconduct against the Solicitor and made the orders sought by the Society. We indicated that we would deliver written reasons at a later stage.

7 The orders that we made on 5 March 2012 were as follows:-

1. John Gordon Bradfield is guilty of professional misconduct.

2. The name of John Gordon Bradfield is to be removed from the Roll of Local Lawyers.

3. John Gordon Bradfield is to pay the costs of the Applicant Society.

8 We now give our reasons for these decisions.

Hearing the Application in the Solicitor's absence

9 On the same day (31 August 2011) as the Law Society filed the Application, it also filed an affidavit sworn by its solicitor, Ms Anne-Marie Foord, on 26 August 2011, and an affidavit sworn by Ms Jean Sayer, a chartered accountant, on 24 August 2011. Exhibited to Ms Sayer's affidavit were twelve volumes of material, comprising copies of eight numbered reports that she had prepared and the annexures to four of these reports.

10 At the hearing, these affidavits were tendered and admitted, along with three affidavits of service sworn by licensed process servers. These three affidavits were to the following effect.

11 In an affidavit sworn on 12 September 2011, Mr Jeffrey Edwards deposed that on that day he personally served the Solicitor with copies of the Application, the affidavits sworn by Ms Foord and Ms Sayer, the twelve volumes of material exhibited to Ms Sayer's affidavit and a letter dated 9 September 2011 from the Law Society to the Solicitor. The letter indicated that the Application was listed for directions in the Tribunal on 5 October 2011.

12 In an affidavit sworn on 17 November 2011, Ms Kristina Cook deposed that on 9 November 2011 she personally served the Solicitor with a letter to him from the Law Society dated 3 November 2011. The letter indicated that at a directions hearing on 2 November 2011 the Tribunal had directed him to file and serve his Reply and any affidavit evidence by 5 December 2011 and that at a further directions hearing to be held on 7 December a date would be set for the hearing of the Application.

13 In an affidavit sworn on 20 December 2011, Mr Bruce Andrews deposed that on 19 December 2011 he personally served the Solicitor with a letter to him from the Law Society dated 9 December 2011. The letter indicated that the Application had been listed for hearing on 5 March 2012 and also for directions on 1 February 2012.

14 The Solicitor did not at any stage file a Reply as required by rule 27 of the Administrative Decisions Tribunal Rules 1998 ('the ADT Rules'), nor did he appear at any of the directions hearings.

15 In the ADT Rules, rules 25, 26 and 29 specify the conditions that must be satisfied if a disciplinary application against an Australian lawyer is to be heard in his or her absence. Their use of the term 'information' instead of 'application' and their references to the Legal Profession Act 1987 ('the LP Act 1987') show that they have not been amended to take account of the enactment of the LP Act 2004. They state as follows:-

25 Accompanying affidavit

(1) If an informant lodges an information with the Tribunal, the informant must at the same time lodge with the Tribunal an affidavit sworn by a competent person on the informant's behalf containing particulars that are sufficient to:

(a) identify the author of the complaint to which the information relates and describe briefly the allegations of unsatisfactory professional conduct or professional misconduct on which the complaint is based, and

(b) describe briefly the action taken by the informant to investigate the complaint, and

(c) identify:

(i) any person who investigated the complaint, or matters associated with it, and on whose evidence the informant relies, and

(ii) the reports or other documents relating to the investigation which the informant intends to tender in evidence, and

(d) establish, for the purposes of section 128 of the Legal Profession Act 1987 , that the person who is the subject of the complaint was a legal practitioner to whom Part 10 of the Legal Profession Act 1987 applies, at the time when the alleged professional misconduct, or unsatisfactory professional conduct, occurred.

(2) The informant must lodge with the information and the affidavit required by subrule (1):

(a) true copies of the reports and other documents, if any, referred to in subrule (1) (c) (ii), identified as exhibits to that affidavit, or

(b) an affidavit by the person who conducted the relevant investigation annexing copies of the reports and other documents.

26 Service of information and related documents

As soon as practicable after lodging the information with the Tribunal, the informant must serve sealed complete copies of the following documents on the legal practitioner...

(a) the information, and

(b) any affidavit, report or other document lodged with the Tribunal under rule 25.

29 Matter may be listed for hearing despite absence of legal practitioner

The Tribunal may list an information for hearing and may proceed to conduct a hearing, despite the legal practitioner's failure to appear, if the following matters are proved to the satisfaction of the Tribunal:

(a) that the documents referred to in rule 26 have been served on the legal practitioner,

(b) that the time limited for the lodging of a reply to the information, or any extension of that time ordered by the Tribunal, has expired,

(c) that the time specified by the Tribunal for compliance with any direction given by it to the parties has expired,

(d) that when it proceeds to conduct a hearing, sufficient notice has been given to the legal practitioner of the date of the hearing.

16 Having taken account of these rules, we decided at the hearing that for the following reasons we could and should proceed to hear and determine the Application.

17 The affidavits of Ms Foord and Ms Sayer, together with the material exhibited to Ms Sayer's affidavit, contained the material specified in rule 25. Mr Edwards' affidavit established compliance with rules 26 and 29(a). The requirements of paragraphs (b) and (c) of rule 29 were satisfied for the following reasons: (1) the period of 21 days specified by rule 27(1) for lodging a Reply expired on 3 October 2011; (2) an extension to that time, granted by the Tribunal at the directions hearing on 2 November 2011 and notified to the Solicitor on 9 November, expired on 5 December; and (3) a direction given to the Law Society on 5 October 2011 specifying a time for compliance had been complied with. Finally, Mr Andrews' affidavit established compliance with rule 29(d).

The Grounds and Particulars set out in the Application

18 In the Application, the Grounds were formulated as follows:-

JOHN GORDON BRADFIELD is guilty of professional misconduct in that:

A. The Solicitor engaged in conduct which would justify a finding that he is not a fit and proper person to engage in Iegal practice (Particulars 6 - 7.3 inclusive).

B. The Solicitor misappropriated moneys entrusted to him (Particulars 8.1 - 8.4 inclusive).

C. The Solicitor failed to account for moneys entrusted to him (Particular 9).

D. The Solicitor breached Rule 12 of the Revised Professional Conduct Rules by borrowing money from clients of the Solicitor (Particular 10).

E. The Solicitor breached section 61 of the Legal Profession Act, 1987 (Particular 12).

F. The Solicitor breached section 62 of the Legal Profession Act, 1987 (Particular 12).

G. The Solicitor breached section 298 of the Legal Profession Act, 2004 (Particular 13).

H. The Solicitor breached section 299 of the Legal Profession Act, 2004 (Particular 13).

19 In the following version of the Particulars, the names of numerous former clients of the Solicitor and some references to reports prepared by Ms Sayer have been omitted, as they are not significant in the present context. Subject to these omissions, the Particulars were as follows:-

In these Particulars:

'the Solicitor' means John Gordon Bradfield

'the Society' means The Law Society of New South Wales

1. The Solicitor was admitted to practice on 12 May 1967. Relevantly he carried on practice as follows:

1.1 13 July 1987 - 16 September 1996: in partnership with Mark Geoffrey O'Brien under the firm name 'Bradfield O'Brien & Company';

1.2 17 September 1996 - 16 July 1998: in sole practice under the firm name 'Bradfield O'Brien & Company';

1.3 17 July 1998 - 3 April 2001: in sole practice under the firm name 'Bradfield Solicitors';

1.4 4 April 2001 - 1 February 2006: in partnership with Warwick Anderson under the firm name 'Bradfield Anderson Solicitors'; and

1.5 2 February 2006 - 18 December 2008: in sole practice under the firm name 'Bradfield Anderson Solicitors'.

2. On 18 December 2008 the Council of the Society suspended the Solicitor's Practising Certificate.

3. On 22 December 2008 Miss Jean Sayer was appointed Receiver of the Solicitor's practice by order of the Supreme Court of New South Wales.

4. Between at least 30 September 1992 and 18 December 2008 the Solicitor held himself out to both his clients and the world at large as being able to invest money on security of a first mortgage over real property at competitive interest rates.

5. Clients of the Solicitor; other persons and entities (collectively referred to as 'the investors') provided to the Solicitor various sums of money for investment.

A. Not fit and proper

6. False epitomes of mortgage

6.1 The Solicitor issued to persons who had entrusted to or placed moneys with him for mortgage financing investment, epitomes of mortgage which were false in that they contained false information and evidenced fictitious transactions.

6.2 Such false epitomes were issued to the investors by the Solicitor to conceal the following facts that:

- The moneys had not been invested as instructed;

- The security of first registered mortgage over real property had not been obtained;

- The identity of the mortgagor was false and misleading in that such named mortgagor had not, in fact, borrowed the money;

- The description of the real property identified as security for the loan was false in that no such property was secured;

- The terms of the loan were false.

6.3 Such false epitomes of mortgage were issued by the Solicitor to the persons or investors in order fraudulently to conceal the fact that he had used the said moneys for his own purposes, or for purposes which were not authorised by the investors.

6.4 Examples of such false epitomes issued by the Solicitor to investor clients:

[The names of investor clients to whom 95 false epitomes were issued by the Solicitor and references to relevant pages in the eight reports exhibited to Ms Sayer's affidavit are omitted.]

6.5 The purported mortgagors identified by the Solicitor in many of the above epitomes as "Gordon Robert Nesbitt and Bette Rae Nesbitt" did not borrow money from investor clients of the Solicitor after I2 November, 2003. As at that date Nesbitt's current account was in credit in the sum of $875,031.37, after the proceeds of sale of properties at Hawks Nest were received by the Solicitor - First Report of Jean Sayer dated 22 October 2009 (p. 28). All such epitomes showing them or either of them as mortgagor after 12 November 2003 were false and evidenced a fictitious transaction.

6.6 Similarly, the purported mortgagor identified by the Solicitor in many of the above epitomes as 'Wallace Developments Pty Limited" ceased trading in 1998 and all its properties were sold in 1999/2000. It did not borrow money from investor clients of the Solicitor after 1998. The company was wound up and deregistered on 14 January, 2007. All such epitomes showing it as mortgagor after the relevant dates were false and evidenced a fictitious transaction - First Report of Jean Sayer dated 22 October 2009 (p. 23).

6.7 The following persons identified as mortgagors in the respective epitomes above, did not borrow money from investor clients of the Solicitor:

[The names of a married couple and two individuals are omitted.]

[The married couple] were investor clients of the Solicitor and did not borrow money through him. [One of the individuals] at the relevant time was deceased, having died on 15 March, 2006.

At all relevant times the Solicitor was aware of such facts.

6.8 No mortgages were registered by the Solicitor over the following properties, which titles remained unencumbered:

- Lots 5 and 6, 47 Tuloa Avenue, Hawks Nest;

- Lots 7, 8 and 9, 47 Tuloa Avenue, Hawks Nest;

- 1493 Willowtree Road, Merriwa;

- Apartment 57, "Celeste" 60-66 Village Drive, Breakfast Point, Canada Bay;

- 128 Centenary Drive, Maleny, Queensland.

6.9 The property at Tea Gardens known as the Shearwater Estate, Wombourne Avenue, Tea Gardens was subject to a first mortgage in favour of [name omitted] registered on 19 September, 2000 securing the sum of $240,000. It was discharged on 11 May, 2006; discharge registered on 22 December, 2006. Since December 2006 the title of the property has been unencumbered - First Report of Jean Sayer dated 22 October 2009 (pp. 22-23).

6.10 The properties at Hawks Nest were sold on the dates for the sums of money as set forth in the First Report of Jean Sayer dated 22 October 2009 (p. 27). The Solicitor received and deposited to his personal passbook accounts subsequent to May 2001 the proceeds of the said sales which amounted to $2,312,698.50. The Solicitor did not account to Gordon Robert Nesbitt the proceeds of sales - First Report of Jean Sayer dated 22 October 2009 (pp. 27-28).

6.11 At the time the above epitomes were prepared and issued to the investor clients the Solicitor knew that they were false and evidenced fictitious transactions. In order to conceal the true position he was prepared to advise clients falsely that their investment was secure. E.G. [The name of an investor client and a reference to relevant pages in a report by Ms Sayer are omitted.]

7. Improperly assisted investor clients to conceal true position of invested monies

7.1 The Solicitor assisted some of his investor clients to conceal from Centrelink the true position of their invested moneys and the rate of interest to be earned thereon and wrote to Centrelink falsely informing it of the rate of interest.

Example: [The names of two investor clients and a reference to relevant pages in a report by Ms Sayer are omitted.]

7.2 The Solicitor in respect of certain investments prepared epitomes of mortgage which expressed a rate of interest which was to be paid by cheque to the investor and at the same time prepared a separate epitome of mortgage in respect of the same loan with a different or separate rate of interest to be paid in cash to the investor.

7.3 Such epitomes were prepared by the Solicitor for the improper purpose of assisting the client to conceal the true position of the investment and its rate of return in respect of the relevant transaction.

Examples [The names of seven investor clients and references to relevant pages in reports by Ms Sayer are omitted.]

B. Misappropriation of Moneys

8.1 The Solicitor received moneys from investor clients which were paid into personal passbook accounts held in his name at the National Australia Bank. Such moneys became inextricably mixed and thus formed a general pool of funds in such accounts from which the Solicitor withdrew funds as and when he chose so to do.

8.2 Such moneys were also paid into bank accounts of Jadlyn Pty Limited, a corporation which was owned and controlled by the Solicitor. Such funds were inextricably mixed and thus formed a general pool of funds from which the Solicitor withdrew and used as and when he chose to do so.

8.3 The Solicitor used the pool of funds to pay his practice expenses, overheads and salaries as well as personal expenses -First Report of Jean Sayer dated 22 October, 2009 (p. 8), Ninth Report of Jean Sayer dated 15 September, 2010 (pp. 4-8; Annexure B).

8.4 Examples of such transactions are as follows:

[The names of the investor clients involved in 75 such transactions and references to relevant pages in reports by Ms Sayer are omitted.]

C. Failure to Account:

The Solicitor failed to account to his investors for moneys entrusted to him to be disbursed as directed:

- First Report of Jean Sayer dated 22 October, 2009 esp. (pp. 119-120).

- Second Report of Jean Sayer dated 24 November, 2009 esp.(pp. 83-84).

- Fifth Report of Jean Sayer dated 29 March, 2010 esp. (pp. 52-53).

- Sixth Report of Jean Sayer dated 27 April, 2010 esp. (pp. 70-71).

D. Personal loans to the Solicitor/ Breach of Rule 12

10 Examples of such transactions are as follows:

[The names of the investor clients involved in thirteen such transactions and references to relevant pages in reports by Ms Sayer are omitted.]

11. Conclusion

11 The total amount claimed by investors to the date of the Eighth Report of Jean Sayer dated 9 August, 2010, most of which is not recoverable, is:

- pre 1st October, 2005 $11,819,863.22

- post 1st October, 2005 $10,457,072.32

$22,276,935.54

The Receiver's investigations are continuing and there are additional claims which are being investigated.

E. Breach of s 61, Legal Profession Act, 1987

F. Breach of s 62, Legal Profession Act, 1987

12 In respect of moneys received prior to October, 2005, the Solicitor breached the following statutory provisions:

- Legal Profession Act (1987):

- Section 61(1) - failed to pay moneys received into a general trust account.

- Section 61(2) - failed to hold the money exclusively for the person on whose behalf it was held and failed to disburse it as directed by that person.

- Section 62 - did not keep accounting records that disclosed at all times the true position in relation to money received.

G. Breach of s 298, Legal Profession Act, 2004

H. Breach of s 299, Legal Profession Act, 2004

13 After 1 October, 2005 the Solicitor breached the following provisions of the Legal Profession Act (2004):

- Section 298 - failed to disclose to clients and notify the persons who entrusted money to him that the money is not treated as trust money for the purposes of the Act and is not subject to a claim against the Fidelity Fund.

- Section 299 - the Solicitor dealt with investment moneys in a passbook account in the name of John Gordon Bradfield kept with the National Australia Bank. He did not in accordance with the regulations give notification as required to The Council of The Law Society of New South Wales of this account and provide details thereof.

The evidence

20 The evidence adduced in support of these allegations comprised the contents of Ms Sayer's affidavit, the eight reports (with annexures) exhibited to that affidavit and her oral testimony. The dates of these eight reports ranged between 22 October 2009 and 9 August 2010.

21 Ms Sayer stated in her affidavit that in fact she prepared three more reports, respectively dated 15 September, 20 September and 15 October 2010. But these three reports were not exhibited to her affidavit, served on the Solicitor nor tendered at the hearing. This has the relatively insignificant consequence that the reference to her Ninth Report in paragraph 8.3 of the Particulars must be left out of account.

22 Ms Sayer confirmed in her oral evidence that on 22 December 2008 the Supreme Court appointed her as Receiver of the law practice known as Bradfield Anderson Solicitors.

23 She then stated that in her first three reports, respectively dated 22 October 2009, 24 November 2009 and 13 January 2010, she provided information on what she called the 'modus operandi' of the Solicitor during the period covered by her investigation (30 September 1992 to 18 December 2008). All of her reports recorded detailed findings, based on painstaking and meticulous research, regarding transactions into which the Solicitor had entered with individual investor clients.

24 The following aspects of the Solicitor's 'modus operandi', as described by Ms Sayer in her reports and her oral evidence, elaborate on the Law Society's allegations in ways that are relevant here.

25 As stated in paragraph 4 of the Particulars, the Solicitor invited people wishing to invest, including clients of his legal practice, to entrust funds to him for the purpose of investment on the security of a first mortgage over real property. He employed at least three specific strategies to make the investments that he offered appear particularly attractive.

26 First, he offered rates of interest greatly exceeding the rates currently available. For instance, during periods when the rates normally obtained by lenders were within the range from 6% to 8%, he offered rates between 12% and 17.5%.

27 Secondly, he undertook to pay compound interest, at monthly, quarterly, half-yearly or sometimes yearly rests.

28 Thirdly, on occasions he would prepare two epitomes of mortgage for a single transaction of loan. One would specify a rate of interest that would be paid by cheque, while the other would specify the same or a different rate of interest to be paid in cash. The rate of interest actually payable was the aggregate of these two rates. By these means he gave scope for investors who were pensioners to avoid any risk of a reduction of their pension by disclosing the first epitome, but not the second, to Centrelink. On at least one occasion, he provided the investor with a letter for production to Centrelink, indicating that the interest stipulated to be paid by cheque was the only interest payable under the loan agreement.

29 On receiving money for investment, the Solicitor would sometimes give the investor a receipt, but most commonly an epitome of mortgage. These epitomes represented that the money had been lent, on terms requiring the payment of interest, to one or more specified persons, and that the borrower(s) had granted a mortgage of specified land as security. In most cases, the representation that the money had been lent was false, to the knowledge of the Solicitor. In almost all cases, the representation that the borrower(s) had granted a mortgage was also false, to the knowledge of the Solicitor.

30 On a number of occasions, the Solicitor named himself as the borrower (which he was) and as the mortgagor (which he never was). In borrowing from investor clients, he breached rule 12 of the Revised Professional Conduct and Practice Rules (Solicitors' Rules) 1995. So far as relevant, rule 12 states:-

12.1 A practitioner must not borrow any money, nor assist an associate to borrow any money from a person -

12.1.1 who is currently a client of the practitioner, or the practitioner's firm;

12.1.2 for whom the practitioner or practitioner's firm has provided legal services, and who has indicated continuing reliance upon the advice of the practitioner, or practitioner's firm in relation to the investment of money; or

12.1.3 who has sought from the practitioner, or the practitioner's firm, advice in respect of the investment of any money, or the management of the person's financial affairs.

31 Most of the epitomes given by the Solicitor to investor clients named as the mortgagor(s) Mr Gordon Nesbitt, who was a builder-developer, or Mr Nesbitt and his wife Ms Bette Nesbitt. (Hereafter, the phrase 'the Nesbitts' will be used to refer to Mr Nesbitt alone, or to Mr and Ms Nesbitt, in his or their capacity as property-owners.) The Solicitor did make certain loans to the Nesbitts, or to Mr Nesbitt's company Wallace Developments Pty Ltd, on the security of mortgages over properties owned by them. But although all of these properties hade been sold by 12 November 2003 and no more loans were made thereafter to these borrowers, the Solicitor continued to name them as mortgagors in epitomes issued subsequently to investors. He did so even though he knew (but failed to disclose to Mr Nesbitt) that the proceeds of sales of properties owned by the Nesbitts at Hawks Nest amounted to $2,312,698.50 and that Mr Nesbitt's current account was therefore in credit in the sum of $875,031.37. He also named Wallace Developments Pty Ltd as a mortgagor even after it had been deregistered in January 2007.

32 In addition, the people falsely named by the Solicitor as mortgagors included a married couple and an individual who were themselves investor clients, not borrowers, and a deceased investor client.

33 Except in two instances, no mortgages were registered on the properties identified as security in the epitomes issued by the Solicitor. This was the case even when the epitome described the Solicitor himself as the borrower and mortgagor and identified his home or his office premises as the security. At the commencement of the receivership, the Solicitor had possession of the certificates of title to five properties owned by the Nesbitts, located at Tea Gardens, Hawks Nest or Merriwa. But the title to these properties was unencumbered.

34 On at least one occasion, as stated in paragraph 6.11 of the Particulars, the Solicitor wrote to an investor falsely assuring him that his invested funds was secure.

35 The Solicitor did not receive any funds by way of interest or dividend so as to generate some sort of cash flow enabling him to pay the interest promised to investors under the false epitomes. He did not even receive interest on the amounts lent to the Nesbitts or to Wallace Developments Pty Ltd. Except when he was able to delay interest payments by securing an investor's agreement to receive compounded interest at a future time, virtually the only source of money to which he had recourse was the funds that he received from new investors. To an increasing extent, he used these funds to make payments due to existing investors, thereby establishing and maintaining a 'Ponzi scheme'.

36 A significant proportion of the very substantial amounts of money entrusted to the Solicitor by investors came to him in the form of cash. Only occasionally did he deposit any of this cash in a bank. It would appear that he kept most of it in his office. At times, investors came to his office and collected envelopes containing payments of interests or repayments of capital in cash. For the most part, the details of these cash transactions cannot be ascertained.

37 Most of the money entrusted to the Solicitor was paid to him by cheque. He deposited the cheques into one of three passbook accounts that he maintained in his own name at the National Australia Bank, or (in relatively few instances) into an account in the name of Jadlyn Pty Ltd ('Jadlyn'). This company, which he owned and controlled, was a service company for his law practice. During the period that Ms Sayer investigated, he obtained as many as 70 passbooks from the Bank for the accounts in his own name.

38 None of the amounts that the Solicitor received from investors was paid into a trust account or any other separate account. Instead, in the accounts held by him and by Jadlyn, he mixed them inextricably with each other. Except for some statements prepared by an accountant for Jadlyn's tax returns, he did not create or cause to be created any statements or other accounting records that would enable the funds received from investors to be traced.

39 The Solicitor regularly transferred substantial funds from one or other of the passbook accounts into the Jadlyn account. He then drew on these funds in order to pay his office expenses, including his own salary, and to make other payments for his personal benefit. Ms Sayer was unable to quantify the extent to which he used investors' funds for these purposes.

40 Initially, some of the payments of interest and repayments of capital that the Solicitor did make to investors were drawn from one of his passbook accounts, but thereafter he drew them only from the Jadlyn account. This account also provided the funds for the relatively few loans that he made to the Nesbitts or to Mr Nesbitt's company.

41 Employing this modus operandi, the Solicitor misappropriated substantial funds received from investor clients through failing to invest them in income-generating assets in accordance with promises made by him and applying them instead to (a) the discharge of his obligations to pay interest or repay capital to other investor clients, (b) the payment of his office expenses or (c) other payments for his own benefit. He failed to account for a large proportion of the funds so received and also for the proceeds of sales of properties owned by the Nesbitts at Hawks Nest, amounting to $2,312,698.50.

42 Until 1 October 2005, the date of commencement of the LP Act 2004, the Solicitor was required by sections 61 and 62 of the LP Act 1987 to pay all the funds received by him from investor clients into a trust account, and to maintain appropriate records disclosing the true position relating to these funds. As indicated earlier, the evidence shows that he failed to do this.

43 As from 1 October 2005, funds so received by him were not trust money, by virtue of section 244 of the LP Act 2004. But he was under an obligation, imposed by section 298, to advise his clients that this was the situation and that no claim against the Fidelity Fund could be made with respect to these funds. The evidence indicates that he failed to do this also.

44 Ms Sayer also recorded a further failure on his part on and after 1 October 2005. This was to comply with an obligation, imposed by section 299 of the LP Act 2004, to provide to the Law Society details of the passbook accounts into which he deposited funds received from investor clients.

45 At the date of commencement of the receivership, most investors had been paid the interest then due to them. But there were no funds available in any bank account for the payment of interest due after that date or for the repayment of capital. According to Ms Sayer's estimate, the total value of the five properties for which the Solicitor held certificates of title was at most $3.5 million.

46 Ms Sayer stated also that the Solicitor had been made bankrupt and that there was no reason to believe that any further assets owned by him might be discovered and become available for distribution to his creditors.

47 As stated in paragraph 11 of the Particulars, the total amount claimed by investors as at 9 August 2010, the date of Ms Sayer's eighth report, was $22,276,935.54. Out of this total, $11,819,863.22 related to funds received by the Solicitor before 1 October 2005 and $10,457,072.32 to funds received on or after that date. For reasons just indicated, his misappropriation of amounts received before 1 October 2005 may be the subject of claims against the Fidelity Fund. But no claim may be made with respect to amounts that he received on or after that date.

48 In oral evidence, Ms Sayer stated that the total amount claimed was now in the vicinity of $29 million and that she believed that claims totalling approximately $19 million had been approved by the Fidelity Fund.

Conclusions

49 The evidence that we have just outlined is uncontradicted and provides ample support for the allegations set out and particularised in the Application. Those allegations have been proved to the requisite standard.

50 In this matter, many questions remain unanswered: for example, how the Solicitor could have expected to be able to maintain for any significant period his practice of attracting investment funds on which large amounts of interest were to be paid without actually investing more than a tiny proportion of those funds; why it actually took so many years for his 'Ponzi scheme' to collapse; and how much money he succeeded in extracting for his own personal benefit.

51 One thing is clear, however: in the present context, these questions do not need to be answered. The course of conduct in which the Solicitor engaged was blatantly dishonest; it caused numerous clients to lose very substantial sums, comprising capital that they believed to have been invested on their behalf and interest to which they believed themselves to be contractually entitled; it included measures designed to enable clients to commit a fraud on the revenue; and it lasted over a considerable period of time. At no stage, it would appear, did the Solicitor give any consideration to the nature and scale of the damage that he was inflicting on clients who had reposed their trust in him.

52 To a degree rarely encountered in cases within this jurisdiction, the Solicitor's conduct would 'reasonably be regarded as disgraceful and dishonourable by professional brethren of good repute and competency' (to quote from Mason P's judgment in New South Wales Bar Association v Hamman [1999] NSWCA 404 at [21], citing Allinson v General Council of Medical Education and Registration [1894] 1 QB 750). It therefore manifestly amounted to professional misconduct at common law.

53 In addition, his repeated breaches of the statutory provisions cited in the Particulars (sections 61 and 62 of the LP Act 1987; sections 298 and 299 of the LP Act 2004), and of rule 12 of the Revised Professional Conduct and Practice Rules (Solicitors' Rules) 1995, were numerous and serious enough to constitute professional misconduct under section 498(1)(a) of the LP Act 2004.

54 This disgraceful and dishonourable conduct on the Solicitor's part indicated that at the time when he engaged in it he was eminently not a fit and proper person to remain on the Roll. In the absence of any evidence or submission advanced by him or on his behalf, 'the probability' now (to employ the test stated by Young CJ in Eq in Prothonotary v P [2003] NSWCA 320 at [17(2)]), is that he is 'permanently unfit to practise'.

55 These are the reasons why at the hearing on 5 March 2012 we made an order removing the name of the Solicitor from the Local Roll, pursuant to section 562(2)(a) of the LP Act 2004.

56 Under section 566(1) of this Act, the Tribunal is required to order that a respondent in disciplinary proceedings who has been found guilty of professional misconduct must pay the costs of the applicant unless 'exceptional circumstances' exist. The present case must be regarded as exceptional, but not in the way contemplated by the section. Accordingly, we also made a costs order against the Solicitor at the hearing.

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Decision last updated: 27 March 2012