Council of the Law Society of NSW v Simpson [2011] NSWADT 242

Peter Kaiser Simpson was the subject of a disciplinary application by the Council of the Law Society of New South Wales alleging that he had been guilty of professional misconduct.

The Law Society of New South Wales contended that the solicitor had breached sections 254 and 255 of the Legal Profession Act 2004 in that he was guilty of misappropriation and delay in the payment of disbursements due to third parties and had that he failed to supervise his employees.

The solicitor admitted the conduct described in the amended particulars relied upon by the Law Society as constituting professional misconduct, however he denied the grounds alleging misappropriation.

The Tribunal set out the amended particulars in respect of each of the grounds of complaint and also the agreed facts.

On 7 September 2009 Mr Napper, a trust account inspector, attended the solicitor’s office and inspected the firm’s accounts. 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.

On 8 September 2009 Mr Napper spoke to the solicitor and informed him that there were unpaid disbursements which had not been paid. The solicitor said that he was not aware of such disbursements. Mr Napper raised with the solicitor the arrangements in respect of the payment of unpaid disbursements such as fees due to Mr Jurisich of Counsel and Aspen Medical. The solicitor said he would have to check with his staff. The solicitor was not aware of the arrangements relating to Counsel and Aspen Medical. The Law Society accepted the solicitor’s position in relation to that issue.

On the afternoon of the 8th of September 2009, the solicitor spoke to his accounts staff and informed them of the remarks of the trust account inspector. The head accountant informed the solicitor that there were unpaid disbursements and unpaid memorandum of fees and arrangements were in place for the payment in two instances. The solicitor sought details and he was then informed that in respect of monies transferred from trust to office there was $196,476.00 in unpaid disbursements, not including fees to Counsel and Aspen Medical. In respect of monies paid directly into the office account there were $187,558.24 in unpaid disbursements not including fees due to Counsel and Aspen Medical. The total amount owing to Counsel was in the sum of $1,297,796.06.

In June 2008 the head accountant discussed the matter directly with Counsel and as the practice had cash flow problems and an arrangement was made whereby his fees were reduced by way of payment of $20,000.00 per week. The solicitor told the head accountant that this was the first he had ever heard of this arrangement. Similar arrangements had been put in place with Aspen Medical and again the solicitor had not been consulted about this. There was credit in the solicitor’s firm’s favour in the sum of $72,905.01 in respect of Aspen Medical.

The solicitor had in practice a system whereby he had delegated to the head accountant and administration manager authority to sign office cheques. 70 such cheques were issued daily. The solicitor signed trust cheques but if he was absent, with permission of the Society, such cheques were signed by authorised solicitors in his employ.

By way of background, the solicitor had been admitted to practice in 1976 and had 75 staff including 13 employed solicitors. He currently had over 4000 matters.

In respect of each of these matters there was a comprehensive system whereby appropriate disclosure was made pursuant to the provisions of the Legal Profession Act; Motor Accidents Compensation Act and Workplace Injury Management and Workers Compensation Act. In respect of each matter appropriate authorities were obtained from the clients in respect of the payments of costs, disbursements and outlays.

The Administrative Decisions Tribunal, constituted by M Chesterman, Deputy President, M Riordan, Judicial Member and C Bennett, Non-judicial member, referred to the relevant statutory provisions of the Legal Profession Act.

Findings

The Tribunal found that the Law Society had established the three grounds being those admitted by the solicitor, namely:

1. Breach of section 254 of the Legal Profession Act
2. Breach of section 255 of the Act; and
3. Failure to supervise

See Re Robb & Anor (1996) 134 FLR 294; Law Society of New South Wales v Davidson [2007] NSWADT 264

Did the solicitor’s conduct involve misappropriation?

It was contended by the Law Society that the conduct of the solicitor amounted to misappropriation. Law Society of New South Wales v McCarthy [2003] NSWADT 198; Council of the Law Society of New South Wales v Doherty [2010] NSWCA 177.

It was contended on behalf of the solicitor that in disciplinary proceedings under the Legal Profession Act “dishonesty” is a “necessary element” in any charge of misappropriation; Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83; Brereton v Legal Service Commissioner [2010] VSC 378.

In the latter judgment, Beryl J observed at [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”.

The Tribunal found that the solicitor was unaware until Mr Napper spoke to him on 8 September 2009 of three (3) crucial aspects of his firm’s management of finds received by it. In such circumstances the Tribunal found at [46] that the conduct alleged against the solicitor did not amount to “misappropriation”.

Orders

The Tribunal reprimanded the solicitor and fined him $8,000.00 and directed him to attend two (2) refresher courses offered by LawCover and pay the applicant’s costs.

For a copy of the decision of the Tribunal please see: www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=155194.