Prothonotary of the Supreme Court of New South Wales v Sharp [2006] NSWCA 27 (28 February 2006)

CITATION: Prothonotary of the Supreme Court of New South Wales v Sharp [2006] NSWCA 27

FILE NUMBER(S):

40553/05

HEARING DATE(S): 23 February 2006

DECISION DATE: 28/02/2006

PARTIES:

Prothonotary of the Supreme Court of New South Wales

Peter Lyle Sharp

JUDGMENT OF: The Court

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Cl: David Dickson

Opp: N/A

SOLICITORS:

Cl: Crown Solicitors Office

Opp: N/A

CATCHWORDS:

LEGAL PRACTITIONERS - solicitors - application to have legal practitioner struck off Local Roll - offences of dishonesty under the Corporations Law and Crimes Act 1900 (NSW) - whether professional misconduct - findings of professional misconduct - declarations and removal from Local Roll

LEGISLATION CITED:

Crimes Act 1900 (NSW) s 178BB

Corporations Act 2001 (Cth) s 1401

Corporations Law s 232(6), s 1317FA

DECISION:

1. DECLARE that the Opponent has been guilty of professional misconduct in that he engaged in conduct between 8 December 1995 and 28 November 1996, for which he pleaded guilty in the District Court of New South Wales of thirty-nine indictable offences, on 5 April 2004, namely

(i) Sixteen counts of offences of knowingly and dishonestly with intent to gain advantage made improper use of position as a company officer, contrary to ss232(6) and 1317FA of the Corporations Law, being offences under the Corporations Act 2001 (Cth) by virtue of s1401 of the Corporations Act 2001 (Cth) and

(ii) Twenty-three counts of offences of make false or misleading statement with intent to obtain a valuable thing, contrary to s178BB of the Crimes Act 1900 (NSW)

2. DECLARE that the Opponent is not a person of good fame and character

3. DECLARE that the Opponent is not a fit and proper person to remain on The Local Roll of lawyers of the Supreme Court of New South Wales

4. ORDER that the name of the Opponent be removed from The Local Roll of lawyers of the Supreme Court of New South Wales

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40553/05

MASON P

SANTOW JA

TOBIAS JA

28 February 2006

PROTHONOTARY OF THE SUPREME COURT OF NEW SOUTH WALES v PETER LYLE SHARP

Judgment

1 THE COURT: By summons filed on 1 July 2005 the claimant, the Prothonotary of the Supreme Court of New South Wales, seeks the following declarations and orders from this Court in the exercise of its inherent jurisdiction to discipline legal practitioners:

1. A declaration that the Opponent has been guilty of professional misconduct in that he engaged in conduct between 8 December 1995 and 28 November 1996, for which he pleaded guilty in the District Court of New South Wales of thirty-nine indictable offences, on 5 April 2004, namely:

(i) Sixteen counts of offences of knowingly and dishonestly with intent to gain advantage made improper use of position as a company officer, contrary to ss232(6) and 1317FA of the Corporations Law, being offences under the Corporations Act 2001 (Cth) by virtue of s1401 of the Corporations Act 2001 (Cth); and

(ii) Twenty-three counts of offences of make false or misleading statement with intent to obtain a valuable thing, contrary to s178BB of the Crimes Act 1900 (NSW).

2. A declaration that the Opponent is not a person of good fame and character.

3. A declaration that the Opponent is not a fit and proper person to remain on the Roll of Legal Practitioners of the Supreme Court of New South Wales.

4. An order that the name of the Opponent be removed from the Roll of Legal Practitioners of the Supreme Court of New South Wales.

5. An order that the Opponent pay the Claimant’s costs of and incidental to these proceedings.

2 Mr Peter Lyle Sharp, the opponent, was admitted as a solicitor of the Supreme Court of New South Wales on 9 March 1979 and his name remains on The Local Roll (as it is now called) of lawyers for this State. This notwithstanding, the opponent’s practising certificate was cancelled on 19 December 1996 and he has not held one since.

3 On 28 January 2004 the opponent pleaded guilty in the District Court of New South Wales to the offences referred to in sub-paragraphs (i) and (ii) of the first declaration sought by the claimant. On 18 May 2004 he was formally convicted and sentenced by her Honour Judge Tupman (the sentencing judge) in respect of the 39 offences contained in the indictment to a total effective term of imprisonment of 5 years with a non-parole period of 3 years.

4 The relevant facts and circumstances leading to the opponent’s conviction and sentence were the subject of an agreed Statement of Facts signed by the opponent and which are set out below, with some minor amendments to facilitate the narrative:

From before 1990 and continuing up to December 1996, the opponent was a solicitor practising as a partner in the Albury firm Tietyens. Throughout that time the firm conducted a substantial mortgage practice, taking deposits from contributories and lending out the money on first mortgage security. The contributories were in many cases clients of the firm. But deposits were also solicited and obtained from non-clients.

The mortgage lending was carried out through a company, Tietyens Investments Pty Ltd (“Tietyens Investments”). That is, Tietyens Investments was nominally the lender of contributories’ moneys to borrowers/mortgagors. Mortgages to secure repayment were taken in favour of Tietyens Investments as mortgagee. Tietyens Investments made written declarations that they held each mortgage on trust for the specific contributories whose funds had been loaned to each mortgagor, respectively. In other words, contributories funds were not pooled and lending was not made from a pool.

Substitution of contributories was common. That is, the loan funds of one contributory would be returned by the firm upon application being made in that behalf. Instead of these funds being called back from the borrower, other funds from a substitute contributory would be taken on deposit. Tietyens Investments’ declaration of trust in respect of the mortgage was (or should have been) altered at each substitution to reflect the changed identity of one or more of the contributories whose funds were on loan and for whom the security was held.

The opponent was a director of Tietyens Investments from 1 July 1982 to 15 July 1997. His partners in the firm (Messrs Rob, Romero and Chapman) were co-directors. Mr Chapman resigned on 1 October 1995. The opponent was the partner and director who primarily administered the firm’s mortgage practice in the years relevant to these charges, 1995 and 1996.

All deposits were taken following representations to contributories that the ratio of the loan to the value of security taken (“the LVR”) would not exceed 66%. General lending authorities were signed by contributories when their funds were deposited and these also recorded the LVR limit of 66%.

Lending to Tally Ho Towers Pty Ltd

The largest borrower of funds from Tietyens Contributory Mortgage Scheme was Tally Ho Towers Pty Ltd (“Tally Ho”). This company undertook a large residential and retirement village development in Burwood, a suburb of Melbourne, commencing in late 1995. All of the charges on the indictment concern conduct of The opponent in relation to the lending to Tally Ho.

The opponent himself caused Tally Ho to be incorporated in August 1995. A Mr Caines and a Mr Hare, both based in Melbourne, were initially the sole shareholders and directors of Tally Ho. From early 1996 Mr Caines was the sole shareholder and director. However the shares of Messrs Caines and Hare were at all times held on trust for Tietyens Investments and as directors they acted according to the instructions of Mr Sharp.

No complaint was made by the Crown along the lines that by virtue of Tietyens Investments’ beneficial interest in the capital of Tally Ho, Tietyens Investments was in effect lending to itself. It appears that the opponent caused Tally Ho Towers to be incorporated and arranged to have control of it through nominee shareholders and directors in order to exercise control over the manner in which funds loaned by Tietyens Investments were disbursed by Tally Ho upon the outgoings of its development project.

Initial advance for purchase of Lot 1

Tietyens Investments’ first loan to Tally Ho was $3.3m to enable it to complete the purchase of Lot 1 from the Australian Broadcasting Commission for a total price of $5.85m. Tally Ho gave a mortgage in favour of Tietyens Investments to secure repayment of the sum of $3.3m.

The balance of the purchase money was provided by a Mr Needham, a client of Tietyens. But his lending was not secured by the mortgage in favour of Tietyens Investments nor by any other mortgage. It is significant that the $3.3m for which the mortgage was prepared was just slightly under 66% of the total purchase price.

At the time of this advance by Tietyens Investments in October 1995, South Pacific Premier Projects Pty Ltd (“South Pacific”) had prepared plans for the conversion of an existing building on Lot 1 into 45 apartments and units. Plans had also been prepared for another apartment building and some townhouses to be constructed on Lot 1. Upon Tally Ho acquiring the property these plans were further developed by consultants engaged by Messrs Caines and Hare as directors of Tally Ho.

The December 1995 Agreement – Count 1

This Agreement provided for the payment by Tally Ho of substantial fees to Tietyens Investments and Tietyens Solicitors (the legal firm). The taking of these fees amounted to Tietyens Investments profiting from its own trust in respect of the contributories. The contributories were never informed that fees such as those provided for in 3 December 1995 Agreement would be earned by Tietyens Investments out of the on-lending of funds contributed under the mortgage scheme.

Count 1 on the indictment was laid upon the basis that Mr Sharp, as a director of Tietyens Investments, breached his duty to the company in a dishonest manner by causing it to enter into this agreement whereby his firm and its nominee company would reap substantial fees from the lending of contributories’ money.

Reference is particularly drawn to the following clauses in the 3 December 1995 Agreement:

1.1.55 The “Tietyens Investments Fee” was to be $6m

1.1.57 The Tietyens Solicitors Contingency Fund” fee was to be $18,000 per month

1.1.58 Definition of the “Tietyens Solicitors Loan Fee”

8.1 Provision for $50,000 per month on account of the Tietyens Solicitors Loan Fees

10.1 Fees generally

Fees drawn off by Tietyens Solicitors (Counts 2-16)

Tietyens operated two trust accounts at the National Australia Bank. The No. 1 Trust Account was for general handling of clients’ money. The No. 2 Trust Account was that to which funds were transferred for on lending in the contributory mortgage scheme. Lendings to borrowers under the scheme were generally drawn out of this account.

The opponent also operated an account at the Macquarie Bank styled “Peter Sharp & Carol Grey of Elton Investment Fund – PAC (Tally-Ho Towers – Tietyens A/C)”. The name is substantially meaningless, having regard to the use, which was made of this account. The opponent and an employee, Carol Grey, were signatories. Funds to be advanced by Tietyens Investments to Tally Ho, by way of instalments in response to draw down notices, were sometimes accumulated in the Macquarie Account before being disbursed to Tally Ho.

Monthly draw down notices were issued by Mr Caines on behalf of Tally Ho to Tietyens Investments. These draw down notices provided expressly that the total sum required included components for the $18,000 per month Tietyens Solicitors Contingency Fund Monthly fee and $50,000 per month on account of the Tietyens Solicitors Loan Fee – under 3 December 1995 Agreement. The total amount of each draw down notice was shown as a debit to the Tally Ho Loan account in the mortgage scheme ledger. However the amounts representing the fees – $68,000 per month – were not included in the transfer of funds to Tally Ho. Rather, those monies were paid directly from the Macquarie Account into accounts under the control of the partners in the firm of Tietyens Solicitors, for their joint use and benefit.

The respective amounts thus paid to the benefit of Tietyens Solicitors on each of the occasions which was the subject of a charge, are set out in the schedule attached hereto. The total thus paid was $761,500.

Transfers of contributories’ deposit funds from the No. 2 Trust Account (NAB) to the Macquarie Account, prior to funds being paid out to Tally Ho, did not constitute the drawing down of funds by the borrower. Funds did not leave the control of the opponent or Tietyens Investments until they were paid out from the Macquarie Account to Tally Ho or at its direction. Thus, the Macquarie Account was de facto a supplementary trust bank account.

The existence of the Macquarie Account was not disclosed to Law Society trust account inspectors. Hence, the fact that the fees of $18,000 per month and $50,000 per month, respectively, were being paid to Tietyens Solicitors by direction of Tally Ho out of funds advanced under the mortgage scheme was concealed from trust account inspectors.

Escalation of the Tally Ho lending

From October 1995 when the first $3.3m was loaned by Tietyens Investments to Tally Ho for the purchase of Lot 1, a further approximately $15m was advanced up to 9 August 1996. The total of debits to the Tally Ho loan account at the latter date was $18.2m, approximately.

On 11 August 1996 an additional $10,365,138.67 was debited to the Tally Ho loan account in Tietyens Investments mortgage lending ledger. This represented moneys which had already been advanced by Mr Needham to Tally Ho but which had hitherto not been secured by Tally Ho’s mortgage of Lot 1 to Tietyens Investments.

From mid August 1996 Tally Ho continued to draw down additional borrowings from Tietyens Investments under 3 December 1995 Agreement. By the time a receiver was appointed to Tietyens’ Trust Account (19 December 1996), the total indebtedness of Tally Ho had grown to $45m. The Receiver, Mr Lombe, was also appointed to Tietyens Investments on 23 December 1996.

Counts 17 to 39

Each of these counts concerned a deposit taken from a contributory during the period 11 August to 26 November 1996. In each case a representation was made to the contributory, either orally or in writing or both, to the effect that deposited funds would be loaned out on first mortgage with a loan to value ratio not exceeding 66%. Such representations were made by members of the staff of Tietyens Solicitors or by financial advisers acting on Tietyens Solicitors behalf, in most cases issuing standard form brochures and general lending authorities, the latter being for signature by the contributory.

The opponent was aware that the representation of maximum 66% LVR was being made because it was a standard term of the documentation of the mortgage practice and had been for a long time. In early 1996 he settled the wording of a brochure which was to be used to solicit funds from potential contributories and he knew that this continued the 66% LVR representation.

Mr Sharp was also aware of the level of lending to Tally Ho at all times in the period 11 August 1996 to 26 November 1996. In particular, his awareness was demonstrated by his signing, from time to time, amended declarations of trust by Tietyens Investments in favour of the contributories. These declarations in each case listed the total amount on loan to Tally Ho.

The funds of each of the contributories the subject of Counts 17-39 were loaned out by Tietyens Investments to Tally Ho, the mortgage security of which was significantly deficient in this period. Between 11 August 1996 and 26 November 1996 the LVR for the Tally Ho loan ranged from 77% to 126%, even when calculated on the valuations provided by Australian Independent Valuer Pty Ltd, that are discussed below.

Value of Tally Ho’s mortgage security from 11 August 1996 to 26 November 1996

Tirtyens Investments did not obtain from Tally Ho a mortgage security over any property additional to Lot 1 until 21 November 1996. The opponent knew this.

On 20 February 1996 a Mr Martin, valuer, of Australian Independent Valuer Pty Ltd (“AIV”) in Melbourne issued a purported valuation of Lot 1 at $20m. This lot had been purchased in October 1995 for only $5.8m. By February 1996, according to Tietyens Investments’ own mortgage lending accounts, only $2m, had been loaned for improvement works. The purported valuation showed on its face no plausible reasoning which could possibly support the increase in value from October 1995 to February 1996.

On 7 August 1996 the same valuer issued a further document purporting to value the “land only” component of Lot 1 at $18,092,000 and the partially executed development works at an additional $8.3m. Again there was no reasoning in the written valuation, which gave any credible justification for this valuation.

Even accepting these successive valuations as reliable, the loan value ratio exceeded 66% from 11 August 1996 when Mr Needham’s advances were debited to the Tally Ho account.

The August 1996 Agreement

In August 1996 the opponent caused Tietyens Investments to enter into an agreement with, inter alia, Tally Ho whereby an additional security for the Tally Ho borrowing would be provided at a later date. This arrangement involved adding on $9.78m to the Tally Ho borrowing from another borrower’s account. The background to this rearrangement of borrowings and securities was as follows.

Commencing in August 1993, Tietyens Investments had loaned to Salvus Quen Nominees Pty Ltd (“Salvus Quen”), Cardiff Dale Pty Ltd and South Pacific a total of $12.276m. Early advances towards this total had been made for the purpose of funding a subdivision development on land near Narooma on the NSW South Coast. Tietyens Investments’ lending on this account is referred to as the Salvus Quen loan.

The properties mortgaged to Tietyens Investments to secure the Salvus Quen loan had included Ringlands Farm (near Narooma) and Lots 4 and 5 at the Tally Ho site in Burwood, Victoria. Lot 4 at the Tally Ho site had been developed and subdivided by August 1996. The borrowers had been permitted by Tietyens Investments to sell off subdivisional lots of Lot 4 without applying any part of the proceeds of sale in reduction of the loan. In addition there were other non-first mortgage securities in the form of company charges and guarantees.

By July 1996 $12.276m was still owed on the Salvus Quen loan. It was secured upon Ringlands Farm, a few residue subdivisional lots from Lot 4 at the Tally Ho site plus Lot 5 at the Tally Ho site. Lot 5 was registered in the name of South Pacific.

The August 1996 Agreement was negotiated by the opponent (with the assistance of Mr Romero) on behalf of Tietyens Investments, with the borrowers and mortgagors under the Salvus Quen loan. As executed it provided as follows:

Salvus Quen would repay only $2.3m of its $12.276m debt.

Tally Ho would assume liability to pay out the balance of $9.78m. Hence this amount was, in due course, debited to the Tally Ho loan account in Tietyens Investments mortgage lending ledger.

Lot 5 and the residual subdivision lots of Lot 4 would be transferred from the other entities to Tally Ho.

Tally Ho would mortgage Lot 5 and the residual portions of Lot 4 to Tietyens Investments.

Pursuant to the August 1996 Agreement real property transfers to Tally Ho were executed in August 1996. A mortgage of Lot 5 and the residual portions of Lot 4, from Tally Ho to Tieryens Investments, was also signed. But these documents were held in escrow pending payment by Salvus Quen to Tietyens Investments of the $2.3m.

Hence, these additional securities did not contribute any improvement in the loan value ratio until 21 November 1996, when the $2.3m payment by Salvus Quen was made.

The residual subdivision lots from Lot 4 had a value of only $300,000. As for Lot 5, it had been purchased on 9 November 1994 by South Pacific from the ABC for $1m. On 20 February 1996, the previously mentioned valuer (Mr Martin of AIV) issued a letter purporting to value this Lot at $15m. It was, on 20 February 1996, a vacant piece of land in exactly the same condition as that in which it had changed hands for only $1m fifteen months earlier. The valuation showed no plausible basis for a fifteen-fold increase in value of this unimproved parcel.

On 7 August 1996 Mr Martin issued a purported valuation of the same Lot 5 at $31m. Again no plausible reason was given to substantiate this figure.

Significantly, it was implicit in the August 1996 Agreement that Tally Ho was acquiring Lot 5 and the residue of Lot 4 in consideration for assuming a debt of $9.78m. That is, the parties treated Lot 5 as having a value no greater than $9.78m.

Counts 17 to 39 particulars

Annexed is a schedule listing in respect of Counts 17 to 39 the date of the false representation made to each investor regarding the 66% LVR, the name of the contributor, the age of that person at the time of his or her deposit and the amount deposited. The total of all amounts invested by these contributories was $1,007,041.01.

During the period 11 August 1996 to 26 November 1996 a total of approximately $27m in additional funds was loaned to Tally Ho, $9.78m of it being by way of transfer on to the Tally Ho account of the deposits of some contributories’ whose monies had previously been advanced to the Salvus Quen borrowers. By the date of appointment of the receiver to Tietyens Trust Account on 19 December 1996, the funds of over 900 contributories had been advanced to Tally Ho.

There was a deficiency of $32.48m between the amount that could be realised on the securities for the Tally Ho loan and the amount owing to the contributories.

This deficiency was paid to contributories out of the NSW Law Society Fidelity Fund: 50 cents in the dollar in September 1998, 25 cents in the dollar in January 2000 and the balance in about October 2000.

On 16 February 1998 the receiver and manager of Tietyens Investments was able to realise Lot 1 for a total of $11.6m (including a unit and two apartments sold separately). On 18 February 1998 Lot 5 realised only $1.58m.

COUNTS 2 TO 16

Contrary to Sections 232(6) and 1317FA of the Corporations Law

As taken to be included in the Corporations Act 2001

By Section 1401 of that Act

Count

Date of Payment

Amount of Payment

2

14 December 1995

$18,000

3

18 December 1995

$50,000

4

17 January 1996

$68,000

5

19 February 1996

$68,000

6

18 March 1996

$140,500

7

21 May 1996

$69,500

8

8 June 1996

$40,000

9

8 June 1996

$40,000

10

1 August 1996

$59,000

11

21 August 1996

$30,000

12

29 August 1996

$25,000

13

3 September 1996

$14,500

14

16 September 1996

$40,000

15

4 October 1996

$29,500

16

19 November 1996

$69,500

TOTAL

$761,500

COUNTS 17 TO 39

Contrary to Section 178BB of the Crimes Act 1900 (NSW)

Count

Date of Representation

Contributor and Age at Time of Investment

Amount Invested in Tally Ho Mortgage

17

22 August 1996

Ms J M Brett 58 years

$25,000

18

27 August 1996

Ms J Kelly 61 years

$3,000

19

7 to 10 September 1996

Mr EJ Bourke 55 years

$100,000

20

1 to 18 September 1996

Mr AG Hosking 59 years

$55,000

21

23 September 1996

Mr AC Hutchinson 35 years

$30,000

22

30 September 1996

Mr GM Francis 62 years

$160,000

23

1 October 1996

Mr JW Henderson 42 years

$29,341.01

24

1 October 1996

Mr MA Sutcliffe 37 years

$15,000

25

4 October 1996

Ms AE Lucas 48 years

$200,000

26

26 September to 4 October 1996

Mr JA D’Arcy 58 years

$50,000

27

1 to 10 October 1996

Ms S Hutman

$8,700

28

22 October 1996

Mr HI Jackson 60 years

$2,500

29

16 October 1996

Mr LR Foord 67 years

$30,000

30

29 October 1996

Mr LB Delamare 53 years

$10,000

31

4 November 1996

Mr JA Gilbert 41 years

$60,000

32

4 September to 7 November 1996

Ms H Boucher 58 years

$40,000

33

15 November 1996

Ms L Lautenbacher 24 years

$5,000

34

12 to 15 November 1996

Mr LF Clarke 57 years

$25,000

35

21 to 29 November 1996

Mr JG Mackinnon 53 years

$25,000

36

26 November 1996

Ms S Hutman 47 years

$2,500

37

28 November 1996

Mr KR Howard 58 years

$31,000

38

1 November to 2 December 1996

Ms MS Gadd 43 years

$50,000

39

5 December 1996

Mr AJ Hodge 58 years

$50,000

TOTAL

$1,007,041.01

5 To summarise the foregoing, all of the charges upon which the opponent was convicted and sentenced arose from his involvement in a contributory mortgage scheme operated by the firm Tietyens and when he was the partner primarily responsible for its administration. It is further apparent that the arrangements were such that the firm would receive substantial fees in which the opponent would beneficially share. However, the contributories to the mortgage scheme were never informed of that arrangement and thus lent monies in ignorance of the significant profit that the firm, and therefore the opponent, stood to gain.

6 The fees in question were paid from funds that were in fact to be held by Tietyens Investments Pty Limited in trust for the contributories under the scheme in circumstances where the opponent controlled that company. The opponent was accordingly using his position as an officer of Tietyens Investments Pty Limited improperly in causing that company to enter into an agreement whereby it, and therefore he, would benefit from its own trust of the contributories’ funds. That action constituted the gravamen of the first count of the indictment in respect of which the opponent was convicted.

7 Counts 2 to 16 inclusive of the indictment were individual instances of that agreement being put into effect by the opponent. The effect of so doing was to enable $18,000 per month to be paid to the Tietyens Solicitors’ Contingency Fund and $50,000 per month to the Tietyens Solicitors’ Loan Fees. The total sum of $68,000 per month was paid directly into an account under the control of the partners of the firm including the opponent for their joint use and benefit. As counts 2 to 16 indicate, there were 15 separate occasions between 14 December 1995 and 19 November 1996 when such fees and payments were made pursuant to the agreement. All of the payments were fees of one type or another, none of which was disclosed or known to the contributories to the mortgage funds. As the agreed Statement of Facts indicates, the total amount of fees of one type or another transferred, and the subject of these 15 charges, was $761,500 which sum flowed to the three partners of the firm including the opponent.

8 Counts 17 to 39 inclusive related to statements made by the opponent to named persons on specific dates covering the period from 22 August 1996 to 5 December 1996. These statements were to the effect that the funds they each deposited with the firm for investment through its mortgage lending scheme would be secured by first mortgage over property at Burwood in Melbourne up to a maximum limit not exceeding 66% of the true value of that security.

9 The offences arose because each of these statements was made by the opponent knowing them to be misleading and with the intention of obtaining financial advantage for Tietyens Investments Pty Limited as well as himself and the other partners of the firm.

10 As was noted by the sentencing judge in her Sentencing Remarks of 18 May 2004 when sentencing the opponent, the offences were aggravated because of the breach of trust he perpetrated. Further, the opportunity for the opponent to commit the offences arose directly out of the fact that he was a solicitor in Albury at the time. The sentencing judge’s remarks continued in these terms:

“Like any solicitor, with a practising certificate, he was a person of good character at the time the offences were committed, and as referred to in the authorities in relation to offences involving defalcation or fraud by solicitors, it is because of that good character and the position of trust occupied by a solicitor that the opportunity exists for such offences to be committed.

Members of the public rely on the good character of members of the legal profession and feel entitled to trust them, particularly so when it comes to depositing money with them. They expect that solicitors will honour that trust, act faithfully and honestly on behalf of their clients and not abuse that trust. Particularly so, not for their own financial advantage.

The [opponent] has abused the trust of each of these individuals in pursuit of his own greed. This abuse of trust by him is an aggravating factor to take into account when sentencing him for each of these offences. In fact, fortunately enough, each of the individuals who contributed to the funds the subject of counts 17-39 were ultimately reimbursed, albeit not by the [opponent].”

11 In light of the foregoing observations of her Honour, with which we respectfully agree, and particularly in light of the conviction of the opponent in respect of the 39 offences referred to, it is apparent that the opponent is neither a person of good fame and character nor a fit and proper person to remain on The Local Roll of lawyers of this Court. Quite properly the opponent does not contest that conclusion. In the present case his unfitness is conclusively proven by his conviction for a large and serious number of offences of an essentially fraudulent nature which strike at the heart of justice and of the relationship of trust and integrity between a solicitor and those with whom he or she deals: Prothonotary of the Supreme Court of New South Wales v Bangallo (1993) 67 A Crim R 77 at 85.

12 The opponent’s conduct was not such as can be tolerated in the legal profession and has clearly damaged the trust that members of the public are able to repose in solicitors whose names remain on The Local Roll of lawyers of this State. It is therefore in the public interest that this Court should formally record that the opponent is not only not of good fame and character but also that he is permanently unfit to practice as a member of the legal profession and is thus not a fit and proper person to remain on The Local Roll of lawyers. Further, in our opinion, the opponent’s conduct amounted to professional misconduct and that finding also should be formally declared.

13 Although there have been suggestions in the past that professional misconduct is confined to misconduct by a solicitor in the exercise of his profession as such, that is no longer the case. Thus in New South Wales Bar Association v Cummins [2001] NSWCA 284; (2001) 52 NSWLR 279 at 289 [56], Spigelman CJ (with whom Mason P and Handley JA agreed) observed as follows:

“There is authority in favour of extending the terminology ‘professional misconduct’ to acts not occurring directly in the course of professional practice. That is not to say that any form of personal conduct may be regarded as professional misconduct. The authorities appear to me to suggest two kinds of relationships that justify applying the terminology in this broader way. First, acts may be sufficiently closely connected with actual practice, albeit not occurring in the course of such practice. Secondly, conduct outside the course of practice may manifest the presence or absence of qualities which are incompatible with, or essential for, the conduct of practice. In this second case, the terminology of ‘professional misconduct’ overlaps with and, usually it is not necessary to distinguish it from, the terminology of ‘good fame and character’ or ‘fit and proper person’.”

14 The High Court expressed similar sentiments, and cited Cummins with approval, in its joint judgment in A Solicitor v Law Society (NSW) [2004] HCA 1; (2004) 216 CLR 253 at 267 [20], where the following observation is made:

“Professional misconduct does not simply mean misconduct by a professional person. At the same time, even though conduct is not engaged in directly in the course of professional practice, it may be so connected to such practice as to amount to professional misconduct.”

15 In our view, even though the conduct of the opponent in respect of which he was convicted may not have occurred in the course of his actual practice as a solicitor, his conduct was so closely connected with that practice as to fall within the first of the two kinds of relationships referred to by the Chief Justice in Cummins as justifying a conclusion of professional misconduct. Further, even if his conduct fell outside the course of his practice, that conduct was such as to manifest the absence of those qualities which are essential for the conduct of a solicitor of this State and the presence of other qualities which are patently incompatible with such conduct. Accordingly, the opponent’s conduct also fell within the second of the relationship categories referred to by the Chief Justice.

16 In any event, we would respectfully agree with the sentencing judge’s comments, to which we have referred above, where she found that at the time the subject offences were committed by the opponent he was a solicitor and was thus placed in a position to obtain funds from the contributories and to misuse them in the manner in which he did. In so doing he clearly breached the relationship of trust reposed in him by those contributories in circumstances where his practice as a solicitor directly provided him with the opportunity to commit the offences in question. His conduct would clearly incur the reprobation of his professional colleagues of good repute and constancy: New South Wales Bar Association v Smith 9 May 1991, Court of Appeal unreported) per Samuels JA.

17 It is therefore appropriate to accede to the submission of the claimant that the opponent, in engaging in the conduct which led to his conviction with respect to the 39 offences, was guilty of professional misconduct. As the Chief Justice said in Cummins at 291 [69],

“The maintenance of the confidence of the public in the legal profession thus makes it appropriate to formally declare that the opponent’s conduct was professional misconduct.”

18 Finally, we note that the opponent has not appeared before us but has consented in writing (Exhibit A) to the making of the declarations and orders in the summons other than costs. In the circumstances, the claimant is prepared to forego any order for costs.

19 For the foregoing reasons, the Court makes the following declarations and order:

1. DECLARE that the Opponent has been guilty of professional misconduct in that he engaged in conduct between 8 December 1995 and 28 November 1996, for which he pleaded guilty in the District Court of New South Wales of thirty-nine indictable offences, on 5 April 2004, namely:

(i) Sixteen counts of offences of knowingly and dishonestly with intent to gain advantage made improper use of position as a company officer, contrary to ss232(6) and 1317FA of the Corporations Law, being offences under the Corporations Act 2001 (Cth) by virtue of s1401 of the Corporations Act 2001 (Cth); and

(ii) Twenty-three counts of offences of make false or misleading statement with intent to obtain a valuable thing, contrary to s178BB of the Crimes Act 1900 (NSW).

2. DECLARE that the Opponent is not a person of good fame and character.

3. DECLARE that the Opponent is not a fit and proper person to remain on The Local Roll of lawyers of the Supreme Court of New South Wales.

4. ORDER that the name of the Opponent be removed from The Local Roll of lawyers of the Supreme Court of New South Wales.

**********

LAST UPDATED: 28/02/2006