NSWCA surveys fines in NSW lawyers’ discipline decisions over a decade

Russo v Legal Services Commissioner [2016] NSWCA 306 was the subject of my previous post. The Court engaged in a comparatively sophisticated review of disciplinary outcomes in like cases.  The purposes of this post is to reproduce that review and comment on the variables which ought to be taken into account in any proper survey of past outcomes.

To survey penalties in like cases has always been an important part of sentencing and should be an important part in imposing disciplinary sanctions.  Barbaro  (2014) 253 CLR 58; [2014] HCA 2 and Cth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 do not suggest to the contrary.  They say that the purpose of a survey of like sanctions is to promote consistency in penalties but not the establishment of a range of available sanctions deviation from which is appellable.  Buchanan JA observed in R v Macneil-Brown [2008] VSCA 190, (2008) 20 VR 677 at [130]:

‘counsel can best assist a sentencing judge, not by advancing what they consider to be sentences at the lower or upper limits of a sound sentencing discretion, but by making submissions as to the existence and nature of aggravating and mitigating circumstances and providing some guide to the manner in which other judges have approached like cases by supplying sentencing statistics and citing passages from decided cases which bear upon aspects of the instant case.’

I would submit that any survey of fines as a disciplinary sanction must take into account, as an important aspect of the analysis, the financial situation of the person or persons liable to pay it.  The specific deterrence of a fine will vary greatly from one practitioner to another.  Practitioners who struggle, for personal reasons, are more likely to get themselves into trouble in the first place, and to exacerbate it by less than perfect intercourse with the Legal Services Commissioner.  Their financial situations often deteriorate too.  Specific deterrence may be achieved by imposition of a fine much smaller than would be imposed on a flourishing practitioner raking it in.  General deterrence will also be achieved if the Tribunal is transparent in taking account of financial circumstance.  In such a case, the Tribunal might indicate the kind of fine which might have been imposed had the practitioner enjoyed an average post-tax income.

Furthermore, the costs burden borne by the practitioner ought also to be taken into consideration.  Costs and fine are inter-related in this way: Environment Protection Authority v Barnes [2006] NSWCCA 246 at [88] (Kirby J speaking for the Court) applied by analogy in LSC v Bechara [2009] NSWADT 313. The extraordinary costs practitioners are liable to in Victoria following disciplinary prosecutions would very often be more than adequate to achieve specific and general deterrence.  If you are prosecuted and reprimanded, made the subject of an editorial on the front page of the Commissioner’s website, and have to cough up $40,000 in unrecoverable solicitor-client costs reasonably incurred and costs liability to the Legal Services Commissioner, that is going to make you think just as hard about doing it again as any comparatively trivial fine you might cop.

Finally, one must be astute to inflation.  In my experience, people tend to exaggerate the effect of inflation when considering older fines.  Here is a calculator which assists in measuring in today’s dollars a fine imposed some years ago.

For some reason, notwithstanding that NSW is now a part of the legal profession uniform law, the other participant in which is Victoria, no Victorian fines were part of the survey.  That strikes me as unusual, since there is a whole statutory office the purpose of which is to promote interstate uniformity in the application of the Uniform Law: the Commissioner for Uniform Legal Services Regulation.  Russo’s Case was decided under the old legislation which the LPUL replaced, and which legislation in fact governed the prosecution was one of the issues on appeal.  Interestingly, apparently because it was thought that there were no relevant differences between the two regimes, that question was not decided.

This is what the NSWCA said about its survey of fines, and about the appropriate fine in this case:

  1. As to the fine, the Commissioner, with the consent of Mr Russo, forwarded a supplementary submission (at the Court’s request) as to the fines that have been levied in legal profession disciplinary proceedings between 2005 and 2016. Mr Russo also filed written submissions on this issue.
  2. In summary, over the period referred to in the Commissioner’s submissions, fines ranging from $2,000 in a range of matters to $48,000 in Legal Services Commissioner v Bryden and Hagipantelis (No 3) [2012] NSWADT 225 have been imposed for a variety of misconduct – the highest fine relating to breach of advertising regulations. The Commissioner notes that, earlier, in 2002, a fine of $35,000 was imposed (Law Society of New South Wales v Shad [2002] NSWADT 236) for the false witnessing of signatures on mortgage documents and attempts to mislead the Law Society, the Court and a bank.
  3. Mr Russo submits that the most comparable matters to take into account in determining the amount of the fine (which he accepts should be a “significant fine”) are those of Council of the Law Society of New South Wales v Ross [2013] NSWADT 106 and Law Society of New South Wales vHannam [2006] NSWADT 24 where the fine imposed for the misconduct in each case was $5,000. In Ross, the practitioner received fines of $5,000 each for two matters – deliberate transfer of $9,900 for costs from trust to office without authority; and subsequently failing to pay counsel’s fees after authorisation to transfer from trust to office of a sum of $2,200 more than required for those fees in any event. In Hannam, there was a failure to keep proper accounting records in respect of 16 client matters. The agreed fine, which the Tribunal considered lenient, was $5,000.
  4. Mr Russo submits that in the cases where the fine imposed has been at or above $10,000 the conduct in question was more egregious than his. In particular, Mr Russo refers to the following cases.
  5. First, Council of the Law Society of New South Wales v Hancock (No 2) [2009] NSWADT 327, where there was a gross delay in performance of a retainer (the stamping of documents), a failure to communicate with the client for three years, and failure to comply with a s 660 notice. Mr Russo says, here, that although he accepts he unsatisfactorily “failed to engage with the substance” of the Client’s correspondence, that was for a lesser period of time (about 12 months) and he did comply with the statutory notice (although it should be noted that the s 660 notice was issued following delay in his response to the Commissioner’s earlier requests for information). The fine there imposed was $12,000.
  6. Second, Legal Services Commissioner v McCarthy [2010] NSWADT 269, where the practitioner had been the subject of three earlier unrelated findings and professional misconduct and the fine of $10,000 was based on a failure to comply with a s 660 notice preceded by persistent failure to respond to correspondence from the clients and the Commission.
  7. Third, Bar Association of New South Wales v Miller (No 2) [2011] NSWADT 148, where the practitioner was fined $10,000, having ignored a s 660 notice and not having otherwise explained his conduct.
  8. Fourth, Legal Services Commissioner v Tsalidis [2013] NSWADT 101, where the practitioner had been found in earlier and separate proceedings to have engaged in unsatisfactory professional conduct and professional misconduct and was later the subject of four applications in which there were five findings of professional misconduct and three findings of unsatisfactory professional conduct, including a failure to comply with four s 660 notices and failures to comply with the Tribunal or other statutory requirements. The practitioner was fined $12,000.
  9. Fifth, Council of the Law Society of New South Wales v McHugh [2014] NSWCATOD 37, where there was consent to a fine of $10,000. The matter involved trust account breaches in respect of 11 client matters and a failure to remit GST and superannuation contributions in respect of employees.
  10. Finally, Council of the Law Society of New South Wales v Vaughan [2015] NSWCATOD 156, where the practitioner was fined $20,000, having borrowed $40,000 from a client that subsequently denied the fact of the loan and that the lender was a client, and having transferred fees of $4,400 from trust to office without authority.
  11. Reference is also made to Re Robb (1996) 134 FLR 294 at 310 (to which the Tribunal had itself made reference), where trust funds were transferred to an office account to pay counsel but the payment was delayed for several months and the conduct was found to amount to professional misconduct. There, the Court said:

Where the solicitor holds a client’s funds for the very purpose and uses them for the solicitor’s own means, the solicitor’s conduct is that the Court must take steps to ensure that the solicitor concerned and other members of the profession who might act likewise, whether through indifference or ignorance, understand the seriousness of their breach of duty.

It is necessary then that the order of the Court, although not punitive in character, deliver the message that no matter how efficient, eminent or popular the practitioner, conduct like that in the present case must be understood by all professional practitioners to amount to professional misconduct.

  1. Under the Legal Profession Act, s 562(7), the maximum fine for professional misconduct was $75,000 and for unsatisfactory professional conduct was $10,000. For completeness, it may be noted that under the equivalent earlier legislation in 1987, the amounts were $50,000 and $5,000 respectively and under the Uniform Law (which Mr Russo contends is the applicable legislation under which the Commissioner’s application should have been determined) there is now a maximum fine for professional misconduct of $100,000 (s 302(1)(l)) and for unsatisfactory professional conduct of $25,000 (s 299(1)(f)).
  2. Counsel for Mr Russo characterises the present case as one where the application was founded on Mr Russo’s dealings with one matter, for one client, in respect of one (of the two) counsel retained in the matter, and related to Mr Russo’s conduct in respect of a small number of invoices. It is said that the evidence did not suggest that Mr Russo’s failings were systemic or widespread (though the manner in which the general office account was operated might well give rise to questions as to how counsels’ fees were invoiced and accounted for in other matters). As to the compensation to the Client, it is submitted that the compensation paid (in the amount sought by the Client’s legal representative) resulted in the net amount paid by the Client to Mr Russo being less than the sum of the relevant invoices. (That, of course, does not take account of the stress occasioned to the Client. Nor is it clear whether the Client received full reimbursement of costs incurred by him in addressing the matter.)
  3. It is submitted that, on the evidence before the Tribunal, the likely explanation for what occurred was inadvertence; that this is not a case where the solicitor deliberately used moneys held on trust for his own purpose; that it is an isolated incident, which should have been resolved at the time it arose; and that Mr Russo accepted before the Tribunal that the fact that it was not so resolved was his fault.
  4. That said, Mr Russo’s misconduct involved obvious deficiencies in his application of trust moneys (and a failure to recognise that moneys paid for counsel’s fees were properly to be regarded as trust moneys). His failure satisfactorily to account to his former client (both in an accounting sense and in the sense of accepting that he was accountable to the Client for what had occurred) for moneys received in payment of counsel’s fees was exacerbated by the high-handed and dismissive manner in which Mr Russo responded to queries made on behalf of the Client.
  5. The fine to be imposed must convey to the legal profession and to the community in general that such conduct is unacceptable.
  6. The Court was informed that it was common ground between the parties that the applicable maximum penalty would not be increased beyond that applicable at the time the matter was dealt with (T 16.14). Approaching the matter on the agreed basis that the maximum penalty would be $75,000, the appropriate fine to mark the Court’s censure of this misconduct in the present case is $20,000. For the reasons given above, particularly at [52] – [54], this was a serious case of professional misconduct involving an elderly and unwell former client and none of the cases cited by Mr Russo as a “comparable” stands in the way of that conclusion.

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