NSW solicitor who failed to pay counsel’s fees struck off

Updated post (25 July 2014):  The answer to the question posed by the original post is: yes, he will be struck off.  Here are the reasons: Council of the Law Society of NSW V Andreone (No2) [2014] NSWCATOD 81.  His failure to make submissions on the question would not have assisted.  On the question of whether monies received by solicitors from clients for payment of counsel’s fees are trust monies, and on whose behalf they are held, see Legal Services Board v Gillespie-Jones [2013] HCA 35 about which Melbourne University’s Associate Professor Bant’s learned commentary may be found here.

Original post (published as ‘Will Solicitor Who Failed to Pay Counsel’s Fees be Struck Off?’): The Law Society of NSW wants a solicitor who persistently delayed in paying counsel struck off. The NSW equivalent of VCAT has found the professional misconduct established: Council of the Law Society of NSW v Andreone (No. 1) [2014] NSWCATOD 49, and a hearing on sentencing is pending.  In this case, clients had paid bills which included claims by the solicitor for counsel’s fees by electronically depositing monies into the firm’s office account — probably at the firm’s direction, as the Tribunal found.

The Tribunal found without reference to authority that those payments were trust monies to the extent that they satisfied the claims by the solicitor for counsel’s fees, the solicitor not having paid the counsel at the time of their receipt.  In other words, the solicitor held the monies on trust for the barristers. But it seems that the Tribunal considered the solicitor’s misappropriation of trust monies and the failure to pay the fees as separate instances of professional misconduct.  In other words, the mere failure to pay the fees, given its intentionality and persistence, amounted to professional misconduct.  This is what the Tribunal said:

‘MISAPPROPRIATION – BARRISTERS’ FEES

64. The funds listed in para 56 were provided by or on behalf of clients to the law practice for payment of barrister’s fees as detailed in para 56. The barrister’s fees were included as disbursements in bills to the clients but had not been paid by the Firm, so the funds provided by the clients in payment of the bills were, to the extent of the amounts of the barristers’ fees, trust money paid to the Firm for payment to the barristers.

65. The funds (total $74,593.75) were by 5 payments. The Respondent says in his Reply they were paid by the clients by electronic funds transferred to the office account. But there is evidence in the Firm’s records that two of the payments were by a single cheque, which the Firm deposited to the office account.

66. The evidence is that the Counsel’s fees had not been paid by the Firm when each of the amounts were received. The funds were for payment of Counsel’s fees and were therefore trust funds. If they were paid to the Firm other than by direct transfer, then the decision to deposit the funds in the office account was a misappropriation by the Firm.

67. If the funds were paid by the clients by direct electronic funds transfer to the office account, that raises a question of how the 3 payments of funds over the period 21 August 2009 to 9 November 2009 by 2 different clients were all paid by electronic transfer to the office account of the Firm, instead of to the trust account.

68. At pages 60-61 of the Affidavit of Anne-Marie Foord there is a copy of the bill for one of the clients: “The Owners – Strata Plan No. 58068″. The cover page of the bill is a printed format, which includes a “payment slip”. Under the invoice number, total amount due, and due date, is an instruction, “Please turn over for how to pay”.

69. There is no copy of the reverse side of the payment slip in evidence.

70. On all the evidence, it appears that the instruction for direct payment on the reverse side of the payment slip identifies the account to which the funds were to be directly deposited using the account number of the office account, rather than the trust account. In other words, the Firm instructed the clients to pay the money to the office account, even where they were or included trust money. The Tribunal is comfortably satisfied that by that method or other means the clients who made those 3 payments were instructed by the Firm to pay them to an account of the Firm that was the Office Account.

71. At pages 66 – 68 of the affidavit of Anne-Marie Foord there is evidence that on 17 August 2009 the law practice received into its office account a payment $15,416.50 part payment of costs and disbursements. The disbursements included Counsel’s fees of $12,980.00 for Mr Jackman. On 9 November 2009 Settlement funds of $630,719.37 were received from the Owners SP 62254 into the trust account and on the same day $119,280.63 of those trust funds were transferred to the office account for the balance of costs and disbursements. But none of Mr Jackman’s fees of $12,980.00 were paid. The receipt of $15,416.50 into office account and transfer of $119,280.63 from the trust account to the office account were a misappropriation of the client’s trust money to the extent of Mr Jackman’s fees of 12,90.00

72. In relation to the transaction on 21 August 2009, there is evidence at page 59 of the affidavit of Anne-Marie Foord that the Firm included Fees of Mr Jackman of $4,400.00 in its bill and received the full amount of the bill ($5,875.87) by direct deposit into its office account. It did not pay Mr Jackman. The receipt of the trust money to pay Mr Jackman into the office account, apparently at the direction of the Firm, was a misappropriation of those trust funds of $4,400.00.

73. The 2 amounts in para 47 dated 2 September 2009 were $43,257.50 for Mr Jackman and $13,956.25 for Mr Young. There is evidence at pages 60-65 of the affidavit of Anne-Marie Foord. The fees of Mr Jackson and Mr Young and the applicable GST were included in the bill to the client of 28 August 2009 for a total of $116,778.98 of which the fees of Mr Jackman and Mr Young (including GST payable to them) was $57,231.75. The client paid precisely that amount by cheque as part payment of the bill on 2 September 2009. On the evidence that payment was for payment of the 2 barristers, and was trust money for that purpose. But neither of the barristers were paid. Instead the Firm deposited that cheque into the office account. That was a misappropriation of the trust funds paid by the client for payment to the barristers.

74. The $74,593.75 of trust money to pay barristers’ fees was misappropriated because instead of using it to pay the barristers, the Firm deposited it into the overdrawn Office Account, thereby using it to reduce the Firm’s debt to its bank. We are comfortably satisfied that the Respondent was aware that the cheque was or included trust money and knowingly caused it to be deposited to the office account. Similarly the direct deposits by the clients to the office account were a result intended by the Respondent by causing the provision of direct deposit payment instructions on the bills to the clients that specified the number of the Office Account instead of the Trust Account. His conduct in relation to each amount was dishonest and fraudulent. It was prohibited by the Act and under the criminal law. It was clearly professional misconduct

FAILURE TO PAY COUNSEL’S FEES

75. With regard to the Counsel’s fees listed in paragraph 56, the Tribunal is comfortably satisfied that the Respondent and the Firm failed to pay each amount of Counsel’s fees.

76. There are numerous decisions establishing the personal duty of a solicitor to pay fees of a barrister retained by the solicitor on behalf of a client. It has also been established that “wilful or persistent refusal to pay Counsel’s fees can amount to professional misconduct on the part of a solicitor” (Re: Robb (1996) 134FLR294 at page 310; Law Society v McCarthy (2003) NSWADT 58 at para 43; and Council of the Law Society of NSW v Beazley [2012] NSWADT 153).

77. In Law Society of NSW v Davidson [2007] NSWADT 264, the solicitor delayed for periods of 1 – 4 months the payment of barrister’s fees and consultant’s fees for a total of 6 different people. The Tribunal found that the delays were: “Not a mere matter of oversight or misapprehension as to the solicitor’s obligation to pay those disbursements”. It found that the delays were deliberate. It found that he: “Failed to pay third parties within a reasonable time”. It held: “… persistent delay in the payment of moneys due to third parties constitutes professional misconduct”. It held that the solicitor was guilty of professional misconduct in relation to the delayed payment of each of the 6 persons.

78. In Council of the Law Society of NSW v Beazley [2012] NSWADT153, in the particular circumstances of the failure of Mr Beazley to pay barrister’s fees, the Tribunal held that his conduct was neither professional misconduct nor unsatisfactory professional misconduct. The solicitor there had not signed the costs agreement for an appeal. He had sent it to the client for signing.

79. Here there were failures to pay 5 amounts of counsel’s fees billed to clients all in about August & September 2009. That is a pattern. It is now approaching 5 years since the bills, but the Respondent has paid no part of the barristers’ fees. His failure to pay is wilful and persistent.

80. The Tribunal finds that the 5 occasions of failure to pay barrister’s fees constituted professional misconduct as it was unsatisfactory professional conduct involving substantial failure to maintain a reasonable standard of competence and diligence.

81. The deposit of these amounts of trust money to the office account in each case also constituted a breach of s. 254(1) of the Act (the requirement to deposit trust money to a trust account). The failure to use the trust money to pay the relevant barristers’ fees was in each case a breach of section 255(1) (the requirement to hold trust money exclusively for the person on whose behalf it is received and to disburse it only in accordance with a direction given by the person).’