Legal Ethics Assignment

1.    Introduction

This question raises a number of ethical issues which involve the misappropriation of client funds and alleged breaches of Section 255 and 256 of the Legal Profession Act 2004 (NSW) (‘the Act’).  This paper will also consider the potential of a Professional Misconduct case in relation to the actions of S in misleading the ATO and his client.

This report will outline:

(a)          The substantive issues of Professional Misconduct on the part of S;

(b)          The Role of Disciplinary Proceedings; and,

(c)          Outline recommended findings and likely orders of the Council.

2.    Alleged Misconduct

Statutory misconduct with respect to handling of trust money is contained in Section 255 of the Act which states:

“a law practice must hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and disburse the trust money only in accordance with a direction given by the person.”[1].  

The facts state that there has been a removal of Joe’s estate funds and under the Act borrowing from the client, without the client’s apparent authority.  This may amount to misappropriation under Section 255.  Similarly, Section 255 of the Act does not require the element of willfulness to be established.  In this sense Section 255 is strict so the mere act of breach amounts to an offence. 

In making their decision the Council must consider S’s conduct at the time in question and not the result of that conduct.  In Law Society of New South Wales v Bolster[2] it was found that the result of the conduct is irrelevant.  Therefore on the facts it is irrelevant that Maria made money from S’s conduct or that S did not cause any loss or damage by his behaviour.  This can be contrasted with the position in Re Hodgekiss[3] which defined willful not just in terms of a deliberate act of willfulness, but also in terms of breaching practitioner’s statutory obligations with reckless carelessness.

The question then turns on whether S misappropriated Maria’s money.  On the facts the money was deposited for the purpose of S acting for her in his capacity as solicitor.  The facts are silent as to whether she provided authority for S to withdraw the funds.  Similarly there is no evidence that the matter had concluded or that a bill had been sent which would be prima facie authority to transfer such funds.  All the available evidence points in the direction that S’s conduct was not authorised by neither Joe nor Maria.  If this view is accepted then there may be a breach of Section 255 of the Act by S.