In an own-motion investigation, a Standards Committee (Committee) has censured, fined and ordered costs against a sole practitioner for failing to maintain adequate trust accounting systems despite repeated reminders and concerns raised during reviews by the Law Society Inspectorate.
The Inspectorate reviewed the lawyer’s practice in 2014, 2018 and 2021, all during which the lawyer’s potential non-compliance with trust account rules and regulations were raised to consider and fix. Of note were concerns regarding the lawyer maintaining a manual hand-written ledger which at the time of a 2021 trust account inspection was “not fit for purpose” having regard to the relevant trust account regulations and guidelines.
Other concerns included inadequate reconciliation, treatment of dormant balances, inadequate reporting to clients regarding the state of their balances and the lawyer’s billing practices by charging “incidental fees” as “disbursements” without prior notification to clients.
In finding the lawyer’s trust accounting system was not fit for purpose, the Committee said for some time he had been using a manual system that was only suitable for a modest volume of transactions and balances. The lawyer’s trust account, however, had received and paid approximately $44 million in one month alone in 2021.
In relation to filing trust account certificates, the Committee considered the lawyer’s “impression that it was fine to submit the [trust account] certificate within the relevant month … concerning” particularly noting this issue was drawn to the lawyer’s attention as early as 2014.
The Committee considered that the lawyer had breached various trust account obligations and had been previously warned about these by the Inspectorate. It noted the lawyer had breached his obligations with respect to the treatment of dormant balances and reporting statements but that this was rectified following the 2021 Inspectorate review. Similarly, the lawyer’s firm had changed its trust accounting system and now correctly advises and estimates office expenses to clients ahead of time. The Committee said that those matters were relevant to consideration of appropriate penalty.
The Committee noted the lawyer considered some of the trust accounting issues to be trivial but it went on to say “trust accounting breaches are not a trivial matter. The need for strict compliance with the trust accounting requirements in the Act and the Regulations has been emphasised previously by both the Legal Complaints Review Officer and the Courts”. It emphasised that “[the] duties imposed on solicitors in relation to trust accounts and protection of client funds are fundamental to the principle of consumer protection and the obligation to ensure public confidence in the profession.”
The Committee found the lawyer breached: regs 11, 11(2), 12(3), 12(7), 14 and 17 of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008); guidelines 1.3, 4.3 and 4.8 of the Lawyers Trust Accounting Guidelines; and rr 3, 3.4(a), 9 and 11.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.
The Committee considered it aggravating that the lawyer had been previously warned and that the matters “involved multiple breaches of trust account requirements under the regulations, repeated overtime.” Moreover, the lawyer had two previous findings of unsatisfactory conduct for trust account breaches of a similar nature. The Committee considered a fine of $12,500 reflected the “high level of seriousness” of the breaches.