Background 

While practising, Ms X operated a trust account in her capacity as a sole practitioner. After her retirement, and three months before her practising certificate expired, Ms X transferred all the funds from her practice’s IBD bank account (exceeding $1.3 million) to her trust account.  

A series of transfers were subsequently made from her trust account to various recipients until her practising certificate expired. Of note, a significant sum was transferred from her trust account to her office account and to the account belonging to her attorney. The Committee was concerned by the lack of evidence of proper instructions or authorities being given from the people on whose behalf the money was held and commenced an investigation. 

Ms X provided limited information to explain the transfers made from the trust account. She argued that the matter fell outside of the Committee’s jurisdiction as she was no longer a lawyer. The Committee established that:  

“Lawyers standards committees have the power to inquire into the conduct of, and make findings in relation to, not only lawyers but former lawyers. In relation to former lawyers, such inquiries and findings relate to conduct occurring when the lawyer was in practice… That includes the possibility of unauthorised or improperly documented dealings with trust money.” 

Because of “the considerable ongoing delays and seriousness of this matter” the Committee initially resolved to refer the matter to the Police, and informed Ms X. Subsequently, after receiving further information from Ms X, the Committee concluded that it did not hold concerns that Ms X had engaged in criminal activity and the Police were informed (no further action being taken by the Police).  

Responding to the investigation, Ms X provided context for nine sums that were transferred to her office account and the attorney’s account in the days leading to the expiry of her practising certificate. The Committee considered the nine transfers of funds and explanations provided by Ms X, which included: 

Transfer of estate funds 

Ms X acted for a client and was appointed power of attorney in relation to his property. After his death, Ms X became the sole executor and trustee of the estate.  

Ms X held the estate funds and continued to do so once she ceased practising. Ms X transferred the funds from her trust account to her office account on the last day she held a practising certificate. Her manual ledger showed that $435,000 was still in her office account at the time of investigation. Ms X provided no evidence of receiving proper authority from the beneficiaries for the transfer, other than alluding to telephone calls.  

Transfer of funds related to a former employee 

Ms X held funds for a relative of a former employee. She transferred more than $13,000 from her trust account to her office account on the last day she held her practising certificate. She explained that the funds were held because of the "advantages of” trust accounts. The authority she provided for holding the money after ceasing practice was that her former employee prepared all notices of her retirement and, therefore, knew of her intentions to cease practising. The funds were held for two months and then paid out at the direction of her former employee.  

Transfer to separate account opened for an estate 

Ms X uplifted files from a law firm on behalf of a client, which included funds and documents. Ms X also prepared her enduring Powers of Attorney and will. When the client died, Ms X was appointed executor of the estate alongside her friend. One third of the estate was left to the client’s friend and the remainder was split between family members.  

Ms X transferred close to $80,000 to her office account on the last day before her practising certificate expired. She advised that she and the client’s friend later opened a separate bank account for the estate. She did not provide any records to prove that she no longer held any money for the estate in her office account. She said all records and correspondence showing payment were with the client’s friend.   

Transfer of estate funds to attorney  

Ms X acted for a client, and when they died, she acted for their estate but was not an executor. Ms X received funds in the sum of $16,849.44 which were sent to her office account prior to the expiry of her practising certificate. Ms X alleged that these funds were sent to her attorney’s bank account, and she held no money in relation to the estate. Ms X provided bank statements, but they did not show a transfer of the funds as described. It came to light that Ms X did not transfer the funds to her attorney until three months after the date she provided to the Committee. This meant she had held the funds in her office account for two years without holding a practising certificate.  

Transfer of funds of a private trust 

Ms X held funds described as relating to a reference to her full name. She advised that she held the funds for a private trust and had done so since the 1980s. She explained that the funds were not held in her capacity as a lawyer but rather because there were no legal or bank fees. Personal acquaintances were the other trustees and beneficiaries.  

Ms X transferred $515,922.12 to her trust account prior to the expiry of her practising certificate. Her office account later received $70,000 worth of these funds. The remainder was transferred to another account. Ms X claimed she did not hold any funds in her office account relating to the private trust.  

Payment to persons entitled 

Regulation 15(1)(b) of the TAR requires that, on ceasing to provide regulated services, a practice must immediately close all trust bank accounts and pay any money in them to the persons entitled. On the evidence available, the Committee was satisfied that Ms X had failed to comply with this regulation, specifically by:  

1. Failing to immediately close her trust account; 
2. Transferring trust money into her office account (thereafter deeming it to be a regulated trust account for the purposes of the Act and the TAR) and then failing to immediately close that account; and 
3. Not immediately paying all money in those bank accounts to persons entitled, in particular, the money in relation to certain transfers (with these funds continuing to be held for periods ranging from several weeks to two years).  

The Committee determined that Ms X’s failure to comply with regulation 15(1)(b) of the TAR amounted to unsatisfactory conduct in terms of section 12(a), (b) and (c) of the Act.  

The Committee considered whether Ms X had continued to fail in her obligations under regulation 15 of the TAR after her practising certificate expired and whether the Committee had any authority over the conduct that took place after this time. It acknowledged that its jurisdiction, in general, was limited to considering conduct that occurs when a person is holding a practising certificate. However, this was not the case for regulation 15 as it imposes obligations upon ceasing practice.   

Nevertheless, the Committee concluded that it was unnecessary to make an additional finding under regulation 15(1)(b) in terms of an ongoing breach. It considered Ms X’s delays in making payments and her ongoing failure to close her trust accounts were aggravating factors and compounded the existing breaches of the TAR.  

Persons entitled 

In relation to transfers certain transfers, the Committee conceded that Ms X is or was the person entitled to the money in her capacities as sole executor, joint executor and court-appointed property manager. In paying the money to herself, Ms X had paid it to the “person entitled.” 

While the funds in other transfers (concerning the “private trust” and deducted fees) caused the Committee disquiet, it decided it had insufficient information about such sums to make any conclusions about them. 

Duty to pay money received into a trust account 

As distinct from her obligations on retiring and closing her practice, the Committee also looked at Ms X’s conduct as a lawyer leading up to her retirement. The Committee considered whether Ms X had failed in her obligations under s110(1)(b) of the Act.  

The Committee looked to the first transfer referred to above as an illustration of its concerns in the way Ms X conducted herself in her role as lawyer leading up to retirement, where she held a significant sum of money in her office account which was not subject to the protections provided in a trust account.  

In general, Ms X said she obtained directions or instructions but provided little to no evidence of this. Where it was alluded that phone calls had been made, no file notes were provided of those conversations. The Committee had no confidence that the instructions Ms X said she obtained were properly informed and confirmed that she was in breach of her duties under s110(1)(b).  

The Committee also concluded that Ms X was in breach of rules 3, 6 and 7 of the RCCC on the basis that she failed to adequately explain to her clients the material risks and alternatives to her retaining the trust account money as a “private citizen” once her practising certificate expired. She had also failed to adequately protect their interests by retaining funds rather than instructing another lawyer and paying the money into their trust account.  

The Committee determined that Ms X’s failings and breaches amounted to high-end unsatisfactory conduct in terms of sections 12(a), (b) and (c) of the Act.  

Penalty 

The Committee noted that there were several aggravating features to the conduct. This included the length of time it took for the funds to be distributed and the lack of co-operation from Ms X in the Committee’s investigation.  

While there was no evidence of harm to those entitled to the funds, the Committee was of the view that Ms X exhibited a lack of planning and little regard for her professional obligations. It also considered her disciplinary history, which included previous breaches of the TAR that specifically involved failing to take instructions.  

The Committee considered that this warranted an uplift in fine and ordered Ms X to pay $7,500 and costs.