LEGAL SERVICES COMMISSIONER ANNUAL REPORT 2012

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Alternative disciplinary actionsWhere the LSC determines thatVCAT is likely to find a lawyer guiltyof unsatisfactory professionalconduct, the LSC may apply to VCATfor an order against the lawyer or mayinstead take an alternative disciplinaryaction against the lawyer. The decisionto take an alternative disciplinaryaction may be based on a numberof factors, including:• the lawyer’s circumstances,including the lawyer’s health,age, years of experience, andfinancial situation• whether the lawyer acknowledgeshis or her error and/or has shownremorse• whether the lawyer made a mistakeand is unlikely to repeat the conduct• whether the lawyer cooperatedduring the investigation, and• whether the conduct is systemicin nature, and affects, or has thepotential to affect, a class of persons.Alternative disciplinary actions include:• with the consent of the lawyer,reprimand the lawyer• with the consent of the lawyer,caution the lawyer• take no further action against thelawyer if satisfied that –−−the lawyer is generally competentand diligent, and−−there has been no substantiatedcomplaint (other than thecomplaint that led to theinvestigation) about the conductof the lawyer within the last fiveyears, orThese alternative disciplinary actionsare not available where the LSCdetermines that VCAT is likely tofind a lawyer guilty of professionalmisconduct. Where this occurs,the LSC must apply to VCAT for anorder against the lawyer. The LSCtook alternative disciplinary action in84 cases in 2011-12 compared with129 in the previous year. In a majorityof the cases, the LSC reprimandedthe lawyer.Figure 8 shows the number and type ofalternative disciplinary actions taken bythe LSC in 2011-12.Figure 8 Alternative disciplinary actions taken by the LSCAlternative Disciplinary Action 2009-10 2010-11 2011-12LSC reprimanded lawyer 30 67 57LSC cautioned lawyer 9 9 6Lawyer found generally competent anddiligent and so no further action27 44 14Lawyer pays compensation asa condition of LSC not making adisciplinary application to VCAT2 9 7Total 68 129 84Publication of VCAT and Courtdecisions on the LSC websiteAs part of the LSC’s statutory objectiveto educate the legal profession aboutissues of concern to the profession andto consumers of legal services, theLSC has taken the initiative to publishVCAT and court decisions involvingthe LSC on its website. The cases arepublished on the website to highlightthe dangers and consequenceslawyers face when engaging in certaintypes of conduct. They serve as atimely reminder to lawyers to ensurethat they act in accordance withapplicable legislation, regulationsand rules, and seek out assistancefrom colleagues and the professionalassociations when issues of concernarise. Issues highlighted includedensuring compliance with practisingcertificate obligations, not undertakinglegal work in areas of law with limitedknowledge and experience withoutassistance, and seeking assistance ifexperiencing financial difficulties.• where the consumer has requesteda compensation order, require thelawyer to pay compensation to theconsumer as a condition of decidingnot to apply to VCAT in respect ofthe lawyer.20 Legal Services COMMISSIONER Annual Report 2012
VCAT decisionsin mattersinvolving the LSCLegal Services Commissioner v Coldham & Ors (Legal practice) [2012]VCAT 74 (19 January 2012)On 18 June 2007, the LSB appointed trust account inspectors to commence a routine investigation into the trustaccount of and records relating to trust money received by a law firm of which Michael Coldham, Donald Brookesand Philip Barton were equity partners.The investigation uncovered unpresented office cheques totalling $541,690. A majority of those cheques related to fundsreceived from clients on account of unpaid disbursements owed to barristers and expert witnesses. At the time of theinvestigation the firm had 216 unsent office cheques in its possession totalling $305,791.97. It was within the knowledgeof the lawyers that unsent cheques had been retained by the firm’s accounting staff, and had deliberately not been sent ordelivered to the payee.Following accounts rendered to clients, the majority of payments made to the firm were first deposited into the firm’strust account and subsequently transferred into the firm’s office account. In all other cases the payments were madedirectly into the firm’s office account. At this time the disbursements owing had not been paid by the firm. Cheques weresubsequently drawn in respect of disbursements for third party service providers and retained and applied by the firm toreduce the level of debt of the firm’s overdraft account.The LSC brought two charges of professional misconduct at common law against the three lawyers, to which they allentered guilty pleas.The lawyers and the LSC agreed that the charges did not allege that the funds were trust moneys or that there was abreach of fiduciary duty. The LSC also conceded that the relevant third party service providers were engaged directly bythe firm and there were no contractual obligations between the clients and the service providers. The proceedings weredetermined by VCAT without consideration of these issues.At the hearing, Counsel for the LSC noted that ‘in some cases the unsent cheques became stale and were reissued bythe firm, but were nevertheless retained by the firm’ Counsel highlighted the respondents’ deferred decision to plead tothe present charges, the length of 30 years experience of all three respondents and the conduct amounting to a longtermstrategy.Counsel on behalf of the lawyers said their clients recognised the wrongfulness of their actions but stressed that theirpleas did not involve a breach of rules in relation to trust accounts or breach of fiduciary duty. They submitted that theLSC’s references to various court and VCAT decisions were not directly applicable to the case at hand. Counsel alsonoted that the delay in bringing this case before VCAT by the LSC should weigh in favour of a more lenient outcome.They said that the delay prevented the partners from taking action to improve the financial situation of the firm. Counselprovided accounting evidence that the firm’s current financial situation was such that if VCAT were to make the orderssought by the LSC the firm would be out of business.VCAT noted that the lawyers had engaged in disgraceful and dishonourable conduct, which should not be reduced inseverity just because the conduct was not found to involve a breach of the trust account rules or fiduciary duty. VCATfound that based on the long period of retention of the cheques, the money was considered to be detained indefinitely bythe firm. It was noted that it was an almost academic distinction to speak of funds being merely obtained as opposed tobeing finally misappropriated.VCAT found it difficult to consider the firm’s financial circumstances as a mitigating factor but acknowledged the direconsequences of ordering the suspension of the respondents’ practising certificates. They noted that ‘in our view itcannot balance out the necessity to impose a relatively severe penalty to send an unmistakable message to the State’slegal profession that this sort of conduct will not be tolerated’.VCAT ordered that the practising certificate of each respondent was to be suspended for a period of nine months andthe respondents were to pay the LSC’s costs of $50,000.Legal Services COMMISSIONER Annual Report 2012 21
Page 3: contentsAbout the Legal Services Co
Page 7 and 8: Education and OutreachIn accordance
Page 9 and 10: chapter 01REPORT OF OPERATIONSThis
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LEGAL SERVICES COMMISSIONER ANNUAL REPORT 2012

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