NSW principal found guilty of trust account deficiencies, intermixing payments

NSW principal found guilty of trust account deficiencies, intermixing payments

15 September 2020 By Naomi Neilson
NSW Civil and Administrative Tribunal

The NSW Civil and Administrative Tribunal has found a principal and partner engaged in unsatisfactory professional conduct due to his part in trust account deficiencies.

The Law Society of NSW launched legal proceedings against Brian Thornton, alleging that he breached the Legal Professional Act 2014 when he intermixed the trust money from his firm Cragg Braye & Thornton with other money and, in another instance, used trust money he was not entitled to, causing a $20,000 deficiency at the firm. 

Between May and October 2010, Mr Thornton received settlement payments due to a personal matter, which he paid into the firm’s trust account. At the time, an accounting firm had been engaged by Cragg Braye & Thornton for other matters, and Mr Thornton requested that a bookkeeper withdraw his settlements into a personal account.

A total of $70,000 was withdrawn from the trust account and deposited into a personal account, monies that made up his settlement payment and were in no way money that was owed to a client. Then, in order to pay personal tax debts, Mr Thornton requested that $15,000 be withdrawn and paid to the deputy commissioner of taxation. 

A further $12,355 was caused to be withdrawn for other matters, which at no time was authorised to be taken out of the trust account and deposited into personal accounts. 

On the same date as Mr Thornton’s first $20,000 settlement withdrawal, two unrelated cheques totalling $20,000 were withdrawn. Significantly, debt adjustments were made as a result of the bookkeeper preparing bank reconciliations. Incorrectly, the cheques were matched against the payment to Mr Thornton and as a result, the $20,000 that was authorised by Mr Thornton was never recorded in trust account records. 

Mr Thornton asserted he did not give instructions for the debt adjustments to be made and was unaware of the adjusting entries until the time of the inspection of his account by the Law Society in March 2017. The accounting firm did not indicate the incorrectly recorded transactions in external examination reports between 2010 and 2017. 

Further transactions in early 2011 caused the firm’s trust accounts to be deficient. Mr Thornton asserted he was unaware of the deficiency until the investigation and cleared it when he deposited $20,000 into the law firm’s trust account in March 2017. 

The state’s Civil and Administrative Tribunal found Mr Thornton engaged in behaviour that constituted unsatisfactory professional conduct. The tribunal ordered a reprimand and that he pay the Law Society’s costs. Despite the Law Society submitting he should pay a fine, the tribunal found the penalty was sufficient for the conduct. 

“In light of findings as to extent of the solicitor’s departure from the expected standards and taking into account the undertakings proffered by Mr Thornton, we are of the view that in the circumstances of this case the imposition of a reprimand and a costs order will sufficiently mark the seriousness of the conduct,” the tribunal noted. 

This judgement can be found on Austlii: Council of the Law Society of New South Wales v Thornton [2020] NSWCATOD 103

NSW principal found guilty of trust account deficiencies, intermixing payments
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