Solicitor preferred paying lease fees for Merc and Beemer rather than paying his tax … Claim that as director of an incorporated legal practice a lawyer does not have a personal obligation to pay the firm’s tax bills … Cash flow problems … Louise Hall reports 

The Parramatta lawyer failed to pay GST and PAYG to the ATO, along with the superannuation entitlements of his employees.

Wehbe, admitted to practice as a solicitor in 1993, was the sole principal and later director of Robert Wehbe & Partners. 

In the ensuing years the company had chronic cash flow problems, primarily because it couldn’t generate billings or recover fees. 

Wehbe admitted he didn’t pay any GST or PAYG to the ATO from November 2009 until the company went into liquidation in April 2012. In May 2012, the Deputy Commissioner of Taxation lodged a proof of debt with the liquidator for $201,890. 

Wehbe further admitted he did not pay $99,130 in employees’ superannuation from February 2010 until the liquidation.

During this period the firm, which traded as an incorporated legal practice, continued to pay some of Wehbe’s personal expenses, including mortgages on investment properties, school fees and leases on a Mercedes and a BMW. He also paid himself some superannuation.

In November 2014 the council of the law society applied to NCAT for a reprimand. In March 2015 the application was amended and the council sought Wehbe’s removal from the roll.

The council submitted that the Legal Profession Act obliged the solicitor to ensure that the company meet all professional obligations that would be imposed upon him as if he were a sole practitioner and the employees of the company were his employees.

In a hearing in February 2018, barrister Ventry Gray for Wehbe vigorously contested that his client was subject to a professional obligation to ensure the company met its statutory tax obligations.

He argued that an incorporated legal practice is a legal entity distinct from its shareholders and directors and that neither shareholders nor directors were per se liable for the incorporated practice’s debts.

But the law society did not submit that all the directors were liable in debt. Rather it said that legal practitioner directors were subject to the professional obligation to ensure tax payments. 

The tribunal agreed and found the obligation falls on a legal practitioner in the capacity of a director, while non-legal practitioner directors are not subject to it. 

The intention of s.143 of the LPA was to recognise that although corporations are separate legal entities at law, practitioners and employees could not use the corporation to shield themselves from their professional obligations which are preserved notwithstanding incorporation.

The tribunal found that as a legal practitioner director it was his decision not to pay the tax man and that his decision was “knowing and intentional”. 

There was no evidence he took steps to reduce his expenses and the continuing operation of the ILP was funded, in part, by the non-payment of statutory revenue obligations.

Wehbe’s conduct was outside the generally accepted standards of fairness and decency, the tribunal said. His steadfast claim that he was under no professional obligation to ensure the company met its liabilities evidenced a lack of remorse. Wehbe did not give evidence at the hearing.

The lawyer’s failure to pay superannuation and remit GST and PAYG withholding tax to the ATO was a sufficient basis to find him guilty of professional misconduct.

However, the tribunal was not satisfied that Wehbe failed to maintain appropriate management systems or that he breached a fiduciary duty to the company to avoid a conflict of interest.

Webhe was ordered to be removed from the roll and to pay the council’s costs.