Byrne v Council of the Law Society of the ACT - [2015] ACAT 19

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

BYRNE v COUNCIL OF THE LAW SOCIETY OF THE ACT (Occupational Discipline) [2015] ACAT 19

OR 13/34
Catchwords: OCCUPATIONAL DISCIPLINE - Legal Profession Act 2006 - legal practitioner - complainant to Law Society regarding conduct of legal practitioners - appeal by complainant to ACAT from dismissal of complaint - duty of practitioner - identity of client - duty of practitioner to directors of client company - conflict of interest - delay in conduct of proceedings - duty of practitioner in making discovery of documents

Legislation cited: Legal Profession Act 2006 ss, 210, 225, 229, 416, 419, 420

ACT Civil and Administrative Tribunal Act 2008
Legal Profession (Solicitors) Rules 2007

Cases cited:

Appellants v Council of the Law Society of the ACT [2011] ACTSC 133
Briginshaw v Briginshaw (1938) 60 CLR 336
Byrne v Production Magic Pty Ltd & Ors [2012] ACTSC 6
Kallinicos v Hunt [2005] NSWSC 1181
Prince Jefri Bolkiah v KPMG [1999] 1All ER 517
Spincode Pty Ltd v Look Software Pty Ltd (2001) VR 501
Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2004] ACTSC 75

List of
Texts/Papers cited:

LexisNexis, Riley's Solicitors Manual
Pearce and Geddes, Statutory Interpretation in Australia (6^th ed, 2006)

Tribunal: Mr C.G Chenoweth OAM – Senior Member

Mr G. Lunney SC – Senior Member
Date of Orders: 3 March 2015
Date of Reasons for Decision: 3 March 2015
ACT CIVIL AND ADMINISTRATIVE TRIBUNAL
OR 13/34

BETWEEN:
SIMON BYRNE
Applicant

AND:
COUNCIL OF THE LAW SOCIETY OF THE ACT
Respondent

TRIBUNAL: Mr C.G Chenoweth OAM – Senior Member
Mr G. Lunney SC – Senior Member

DATE: 3 March 2015

ORDER

THE TRIBUNAL ORDERS THAT:

The decision made by the respondent on 1 August 2013 to dismiss the applicant’s complaint against the practitioners P1 and P2 pursuant to section 412 of the Legal Profession Act 2006 is set aside and the orders which follow substituted.
Application be made to the ACAT pursuant to section 419 of the Legal Profession Act for an order of professional misconduct or alternatively unsatisfactory professional conduct against P1 arising out of the complaint made against that practitioner by the applicant.
Application be made to the ACAT pursuant to section 419 of the Legal Profession Act for an order of professional misconduct or alternatively unsatisfactory professional conduct against P2 arising out of the complaint made against that practitioner by the applicant.

THE TRIBUNAL DIRECTS THAT:

That solicitors be engaged to act for the respondent in the proceedings commenced.
That counsel be retained to advise and draft the necessary Tribunal documents.
That the evidence in the hearing in these proceedings be considered and the application(s) be drafted in accordance with these Reasons for Decisions.
.............………………………………..

Mr G. Lunney SC – Senior Member
For and on behalf of the Tribunal

REASONS FOR DECISION

This is an application made pursuant to section 416 of the Legal Profession Act 2006, (the Act). The section is reproduced at paragraph 32 later in this decision. The application was filed on 19 September 2013. It sought review of a decision of the Council of the Law Society of the ACT to dismiss a complaint made by the applicant.
The applicant made a complaint to the Council of the Law Society, (the respondent) in respect of two legal practitioners practising within the same firm, (the Firm). The first practitioner, (P1) was an associate with the Firm. The second, (P2) was a partner. That complaint was dated 23 May 2011. There was some delay in consideration of the complaint because there were proceedings brought by the applicant in the ACT Supreme Court. There was correspondence between the applicant and the respondent in which the detail of the complaint was expanded in the period before the SC proceedings being settled on 17 October 2012, and then after that until the complaint was finally determined the next year.
The applicant’s complaint was dismissed by the respondent pursuant to section 412 of the Act on 1 August 2013. The applicant exercised the right of appeal against that dismissal found in section 416.

Background

The background to the complaint is briefly as follows. The applicant was operating a business as a sole trader, and wished to admit other investors into the business by means of the formation of a company but while still holding a majority interest in the company and acting as its managing director. The Firm incorporated the company on the applicant’s instructions in July 2000. The applicant was initially the sole director and shareholder. After admission of the investors into the company in the same year, a Directors and Shareholders Agreement drawn up by the firm was executed by all parties.
The investing shareholders were two individuals and a company which had two directors. The two incoming shareholders and the two shareholder company directors were made directors of the company. They are referred to as ‘the incoming directors’.
The business did not trade as successfully as expected, so by 2005, the applicant decided to resign in October. By that time the remaining shareholders had sought advice from P1 regarding resignation generally and then after the applicant submitted his resignation, the validity of that resignation. The applicant alleged that this was done without his knowledge.
A significant dispute arose between the applicant and the incoming directors who gained control of the company. The applicant commenced proceedings in the ACT Supreme Court against the company, the investing shareholders, and the incoming directors (the SC proceedings). The Firm acted for all defendants in that litigation. The applicant’s complaint included P2 having done so and also aspects of P2’s professional behaviour in conduct of the litigation as well as supervising the work of P1. The firm and P2 also acted for the defendants in an application made by the applicant within those proceedings. That application sought orders restraining the Firm from acting for the defendants in the SC proceedings. That application was dismissed by Master Harper.

The complaint of 23 May 2011 and later developments.

The complaint was contained in a nine page letter of 23 May 2011 written by the applicant to the respondent.
It is not easy to shortly state the nature of the complaint. The Professional Standards Director of the Law Society, (the Director), when transmitting the complaint to each of the two practitioners summarised the areas of complaint as follows:
(a)Conflict of interest;
(b)Acting against a former client;
(c)Fabricating or assisting in the fabrication of documents; and
(d)Negligence.
The Tribunal considers that a further head of complaint was clearly included in the applicant’s letter and was amplified in his further letter to the respondent of 14 October 2011 The following category should be added to those identified by the Director. It was referred to in both the written and oral submissions.
(e)Delay by P2 in conducting the proceedings commenced by the applicant; failing to properly discover documents in the proceedings; and, supervising the work of P1 the subject of the applicant’s complaint.
Essentially, on 23 May 2011 the applicant complained that the Firm, through P1, had provided advice to the incoming directors without his knowledge and actively kept this information from him. He claimed that the Firm, and P1 in particular, owed him a duty of care and that P1 by advising the incoming directors and then refusing to provide him with information about that advice was in breach of that duty. He complained that P1 drew up a number of documents for the company and provided the advice which was passed to him about the validity of his resignation with content differing from that given to the incoming directors. He complained that P1 advised that his resignation was invalid in order to permit the incoming directors to obtain the advantage of resigning first. He also complained about P2 supervising the work of P1 prior to P1 leaving the firm, P2 acting for the company and other defendants in litigation that he commenced, of delays by P2 in conducting that litigation and withholding documents on discovery. There was also complaint of fabrication of documents and negligence.
Prior to the complaint being made to the respondent, the applicant raised possible conflict directly with P1 in October 2005. On 4 November 2005, a firm of solicitors acting for the applicant wrote to the Firm for the attention of P1 raising issues of conflict. The following was included:
We are concerned that you appear to be giving advice to one set of directors of the Company against another in circumstances where a dispute is clearly apparent. In our view, (the firm) is conflicted from representing any of the directors.
Not only does (the Firm) act for the Company as a whole, it was your firm that drew up the Shareholders Agreement upon which both sides rely and was the firm advising parties at the time of incorporation of the company.
P1 responded to this letter on 11 November 2005 and included the following statement:
(The Firm) and its predecessor firm (omitted) have at all times acted for the company and have provided advice to the board of the company. At no time have we acted for or advised the individual directors or the shareholders of the company in relation to any relevant matters. Accordingly, we do not consider that we have now or have had in the past a conflict of interest.
The same firm acting for the applicant wrote to the Firm again on 12 February 2009 raising conflict as well as issues relating to discovery and claimed privilege. P1 had left the firm by that time. A reply was provided on 10 March 2009 showing the supervising partner to be P2. The following was included in the letter:
When our firm was first instructed to act for (the company) at the time the Company was first registered, those instructions were received from your client, who was then the sole and managing director of the Company. However, our firm was neither at that stage, nor at any time since then, acting on behalf of your client, as managing director, director or otherwise. It was acting on behalf of the Company, albeit that the instructions were provided by (the applicant).
When (the applicant) fell into dispute with the other directors, (the firm) continued to act on behalf of the Company and in the Company’s interests. Our firm was not obliged to act or advise your client, nor was it appropriate for our firm to do so, despite the fact that your client remained managing director until his resignation in November 2005.
Similarly with respect to the other directors of the Company, our firm did not act on their behalf as individual directors, until such time as proceedings were commenced, and it was determined that (the Firm’s) obligations to act on behalf of the Company in the proceedings did not place it in a position of conflict which would have otherwise prevented it from acting on behalf of the individual directors as well.
A new firm of solicitors continued to agitate the issue of conflict with the Firm. A letter was written to the Firm on 11 April 2011. They pointed out that the applicant had been a client of the Firm for the incorporation of the company. They also suggested that the Firm had a material interest in the outcome of the proceedings as a result of the error made in the drafting of the Shareholders and Directors Memorandum of Agreement.
The Firm responded through a letter authored by P2 of 10 May 2011. It disputed the allegation that the applicant had been a client on the basis that he had been the promoter of the company, and had not been dealing with the Firm in his personal capacity. All other bases of suggested conflict were rejected.
The same firm wrote again taking issue with the letter of 10 May 2011, but received no answer.[1]
[1] See exhibit 3 at page 77
Correspondence between the applicant and the respondent after that time included a letter of 14 October 2011 in which he somewhat expanded an aspect of his previous complaint. The applicant had previously in his earlier letter of 23 May 2011 complained about P2 failing to produce documents which he said were missing from discovery in the SC proceedings. In the later letter he referred to the earlier complaint and said that he had since issued a subpoena to the company’s accountants and the documents which he had previously said were missing were among the documents produced by those accountants. He alleged that P2 had delayed the discovery process and had failed to discover documents later produced on subpoena and which the applicant alleged had shown that cash assets had been stripped out of the company. He further alleged that: “(P2) was either sloppy at best due to this inability or unwillingness to source the documents, or at worst, an active and willing participant in a failed attempt to hide evidence from us. Perhaps the truth lies somewhere in between”.
The applicant also alleged in his letter of 14 October 2011 that P2 was in breach of rule 11.1 of the Legal Profession (Solicitors) Rules 2007. At the hearing before the Tribunal it was agreed that any allegation of breach of rule 11.1 had not been considered by the Council as part of his 23 May 2011 complaint, and was excluded from review by the Tribunal.
Then in another letter of 3 December 2012 the applicant raised further issues which related to an allegation he made that P1’s work had been supervised by partners in the Firm including P2. He also made it clear that his complaint relating to conflict related to P2 in conducting the proceeding which the applicant had brought against the company and its incoming directors.
When the applicant wrote to the respondent on 3 December 2012, his correspondence was passed to the two practitioners on 18 December 2012 for comment. At the time of writing this letter, the judgment of Master Harper of 31 January 2012 had been handed down, and documents previously the subject of a claim for privilege by the company and the incoming directors had been produced after proceedings before Foster J on 9 October 2012.
Both practitioners responded to the Director’s letter of 18 December 2012 early in January 2013. Their responses were sent by the Director to the applicant who replied on 28 January 2013. This was then forwarded to P1 and P2 on 29 January 2013 advising that further comments should be received by 13 February 2013. P1 said that he wished to make no further comment. P2 wrote on similar lines on 15 February 2013.
The applicant then wrote to the Council on 12 February 2014 referring to a second complaint. This contained some material common with the May 2011 complaint, and was acknowledged by the respondent, but seems to have been held in abeyance by the Council pending the outcome of consideration of the 23 May 2011 complaint.[2]
[2] Transcript 22 August 2014 at page 8
The complaints committee met on 28 February 2013, and considered the applicant’s complaint but did not come to a concluded outcome. Following that meeting, the Director wrote a letter on 6 March 2013 to P2 which included the following statement:
This matter was considered by the Complaints Committee on 28 February 2013. ….. Committee members agreed that your responses have not adequately addressed (the applicant’s) complaint pertaining to conflict of interest. To enable the Committee to further consider this aspect of the complaint, you are requested to provide a more comprehensive response to this issue.
Please ensure your response is received at the Society by 21 March 2013.
The Director also wrote to P1 on 6 March 2013. In that letter the Director said that the Committee noted that Master Harper dismissed the restraint application not on a conclusion that there was no conflict of interest, but rather on the timing of the application. The Committee gave P1 a further opportunity to respond to the allegation of conflict of interest raised in the applicant’s complaint.
Apparently no response was provided by either practitioner by the time of the deadline, because the applicant wrote to the Director on 17 July 2013 requesting advice on the status of his complaint. A response to the letter of 6 March 2013 from P1 was received by the respondent on 23 July 2013. No response was sent by P2.
On 1 August 2013 the applicant’s complaint was dismissed by the respondent pursuant to section 412 of the Act. The Director wrote to the applicant pursuant to section 415 of the Act advising him of the decision and the reasons for it. It is a little difficult to regard the investigation of the complaint as having concluded at that time since there had been no response by P2 to the Director’s letter of 6 March 2013. The Tribunal notes the provisions of rule 39.2 of the Solicitors Rules which requires compliance with any requirement by the Law Society for comment or information in relation to a practitioner’s professional behaviour. This rule does not appear to have been observed on this occasion.
In their correspondence with the respondent, the two practitioners had taken a very robust stance in opposition to the complaint. They each relied heavily on the dismissal by Master Harper of the application that had been made by the applicant in the SC proceedings that the firm cease to act for the defendants and they asserted that any possible issue of conflict had been settled by Master Harper in that litigation. His judgment is reported as Byrne v Production Magic Pty Ltd & Ors [2012] ACTSC 6. They also submitted that other aspects of the applicant’s complaint were without foundation. P1 said that he had never met or spoken to the respondent.

The application under section 416.

This was filed on 19 September 2013.
The applicant attached a copy of the decision of the respondent which was contained in a letter from the Director of 23 August 2013. It said that the complaints committee of the respondent was of the view that the complaint about conflict of interest was not made out and that there was no evidence of fabrication of documents. It concluded:
In conclusion the Committee was of the view that your allegations are not supported by the material gathered during the investigation.
In his Application for Review, the applicant gave reasons for applying for review of the decision and attached these to the Application. He set out seven reasons for review. One was not progressed with in these proceedings. The remaining grounds could be categorised under the five headings referred to above which are:
(a)Conflict of interest;
(b)Acting against a former client;
(c)Fabricating or assisting in the fabrication of documents;
(d)Negligence.
(e)Delay by P2 in conducting proceedings brought by the applicant, failing to properly discover documents including maintaining an untenable claim for privilege, and supervising the work of P1 the subject of the applicant’s complaint.

Section 416

Section 416 is contained in the Act as follows:
416 Appeals to ACAT against decisions of relevant council
(1) A person mentioned in table 416, column 2 may appeal a decision mentioned in column 3 to the ACAT.
(2) The appeal must be made not later than—
(a) 28 days after the day the relevant council gave the person making the appeal a statement of reasons under section 415; or
(b) any further time allowed by the ACAT.
(3) The ACAT may make any order it considers appropriate on the appeal.
(4) Without limiting subsection (3), the ACAT may make 1 or more of the orders mentioned in section 425 (3) to (5) (ACAT orders—Australian legal practitioners).

Table 416 Appealable decisions

column 1
item column 2
person column 3
decision

1
complainant dismiss a complaint under s 412

2 complainant
omit matter from application to ACAT that was originally part of complaint

3 Australian legal practitioner complained about take action under s 413 in relation to practitioner

This section gives to the applicant a right to appeal the respondent’s decision not to take action in relation to his complaint. The nature of the appeals created in this section were referred to by Refshauge J in an ACT case of Appellants v Council of the Law Society of the ACT [2011] ACTSC 133. There had been an appeal to ACAT under section 416. There was no challenge to the substantive decision given by ACAT. The appeal related to an award of costs made against the parties who had initiated the original appeal.
Refshauge J held that although the word ‘appeal’ was used, the nature of the proceedings was review by the ACAT of an administrative decision. The following is taken from his decision:
109. The decision of the [council] is, then, as noted earlier, subject to “appeal” to the ACAT. This, it seems to me, is not an appeal in the sense one uses the term as between courts, but in the sense that administrative review as conducted in the Commonwealth sphere by the Administrative Appeals Tribunal. See my comments above (at [74] and [75]).
110. It is true that, so far as I could see from an inspection of the ACT Civil and Administrative Tribunal Legislation Amendment Act 2008 (ACT), by which most other Acts were amended to provide access to the ACAT for review of decisions, the term used in them is “application for review” rather than “appeal” but that may be because of the particular nature of the Legal Profession Act and the wish for national uniformity. I note, too, that most of the other Acts so amended refer to “Occupational Discipline” whereas the Legal Profession Act refers to “Disciplinary Action”. I do not regard this matter as particularly relevant.
111. In my view, the process under s 416 is a review of an administrative decision in the same way as under other similar legislation.
Section 416 is found in Chapter 4 of the Act, which is headed ‘Complaints and Discipline’. This part of the Act sets up a system for the handling of complaints. Section 394 provides that complaints are to be made to the relevant Council: in this case the Council of the Law Society of the ACT. The person the subject of the complaint must be informed, and may make submissions to the Council. Section 399 provides for summary dismissal in circumstances there referred to. Section 406 provides that, with some exceptions, complaints are to be investigated by the Council.
Under the general scheme of the complaints procedure the Council of the Law Society does not have jurisdiction to make disciplinary orders except as provided in Section 413 by way of summary disposal. With that exception, the Council acts as a clearing house for complaints following the procedures laid down in the Act.
After investigating a complaint, the Council has a number of options set out in section 410 in Part 4.5.
Part 4.5 Decision of council
410 Decision of council after investigation
(1) After finishing an investigation of a complaint against a person, the relevant council must—
(a) dismiss the complaint under section 412; or
(b) take action under section 413 (Summary conclusion or complaint procedure by fine etc); or
(c) make an application to the ACAT under part 4.7.
(2) This section does not affect section 400 (Withdrawal of complaints).

The Council may dismiss a complaint under section 412. This can be done if the Council is satisfied that there is no reasonable likelihood that the practitioner will be found guilty by the ACAT of either unsatisfactory professional conduct or professional misconduct. The decision to be made by the Council is not whether there has been either type of conduct. The Council must make an assessment of what the probability is of the ACAT making such a finding. If its assessment is that there is no reasonable likelihood of the ACAT making either finding it must dismiss the complaint.
This assessment is repeated in Section 413, in which the Council assesses the probabilities of the ACAT making a finding of unsatisfactory professional conduct and not one of professional misconduct. The Council may deal summarily with appropriate cases after making certain factual findings including an assessment of the likelihood of the probabilities of the ACAT making the specified finding. The Council does not make a finding of unsatisfactory professional behaviour; it makes an assessment of the reasonable likelihood of the ACAT making such a finding.
The final alternative, that of referral to the ACAT, found in section 419 of the Act is not expressed to involve any probabilistic assessment. It could usually be expected to apply if the earlier two alternatives had been considered but excluded. Section 419 is as follows:
Part 4.7 Disciplinary action
419 Application to ACAT
(1) The relevant council for an Australian legal practitioner may apply to the ACAT for an order in relation to a complaint against the practitioner.
(2) The relevant council for an employee of a solicitor may apply to the ACAT for an order under this part in relation to a complaint against the employee.
(3) The application must include the charge of unsatisfactory professional conduct, professional misconduct or unsatisfactory employment conduct that the relevant council considers arise out of the complaint.

In order to make the application, the section does not require the Council to be of the view that a finding by the ACAT of unsatisfactory professional conduct or professional misconduct is reasonably likely. It does require that the Council considers that a charge of either conduct arises out of the complaint. This Tribunal is of the view that this implies a requirement in ordinary circumstances that there be a reasonable likelihood that the practitioner will be found guilty by the ACAT of either unsatisfactory professional conduct or professional misconduct prior to acting under section 419. It would then be up to the ACAT after a hearing to determine whether there was professional misconduct, unsatisfactory professional conduct, or that the application should be dismissed.
It is the decision of dismissal of the complaint under section 412 which is subject to review by this Tribunal pursuant to section 416 in these proceedings. If the Tribunal in reviewing such a decision decides that the decision is incorrect, then the Tribunal must do what the Council does pursuant to section 410: that is determine which of the options available under that section to act under.
A finding of professional misconduct or unsatisfactory professional conduct can only be made by the ACAT or the Supreme Court. This Tribunal in reviewing the decision of the respondent, has only the powers possessed by the respondent pursuant to the Act. The Tribunal is not able to make a determination relating to disciplinary action in these proceedings, it must however make an assessment of the likelihood of such a determination being made by the ACAT as has to be done by the Council.

The hearing

The hearing was conducted essentially on documentary evidence. This consisted of the following which were received without objection.
Ex 1Documents considered by the Council, produced as T documents by the respondent.
Ex 2Documentation of a Power Point presentation which outlined the applicant’s oral evidence at the hearing and the essence of his submissions at the hearing.
Ex 3Documents filed by the applicant pursuant to a direction that he file documents to be relied on at the hearing of his application. The latest of these documents was an email of 14 September 2012.
Ex 4A consolidated chronology which incorporated chronologies prepared by each party.
Ex 5A further bundle of documents which had been filed by the applicant with his Application to Review on 19 September 2013.
Another bundle of documents was filed by the applicant after the conclusion of the hearing. The filing of these was discussed at the hearing where they were identified.[3] Copies were to be sent to the respondent. They included correspondence from P1 to the company in 2005 and a copy of the Directors and Shareholders Agreement. These documents have been identified as MFI 6 by the Tribunal and placed with the application file. They have been considered as evidence by the Tribunal and were filed with the Tribunal on 22 August 2014.

Standard of proof

[3] Transcript of 22 August 2014 at page 6

The standard of proof is the civil standard: proof on the balance of probabilities. However, the Tribunal bears in mind the warnings contained in cases such as Briginshaw v Briginshaw (1938) 60 CLR 336 of the significance for a practitioner in disciplinary proceedings of any adverse finding, and the consequent need for ‘comfortable satisfaction’; or a ‘high degree of satisfaction’ in assessing the evidence on the balance of probabilities.
In Briginshaw Dixon J said at page 368: “It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained.”
This Tribunal is reviewing the decision of the respondent. In doing so, except if acting under section 413, it will not be making any order of a disciplinary nature. However, it considers it appropriate to have regard to the Briginshaw statements of principle in proceeding to review the evidence available to it, since it is the Briginshaw principle which would be applied by the ACAT when making a relevant determination.

Significant dates

Chronologies were prepared by the applicant and the respondent, and a combined version was tendered in evidence.
In July 2000, the company was incorporated by the firm. Initially, the applicant was the sole shareholder with 510 shares.
In August 2000, 490 shares in the company, (49%), were issued to investing shareholders. The applicant became the managing director, the majority shareholder, and was appointed secretary of the company. The company commenced to trade.
The firm also prepared a Directors and Shareholders Agreement which is dated 10 November 2000 on its cover page.
Clause 22.4 of the Agreement provided as follows:
The Company will keep each of the Shareholders fully informed regarding its business and financial affairs and provide prompt and adequate particulars of any past, current or intended future transaction or matter in response to written inquiries made by any of the Shareholders.
For the accounting period 11 February 2005 to 15 February 2005, P1 sent an invoice to the company at its post office box in Fyshwick for work done for it in that period regarding ‘company advice’. This invoice in the form it appears in the T documents has a hand written endorsement that indicates that the services provided were ‘attendances on client; draft and settle advice on director’s resignation’.
There are two letters of advice, one of 15 February 2005 and another of 4 Mar 2005 sent to one of the incoming directors, GW, at his home address and not the company’s post office box, regarding the process of retirement of a director from the company. They appear to be identical and contain the same typographical error. The applicant says that he was not aware of these letters at the time or that such advice had been sought.
The date of the purported resignation by the applicant was 5 October 2005. His evidence was that this was done in accordance with the procedures set out in the Shareholders’ Agreement. However, he was not able to include a notice of transfer, a form which had been omitted from the Agreement when it was drafted by the Firm.
There is a file note from P1 of a meeting on 7 October 2005 with GW indicating that the resignation submitted by the applicant was discussed. There is a reference to ‘redo letter’ and ‘plus separate advice – requirements for a valid (retirement?) notice’. There was also a direction to send mail to GW’s home address.
On. 9 October 2005, the applicant went overseas for 9 days.
On 10 October 2005, GW wrote to P1 requesting advice regarding the applicant’s compliance with the terms of the Directors and Shareholders Agreement and regarding the validity of the retirement notice which had been submitted by the applicant. This included a request for ‘confirmation that previous advice re invalidity is correct’. A later email requests that a valid notice be drafted. On the same day, advice regarding retirement was issued and signed by P1 in two different versions and addressed to the same home address previously mentioned. One of these advices was sent by GW to the applicant on his return from overseas. It was the version declaring his resignation invalid.
On 11 October 2005 a draft transfer notice apparently drafted by P1 was sent by P1 to GW at his home address. The directors other than the applicant started the retirement process using the transfer notice drafted by P1.
On 12 October 2005, the incoming directors submitted resignation papers including transfer notices.
14 October 2005 is the typed date of an advice by P1 declaring the resignations of the other directors to be valid. This date is hand altered to read 21 October 2005. The letter is addressed to GW’s home address.
On 17 October 2005 on return of the applicant from overseas the version of the 10 October 2005 advice declaring the applicant’s resignation invalid was forwarded to the applicant by GW to whose residence it had been addressed.
Also on 17 October 2005, the applicant wrote to P1 to take issue with his interpretation of the need for a transfer notice. There is a clear indication of a dispute regarding the interpretation of the shareholders’ agreement which had been drawn up by the firm for which P1 worked. The applicant maintained that his resignation was valid and gave reasons for that view. He emphasised his position in the company as the managing director.
On the same date, P1 wrote to the applicant advising him that he could not advise him separately because to do so would put him ‘in an untenable conflict of interest’. He actually also said “you are obviously free to seek your own advice, but they do not cause me to change my earlier views”. No mention is made of clause 22.4 of the Directors and Shareholders Agreement.
Also on the same date, the applicant sent an email to P1 alleging a breach of trust on his part. The applicant also wrote to two of the Firm’s partners (which did not include P2) seeking their intervention, but received no response.
Again on 17 October 2005, the applicant emailed P1 demanding that he provide him with a copy of the instructions he had received from the other director. He received a reply on 18 October 2005 stating that those instructions were privileged. This email was copied to the other shareholders.
On 19 October 2005, there is further correspondence in which the applicant asks P1 to identify his client and attempts to convince P1 that he had a conflict. This submission evidently does not meet with the agreement of P1 as evidenced by his letter of 7 January 2013 to the Law Society in which he said:
The complainant appears to allege that my advice was kept secret from him. Prior to the dispute arising with the complainant, I had no reason to think that the advice was being kept from any of the board members. I only received a request for that advice from the complainant after he was already in dispute with my client. It is not unusual in practice for one director to seek legal advice on behalf of the board generally, and that is what happened here, I have provided advice to my client in accordance with my client’s instructions.
This part of the letter avoids any explanation for having corresponded with an individual shareholder at his private address while sending more formal correspondence to the company’s post office box.
Later on 19 October 2005, the applicant received an email from P1 in which he identifies his client as being ‘the company and the board’. He said that he does not act for any of the individual shareholders or directors. (He had in earlier correspondence declared the applicant’s resignation as a director to be invalid. The incoming directors had also submitted their resignations). He concludes the email as follows which could be interpreted to indicate that, in spite of declaring earlier that his client was the company, he regarded the incoming directors as his clients:
As a matter of courtesy I have not passed your email onto my clients. Be aware, however, that in the future I will have no hesitation in doing so if I think it necessary to advise my clients fully and frankly.
The applicant resigned for a second time on 3 November 2005. This was stated to take effect immediately. He completed a transfer notice. At this time he engaged another firm of solicitors to act for him. That firm wrote to the Firm asserting that that the Firm was conflicted. A response was sent on 11 November 2005 signed by P1. It denies any conflict and asserts that the client was the company.
The applicant alleges that in the next four months the other shareholders moved all assets out of the company, transferred the applicant’s shares to themselves at low value, revaluing it as a shell and paying themselves a re-declared dividend.
The applicant commenced proceedings against the company and the other shareholders on 19 October 2007. The Firm acted for all defendants in that litigation. P2 conducted the litigation on behalf of the Firm.
In the course of discovery, the applicant found that some accounting documents were missing from the discovered documents. This was raised by the applicant with P2 by a letter of 22 June 2010 from his then solicitors without response, and by four further letters, the last bearing date 10 May 2011. One of those letters, that of 27 October 2010, contains an assertion that ‘the defendant has not complied with the Deputy Registrar’s direction to provide a response to our letter dated 22 June 2010 by 10 October 2010’. It would therefore appear that steps had been taken to gain compliance without result. There was a response of 17 May 2011 but it was to the effect that accounting documents sought were accountants’ working papers, were incomplete and out of order, and ‘further papers could not be located’, “We are therefore unable to assist further”.
The applicant then issued a subpoena to the company’s accountants. A locked MYOB electronic file was produced in about September 2011. The applicant alleges that there were documents produced in electronic form that had not been the subject of discovery and amongst other things showed asset and profit stripping from the company with retention of costs. His evidence was that the Firm and P2 had easy access to the accountants as did the defendants.
The hearing of the applicant’s claim against the company and other shareholders was listed for 15 October 2012. The applicant issued a subpoena to the defendants for production of documents not produced, some of which were the subject of claims of legal professional privilege. The subpoenas were the subject of an application listed on 9 October 2012 before the judge who was to hear the claim.
The evidence of the applicant indicates that the documents were produced without objection on 9 October 2012; previous claims of privilege being abandoned. There is a transcript of the judge’s ex tempore decision available on the internet.

Evidence

The events forming the basis for the complaint are set out above. The evidence reviewed in the hearing if accepted is reasonably likely to establish the following:
(a)The applicant had been a client of the Firm to the extent of having given instructions for incorporation of the company. He had a continuing relationship with the Firm as an officer of the company, having given instructions on behalf of the company relating to miscellaneous company matters. He had a continuing experience and expectation up to the events of early October 2005 that his instructions would be accepted by the Firm.
(b)At the time of the matters complained of P1’s client was the company.
(c)P1 gave advice to a group of directors of the company to the exclusion of the applicant commencing in about February 2005.
(d)On 10 October 2005, at a time when a dispute had arisen between the applicant and the incoming directors, P1 issued two advices. One of these was used by the incoming directors to the disadvantage of the applicant. The giving of two advices is unexplained. The evidence raises issues regarding P1’s motivation in issuing two advices.
(e)It was the Firm that employed P1 that had omitted the notice from the Agreement. P1 drafted an amendment to the document and supplied it to a group of directors, knowing that a dispute had arisen. It was not offered to the applicant who had submitted his resignation.
(f)When requested to do so P1 refused to give information to the applicant in spite of his status within the company and his immediate protests.
(g)After the applicant commenced proceedings against the company and the incoming directors, P2 acted for those parties in spite of submissions to the contrary.
(h)The restraint proceedings before the Master while being successful in result did not result in a finding that there was no conflict. Remarks of Master Harper at paragraph 20 of his judgment were to the contrary.
(i)P2 in the conduct of that litigation did not discover documentation within the control of the parties for whom he was acting.
(j)A substantial issue in the proceedings brought by the applicant was the effect of the omission of the transfer notice from the agreement and its use and non-use by the directors in their respective resignations. This had been drafted by the Firm.
(k)P2 maintained a claim for privilege which was abandoned immediately prior to the hearing.
(l)P2 caused significant delay in progress of the applicant’s claim towards hearing.
(m)P2 failed to respond to correspondence from the applicant’s solicitors regarding discovery between 6 July 2010 and 17 May 2011.

The Tribunal notes the reason given by the respondent for dismissing the complaint was a lack of evidence establishing the matters complained of. More evidence is available to the Tribunal than was available to the respondent.

Submissions of the respondent

The respondent filed written submissions prior to the hearing, and amplified these at the hearing. A number of references were made to the judgment of Master Harper already referred to. Master Harper had referred to principles stated by Brereton J in the NSW Supreme Court in Kallinicos v Hunt [2005] NSWSC 1181. The submissions explained that:
… the (respondent) was not satisfied on the material then before it that (P1), apart from having no personal knowledge of the Applicant, could be deemed to have had sufficient “knowledge of such things as the personalities and reactions of participants” nor “knowledge of the firm of the vulnerabilities and strengths” of the Applicant which could be used against him in the underlying action.
At the hearing the respondent submitted that the issue involved was not of conflict of interest, but an issue of who had retained P1 and provided instructions to him. The incoming directors had provided the instructions presumably on behalf of the company and they were the conduit to the company. It was up to the company to inform the applicant of the substance of the advice that had been given. The written submissions indicated that the respondent assumed that board approval had not been given for P1 to release that information to the applicant. Those submissions recognised that the client was the company but submitted that P1 was entitled to take instructions from one group of directors on the assumption that they represented the board. This presumably was unchanged in the presence of the assertive protests of the applicant, since in paragraph 55 the submissions put:
… it makes no difference to the thrust of the above submissions if (the firm) having initially acted for the company rather than the directors, subsequently also concurrently acted for the directors or individual directors in the period 5 September 2005 to 3 November 2005 when the applicant resigned as director.
Submissions were also made in relation to the rather compendious ground directed at P2 that there was continuing conflict prior to and after the commencement of the SC proceedings, deliberate delay in prosecution of the SC proceedings and failure to give proper discovery. The Tribunal has some difficulty understanding the written submissions which appear to be based on absence of notice to the practitioners. As has been referred to above, this issue does not seem to have been included in the Director’s categorisation of issues in his letter referring the applicant’s complaint, but was clearly raised by the applicant in his original letter of 23 April 2011 and in later correspondence which was referred to the practitioners for comment. The SC proceedings were not completed until late in 2012, and it was not until then that the extent of this area of complaint became better known to the applicant as more documents became available. It was the subject of evidence and submission during the hearing. The written submissions had been prepared before the hearing. It is the complaint which is at issue, not the Director’s summary of it, and it was the letter of complaint which was referred by the Director to the practitioners for comment.
Considerably more documentation was available to the Tribunal than was before the respondent. Counsel for the respondent conceded at the hearing that the Tribunal in these proceedings was not confined to the material that had been available to the respondent.
In oral submissions the respondent suggested that the complainant had not established that the defendants had control over the documents produced by the accountant on subpoena. There was substantial evidence to the contrary.

Consideration

The Complaint

The applicant’s complaint had a number of aspects. His concern with the Firm and P1 in particular commenced in October 2005 when he returned from overseas. He felt that he had been unfairly dealt with by the Firm and that P1 was going behind his back. He asserts that the conflict continued into the period in which the SC proceedings were being conducted by P2. Because of delay caused by the SC proceedings, and receipt of further information on discovery in those proceedings, there was further correspondence by the applicant with the respondent regarding the complaint in which further information concerning his complaint was provided by the applicant.
By the time that the applicant wrote to the respondent on 23 May 2011, the nature of his complaint had been made clear to P1, P2 and the Firm. However, it was not until October 2012 when Foster J ruled in relation to the production of documents in the proceedings which were listed for hearing in about a week’s time that it was possible to have access to all relevant material.
The Tribunal takes the view that the nature of the complaint is clear and was well defined and understood by the parties at the hearing. It can conveniently be considered as being made up of the components referred to shortly.

The judgment of Master Harper, Byrne v Production Magic Pty Ltd & Ors [2012]ACTSC 6

This judgment was much quoted and relied upon by the practitioners in their correspondence with the respondent. In his judgment, His Honour referred to the evidence before him and referred at paragraph 18 to it not being a case in which it was suggested that the applicant had been a client of the firm. That has not been the case in the present proceedings. The applicant in the evidence before the Tribunal certainly claims that he was a client and his claim is supported by evidence which has been referred to. In the course of his judgment Master Harper referred to a number of authorities in Australia which came after an English House of Lords case of Prince Jefri Bolkiah v KPMG [1999] 1All ER 517. The issue in that case has since been referred to rather baldly as ‘when can a solicitor change sides’. Prince Bolkiah said that in order to support an injunction to prevent a solicitor acting against a former client, it was necessary to demonstrate that confidentiality was in jeopardy. Later Australian cases referred to by Master Harper would recognise an additional category. Master Harper expressed that category as it had been formulated in previous Australian cases as follows.
…. the test to be applied in the exercise of the inherent jurisdiction is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice.
His Honour’s judgment was against interfering, but in taking that view, he relied on the delay of the applicant in making the application and the advanced stage that the matter had reached at the time of making his decision. Harking back to his previous statement of principle referred to above, he said the following at paragraph 20.
It seems to me that a fair-minded reasonably informed member of the public might very well come to the view that the solicitors for the defendants should not be permitted to represent them in defending litigation commenced by the plaintiff, the former chairman and managing director of the first defendant company prior to the dispute. I think that an ordinary member of the public may well see this as inherently unfair.
Master Harper had referred to a judgment of Higgins CJ: Wagdy Hanna &Associates Pty Ltd v National Library of Australia [2004] ACTSC 75; and, Kallinicos v Hunt [2005] NSWSC 1181, a judgment of Brereton J in the New South Wales Supreme Court. These cases referred to the history in Australia of the development of the additional category referred to. There were variations in the degree of support along the way which were referred to by Higgins CJ.
One relatively early case which was referred to by Higgins J and supported the additional category was Spincode Pty Ltd v Look Software Pty Ltd (2001) VR 501 which was interesting since its factual basis was similar to the present one.
The Tribunal is examining a disciplinary issue that has the same factual basis, but in principle far removed from those issues confronting Master Harper. However his statements of principle that have been referred to are relevant to the question of whether there has been a situation of conflict.

Conflict of interest

This is a significant component of the applicant’s complaint. The complaint starts with the actions of P1 commencing in October 2005 and continues into the conduct by P2 of the proceedings commenced by the applicant. This Tribunal does not have to make a ‘finding’ that there was a conflict at any time; that is the province of the ACAT if there is an application under section 419. It is however necessary to examine the evidence and the legal context to assess whether this ground would support the making of a section 419(3) charge. There appear to be two avenues of commencement of approach to this issue. The first of these is to look at P1’s actions referred to above against a finding that the company was his client. The second is to examine his actions on the assumption that the applicant was a former client of the Firm with whom the Firm had continuing dealings by virtue of his role of managing director within the company and providing continuing instructions on behalf of the company to the firm.
On the assumption that the company was his client, something that he himself asserted, his duty of fidelity was to the company. The following is taken from Riley Solicitors Manual:
[7075] Conflict when representing entity clients
[7075.5] Entity as the client as compared with multiple representation
Where a lawyer is retained by an entity, it is the artificial legal person of the entity that is the client. It follows that the lawyer owes his or her duties to the entity, including fiduciary duties to that entity as a client. The separate entity status dictates that the lawyer does not ordinarily owe a fiduciary duty to individual officers of the entity.
The Tribunal is not aware of what P1 knew about the company, its constitution, or the relative positions of the directors early in October 2005 when he first had contact with the incoming directors, and indeed whether he had had any involvement with the company or directors prior to that. However, he did have an opportunity to gain this knowledge when he first spoke to GW and he would have gained quite extensive knowledge about the company, its shareholders and directors after undertaking the research that would have been necessary for the October advice which he prepared. It could probably be inferred that he was aware he was acting for only part of the board from his dealings with the applicant. Without explanation that is difficult to reconcile with his later claim that in dealing with those directors he was dealing with the board. It is also difficult without explanation to determine when he became aware that there was conflict between the applicant and the incoming directors. However that dispute probably became apparent no later than at the time that he was asked to advise on the validity of the applicant’s resignation on 7 October 2005, and his later unwillingness to deal with the applicant after the applicant’s return from overseas. So that, analogously with Spincode, no later than at 7 October 2005, P1 commenced to act for one side in a dispute between directors.
On the assumption that the company was P1’s client, it would be strongly arguable that it was a breach of his duty to his client to take sides in and foster a dispute among its directors. It would be a matter for the ACAT to infer from the evidence what P1’s motivation was in providing advice and drafting documents.
Likewise it is likely to be established that the applicant had been a client of the firm for the purposes of incorporation of the company and had then had an ongoing relationship with the firm as a shareholder and managing director of the company. In those circumstances on the principles referred to by Master Harper, for the firm in general, and P1 in particular, to act for the company and the incoming directors to the exclusion of the applicant would arguably be a situation of conflict. This was explicitly recognised by Master Harper in spite of his comments regarding the applicant not having been a client of the Firm.
This analysis not only relates to P1’s dealing with the applicant, but also P2’s prosecution of the defence of the applicant’s litigation on behalf of the company and the incoming directors and shareholders.
The Tribunal is therefore of the view that this ground would support an application pursuant to section 419(1) to the ACAT for an order of professional misconduct or alternatively unsatisfactory professional conduct, against each practitioner in relation to the applicant’s complaint.

Fabrication of documents

The evidence indicates that documents identified in the complaint were prepared by P1 on instructions. It is difficult within the evidence to distinguish between documents which were drafts and documents which were final versions. The Tribunal takes the view that this area of the complaint would not support an application for an order under section 419.

Acting for a former client

This is dealt with under the heading ‘Conflict of Interest’.

Negligence

This does not seem to form an identifiable ground of complaint and was not dealt with as such by the applicant either in evidence or in submissions.

Delay by P2 in conducting proceedings brought by the applicant, failing to properly discover documents including maintaining an untenable claim for privilege, and supervising the work of P1 the subject of the applicant’s complaint

The evidence indicates that there was significant delay in producing documents which were in the custody of the company’s accountants, and were in fact not produced by the company with support by P2, but on subpoena directed to the company’s accountants. During the period of delay, the uncontested evidence is that correspondence from the applicant’s solicitors was ignored by P2 as was a direction of the Court.
The claim for privilege over documents created while the applicant was a director was maintained for years and was finally abandoned at the eleventh hour and only after application to the Court by the applicant. There is a reasonable probability that the claim for privilege was unfounded and contributed to delay and the cost of the litigation.
P2 was a partner in the Firm which employed P1 at the relevant time of the complaint.
Evidence relating to this ground has not been controversial and it is the view of the Tribunal that it raises a reasonable likelihood that a finding of either professional misconduct or unsatisfactory professional conduct by the ACAT would be made in respect of it.

Conclusion

It is the opinion of the Tribunal that the decision of the respondent should be set aside pursuant to section 416. Applications should be made to the ACAT in respect of each of P1 and P2 seeking orders of professional misconduct or unsatisfactory professional conduct as appropriate arising out of the complaint of the applicant. Those orders should be sought in relation to those components of the complaint which relate to conflict of interest and consequent breach of duty to the applicant in respect of P1 and P2. Those orders should also be sought to those components which relate to P2 acting for the company and incoming directors in the litigation commenced by the applicant, delay in conducting those proceedings; failing to properly discover documents; and, supervising the work of P1. Solicitors should be engaged to commence proceedings, and (preferably senior) counsel engaged to draft the application. All evidence, the transcript of proceedings, and this decision should be referred to counsel for that purpose.

ORDERS

The decision made by the respondent on 1 August 2013 to dismiss the applicant’s complaint against the practitioners P1 and P2 pursuant to section 412 of the Legal Profession Act 2006 is set aside and the orders which follow substituted.
Application be made to the ACAT pursuant to section 419 of the Legal Profession Act for an order of professional misconduct or alternatively unsatisfactory professional conduct against P1 arising out of the complaint made against that practitioner by the applicant.
Application be made to the ACAT pursuant to section 419 of the Legal Profession Act for an order of professional misconduct or alternatively unsatisfactory professional conduct against P2 arising out of the complaint made against that practitioner by the applicant.

DIRECTIONS

That solicitors be engaged to act for the respondent in the proceedings commenced.
That counsel be retained to advise and draft the necessary Tribunal documents.
That the evidence in the hearing in these proceedings be considered and the application(s) be drafted in accordance with these Reasons for Decisions.

………………………………..
Mr G. Lunney SC– Senior Member
For and on behalf of the Tribunal

HEARING DETAILS

FILE NUMBER:	OR 13/34
PARTIES, APPLICANT:	Simon Byrne
PARTIES, RESPONDENT:	Council of the Law Society of the ACT
COUNSEL APPEARING, RESPONDENT	Mr Gill
SOLICITORS FOR RESPONDENT	Mr Phelps – Phelps Reid Lawyers
TRIBUNAL MEMBERS:	Mr C.G Chenoweth OAM – Senior Member Mr G. Lunney SC – Senior Member
DATES OF HEARING:	22 August 2014

*column 1* *item*	*column 2* *person*	*column 3* *decision*
1	complainant	dismiss a complaint under s 412
2	complainant	omit matter from application to ACAT that was originally part of complaint
3	Australian legal practitioner complained about	take action under s 413 in relation to practitioner