Council of the Law Society of the Act v Legal Practitioner ‘Ha' (Occupational Discipline)
[2016] ACAT 55
•2 June 2016
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
COUNCIL OF THE LAW SOCIETY OF THE ACT v LEGAL PRACTITIONER ‘HA’ (Occupational Discipline) [2016] ACAT 55
OR15/22, OR 15/26 & OR 15/27
Catchwords: OCCUPATIONAL DISCIPLINE – LEGAL PRACTITIONERS – failure to respond to client appropriately- failure to act in a timely and competent manner – failure to respond to Law Society as required-whether unsatisfactory professional conduct – failure to be open and frank in dealing with Law Society whether professional misconduct-what constitutes special circumstances for costs
Legislation cited: Legal Profession Act 2006 ss 386, 387, 389, 419, 420, 425, 433
Legislation Act 2001s 104
Legal Profession (Solicitors) Rules 2007 rr 39.1, 39.2
Cases cited: Breskvar v. Wall (1971) 126 CLR 376
Briginshaw v Briginshaw (1938) 60 CLR 336
Council of the Law Society of the ACT v The Legal Practitioner [2010] ACAT 73
Council of the Law Society of the ACT v Legal Practitioner“D1” [2014] ACAT 17
Council of the Law Society of the ACT v Legal Practitioner “D2” [2014] ACAT 6
Council of the Law Society of the ACT v The Legal Practitioner N1 [2016] ACAT 36
Council of the Law Society of the ACT v The Legal Practitioner X [2012] ACAT 34Council of the Law Society (NSW) v Dalla [2011] NSWADT 130
Council of the Law Society (NSW) v Delpopolo [2014] NSWCATOD 55
Council of the Law Society (NSW) v Koffel [2010] NSWADT 149In the matter of DP and the Legal Practitioner Act 1970 [2005] ACTSC 78
Law Society of the ACT v The Legal Practitioner P [2010] ACAT 47
Law Society of the Australian Capital Territory & The Legal Practitioner [2011] ACAT 51
Law Society of the Australian Capital Territory v Burns [2012] ACTSC 91Law Society of New South Wales v Bouzanis [2006] NSWADT 55
Law Society of New South Wales v Gillroy [2010] NSWADT 232
Law Society of New South Wales v Vosnakis [2007] NSWADT 42Legal Practitioner v Council of the Law Society of the Australian Capital Territory (2014) ACTSC 13
NSW Bar Association v Livesey (1982) 2 NSWLR 231
List of
Texts/Papers cited: Butterworths, Halsbury’s Laws of Australia, Vol 16 (1997)
CCH NSW Conveyancing Law in Practice
Dal Pont, G.E, Riley’s Solicitors Manual, 5th ed.
Tribunal: Senior Member C Chenoweth (Presiding)
Senior Member E Ferguson
Member L Mayes
Date of Orders: 2 June 2016
Date of Reasons for Decision: 2 June 2016
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) OR 22/15, OR 26/15 & OR 27/15
BETWEEN:
COUNCIL OF THE LAW SOCIETY
OF THE ACT
Applicant
AND:
LEGAL PRACTITIONER ‘HA’
Respondent
(OR 22/2015)
LEGAL PRACTITIONER ‘HA1’
Respondent
(OR 26/2015)
LEGAL PRACTITIONER ‘HA2’
Respondent
(OR 27/2015)
TRIBUNAL: Senior Member C Chenoweth (Presiding)
Senior Member E Ferguson
Member L Mayes
DATE: 2 June 2016
ORDERS
The Tribunal makes the following determination and orders:
Matter OR 22/2015
The Tribunal finds the respondent guilty of unsatisfactory professional conduct as defined by section 386 of the Legal Profession Act 2006 (the LP Act) in relation to his failure to respond to correspondence and queries from or on behalf of a client or people acting on his behalf.
The Tribunal finds the respondent guilty of unsatisfactory professional conduct as defined by section 386 of the LP Act and in that he breached Rule 39.2 by failing to respond to Law Society enquiries as required.
In relation to the findings in orders 1 and 2 the Tribunal imposes the following orders:
(a)The respondent be publicly reprimanded pursuant to subsection 425(3)(e) of the LP Act; and
(b)Pursuant to section 433 of the LP Act the respondent is to pay 66% of the applicant’s costs in the manner set out in Orders 11 and 12 below.
Matter OR 15/26
The Tribunal finds the respondent guilty of unsatisfactory professional conduct as defined by section 386 of the LP Act in relation to his failure to act for a vendor in a sale of business in a timely and competent manner; and for failing to properly respond to solicitors for the purchaser in that transaction.
The Tribunal finds the respondent guilty of unsatisfactory professional conduct as defined by section 386 of the LP Act and in that he breached Rule 39.2 by failing to respond to Law Society enquiries as required.
In relation to the findings in orders 4 and 5 the Tribunal imposes the following orders:
(a)The respondent be publicly reprimanded pursuant to subsection 425(3)(e) of the LP Act;and
(b)Pursuant to section 433 of the LP Act the respondent is to pay 50% of the applicant’s costs in the manner set out in Orders 11 and 12 below.
Matter OR 27/2015
The Tribunal finds the respondent guilty of unsatisfactory professional conduct as defined by section 386 of the LP Act in relation to his failure to pay employee entitlements.
The Tribunal finds the respondent guilty of professional misconduct as defined by section 387 of the LP Act and in that he breached both Rule 39.1 by failing be open and frank with his dealing with the Law Society; and Rule 39.2 by failing to respond to Law Society enquiries as required. The conduct is not so serious as to justify a finding that the respondent is not a fit and proper person to engage in legal practice.
In relation to the findings in orders 7 and 8 the Tribunal imposes the following orders:
(a)The respondent be publicly reprimanded pursuant to subsection 425(3)(e) of the LP Act.
(b)The respondent be fined the sum of $3,000 pursuant to section 425 of the LP Act to be paid by 31 August 2016.
(c)Pursuant to section 433 of the LP Act the respondent is to pay the applicant’s costs in the manner set out in Orders 11 and 12 below.
Matters OR 27/15; OR 27/15; and OR 26/15
The respondent is required to undertake and complete a course in Ethics and Practice Management approved by the Law Society within 12 months from the date of this order.
Costs of these applications are on a party/party basis at the scale applicable to matters in the Supreme Court in an amount to be agreed, or failing agreement to be determined by the Tribunal.
Parties have liberty to seek relisting of matter for consideration of costs.
………………………………..
Senior Member C Chenoweth
for and on behalf of the Tribunal
REASONS FOR DECISION
The applications
There are three separate applications before the Tribunal for disciplinary action against the respondent. OR 22/2015 dated 5 June 2015; and OR 26/2015 and OR 27/2015 both dated 26 June 2015.
OR 22/2015 concerns the respondent having acted for a party or parties for many years leading up to events concerning the sale of a forest plantation in 2010 or 2011 and general neglect and delay on his part from that time to properly conclude the matter. There was also an allegation of failing to invest, or seek instructions to invest, trust monies arising from the transaction. The respondent is also charged with contravening Rule 39.2 by failing to respond to enquiries by the Law Society of the ACT (the Law Society) as required.
OR 26/2015 concerns the conduct of the respondent in acting for the seller in the sale of a business. The broad allegation is that he failed to adequately respond to inquiries from the purchaser’s solicitors during the period from March 2013 to about July 2014. The respondent is also charged with contravening of Rule 39.2 by failing to respond to the Law Society enquiries as required.
OR 27/15 arose from complaints by two former employees of the respondent that he failed to pay them their entitlements to payment in lieu of notice when he unexpectedly terminated their employment on 28 June 2013. The respondent is also charged with contravening both Rule 39.1 by failing to be open and frank with his dealing with the Law Society; and Rule 39.2 by failing to respond to the Law Society enquiries as required.
On 3 August 2015 the Tribunal directed that the three matters be heard jointly at the respondent’s request given that the same mitigating circumstances largely apply to all of them.
The respondent and the applicant filed a joint submission for each matter (the joint submissions) in which certain matters were agreed.
Methodology
In this decision a reference to the ‘tribunal’ or ‘ACAT’ refers to the ACT Civil and Administrative Tribunal generally and a reference to the ‘Tribunal’ refers to the members who heard these matters.
After considering the circumstances and law applicable to all three matters the Tribunal will consider each matter separately.
The Tribunal will deal with OR 27/2015 first and in most detail as it relates to the most serious contraventions. The Tribunal’s reasoning and consideration of the law and circumstances in that application will where relevant and indicated be applied to the other two matters.
A summary of the Tribunal’s decision in relation to penalties and costs for all matters considered at the hearing is set out at the end of this decision.
The general background
The respondent was at all material times the holder of an unrestricted practicing certificate issued by the Law Society.
He was the sole principal of an incorporated legal practice until its sale on 28 June 2013. After the sale he remained as an employed solicitor of the purchasing practice for the remainder of the relevant period.
Towards the end of 2012 in the early part of 2013 the respondent’s firm started suffering financial difficulties culminating in the distressed sale of the practice on 28 June 2013 to the purchasing firm. The respondent’s firm ceased trading from the following Monday, which was 1 July 2013.
The respondent accepted the purchaser’s offer of employment and continued to work in the purchaser’s practice for next 18 months until the end of 2014.
On 11 September 2013 the respondent’s practice was placed in the hands of a liquidator who took over the final administration and winding up of the practice.
The respondent now conducts a sole practice in Sydney.
General law to be applied
The Tribunal refers to and adapts the legislative scheme as described in The Council of the ACT Law Society & The Legal Practitioner [2010] ACAT 73 as follows.
Section 419 of the LP Act gives the tribunal power to make orders for the discipline of legal practitioners where the tribunal is satisfied that a practitioner is guilty of either unsatisfactory professional conduct or professional misconduct.
Section 420 of the LP Act provides that the tribunal is bound by the rules of evidence in hearing an application. The applicant bears the onus of proving its case to the level of the tribunal being comfortably satisfied that the matters have been made out. A line of authorities establish that the standard of proof as described in Briginshaw v Briginshaw[1] is appropriate[2] for disciplinary proceedings because of the potential serious consequences for a practitioner who is found guilty of misconduct.
[1] (1938) 60 CLR 336 at 368
[2] see NSW Bar Association v Livesey (1982) 2 NSWLR 231 at 237-8 and the line of authorities cited
The terms unsatisfactory professional conduct and professional misconduct are defined in sections 386 and 387 of the LP Act.
The statutory definition of unsatisfactory professional conduct set out in section 386 of the LP Act, includes conduct “happening in connection with the practice of law” that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent practitioner. It comprehends behaviour that is not so significant that it can be described as disgraceful, but is, nevertheless, of a standard less than the standard that a member of the public is entitled to expect from a professional person.
It is described in Riley Solicitors Manual[3] in this way:
1. These standards are not to be determined by reference to lawyers who are without fault, but of the reasonably competent lawyer. As such, the standard of reasonableness invoked by the definition aims to distinguish between conduct that falls within a tolerable range of human error and bad professional work which falls below reasonable standards of competence and diligence.
[3] Dal Pont, G.E Riley’s Solicitors Manual 2005 at (33,040.10)
Professional misconduct is defined in section 387 of the LP Act as “including unsatisfactory professional conduct” that involves a substantial or consistent failure to reach or to maintain a reasonable standard of competence and diligence. It also includes conduct, “whether happening in connection with the practice of law or otherwise”, that justifies a finding that the practitioner is not a fit and proper person to engage in legal practice.
Section 389 of the LP Act lists specific behaviours that can constitute either unsatisfactory professional conduct or professional misconduct. Paragraph (a) is relevant here. It provides that conduct, which is a contravention of the LP Act, can be either unsatisfactory professional conduct or professional misconduct.
Section 104 of the Legislation Act 2001 provides that a reference to an Act includes a reference to any statutory instruments made, or in force, under the Act. For the purposes of the LP Act, this includes the Legal Profession (Solicitors) Rules 2007 (the Rules).
Rule 39 of the Rules at the time these matters arose is relevant to these proceedings it provides:
39.1 Subject only to his or her duty to the client, a practitioner should be open and frank in his or her dealings with the Law Society.
39.2 A practitioner should respond within a reasonable time and in any event within 14 days (or such extended time as the Society may allow) to any requirement of the Society for comments or information in relation to the practitioner’s conduct or professional behaviour and in doing so the practitioner should furnish in writing a full and accurate account of his or her conduct in relation to the matter.
Section 425(3) of the LP Act sets out the types of orders the tribunal may make if satisfied that the practitioner is guilty of unsatisfactory professional conduct or professional misconduct.
Section 425(1)(b) also allows the tribunal to make any other order it considers appropriate.
Matter OR 27/15 failure to pay and/or advise employee entitlements; and failure to respond properly to the Law Society
The first ground: Failure to pay employee entitlements
In their joint submission dated 9 September 2013 the parties agree upon the following central facts:
(a)The respondent failed to pay the complainants in lieu of notice upon their termination on 28 June 2013 in circumstances where he was aware that each had such an entitlement, and further he deliberately failed to inform each of their entitlement, notwithstanding the firm’s inability to effect any such payment on that day.
(b)Each complainant was entitled to payment equivalent to at least two weeks wages.
(c)At the time of the conduct described above the respondent was suffering significant financial difficulties culminating in the distressed sale of the business of his practice to the purchasing firm on 28 June 2013 and the ultimate appointment of a liquidator on 11 September 2013. At the time the respondent was also suffering matrimonial difficulties and ill health.
The facts
The following facts are not in dispute.
Perhaps a week or two prior to settlement of the sale the respondent instructed his bookkeeper to calculate the wage and leave entitlements of all seven staff employed by the practice up to 30 June 2013. The respondent did not ask for the calculation to include any entitlements under the National Employment Standards for payment in lieu of notice (PILON).
The respondent negotiated a purchase price sufficient to cover the total employee entitlements so calculated and tried to find out which staff the purchasers were going to keep on.
Either on, or very close to, Friday 28 June 2013, the purchasers finally told the respondent it would only retain two identified employees.
On Friday 28 June, the respondent told his bookkeeper of the purchaser’s decision. The bookkeeper alerted the respondent to the possibility that some of the staff to be dismissed may be entitled to PILON depending on their length of service.
Later that day the respondent summarily dismissed the five employees the purchaser had chosen not to retain, including the two complainants, and paid them their entitlements, without PILON, as previously calculated by the bookkeeper.
The proceeds of the sale were only sufficient to cover the employee entitlements calculated and other debts of the practice but not payment in lieu of notice.
The respondent was aware at the time he terminated the complainants’ employment that he owed them PILON and should have told them so. He made a deliberate decision not to pay because he had no capacity to do so on the day. He decided not to inform for the following reasons:
(a)There was no time to calculate such entitlements.
(b)The respondent did not have funds to pay them.
(c)The circumstances were generally stressful.
One of the complainants was entitled to PILON equivalent to four weeks pay (although she claimed for only two weeks). The other complainant was owed the equivalent of two weeks pay. They made separate complaints to the Law Society requesting the respondent pay these amounts.
In the period between the complainants being dismissed on 28 June 2013 and their complaining to Law Society on 11 July and 29 July 2013 the respondent admits he took no steps to remedy his failure to inform them of their unpaid entitlements.
After being notified of the complaints the respondent did not offer to pay the entitlements. He told the Tribunal that he failed to do so because:
(a)The complainants did not ask him to.
(b)Events overtook him- they complained to the Law Society then he was focused on responding to that process.
(c)His work situation continued to be very stressful after the sale.
During the hearing, at the Tribunal’s request, the applicant made enquiries and established that at least one of the complainants through her own efforts managed to recover her unpaid entitlements from the Commonwealth Government’s Fair Entitlements Guarantee Scheme (FEG).
Following the hearing the applicant was able to confirm that FEG has now also fully compensated the other complainant for her unpaid entitlements.
Characterisation of conduct:
In the joint submission at [35] the parties agree that:
the conduct of the respondent described in paragraph 26 above relates primarily to his personal conduct, as principal of the firm and director of the company, rather than his professional conduct in that it concerns his dealings with his employees rather than the conduct of his practice and the provision of legal services generally.
The applicant submitted that although such conduct can be unsatisfactory professional conduct it is usually regarded as professional misconduct.
The Tribunal’s first recourse is to the definitions set out in sections 386 and 387 of the LP Act. As both are inclusive definitions the Tribunal shares the view expressed by Refshauge J in Legal Practitioner v Council of the Law Society of the Australian Capital Territory (2014) ACTSC 13 at [307] that, “the common law definitions are not necessarily excluded, unless of course they are inconsistent with the statutory definitions.”
Consistent with the ACAT’s previous decision in Council of the Law Society v Legal Practitioner “D1” [2014] ACAT 17[4] the Tribunal finds that although the conduct was not connected with the provision of legal services, as it concerned the respondent’s contractual and monetary responsibilities to his employees it happened ‘in connection with the practice of law’ and as such could be fall within either the definition of unsatisfactory professional conduct in section 386 of the LP Act or the definition of professional misconduct in section 387(1).
[4] In this decision the Tribunal found that the practitioner’s failure to meet obligations to an employee, in that case to provide separation certificate and to pay super levy, was conduct “happening in connection with the practice of the law” and therefore could constitute either unsatisfactory professional conduct or professional misconduct under the LP Act
The tribunal in Council of the Law Society of the ACT V Legal Practitioner N1 recently considered how a practitioner’s failure to pay employee entitlements, in that case to superannuation contributions, should be characterised.[5]
[5] Council of the Law Society of the ACT v Legal Practitioner N1 [2016] ACAT 36
In that case the practitioner, who was the principal of an incorporated legal practice, only paid the firm’s employees about 35% of their statutory entitlements over a period of approximately three years, leaving a shortfall of just over $100,000. The tribunal found the respondent guilty of professional misconduct.
In reaching its decision the tribunal in N1 considered a line of NSW decisions[6] which dealt with the failure to meet statutory obligations to pay employee super entitlements over periods ranging from two to nine years and involving sums ranging from $7,283.85 to $213,852.81 in the case of Gillroy which sum also included unpaid tax.
[6]Law Society of New South Wales v Bouzanis [2006] NSWADT 55
Law Society of New South Wales v Vosnakis [2007] NSWADT 42
Council of the Law Society (NSW) v Koffel [2010] NSWADT 149
Law Society of New South Wales v Gillroy [2010] NSWADT 232
Council of the Law Society (NSW) v Dalla [2011] NSWADT 130
Council of the Law Society (NSW) v Delpopolo [2014] NSWCATOD 55
In all the NSW cases referred to, except Koffel, the conduct was characterised as professional misconduct.
In Koffel the tribunal found the respondent had taken all reasonable steps to try to meet his obligations and so dismissed the application.
The tribunal in Koffel noted at [48] that:
the mere fact of a failure to pay superannuation guarantee contributions on time does not, of itself, constitute professional misconduct. It is the circumstances surrounding the failure, the consequences of the failure, and the actions subsequently taken by the solicitor, that determine whether the conduct constitutes professional misconduct.
The tribunal in Council of the Law Society of the ACT v Legal Practitioner N1 at [17] concluded that:
The authorities are clear that personal or non-practice conduct, including the failure to carry out fiscal responsibilities, and more specifically the failure to pay superannuation contributions to employees, can amount to 'professional misconduct' at common law if the conduct is such that it would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency and is otherwise capable of bringing the legal profession into disrepute.
The Tribunal notes that the requirement to make payment in lieu of notice serves the important purpose of easing the financial pain inevitably caused to an employee by the unexpected loss of his or her job.
The Tribunal finds that the respondent’s failure to pay was an isolated and uncharacteristic lapse at a time of great personal and financial stress, unlike the NSW cases and N1 where the principal of the firm systematically failed to pay employee entitlements over a number of years.
The Tribunal also considered the less defensible aspects of the respondent’s conduct namely his deliberate decision not to tell the complainants that he might owe them further entitlements and his subsequent failure to rectify his omission.
Findings
Having regard to all the circumstances referred to above the Tribunal finds the conduct described at paragraph 30 falls within the statutory definition of unsatisfactory professional conduct in “that is not so significant that it can be described as disgraceful, but is, nevertheless, of a standard less than the standard that a member of the public is entitled to expect from a professional person.”
The Tribunal considers the conduct to be at the higher range of seriousness for unsatisfactory professional conduct as it involves a deliberate omission by the respondent.
The second ground- failure to deal properly with the Law Society
The parties agreed in the joint submission that the respondent had engaged in conduct that contravened both his obligation to be open and frank in his dealings with the applicant as required by Rule 39.1; and to respond to the applicant as required by Rule 39.2.
The facts
The parties agree that in six separate letters or emails between August 2014 and May 2015 the respondent falsely represented to the Law Society that he was not aware that the complainants had not received payment in lieu of notice at the time he terminated their employment and paid them their other entitlements.
The respondent eventually admitted, almost immediately upon receipt of the sealed application to the tribunal, that he had known either on the day the complainants were dismissed, or the previous day, of the possibility of additional entitlements. He subsequently signed a joint submission to that effect.
The parties agree that the respondent’s responses to the Law Society in relation to investigation of the complaints were
(a)neither full nor frank nor accurate;
(b)both careless and misleading; and
(c)as such constituted a breach of Rule 39.1 and Rule 39.2
Characterisation of conduct
In the joint submission the parties agreed that the Rule 39 breaches could be characterised as either unsatisfactory professional conduct or professional misconduct but made no submissions to which was more appropriate.
The parties’ joint submission to OR 22/15 at [28] refers to a line of ACT decisions regarding failure to respond as required to the applicant[7], and in particular the decision by the Full Court of the Supreme Court In the matter of DP and the Legal Practitioner Act 1970 [2005] ACTSC 78 that a practitioner was guilty of unsatisfactory professional conduct on the grounds of his failure to respond to a requirement when notified of the obligation to do so under the Rules.
[7] Law Society of the ACT v The Legal Practitioner P [2010] ACAT 47; Council of the Law Society of the ACT v Legal Practitioner “D1” [2014] ACAT 17; Council of the Law Society of the ACT v Legal Practitioner “D2” [2014] ACAT 6
However, misleading the Law Society is usually considered professional misconduct: see for example the decisions in LP v LSACT (2014) ACTSC 13 at [311], and the Full Court in the Law Society of the Australian Capital Territory v Burns at [42]-[44].
The Tribunal is satisfied that the respondent’s conduct in repeating what he knew to be false and critical information to Law Society over a period of several months was a breach of Rule 39.1 and both a substantial and a consistent failure to meet reasonable standard of competence and diligence within the meaning of section 387 of the LP Act and so amounts to professional misconduct.
The Tribunal agrees with the applicant that the conduct is not so serious as to bring into question the respondent’s fitness for practice and so finds it does not fall into the more serious category of professional misconduct referred to at section 387(2).
The Tribunal does not think it necessary to characterise the Rule 39.2 breach separately as it forms part of the same pattern of the respondent’s dealings with the applicant in this matter.
Penalty
The parties’ positions
The applicant sought the following orders in relation to both breaches:
(a)a public reprimand under section 425(3)(e);
(b)the respondent to undertake a course in Ethics and Practice Management,
(c)a fine of $3000;
(d)compensation to complainants for amount owed to them; and
(e)costs to be paid by the respondent.
The respondent made no submission as to penalty in the joint submission but at the hearing expressed a willingness to undertake a course in Ethics and Practice Management.
The law
A reprimand is the least severe of the penalties listed in section 425(3). If the Tribunal decides that a reprimand is appropriate then, if there are special circumstances, it can choose to reprimand the practitioner privately, rather than publicly.
Section 425(1)(b) also allows the Tribunal to make any other order it considers appropriate.
It is open under section 425(1) to the Tribunal to exercise its discretion to not impose any penalty if it considers the contravention not sufficiently serious to warrant one.
The Law Society of the Australian Capital Territory & The Legal Practitioner [2011] ACAT 51 at [32]-[33] sets out the relevant factors for the tribunal in exercising its discretion under section 425 as follows.
It is well established that the primary objective of the legal profession disciplinary system is to protect the public rather than to punish the practitioner.
The tribunal has previously identified factors relevant to the determination of an appropriate sanction as including the nature of, and the circumstances surrounding, the acts found to constitute unsatisfactory conduct, the level of understanding demonstrated by the practitioner of the unsatisfactory nature of his conduct, the attitude of the practitioner especially whether he demonstrates any remorse or regret for the conduct, the likelihood of a future re-occurrence of unsatisfactory conduct, and any previous adverse findings in relation to the practitioner’s professional conduct. We add to this list any loss suffered by others as a result of the unsatisfactory conduct and any benefit gained or loss suffered by the practitioner. The factors are to be considered in the context of the protective aim of these proceedings. The relevant authorities are discussed in detail in Riley’s Solicitors’ Manual at paragraphs [33,065] to [33,105].
Mitigating circumstances
The parties agree on the following mitigating circumstances in relation to the respondent’s conduct both towards the Law Society and his former employees. To a large extent theses circumstances are also relevant to the other two applications heard.
The respondent is a practitioner of considerable experience. He readily admits that a number of other complaints were made about his conduct at his old firm, two of which resulted in the formal applications being heard concurrently with this one.
The breaches in relation to his employees were committed over a short period of time leading up to the urgent sale of the respondent’s business and uncertainty as to which of his employees would be offered a job. They came after several months of intense stress associated with the deterioration of his practice and personal life. The stress continued after the sale for 18 months while he remained with the purchasing practice as an employed lawyer.
The respondent admitted, albeit belatedly, that he had failed to inform his employees of their entitlements so as to avoid a legitimate claim against him which he could not pay.
The respondent admitted the factual grounds of all breaches almost immediately upon receipt of the sealed application.
The Tribunal acknowledges that the respondent’s prompt plea saved considerable time and expense for both the applicant, the tribunal and potential witnesses.
The respondent did not receive any financial benefit from sale of his practice other than paying out some of the firm’s liabilities.
The respondent is apologetic and embarrassed by his conduct in relation to the applicant and the complainants.
The Tribunal finds that although the type of conduct was serious it caused relatively small pecuniary loss to the complainants.
During the course of the hearing counsel for the applicant provided an informed estimate of the applicant’s costs and disbursements for all three applications up to, but not including the hearing, of about $50,000.
Findings
Whilst a cost order is not in the nature of a sanction it is a circumstance that can be taken into account by the tribunal when considering penalty.
The original application called for orders under section 442 of the LP Act to compensate the complainants for their unpaid payment in lieu of notice. Since both complainants have since recouped their entitlements a compensation order is no longer appropriate.
At the hearing the respondent expressed his willingness to undertake and complete a course on ethics and practice management.
In light of the nature of the conduct and the circumstances set out above the Tribunal is satisfied that the nature of the respondent’s unsatisfactory professional conduct in relation to his former employees is at the higher end of the scale in terms of seriousness.
In light of the nature of the conduct and the circumstances set out above the Tribunal is satisfied that the nature of the respondent’s professional misconduct in relation to the Law Society is at the lower end of the scale in terms of seriousness.
The purpose of a penalty is not just to act as a personal deterrent to the practitioner, but also to provide guidance to the profession and to give members of the public confidence that that the tribunal is serious about upholding professional standards.
In this matter, the Tribunal considers it appropriate that a fine of $3,000 be imposed, payable within three months of the date of the order. The failure to be open and frank with the departing employees, and the failure to then follow up to explain and make arrangements to pay their entitlements, meant that their vulnerability was taken advantage of. When this is coupled with the misleading information provided by the respondent to the applicant, the conduct goes beyond a momentary failure into the area of a deliberate misleading response to the applicant in its capacity as regulator of the profession. The fine is an appropriate way to mark the Tribunal’s condemnation of the respondent’s conduct.
The Tribunal is satisfied that the respondent’s conduct warrants an order reprimanding the practitioner under section 425(3)(e) of the LP Act.
The Tribunal must then consider whether there are special circumstances that warrant the issuing of a private reprimand. There was no submission to do so.
Previously, the tribunal has found that the dual purposes of providing guidance to the ACT practitioners and maintaining public confidence in the regulation of the profession is best served by making reprimands public. This approach reflects the requirement in section 425(3)(e) for special circumstances.
The Tribunal is not satisfied that there are special circumstances warranting the issue of a private reprimand.
Matter OR 15/22- General neglect and delay to conclude matter and failure to respond properly to the Law Society
The grounds
In the application for disciplinary action, the respondent alleged three areas of failure.
Firstly was of a failure to invest trust monies, or seek instructions to invest trust monies in interest-bearing account pending the settlement of the company's taxation matters. It was complained that this constituted undue neglect and delay and breach of the rules to treat one's client fairly.
Evidence was provided by respondent at the hearing that the client was aware that the funds were not invested, and drew out part of them from time to time as a matter of convenience. The applicant acknowledged that the matter of the trust account and the way in which it was managed was not pressed and the Tribunal makes no adverse finding against the respondent in relation to this matter.
The second ground of complaint was that the failure by the respondent or anyone on his behalf to respond to queries raised by or on behalf of a client or people acting on his behalf, and that this constituted undue neglect and delay and failure to act with a reasonable degree of competence and diligence, and could also constitute a failure to treat the client fairly.
The third ground of complaint was that the respondent had failed to provide a full account of the matter by way of response to the applicant's solicitors letters of 3 March 2014, 6 March 2014, 11 August 2014 and 12 September 2014 and that this constituted a breach of rule 39.2.
In clause 24 of the joint submission, the respondent acknowledged that he had:
(a)failed to respond to queries made on behalf of the complainant in relation to certain land transactions and tax obligations relating to the company;
(b)failed to respond to the applicant’s appointed solicitor in accordance with the requirements of rules 39; and
(c)failed to obtain instructions to invest the money held by him on trust. The respondent provided an explanation for this at the hearing as noted above.
The facts
This matter arose from the actions of the respondent in relation to transactions concerning the purchase and sale of certain pine forests on behalf of a client, Mr P. At the request of Mr P, the respondent arranged for the incorporation of a shelf company (‘the company’) with himself as the sole director and shareholder.
While Mr P provided funds for the acquisition of the company, and for the purchase of certain properties made by the company, no declaration of trust in relation to the share was entered into by the respondent.
Subsequent correspondence after the complaint had been initiated indicated that there was some uncertainty in the minds of the solicitor who now acts for Mr P as to who is the beneficial owner of the share, and therefore of the assets (and liabilities) of the company.
This lack of clarity as to the beneficial interest in the company lead to further problems for the respondent. One of those problems was the failure to properly secure his position as trustee in relation to the trust asset being the share in the company, and through it control of the assets of the company, against the possibility of future liabilities that may have fallen on him as a director.
Some years later, on the instructions of the Melbourne solicitor for Mr P the respondent sent the certificate of title to the properties to that solicitor. It appears that two of the properties were subsequently sold, and presumably the respondent as the director of the registered proprietor executed all appropriate transfers.
Difficulties arose for the respondent when he sought to obtain information about the taxation position of the company as a result of the sales. The sale of the two properties, having been handled in Melbourne, was not under the control of the company: yet the company as the registered proprietor and (presumably) as trustee on behalf of somebody, had a right of indemnity against those trust assets in respect of any liability arising out of the transaction.
The respondent as the sole director of the company also faced the prospect that if the company could not pay any taxation liability arising from sale, then the respondent himself may have been liable. This was a matter which was of considerable concern to the respondent.
The complainant reported that he had instructed accountants to obtain information from the respondent about the sales so that the taxation situation of the company could be finalised. The accountants and the Melbourne solicitor for Mr P made repeated attempts to obtain information from the respondent, including by a number of written communications.
The respondent acknowledges that these were not being responded to promptly or appropriately.
Subsequent correspondence between the applicant and the respondent requiring detailed information as to the manner in which the respondent had handled the transaction, including requests for information were not dealt with satisfactorily.
The respondent acknowledges that there was a substantial failure to respond to the applicant’s letters in 2014. The respondent’s files ultimately were provided to the applicant’s solicitor on 20 November 2014.
Characterisation of conduct
The parties agreed in the joint submission that the conduct in relation to all grounds of this application constituted unsatisfactory professional conduct. In that statement, the applicant sought certain orders from the Tribunal. The respondent did not concur with those orders.
It is clear from the statement of agreed facts that there was a failure by the respondent to deal appropriately with the requests for information emanating from the Melbourne solicitor of Mr P.
It is also clear, and respondent acknowledged, that the transaction had not been well set up in the first place, and the respondent was exposed for all potential taxation liabilities in a matter where he had no interest, and in relation to the two sales that he had not conducted, with no ability to determine what those liabilities were.
The correspondence from the complainant did not focus on this potential liability, and the lack of communication between the respondent and Melbourne solicitor and accountants appointed by the client led to the breakdown in communications.
As indicated elsewhere in this decision, this was also a time when the respondent was under very considerable financial and personal strain. While not excusing the respondent’s conduct, this is a matter to which the Tribunal ought to have regard.
While the conduct of the respondent in this matter is below the standard which would be expected of a practitioner, it had a number of complex issues which the respondent acknowledged that he was not equipped to deal with. When coupled with the personal difficulties of the respondent referred to elsewhere in this decision, the unsatisfactory situation which resulted in these proceedings was predictable.
Penalty
In the joint submission, the applicant proposed that the orders that the Tribunal should make were that there be a public reprimand, that the respondent complete a course in ethics and in practice management within 12 months, that the respondent pay a fine of $3,000, and that the respondent pay the applicant's costs.
Findings
The Tribunal finds that the failure by the respondent to respond to queries made on behalf of the client, his delay in dealing with the matter, and his failure (as acknowledged) to respond to the applicant in accordance with the provisions of rule 39.2 justified a finding of unsatisfactory professional conduct.
While the Tribunal notes the particular difficulties of the respondent in this matter, the Law Society cannot carry out its important statutory responsibilities where practitioners fail in their obligations to provide information promptly and fully as required by the Rules. This failure of itself justifies a public reprimand.
Having regard to the personal difficulties of the respondent referred to elsewhere in this decision, and the personal difficulty faced by the respondent because of his position as a director of the company, a difficulty which the other advisers to the client did not seem to be aware of or prepared to assist the respondent with the Tribunal does not consider it appropriate to impose a further fine in relation to the matter.
A summary of the Tribunal’s decision in relation to penalties and costs for all matters considered at the hearing is set out at the end of this decision.
Matter OR 26/15 - Failure to adequately respond to purchaser’s solicitor when acting for the vendor in a sale of business; and failure to respond properly to the Law Society
The grounds
In the application for disciplinary action, the respondent alleged three areas of failure.
The first ground was that the respondent had not taken steps necessary to conclude the transaction in a timely and competent manner constitutes gross neglect or delay on the part of the respondent.
The second ground was that respondent failed to inform the solicitors for the purchaser as to what was going on and to respond other enquires. This constitutes dealing with practitioners in a manner falling short of the standards of courtesy and due respect expected of a legal practitioner and is conduct otherwise capable of bringing the legal profession into disrepute.
The third ground was that the respondent had failed to provide a full account of the matter by way of response to the applicant's solicitors’ letters, and in particular the failure to produce his file relating to the transaction as requested, and that this constituted a breach of rule 39.2.
Facts
The complaint against the respondent in this matter arose from his firm acting on the sale of a business in Canberra. An employed solicitor (‘M’) had carriage of the matter.
The client of the respondent’s firm was a company which owned a business conducted in the Westfield Plaza in Woden, ACT. The business was being sold to a New South Wales company.
The transaction was due to settle on or about 13 March 2013. Part of the contract of sale was the usual condition requiring the transfer of a business name.
The long-standing procedure to effect this had been for the vendor to hand to the purchaser or its solicitor a transfer form of the business name signed by the vendor.
As a result of changed procedures by the Australian Securities and Investments Commission (‘ASIC’) in order to effect the transfer, the purchaser required a transfer reference number (‘TRN’) to be generated by the ASIC.
The new procedure was for this number to be provided by ASIC to a director of the vendor company, who could then pass it on to his solicitor and ultimately on settlement to the purchaser. Without this number, the transfer of registration could not be effected. Presumably, this new procedure has been adopted to increase security over the transfer of business names.
The complainant alleged that prior to settlement, the solicitor acting for the purchaser had requested M to give an undertaking that the respondent’s firm would provide as soon as possible after settlement the transfer reference number for the purpose of completing the registration of transfer of business name with ASIC.
The applicant having investigated the allegation did not prosecute this charge and agreed with the respondent that M did not provide the undertaking as contended for by the solicitor for the purchaser of the business.
There was no evidence provided that there was such an oral undertaking nor any evidence that M was authorised to give the undertaking on behalf of the firm.
Further, if the undertaking had been given it would have required the co-operation of a third party (ASIC), and therefore should not have been given at all.
It is a well accepted principle in the area of the giving and receiving of undertakings, that they should only be given in writing and by the principal of the firm that is sought to the bound by them.
In the present case, the respondent denied that he was aware of any such undertaking having been given, and would not have authorised it.
M, through the principal of his new firm, had informed the applicant’s solicitor that no undertaking had been given. Further, in response to a question from the tribunal, the applicant’s solicitor contended that no issue relating to the supposed undertaking was alleged against the respondent.
The issues before the Tribunal were confined to delay in completing the matter once M had left the firm, and a failure by the respondent to fully respond to the applicant under rule 39.
At the hearing, it was accepted by the applicant and the respondent that a new procedure had been adopted by ASIC for the transfer of a business name, requiring separate documentation to be issued by ASIC direct to the address of the vendor’s director.
The respondent was not familiar with that process, and was attempting to resolve the matter through discussions with the solicitors for the purchaser. It appears that the respondent was not given anything by his client that would have clarified the matter.
When the matter of the failure to complete the transfer of the business name was brought to the respondent’s attention by the solicitor for the purchaser, the respondent attempted to complete the matter by providing the corporate key number of the vendor company. This was not effective to transfer the business name.
There was further correspondence and emails from the purchaser’s solicitors to the respondent. It is admitted that these were not satisfactorily dealt with and the matter was not completed with expedition.
The respondent did try to contact his client, but the client appeared to have gone on a trip around Australia and could not be contacted.
The respondent acknowledged in the joint submissions that he had not properly responded to the applicant over a period of some months.
Characterisation
In the joint submissions, the parties agreed that the respondent’s conduct in relation to all three grounds was properly characterised as unsatisfactory professional conduct. The Tribunal agrees that this is the proper characterisation, and so finds. The respondent should have ascertained the correct procedure for the transfer, and completed it within a reasonable time.
Penalty
In the joint submissions, the applicant contended that on the basis of finding of unsatisfactory professional conduct, there should be a public reprimand and a fine of $2000. In addition the respondent should be ordered to undertake and complete a course in professional ethics, and a further course of practice management, both to be undertaken within 12 months from the date of the decision.
Mitigating Circumstances
In the joint submissions, the respondent pointed to his understanding that after settlement of the sale the director of the vendor company was working for the purchaser in another office, and that the respondent assumed, (without proper enquiry), that the matter of the outstanding transfer requirements for the business would be settled internally. This had contributed to delay.
The respondent also contended that following sale of his firm, he had contacted his former client on a couple of occasions and asked him to make an appointment to resolve the matter but the appointments were not kept.
The matter was eventually settled and the transfer completed without loss to the purchaser.
In an e-mail from the principal of the purchaser’s solicitors of 23 July 2014, she expressed the view that as the matter had been completed, she did not wish the complaint to go further. She acknowledged the personal factors which had made the respondent’s life very difficult and expressed considerable sympathy for this.
A summary of the Tribunal’s decision in relation to penalties and costs for all matters considered at the hearing is set out at the end of this decision.
Conclusion – all three applications
The joint submission contained matters in mitigation, which were acknowledged by the applicant.
These matters affected all three cases the subject of the present proceedings before the Tribunal. While it is not necessary to go to the detail of the personal aspects of the respondent’s life, the effect of these for the proceedings on him has been substantial, both in personal and financial terms.
The Tribunal notes that the respondent is apologetic, remorseful and embarrassed by his conduct.
While it is important for the Tribunal to demonstrate both to practitioners and to the public that proper standards of professional practice and behaviour will be upheld by its decisions, the Tribunal must also have regard to the personal circumstances of the respondent and the factors which impinged on his professional life at the time of the matters the subject of complaint.
It is not appropriate that the penalties imposed by the Tribunal to demonstrate to the public and the profession the importance of upholding professional standards, be unreasonably severe. In cases such as these regard must also be had to the practitioner’s opportunity to learn from his mistakes, and to continue to practice his profession, without crushing financial obligations.
Penalty
As the Tribunal previously noted the respondent at the hearing agreed with the applicant’s proposal that he would undertake a course in Ethics and Practice Management and the Tribunal finds it appropriate that he do so.
The Tribunal is satisfied that the respondent’s conduct in relation to all three applications warrants a public reprimand under section 425(3)(e) of the LP Act.
Costs
Section 433 of the LP Act provides that if the tribunal finds a practitioner guilty of unsatisfactory professional conduct or professional misconduct it must order the practitioner to pay costs (including the costs of the relevant council and the complainant) unless satisfied that exceptional circumstances exist.
The Tribunal is satisfied that no such circumstances apply to OR 27/15 and so finds the respondent is required to pay all the respondent’s cost of that application.
The Tribunal finds special circumstances pursuant to section 433 pertained to both OR 22/15 and OR 26/15.
In OR 22/15 the respondent’s acknowledged failure to invest, or seek instructions to invest, trust monies for his client was not pressed by the applicant at the hearing and therefore there is no basis for an order for costs on the basis of this ground.
Bearing in mind the other two grounds of the application were successful the Tribunal considers that an appropriate allocation of costs in OR 15/22 is to require the respondent to pay 66% of the applicant’s costs of the application.
In OR 15/26 after investigation the applicant dismissed an allegation by the purchaser’s solicitors that a solicitor employed by the respondent’s firm had provided an undertaking that the firm would take certain action to complete the transaction. The parties agreed in the joint submission that such an undertaking could not have been provided as it would be precluded by Rule 25 as it required the co operation of a third party being ASIC, to comply.
The Tribunal finds that the applicant unnecessarily expended resources investigating an allegation, which on its face, lacked merit.
Although ultimately not prosecuted the alleged breach of a practitioner’s undertaking was the most serious aspect of the complaint that lead to application OR 26/15. Accordingly it is likely that it would have formed the focus of the investigation.
Having regard to these matters, and accepting that these are questions for judgment and must to some extent depend on subjective views of the case, the Tribunal considers that an appropriate allocation of costs is to require the practitioner to pay 50 % of the applicant’s costs of the application.
The practitioner is to pay the applicant’s costs of these proceedings as agreed, or if not agreed, costs will be fixed by the tribunal on the recommendation of the Registrar following an assessment of costs by the Registrar at the scale applicable for Supreme Court matters on a party/party basis. The application may be re-listed only for the purpose of fixing costs if not agreed.
………………………………..
Senior Member C Chenoweth
for and on behalf of the Tribunal
HEARING DETAILS
FILE NUMBER: | OR 15/22, OR 15/26 & OR 15/27 |
PARTIES, APPLICANT: | Council of the Law Society of the ACT |
PARTIES, RESPONDENT: | ‘HA’ |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | N/A |
SOLICITORS FOR APPLICANT | Mr John Buxton, Dibbs Barker Lawyers |
SOLICITORS FOR RESPONDENT | Self Represented |
TRIBUNAL MEMBERS: | Senior Member C Chenoweth (Presiding) |
DATES OF HEARING: | 18 September 2015 |
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