Doherty v The Law Society of New South Wales

[2003] NSWSC 464

CITATION:	Doherty v The Law Society of New South Wales [2003] NSWSC 464
HEARING DATE(S):	23 May 2003
JUDGMENT DATE:	2 June 2003
JURISDICTION:	Common Law
JUDGMENT OF:	Studdert J
DECISION:	The plaintiff to pay the first defendant's costs in the proceedings; no order as to costs of the second defendant.
CATCHWORDS:	Legal practitioners - appeal against resolution of Law Society refusing application for practising certificate - order made for issue of certificate subject to conditions - application by Law Society for order for costs in its favour - whether such an order should be made - relevance of manner in which Society conducted itself in the proceedings.
LEGISLATION CITED:	Legal Profession Act ss 61, 62 Supreme Court Act s 76
CASES CITED:	Doherty v The Law Society of New South Wales [2003] NSWSC 105 Gersten v The Law Society [2003] NSWCA 39
PARTIES :	Peter Doherty (Plaintiff) The Law Society of New South Wales ACN 000 000 699 (First Defendant) Andrew Stuart Brown (Second Defendant)
FILE NUMBER(S):	SC 13117/02
COUNSEL:	I.M. Wales SC (Plaintiff) R.I. Bellamy (Defendants)
SOLICITORS:	Stewart Cuddy & Mockler (Plaintiff) Raymond John Collins (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

STUDDERT J

Monday 2 June 2003

13117/02 PETER DOHERTY v THE LAW SOCIETY OF NEW SOUTH WALES ACN 000 000 699 & ANOR

JUDGMENT

1 HIS HONOUR: On 28 February last I delivered judgment in proceedings brought before this Court by the plaintiff by way of summons: Doherty v The Law Society of New South Wales [2003] NSWSC 105. I reserved the question of costs of those proceedings at that time and on Friday, 23 May 2003 I heard submissions on the issue of costs.

2 It was submitted by the Law Society (the first defendant on the summons) that the plaintiff should be ordered to pay the costs of the Society. The plaintiff opposed the making of such an order although it was not contended on his behalf that the plaintiff should have an order for costs in his favour. Rather, Mr Wales of Senior Counsel for the plaintiff, submitted that the Court should order each party to pay his and its own costs.

3 The second defendant joined in the proceedings on the summons was joined as the manager of the practice. No submissions have been made concerning his costs. From a practical point of view, it was the first defendant which resisted the plaintiff’s summons and it is appropriate that no order be made as to the costs of the second defendant.

4 Under s 76 of the Supreme Court Act costs are in the discretion of the Court. It was not contended by either the plaintiff or the Society that the position was otherwise. Whilst costs ordinarily follow the event, there is not, nor could there be, a rigid rule to that effect.

5 In the present case the plaintiff succeeded on the summons to the extent that an order was made that he be issued with a practising certificate expressed to be subject to conditions which were to apply to any practising certificate held by the plaintiff during a period of two years from the date of judgment. Why then should the plaintiff be ordered to pay the costs of the Society incurred in these proceedings?

6 A number of considerations were put forward by Mr Bellamy to support his submission that such an order for costs should be made:

(i) It was the conduct of the plaintiff in failing to comply with s 61 and s 62 of the Legal Profession Act which prompted the resolution on 2 August 2002 for cancellation of the plaintiff’s practising certificate and the resolution to appoint the second defendant as manager of his practice. The same conduct of the plaintiff prompted the later resolution of the Society on 22 August 2002 to refuse his application for a practising certificate for the year commencing 1 July 2002. Hence the need for the plaintiff to bring proceedings in this Court was brought about by his own conduct when he held a practising certificate.

(ii) The plaintiff’s failure to maintain trust records was compounded by deficiencies in the trust accounts.

(iii) The deficiencies continued to exist until after the hearing on the summons had been concluded.

(iv) The Society in recognition of the need to protect the public had a role to “reasonably contradict”, thus affording the Court the opportunity of best assessing not only the interests of the plaintiff but also the public interest and the appropriate outcome.

7 It was submitted by Mr Wales on behalf of the plaintiff that it was the behaviour of the Law Society in not providing access to the plaintiff’s account records which prevented an earlier acknowledgement of the trust account deficiencies and the amount of the deficiencies. Further, Mr Wales submitted, that the Society acted unreasonably in not informing the plaintiff prior to the hearing that it was not opposed to the plaintiff having some opportunity to practise. Mr Wales also submitted that the plaintiff put forward an offer of compromise dated 24 December 2002 which was received by the Society on 30 December 2002 and that the terms of that proposal did not differ markedly from the decision reached by the Court. The society ought to have responded to that offer of compromise.

8 It is important that I have regard to all the competing submissions, including those summarised, in determining how the discretion of the Court as to costs should be exercised. These submissions emphasise the need for me to assess the manner in which the Society conducted this litigation.

9 I am satisfied that it was proper that the Society took the action which it did take in the cancellation of the certificate and in the refusal of an application for a practising certificate for the year beginning 1 July 2002. The Society’s resolutions on 2 August 2002 and 22 August 2002 (see paras 1 and 2 of my judgment of 28 February 2003) were altogether appropriate

10 After the second defendant collected the trust account books and records, they were taken to Deloittes for analysis and the report from Deloittes, received on 17 September 2002, disclosed deficiencies from the two branches totalling $9938.90. The plaintiff did not have access to those records in September 2002 to satisfy himself that the analysis as to the deficiencies was correct. It is understandable that he was desirous of having an accountant of his choice inspect the records examined by Deloittes. Ultimately there was a joint report by the accountants, Mr Lombe and Mr Kitt, which recorded agreement on all matters. That report was completed on 10 February 2003, one week before the hearing commenced. That report followed upon a conference ordered by the Court and its preparation avoided the necessity for time to be occupied on the hearing of the summons, and associated costs, in determining the extent of any discrepancies. I have, of course, considered all the correspondence tendered by Mr Wales as Exhibit 1 on the costs application, but I am not persuaded that the Society acted unreasonably concerning the matter of access to the records before Mr Kitt had the opportunity of conferring with Mr Lombe, or that earlier lack of access to the records ought to bear upon the issue as to the appropriate order for costs in this case.

11 The plaintiff filed the summons in these proceedings on 15 November 2002 and the matter was set down for hearing for 17 February 2003 just thirteen days after the summons was filed. Allowing for the long vacation period, it was necessary for the parties to move expeditiously to ready the matter for hearing, and I note that on 6 February 2003 Kirby J ordered the accountants to confer not later than 11 February 2003. That direction was complied with of course, and hence the joint report on 10 February 2003. Kirby J also made an order on 6 February that the plaintiff file evidence as to character by 12 February 2003. Affidavits in response to that direction from Kenneth Hancock, David Baran and Christopher Lee were filed on 12 February 2003. There was a later filing of an affidavit by Geoffrey Turner on 17 February 2003.

12 The Law Society filed affidavits by Andrew Brown on 14 February 2003 and by Raymond Collins on the same date.

13 It seems to me that the Society acted with all due expedition in preparing for the hearing on 17 February 2003. I do not consider it was unreasonable of the Society not to indicate that it would not oppose the issue of a practising certificate before that indication was conveyed in para 37 of Mr Collins’ affidavit of 14 February 2003. On the contrary, it was to my mind entirely reasonable that the Society have the opportunity of considering all the plaintiff’s affidavit evidence, including the evidence as to character, before expressing its attitude in the way in which it was expressed through the affidavit of Mr Collins.

14 The offer of compromise forming part of Exhibit 1 required that the first defendant within twenty-eight days of 24 December 2002 issue a practising certificate subject to one or other of the restrictions in para 1(a). This called upon the Society to act before the plaintiff’s evidence was complete and before the filing of the affidavits as to character previously mentioned. In my opinion it was not unreasonable for the Society to decline to respond to that notice when the plaintiff’s evidence was incomplete.

15 The trust account records that were kept in the period from 1 July 2001 to 25 March 2002 were not accurately maintained and bookkeeping errors resulted in trust debit balances (see my judgment para 27). Moreover, the plaintiff failed to maintain any trust records between April and July 2002. There was then the troublesome matter of the failure to comply with undertakings (see my judgment paras 54-68).

16 Mr Collins opined that by his conduct the plaintiff had evidenced that he did not have the necessary skills and knowledge to conduct a sole practice. I addressed the concern of the Society as reflected in the evidence of Mr Collins at para 69-73 of my earlier judgment. It seems to me that the Society was altogether responsible in raising those concerns for the consideration of the Court.

17 My conclusion is that the Society acted in a responsible manner from the time that resolutions were first passed on 2 August 2002 until the time that the hearing concluded. It seems to me that in its conduct of these proceedings the Society has served the public interest. As I observed in my earlier judgment (at para 38) the need to protect the public was a major consideration for the Court in determining the appropriate outcome on the summons, and the manner in which the Society conducted the proceedings assisted the Court in what was perceived by the Court to be the appropriate outcome.

18 During the hearing as to costs, counsel were unable to refer the Court to any cases of a like nature where a contested application for costs was made by the Society. After the hearing concluded, Mr Bellamy referred the Court to the decision of the Court of Appeal in Gersten v The Law Society [2003] NSWCA 39. That was a case that involved consideration of Pt 65A r 3 of the Rules of Court and in which a legal practitioner suspended from practise outside the State applied by summons for an order in New South Wales to be permitted to practise. The application was opposed by the Society and at first instance the summons was dismissed. The appeal was successful. Subsequently the Court of Appeal dealt with the question of costs. Whilst upholding the appeal, the Court of Appeal did not disturb the order made at first instance that the practitioner pay the Law Society’s costs at first instance. Before ordering the appellant to pay the costs of the Law Society of the proceedings in the Common Law Division, the court stated:

“4 The proceedings at first instance took 19 days between February and July 2001 and the appellant’s application was strongly contested. The Law Society however appeared in the proceedings to safeguard the standards of the profession in the public interest and for the protection of the public. See paras 51-4 of this Court’s reasons of 22 November 2002. We have not been persuaded that the Law Society stepped outside this role. It follows that this was not adverse litigation in the ordinary sense.
5 Counsel for the Law Society submit that an application under SCR Pt 65A r 3 for an “otherwise order” lifting the automatic suspension under the rule is analogous to an application for re-admission by a former practitioner who has been struck off for misconduct. In such a case the Court will ordinarily order the applicant for re-admission to pay the costs of the Law Society or Bar Association. See Ex parte Lenehan (1948) 77 CLR 403, 425; Johns v Law Society (CA NSW u/r 6/6/91) and Ex parte Davis (1962) 63 SR (NSW) 54, not affected on this point by the reversal of the substantive decision ((1963) 109 CLR 428).”

19 It is to be recognised that the nature of the proceedings before me differs from the nature of the proceedings in Gersten, but I am satisfied that the present proceedings were prompted by the responsible cancellation of a practising certificate and by the responsible refusal of an application for a practising certificate. It seems to me that what can be drawn from Gersten is that the Court should consider favourably an application such as has been made by the Society in the present case, provided that the Court is satisfied that in its conduct of the proceedings in which the application for costs is made the Society has been seen to have conducted itself in the public interest.

20 What order for costs is appropriate in the exercise of the Court’s discretion is a matter to be determined heeding all the circumstances of the particular case. Here I am satisfied, having reflected upon the submissions of counsel and the conclusions I have expressed in para 17 above, that it is appropriate that I should order the plaintiff to pay the costs of the Society in these proceedings.

Formal orders

21 1. I order the plaintiff to pay the first defendant’s costs in the proceedings.

2. I make no order as to costs of the second defendant.

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Last Modified: 06/18/2003