Fittock v Legal Profession Conduct Commissioner (No 2) - [2015] SASCFC 167

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
FITTOCK v LEGAL PROFESSION CONDUCT COMMISSIONER (No 2)
[2015] SASCFC 167
Judgment of The Full Court
(The Honourable Justice Sulan, The Honourable Justice Blue and The Honourable Justice Nicholson)
19 November 2015
PROFESSIONS AND TRADES - LAWYERS - COMPLAINTS AND DISCIPLINE - DISCIPLINARY PROCEEDINGS - SOUTH AUSTRALIA - APPEALS
PROFESSIONS AND TRADES - LAWYERS - COMPLAINTS AND DISCIPLINE - PROFESSIONAL MISCONDUCT AND UNSATISFACTORY PROFESSIONAL CONDUCT - GENERALLY
The appellant was found guilty of three counts of unprofessional conduct. The conduct related to the non-payment of fees owing to a psychologist who had been instructed by the practitioner's firm on behalf of the client.
Count 1 alleged that the practitioner failed to take any or any adequate action to protect the client from the psychologist's recovery for fees claim. The psychologist had threatened to sue the client and default judgment was subsequently entered in the Magistrates Court. Count 2 alleged that the practitioner had misused the client's trust money. Count 3 alleged that the practitioner had allowed his interests to conflict with the client's interests.
The Legal Practitioners Disciplinary Tribunal found him guilty of unprofessional conduct on the first count, and imposed a $15,000 fine and costs order. The Tribunal did not address or make any findings on counts 2 and 3.
The practitioner appealed. He contended that he took adequate action to protect his client from threatened and actual fee recovery proceedings. The practitioner further contended that his conduct did not constitute unprofessional conduct.
Held, allowing the appeal (the Court):
1. The Court sets aside the decision of the Tribunal that the practitioner was guilty of unprofessional conduct, and substitutes a finding of unsatisfactory conduct as to counts 1 and 2.
2. The order of a fine of $15,000 is set aside.
3. Count 3 is dismissed.
4. The practitioner is reprimanded.
5. The order for costs is not set aside.
Legal Practitioners Act 1981 (SA) s 5 (definition of 'unprofessional conduct') (repealed), s 5 (definition of 'unsatisfactory conduct') (repealed), s 82(2), s 82(6), s 82(6)(a) (amended); Legal Practitioners (Miscellaneous) Amendment Act 2013 (SA) Sch 2, s 14(2); Rules of Professional Conduct and Practice r 9.1.1 (repealed); Rules of Professional Conduct and Practice r 26; Solicitors' Conduct Rules r 12.1, referred to.
Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 27 ALR 367; Palser v Grinling [1948] AC 291, discussed.
BT Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"substantial"

FITTOCK v LEGAL PROFESSION CONDUCT COMMISSIONER (No 2)
[2015] SASCFC 167
Civil: Sulan, Blue and Nicholson JJ

THE COURT: This is an appeal against a decision of the Legal Practitioners Disciplinary Tribunal in respect of the conduct of Laurence John Fittock, a solicitor. The conduct related to a personal injury claim of Salih Begic, for whom the appellant practitioner’s firm acted. The Tribunal found the practitioner guilty of unprofessional conduct, imposed a fine of $15,000 and ordered that he pay the legal costs of the Commissioner in the proceedings.
The counts of unprofessional conduct
As the Legal Practitioners Act 1981 (SA) (“the Act”) applied at the relevant time,[1] the definitions of “unprofessional” and “unsatisfactory” conduct were:
unprofessional conduct, in relation to a legal practitioner, means—
(a) an offence of a dishonest or infamous nature committed by the legal practitioner in respect of which punishment by imprisonment is prescribed or authorised by law; or
(b) any conduct in the course of, or in connection with, practice by the legal practitioner that involves substantial or recurrent failure to meet the standard of conduct observed by competent legal practitioners of good repute;
unsatisfactory conduct, in relation to a legal practitioner, means conduct in the course of, or in connection with, practice by the legal practitioner that is less serious than unprofessional conduct but involves a failure to meet the standard of conduct observed by competent legal practitioners of good repute.
[1] These definitions no longer appear in the current Act, but are preserved in relation to conduct occurring prior to the Act’s amendment by Schedule 2 and s 14(2) of the Legal Practitioners (Miscellaneous) Amendment Act 2013 (SA).
On 15 May 2014, the Legal Practitioners Conduct Board charged the practitioner pursuant to section 82(2) of the Act with three counts of unprofessional conduct.
Count 1 alleged that between 5 October 2010 and 3 March 2011 the practitioner failed to take any or any adequate action to protect Mr Begic in relation to a claim for fees owed to Frances Koulos, a psychologist. This related to a threat by Ms Koulos to sue Mr Begic in the Magistrate Court and to default judgment entered in the Magistrates Court action on 21 December 2010.
Count 2 alleged that on 3 March 2011 the practitioner paid to Ms Koulos $215.35 from Mr Begic’s trust money when this sum was not properly payable by Mr Begic. The amount was in relation to costs payable to Ms Koulos in the Magistrates Court action.
Count 3 alleged that between 5 October 2010 and 1 November 2012 the practitioner allowed his interests to conflict with Mr Begic’s interests in relation to Ms Koulos’ account contrary to rule 9.1.1 of the then prevailing Rules of Professional Conduct and Practice.[2]
[2] Those Rules have now been revoked. Conflict of interest is now governed by the Solicitors’ Conduct Rules rule 12.1.
On 23 May 2014, the practitioner was declared bankrupt. Debts of approximately $4 million were owed. The bankruptcy is due to expire in May 2017.
In September 2014, the practitioner acting on his own behalf filed a response to the charge admitting the allegations but saying that the conduct comprised unsatisfactory rather than unprofessional conduct.
In December 2014, the practitioner, who was now legally represented, filed new responses denying the charges and denying that his conduct comprised either unsatisfactory or unprofessional conduct.
The Tribunal heard the matter in December 2014 and March 2015. Evidence was given by Mr Begic and the practitioner.
At the time of the Tribunal hearing, the practitioner was employed by his wife’s company. He does not undertake any legal work for this company. He does not hold a practising certificate. He will be required to re-apply for a practising certificate if he intends to resume legal practice.
In April 2015, the Tribunal delivered a report making a finding of unprofessional conduct, fining the practitioner $15,000 and ordering that he pay the legal costs of the Commissioner in the proceedings.
Background
At all relevant times the practitioner carried on a legal practice, including personal injury claims, trading as Fittock Barristers and Solicitors (“the firm”) in Adelaide. The firm employed Linden Fairclough and Anne Marie Donaldson as clerks.
The firm had an arrangement with Ms Koulos that it would send personal injuries clients with psychological claims to her for assessment and a medico‑legal report. The firm sent over 36 clients to Ms Koulos for this purpose over a two year period. Ms Koulos was generally prepared to forbear payment of her fee until the end of the matter and be paid out of the proceeds of the claim if the defendant’s insurer did not make interim payment.[3]
[3] An issue is raised on appeal whether this was a term of the retainer of Ms Koulos or she merely forbore insisting on payment according to her strict legal rights.
Sometimes Ms Koulos took on as her patient a client who had been referred for a medico-legal report. The practitioner made it clear to Ms Koulos that the firm was not responsible for her fees for providing psychological services to its clients in their capacity as patients.
The firm used a standard fee agreement for all of its matters. The firm often agreed to act on the basis its costs would not be paid until the conclusion of the matter or that it would not charge unless the client was successful (“no win no fee”). This was designated by including the words (“Deferred Fee”) below the title of the Fee Agreement. However, the substantive provisions of the Fee Agreement were the same as in a fee agreement in which accounts were to be rendered and paid progressively even though some of those clauses were not apposite to a deferred fee arrangement.
Relevant provisions of the standard fee agreement included:
4.The client understands disbursements as being expenditure incurred by Fittock and on behalf of the Client in conducting the matter. The Client acknowledges that disbursements include, but are not limited to, payments for medical reports, police reports and any other third party services required for that matter.
8.Unless otherwise agreed the Client will be responsible for all disbursements including … medical and professional reports and counsel fees (in house or chambers) and such GST as may be applicable.
15. Fittock will render accounts, including accounts for disbursements, as and when Fittock sees fit. The Client hereby confirms that having rendered any accounts to the Client, Fittock will be at liberty to deduct such sums that Fittock is holding in Trust, to the Client’s credit, in payment of the accounts.
In 2009, the firm was engaged to act for Mr Begic in relation to a claim for injuries suffered in a motor vehicle accident on 5 December 2007.[4] It appears that Mr Begic dealt initially with Mr Fairclough. It appears that it was agreed that the firm would conduct the matter on a “no win no fee” basis.
[4] It is not clear when the firm commenced to act for Mr Begic. It was not later than July 2009 when the firm wrote to him saying it was about to issue proceedings in the District Court and requesting that he pay the filing fee of $870. The firm’s file before October 2010 was not tendered.
On 15 October 2009, Mr Begic was involved in a second motor vehicle accident. Mr Begic engaged the firm to act for him in relation to this accident as well.
On 26 October 2009, Mr Begic signed at the request and in the presence of Mr Fairclough the standard fee agreement with the firm (“Fee Agreement”). Mr Begic gave evidence that he did not see the practitioner on that occasion. Mr Fairclough told Mr Begic that there would be “no win no fee”. Mr Fairclough did not distinguish between disbursements and professional costs in the discussion. Mr Fairclough did not take Mr Begic through the clauses of the document.[5]
[5] The practitioner gave evidence of his own standard practice when asking a client to sign a fee agreement. He said that he paraphrased for the client each clause and explained “You’re responsible for these fees but they will be covered as disbursements by the insurer in most cases”. However, he did not suggest that he met with Mr Begic for this purpose.
Most of the work undertaken by the firm on Mr Begic’s file was undertaken by Mr Fairclough assisted by Ms Donaldson and most of Mr Begic’s dealings were with Mr Fairclough. However, the practitioner did some work on the file, signed all letters and closely supervised and undertook responsibility for the work undertaken by Mr Fairclough and Ms Donaldson. The practitioner had some attendances and telephone attendances on Mr Begic.
In December 2009, the firm made an appointment for Mr Begic to see Ms Koulos on 22 December 2009 in connection with injuries suffered as a result of the second accident. On 17 December 2009 the firm wrote a letter signed by the practitioner to Mr Begic informing him of the appointment. On 18 December, the firm wrote a letter signed by the practitioner to Ms Koulos confirming the appointment and requesting that she examine Mr Begic and provide to the firm a report addressing 15 questions. The letter concluded:
Please provide us with your report and relevant tax invoice.
In his evidence, the practitioner accepted that he had an ultimate obligation to pay Ms Koulos for the report if the insurer did not pay and Ms Koulos insisted on payment. He described this as a professional conduct obligation and denied that he had a contractual obligation. However, he said in his evidence on six occasions that he believed at the time that he was legally liable to Ms Koulos and Mr Begic was not. The practitioner’s evidence can only be reconciled on the basis that his belief at the time in 2009 to 2011 was that he and not Mr Begic was contractually liable to Ms Koulos but by the time he gave evidence in December 2014 he now believed that as a matter of law he had not been contractually liable. This is consistent with his initial response to the charge admitting unsatisfactory conduct but his amended response after he was legally represented denying any unsatisfactory conduct.
On 22 December 2009, Ms Koulos saw Mr Begic. Mr Begic gave evidence, which was not challenged, that he asked Ms Koulos who would pay for the report and she said “Don’t worry, the company will pay me. Nothing to do with you.”
On 22 December 2009, Ms Koulos issued a tax invoice addressed to Allianz Australia Insurance Group (“Allianz”), the third party insurer, for $388.96 for the attendance. On 11 January 2010, Ms Koulos issued a tax invoice addressed to Allianz for $1,612.60 for preparation of her medico-legal report.
On 11 January 2010, Ms Koulos sent the report to the firm together with the two invoices addressed to Allianz for the firm to forward to Allianz in anticipation that it may be prepared to pay them on an interim basis.
On 30 April 2010 the firm wrote to Finlaysons, the solicitors for Allianz, enclosing Ms Koulos’ report and the invoices. The letter requested that Allianz consider paying the invoices directly. The letter was signed by the practitioner.
Allianz did not pay the accounts. The firm did not send the invoices to Mr Begic or render a disbursement account for them.
It appears from Ms Koulos’ subsequent emails that at some point between April and October 2010 Ms Koulos told Mr Fairclough on more than one occasion that she wanted payment by the firm rather than awaiting payment on the conclusion of Mr Begic’s claims. However, no other evidence beyond those emails was adduced before the Tribunal about these communications.
On 5 October 2010 Ms Koulos sent a letter of demand to Mr Begic for $2,001.56. The letter required payment by 22 October 2010. A copy of the letter was sent to the firm.
In his evidence, the practitioner accepted that he became aware of the issue of the letter of demand at this time. This was the first time he became aware that the insurer had not paid the invoices and that Ms Koulos was seeking payment rather than awaiting the conclusion of the matter. He also accepted that he knew that Mr Begic was at risk of action being instituted by Ms Koulos if payment was not made.
Soon after 5 October 2010, Mr Begic came in to the firm and spoke to Mr Fairclough about the letter of demand. He said he was worried about it and did not have the money to pay. Mr Fairclough told him not to worry about it, to throw it in the bin and the firm would fix it. The practitioner in his evidence accepted that it was a fair assumption that he was aware that Mr Fairclough had said this at the time. He accepted that he did not tell Mr Fairclough that something more needed to be done.
No evidence was adduced of any contact being made by the firm with Ms Koulos as a result of her issue of the letter of demand.
On 18 October 2010, Ms Koulos sent to Mr Begic a final notice of intention to file a Magistrates Court claim for $2,001.56 plus $17.60 for the final notice requiring a response within 21 days and saying that otherwise she would institute an action in the Magistrates Court.
Soon after 18 October 2010, Mr Begic came in to the firm and spoke to Mr Fairclough about the final notice. The practitioner was brought in by Mr Fairclough and was present for part of the meeting. Mr Begic reiterated his concerns to Mr Fairclough. Mr Fairclough told him to disregard the final notice and he would deal with it. The practitioner in his evidence accepted that he may well have been aware that Mr Fairclough said this at the time.
On 21 October 2010, Finlaysons wrote to the firm offering to settle Mr Begic’s two claims for $30,000 plus external disbursements. On 26 October 2010, Mr Begic signed instructions to the firm to settle the claims for a net amount paid to him of $30,800.
On 9 November 2010 Ms Koulos sent an email to Ms Donaldson informing her that she had issued a final notice to Mr Begic. She said that she required payment in full, or a substantial part payment, by 12 November. She threatened to issue Court proceedings against Mr Begic if this did not occur. She asked Ms Donaldson to speak to Mr Fairclough and email a reply as to Mr Begic’s intentions. In his evidence, the practitioner accepted that he became aware of the email from Ms Koulos on that day or the next.
On 10 November 2010, Mr Fairclough sent an email to Ms Koulos requesting her to stop the court action against the firm’s clients. It appears that Ms Koulos had issued a formal notice of intention to sue at least one other firm client for report fees. Mr Fairclough suggested that they meet for coffee to discuss the issue. Mr Fairclough said “As in the past we will assist you with prompt payment of accounts, but there are just a small percentage that you will have to be patient with. Wait to hear from you”.
No evidence was adduced that Ms Koulos responded to Mr Fairclough's email.
On 22 November 2010, Ms Koulos issued and served on Mr Begic by post a minor civil claim in the Adelaide Magistrates Court claiming $2,019.16 plus $120.00 in court costs. Under rule 60 of the Magistrates Court (Civil) Rules 1992 (SA), if a defence was not filed within 21 days of service, the plaintiff was entitled to sign default judgment.
Within a few days after this Ms Begic attended at the firm with the summons and saw Mr Fairclough. Mr Fairclough told him to disregard it and he would attend to it.
In his evidence, the practitioner said that he became aware of the issue of the summons within a few days of its issue. The practitioner accepted that he knew that a defence needed to be filed to avoid default judgment and that he did not assist Mr Begic to file a defence.
The practitioner gave evidence about what he would have said if he had spoken to Mr Begic:
What I would have said, and I’m not sure whether I did or not, but what I would have said was, you attend the court and say that this isn’t your debt, that she should be taking action against me.
It was clear from the practitioner’s evidence that he did not have a recollection of saying this to Mr Begic and he did not have a file note of such a conversation. At one point in his evidence, the practitioner said that he believed that he did say this to Mr Begic but it is apparent that this was only reconstruction. In reality, there was no point in the practitioner advising Mr Begic to attend the court before default judgment was signed because there was to be no hearing unless and until Mr Begic filed a defence. The assistance Mr Begic needed after the summons was served upon him was assistance in preparing and filing a defence and not in attending any court hearing at that time. The practitioner admitted that he did not give Mr Begic any assistance in preparing or filing a defence or direct Mr Fairclough to do so. In addition, Mr Begic gave evidence that it was Mr Fairclough whom he saw after the summons was served on him and it was not put to him in cross-examination that he spoke to the practitioner at that point. In the circumstances, it is clear that the practitioner did not in fact advise Mr Begic to attend the court and say that this was not Mr Begic’s debt and that Ms Koulos should be taking action against the practitioner. Any such advice would in any event have been of no assistance to Mr Begic given the need to file a defence to avoid default judgement.

On 30 November 2010 the firm wrote a letter, signed by the practitioner, to Ms Koulos saying that it had been informed that she had chosen to commence proceedings against Mr Begic, that efforts had been made to meet her to discuss Mr Begic’s matter and that of another firm client and that she had chosen to ignore that invitation. It said that Ms Koulos left the firm with no alternative but to sever their working relationship and all outstanding requests for medico-legal reports were withdrawn. It requested Ms Koulos not to contact any firm clients, but to direct correspondence to the attention of the practitioner. It concluded by requesting:
a schedule of accounts which are allegedly outstanding in relation to clients of the firm and which accounts have been raised as a direct result of instructions from this firm.
No evidence was adduced that Ms Koulos responded to the firm’s letter.
On 14 December 2010, Ms Donaldson left a telephone message for Ms Koulos requesting copies of the outstanding invoices.
On 14 December 2010, Ms Koulos sent an email in response to Ms Donaldson saying that she was emailing invoices she had sent to Allianz in December 2009 and January 2010. She said that the total claimed for the invoices and court costs was $2,139.16. She asked Ms Donaldson to notify Mr Begic that if he did not pay the whole amount she could and would issue the next stage of court proceedings and he needed to be aware that he did not have much time left before she proceeded further. She wished Mr Begic all the best at the forthcoming settlement conference in relation to his accident claims as that would allow him to pay her.
On 14 December 2010, Ms Donaldson sent an email in response saying that she would let Ms Koulos know how the conference ended up and she had put down the total owed to Ms Koulos at $2,139.16.
On 14 December 2010, Ms Koulos sent an email to Ms Donaldson enquiring as to the date of the conference and saying that if she knew Mr Begic would settle her invoices from settlement money she did not need to proceed further and he would not have additional costs. No evidence was adduced of any reply to Ms Koulos’ query.
On 21 December 2010, Ms Koulos signed default judgment against Mr Begic for $2,139.16. An investigation summons was issued to Mr Begic requiring his attendance at the Port Adelaide Magistrates Court on 23 February 2011 to answer questions regarding payment of the judgment.
On 11 February 2011, the firm wrote to Finlaysons accepting the settlement offer of $30,000.00 plus disbursements.
On 14 February 2011, the practitioner sent an email to Ms Koulos saying that he had tried to ring her and asking her to call him to discuss outstanding funds owed to her. Ms Koulos responded by email saying that she had had fruitless discussions regarding recovery with Mr Fairclough for over a year and she was not prepared to have conversations about the topic.
On 14 February 2011, the practitioner sent a responding email saying that Ms Koulos was aware that the insurer normally pays such fees on conclusion of the matter and in the past she had appeared content with this arrangement. He said that he would not resile from his obligation to pay for her reports commissioned by the firm should the insurers decline payment.
On 22 February 2011, the practitioner wrote to the Magistrates Court saying that the insurer would pay the outstanding debt the subject of proceedings with Ms Koulos. The firm had arranged for someone to attend the hearing of the investigation summons if necessary to seek an adjournment until the settlement proceeds had been received.
Before the hearing, it was agreed between Ms Koulos and the firm that the hearing would be adjourned on the condition that $2,216.91 was paid within two weeks. On 23 February 2011, the investigation summons was adjourned to 30 March 2011.
On 1 March 2011, the firm received the settlement sum from Finlaysons and it was paid into the firm’s trust account. On 3 March 2011, the firm paid $2,216.91 to Ms Koulos from Mr Begic’s trust money.
On 30 March 2011, the investigation summons was dismissed.
On 1 November 2012 Mr Begic attended at the Port Adelaide Magistrates Court and the judgment against him was set aside and Ms Koulos’ claim was dismissed.
Evidence before the Legal Practitioners Disciplinary Tribunal
Mr Begic was called by the Commissioner to give evidence. His evidence was largely uncontested and has been summarised above.
The practitioner gave evidence. His evidence also was largely uncontested and has been summarised above. Leaving aside his contention that Mr Begic and not his firm was the party to the contract with Ms Koulos, which was essentially a question of law as opposed to an account of his contemporaneous state of mind, his evidence was candid and he made appropriate concessions against his interests including that in retrospect he could have addressed the situation in which he found himself in better ways.
The practitioner contended, by his counsel and in his evidence, that as a matter of law, in retaining Ms Koulos to assess Mr Begic and provide a report, he was acting as Mr Begic’s agent and therefore bore no contractual liability for the fees. During evidence however, as noted above, the practitioner accepted that in any event he had a professional responsibility to pay Ms Koulos’ fees if the insurer refused to do so.
The practitioner contended by his counsel that even if he were responsible for payment of Ms Koulos’ fees, in the circumstances he did all that was reasonably required to protect Mr Begic from Ms Koulos’ claim.
The Tribunal’s reasons
The Tribunal identified the practitioner’s primary contention as being that in acting for Mr Begic he was acting as his agent and was therefore not personally liable for Ms Koulos’ fees. The Tribunal referred to a passage from Halsbury’s Laws of Australia relied on by the practitioner that “where a non‑client who contracts with a lawyer knows the lawyer is acting as agent for a client, the lawyer is not generally liable”. The Tribunal observed that the passage went on to say that, in exceptional circumstances, a lawyer may be liable notwithstanding that the non-client is aware that the lawyer is acting as agent for the client and gave examples and went on to say “the requirements of professional practice may also impose obligations upon lawyers with respect to non-clients.”
The Tribunal referred to rule 26 of the Rules of Professional Conduct and Practice prevailing in 2009 which provided that:
A practitioner who deals with a third-party on behalf of a client for the purpose of obtaining some service in respect of the client’s matter must inform the third-party when the service is requested that the practitioner will accept personal liability for payment of the fees to be charged for the service or, if the practitioner is not to accept personal liability, the practitioner must inform the third-party of the arrangements intended to be made for payment of the fees.
The Tribunal referred to the practitioner’s contention that clauses 4 and 8 of the Fee Agreement provided that disbursements such as medical reports were a liability of the client.
The Tribunal observed that the practitioner had not rendered a disbursement account to Mr Begic for Ms Koulos’ fees. The Tribunal concluded:
Having regard to the practitioner’s explanation of the Deferred Fee basis of the Fee Agreement, no fees or disbursements were payable by Mr Begic before the end of the matter. In the Tribunal’s view, the terms of the Fee Agreement and in particular clauses 4 and 8, did not impose upon Mr Begic a liability to Ms Koulos to pay the invoices. The effect of those clauses was to impose a liability upon Mr Begic to reimburse the practitioner in the event that he had paid Ms Koulos’ fees.
The Tribunal then addressed the practitioner’s alternative contention that, even if it were found that he was responsible for payment of Ms Koulos’ fees, he did all that was reasonably required of him to protect Mr Begic from the claim made against him by Ms Koulos.
The Tribunal rejected this contention. The Tribunal said:
It cannot be said that the practitioner sat on his hands and did nothing at all to protect Mr Begic’s interests regarding the proceedings. He made some attempts to deal with the issue but in the Tribunal’s view, his efforts were insufficient and he failed to provide Mr Begic with the protection that one would expect a practitioner to provide to his client given the circumstances. In this regard, it is clear from the above chronology of events that the practitioner or Mr Fairclough made some effort to liaise with Ms Koulos in order to have her adhere to her previous practice of waiting for payment of her accounts from the settlement monies. However, it was evident to the practitioner by at least October/November 2010 that Ms Koulos was dissatisfied about her outstanding accounts and was threatening legal action against Mr Begic and was making it very clear that this was more than an idle threat.
… As soon as he became aware of Ms Koulos’s intention to claim payment of her invoices from Mr Begic he should have advised Mr Begic and Ms Koulos of this fact and taken action to protect Mr Begic from the misconceived claim. Upon learning of the proceedings he ought to have promptly advised the court by filing a defence on behalf of the client, or filing an affidavit or writing a letter to the court setting out the full facts in order to protect Mr Begic’s interests. The practitioner failed to do any of these things in a timely manner or at all.
The Tribunal finds that the practitioner’s conduct as set out in the charge is made out on the evidence and constitutes unprofessional conduct within the meaning of the second limb of the definition of unprofessional conduct in section 5 of the Act, in that, it involved a substantial failure to meet the standard of conduct observed by competent legal practitioners of good repute.
The Tribunal addressed and made a finding on count 1 being the alleged failure to take adequate action to protect Mr Begic in relation to Ms Koulos’ threatened and actual proceedings. The Tribunal failed to address or make any finding on counts 2 and 3 relating to the practitioner acting in October 2010 in a position of conflict of interest and the use of trust monies in March 2011 to pay Ms Koulos’ court costs.
The appeal
The practitioner contends that the Tribunal erred in finding that the practitioner had a legal obligation to pay Ms Koulos and should have held that Ms Koulos contracted with Mr Begic and it was a term of the contract that her fees would not become due and payable until settlement.
The practitioner contends in the alternative that he did not fail to take adequate action to protect Mr Begic in relation to Ms Koulos’ threatened and actual proceedings, nor did he act in a position of conflict of interest or wrongly use trust monies to pay Ms Koulos’ court costs.
The practitioner contends in the further alternative that, if his conduct involved a failure to meet the standard of conduct observed by competent legal practitioners of good repute, it was not a substantial failure within the meaning of the definition of “unprofessional conduct”.
Failure adequately to protect Mr Begic
The legal position between Ms Koulos and the practitioner and Mr Begic
The practitioner contends that he entered into the contract with Ms Koulos in December 2009 as disclosed agent for Mr Begic. The ordinary principles of contract and agency are that an agent entering into a contract for a disclosed principal is ordinarily not liable to the other party on the contract,[6] and the terms of the letter of engagement and previous dealings between the parties supported or at least were not inconsistent with that conclusion.
[6] William Bowstead, Peter George Watts and Francis Martin Baillie Reynolds, On Agency (Sweet & Maxwell, 20^th etc, 2014) article 97.
The practitioner contends that, by reason of the course of dealings between the firm and Ms Koulos, it was an implied term of the contract that Ms Koulos’ fees were not due and payable until settlement.
For the reasons which follow, it is unnecessary to resolve these issues to determine this appeal. Whatever the merits of Ms Koulos’ action and the exact legal position between Ms Koulos, the practitioner and Mr Begic, the practitioner had a responsibility in the circumstances to protect his client from the risk that Magistrates Court proceedings would be instituted or that a judgment would be entered against him. That responsibility was not lessened if it be assumed that the practitioner’s contentions referred to in the previous two paragraphs are correct.
However, because the Tribunal made a finding that the practitioner was liable for Ms Koulos’ fees and these issues were argued on appeal, we address them briefly.
The identity of the contracting party
It may be accepted that the starting point is that an agent entering into a contract for a disclosed principal is ordinarily not liable to the other party on the contract. However, as the practitioner accepts, the question who are the parties to the contract is ultimately to be determined as a matter of the objective intention of the parties as a matter of construction of the written terms in their context and surrounding circumstances.[7]
[7] G E Dal Pont, Law of Agency, (Butterworths, 2001) paragraph 23.10; LexisNexis Halsbury’s Laws of England (4th ed reissue, 2003), Vol 2(1), paragraph 184 as cited by the practitioner.
The previous dealings between the firm and Ms Koulos (upon which the practitioner relies for his contention that the fees were not due and payable until settlement) involved an explicit distinction being drawn between fees for medico-legal reports requested by and provided to the firm in respect of its clients and fees for the psychological treatment provided by Mr Koulos requested by and provided to the firm’s clients in their capacity as patients. The practitioner told Mr Koulos that the firm was not responsible for her fees for providing psychological services to its clients in their capacity as patients and implicitly accepted that it was responsible for her fees for providing medico-legal reports to the firm.
The firm had a professional obligation, of which the practitioner was aware, pursuant to rule 26 of the Rules of Professional Conduct and Practice to inform Ms Koulos if it was not accepting personal liability for payment of the fees to be charged for the service and of the arrangements intended to be made for payment of the fees. The firm’s letter of 18 December 2009 engaging Ms Koulos to provide the medico-legal report did not so inform Ms Koulos, did not contain any suggestion that the firm was not engaging Ms Koulos in its own right and on the contrary requested her to provide the firm with a tax invoice that can only be understood to be an invoice to the firm.
The firm had no authority from Mr Begic to enter into a contract on his behalf with Ms Koulos to pay her fees for the medico-legal report. The firm did not seek any such authority from Mr Begic, nor advise him of the cost of the report or other terms of the contract or advise him that by attending on Ms Koulos he would become contractually liable to pay her. It was not within the scope of the firm's general authority to act for Mr Begic in his claim for damages for personal injuries to enter into a contract with Ms Koulos without seeking specific authority to do so. On the contrary, Mr Begic had been told by Mr Fairclough that his engagement of the firm was on a “no win no fee” basis and Mr Fairclough did not distinguish for this purpose between professional fees and disbursements. The Fee Agreement does not assist the practitioner in this respect. It is internally contradictory. On the one hand, the inclusion of the words “Deferred Fee” at the beginning of the agreement designate that costs were not payable until the conclusion, and probably the favourable conclusion, of the matter. On the other hand, the substantive clauses are drawn on the basis that all costs, both fees and disbursements, are billable and payable on a progressive basis. If the firm wished to contract with Mr Begic on the basis that he would pay what would otherwise be disbursements directly to external service providers on a progressive basis, it was necessary in the particular circumstances that such a term be expressly incorporated in the Fee Agreement. As the Tribunal observed, the substantive clauses of the Fee Agreement proceed on the basis that disbursements would first be paid by the firm and then reimbursed by the client, the timing of the reimbursement depending on the deferred fee arrangements.
In the circumstances, the firm entered into the contract with Ms Koulos as principal and not as agent for Mr Begic.
In any event, as the practitioner candidly accepted in his evidence before the Tribunal, he had a professional obligation pursuant to rule 26 of the Rules of Professional Conduct and Practice to ensure that Ms Koulos’ fees were paid and this obligation in itself was sufficient to give rise to a duty to protect Mr Begic against the threatened and actual actions by Ms Koulos.
The term of the contract as to when fees were payable
The practitioner contends that, by reason of the course of dealings between the firm and Ms Koulos, it was an implied term of the contract that Ms Koulos’ fees were not due and payable until settlement.
If this were so, it would not assist the practitioner in relation to his duty to protect Mr Begic against the threatened and actual actions by Ms Koulos.
The practitioner did not give evidence of any discussion with Ms Koulos in which it was agreed that her fees for medico-legal reports would not be payable until settlement of the firm's clients’ claims. The practitioner contends that such a term should be implied by the course of previous dealings.
The mere fact that Ms Koulos had been prepared in the past to refrain from requiring immediate payment of her fees until she received an interim payment from the insurer on the conclusion of the matter does not give rise to any implication that it was a term of the contract that she could not recover her fees until that time. The implication of such a term does not meet the requirements for the implication of a term identified in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[8] and Codelfa Construction Pty Ltd v State Rail Authority of NSW.[9]
Action to protect Mr Begic from the claim
[8] (1977) 180 CLR 266.
[9] (1982) 149 CLR 337.
Shortly after 5 October 2010, the practitioner became aware that Ms Koulos had issued to Mr Begic a letter of demand. Between 18 October and 9 November 2010, the practitioner became aware that Ms Koulos had issued to Mr Begic a final notice of intention to sue in the Magistrates Court.
In the circumstances, the practitioner owed to Mr Begic a duty to take steps to seek to avoid a summons being issued against Mr Begic. A competent practitioner of good repute in the practitioner’s position would have known the following matters. The issue of a summons might cause distress to a client and might have adverse consequences on a client’s credit rating albeit not as serious as entry of judgment. The issue of a summons would result in the incurring of costs by Ms Koulos that would be recoverable from Mr Begic if she were successful. There was a real risk that Ms Koulos would carry out her threat to issue a summons against Mr Begic. If Mr Begic was liable as the contracting party and had no defence to the action, it was in his interests to resolve the issue before the summons was issued. If he was not, or arguably was not, liable, it was in his interests that Ms Koulos be informed why he was not so liable with a view to avoiding the issue of the summons. Mr Begic had no legal expertise and was reliant on the firm to protect him against the issue of a summons by Ms Koulos. He was unable to communicate effectively with Ms Koulos in relation to either the merits or resolution of her claim.

The steps taken by the practitioner were inadequate to seek to protect Mr Begic against the issue of a summons. He did not take steps or direct Mr Fairclough to take steps to contact Ms Koulos after learning of the 5 October letter of demand. Mr Fairclough sent an email to Ms Koulos on 10 November after Ms Koulos issued the final notice and sent the 9 November email. Ms Koulos did not respond and ultimately issued the summons on 22 November. A competent practitioner would have ensured there was some follow up with Ms Koulos after the sending of that email. A competent practitioner would have sought to negotiate an acceptable outcome with Ms Koulos.
The practitioner’s conduct between 5 October and 22 November 2010 fell short of the standard of conduct observed by competent legal practitioners of good repute. However, it was a breach at the lower end of the range. A step was taken on 10 November 2010 albeit inadequate. It is surprising that Ms Koulos did not respond but simply issued the summons on 22 November. The practitioner did not deliberately breach his obligations to Mr Begic. He did not appreciate the detriment if a summons were issued or that Ms Koulos would make good her threat. His conduct was negligent rather than deliberate and the negligence was not egregious.
Between 22 and 30 November 2010, the practitioner became aware that Ms Koulos had issued and served a summons on Mr Begic. He knew that if Mr Begic did not file a defence within the required time and if a resolution was not negotiated, Ms Koulos could sign default judgment.
In the circumstances, the practitioner owed to Mr Begic a duty to take steps to seek to avoid judgment being entered. A competent practitioner of good repute in the practitioner’s position would have known the following matters. The entry of a judgment might cause distress to a client and would have adverse consequences on a client’s credit rating. The entry of judgment would result in the awarding of costs in favour of Ms Koulos against Mr Begic. If Mr Begic was liable as the contracting party and had no defence to the action, it was in his interests to resolve the issue before judgment was entered. If he was not or arguably was not liable, it was in his interests that a defence be filed to avoid the entry of default judgment. Mr Begic had no legal expertise and was reliant on the firm to protect him against the entry of judgment.
The steps taken by the practitioner were inadequate to seek to protect Mr Begic against entry of default judgment. He did send a letter to Ms Koulos on 30 November and Ms Donaldson had communications with Ms Koulos on 14 December 2010. However he did not follow up his own letter or ensure that the firm responded to Ms Koulos’ last email of 14 December 2010. A competent practitioner would have ensured these matters were followed up with Ms Koulos. A competent practitioner would have sought to negotiate an acceptable outcome with Ms Koulos. A competent practitioner would have ensured Mr Begic was advised whether he had a defence to the claim and if so assisted him to draft and file it or advised him to seek independent legal advice if he were in a positon of conflict of interest.
By February 2011, the practitioner became aware that Ms Koulos had issued an investigation summons. Between 14 and 22 February 2011, he contacted Ms Koulos and personally undertook to ensure that her fees were paid. He negotiated with Ms Koulos an adjournment of the hearing of the investigation summons pending receipt of settlement monies and ultimately the dismissal of the investigation summons. His conduct in this period did not fall short of the standard of conduct observed by competent legal practitioners of good repute.
The alleged conflict of interest
Count 3 alleged that between 5 October 2010 and 1 November 2012 the practitioner allowed his interests to conflict with Mr Begic’s interests in relation to Ms Koulos’ account contrary to rule 9.1.1 of the Rules of Professional Conduct and Practice.
Rule 9.1.1 provided:
9.1 A practitioner must not, in any dealings with a client:
9.1.1 allow an interest of the practitioner or an associate of the practitioner to conflict with the client's interest.
The Tribunal failed to address count 3. It ought to have made a finding that count 3 was proved or not proved.
The practitioner did not do anything over the period between 5 October 2010 and 1 November 2012. His inaction was already the subject of count 1. It is evident from his evidence that his inaction, while negligent, was not connected with any conflict between his own interests and those of Mr Begic. This was not suggested to him in cross-examination. The Tribunal ought to have found count 3 not proved.
The payment of Mr Begic’s trust money
Count 2 alleged that on 3 March 2011 the practitioner paid Ms Koulos $215.35 from Mr Begic’s trust money for court costs arising from the recovery proceedings when he knew that they were not properly payable by Mr Begic.
The costs incurred by Ms Koulos and awarded to her were as a result of the negligence of the practitioner. The practitioner, not his client, was therefore responsible to pay those costs. A competent practitioner would have appreciated this and would not have paid the costs out of Mr Begic’s trust monies.
The practitioner’s conduct fell short of the standard of conduct observed by competent practitioners of good repute. However, it was a breach that fell at the lower end of the range. It is evident from the practitioner’s evidence that, when he drew the cheque on his trust account to pay the judgment amount to Ms Koulos, he treated the whole amount as falling into a single category, did not distinguish between the sum of $2,001.56 that was properly chargeable to Mr Begic and the smaller sum of $215.35 that was not, and did not appreciate that the sum of $215.35 should not be charged to Mr Begic or paid out of his trust monies. It was not suggested to him in cross-examination that he was so aware. This is not an example of a practitioner withdrawing trust money to line his or her own pocket, but rather a small withdrawal to be used in moving forward proceedings in which Mr Begic was directly involved.
Was the conduct unprofessional or unsatisfactory?
A finding of unprofessional conduct in relation to a practitioner engenders more serious consequences than if the conduct is found to be unsatisfactory conduct. Unprofessional conduct is defined generally at common law as behaviour that would reasonably be regarded as disgraceful or dishonourable by other members of the legal profession of good repute and competence.[10]
[10] Allinson v General Council of Medical Education and Registration [1894] 1 QB 750. See also G E Dal Pont, Lawyers’ Professional Responsibility (Thomson Reuters (Professional) Australia, 5th ed, 2013) at 752 [23.85].
The Tribunal found the practitioner’s conduct “unprofessional” pursuant to the second limb of the statutory definition:
... conduct in the course of, or in connection with, practice by the legal practitioner that involves substantial ... failure to meet the standard of conduct observed by competent legal practitioners of good repute.
The practitioner did not act dishonestly and the Tribunal did not find that he did. The first limb of the definition of unprofessional conduct is not met.[11]
[11] Legal Practitioners Act 1981 (SA) s 5(a).
The Tribunal found that the practitioner’s failure to meet the standard of conduct observed by competent legal practitioners of good repute was substantial within the meaning of the second limb of the definition of unprofessional conduct. The Tribunal did not give any reasons for this conclusion.
The meaning of ‘substantial’
In order to constitute unprofessional conduct, the conduct complained of must involve “substantial or recurrent failure to meet the standard of conduct observed by competent legal practitioners of good repute”. To ascertain whether the Tribunal erred in categorising the practitioner’s conduct as a “substantial” failure, and therefore finding it constituted unprofessional conduct, it is necessary to consider the meaning of “substantial”.
The term “substantial” is defined by the Encyclopaedic Legal Dictionary as: “[l]arge, weighty or big”;[12] “considerable”;[13] and “[r]eal or of substance, as distinct from ephemeral or nominal”.[14] In Tillmanns Butcheries, Deane J observed:[15]
[i]n the phrase ‘substantial loss or damage’ it can, in an appropriate context mean real or of substance as distinct from ephemeral or phenomenal. It can also mean large, weighty or big. It can be used in a relative sense or it can indicate an absolute significance, quality or size.
[12] Palser v Grinling [1948] AC 291.
[13] Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982) 44 ALR 557.
[14] Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 27 ALR 367.
[15] Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 27 ALR 367 at 382.
This consideration of the term was not in the context of legal practitioner misconduct; however, consideration of the context in which “substantial” appears, in this case practitioner conduct, is essential in determining the intended scope. This was recognised in Palser v Grinling:[16]
The word “substantial” is imprecise and ambiguous. Its meaning must be taken from its context.
[16] [1948] AC 291 at 371.
In the context of the definition in section 5 of the Act as it stood at the time, it is apparent that what is required is more than a mere departure from the standard of conduct required of a practitioner. In the context of this appeal, “substantial” connotes a large or considerable departure from the standard required. This large or considerable departure could be the result of the extent and seriousness of the departure from the requisite standard of conduct, the deliberateness of the conduct, the consequences for the client or other aspects of the conduct. It is impossible to define exhaustively the circumstances, and it is for this reason that the definition does not lend itself to precise wording. This was recognised in Tillmanns Butcheries, where Deane J stated that:[17]
[t]he word substantial is not only susceptible of ambiguity, it is a word calculated to conceal a lack of precision.
[Emphasis added]
An element of common sense is also required when assessing the term’s use, as recognised in Palser v Grinling:[18]
applying the word ... it must be left to the discretion of the judge of fact to decide as best he can according to the circumstances of each case.
[Emphasis added]
[17] Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 27 ALR 367 at 382.
[18] [1948] AC 291 at 317.
It is clear that something more than a minor or moderate departure from the standard is required to meet the definition under the Act as it stood at the time.
When the Act spoke of a “substantial or recurrent failure to meet the standard of conduct observed by competent legal practitioners of good repute”, what was contemplated as comprising unprofessional conduct was a considerable failure to meet the standard as opposed to any failure to meet the standard. This interpretation is also borne out by the distinction between unprofessional and unsatisfactory conduct. If any departure from the standard were sufficient, no matter how large or small, it would be unnecessary to mark out this distinction, either by name or potential penalty. It can be concluded that to meet the definition, the conduct in question must be a large or weighty deviation from the standard required, as opposed to conduct that just falls short.
Does this conduct constitute substantial misconduct?
The conduct in this matter was isolated. This is not a situation revealing systematic failures by the practitioner to undertake adequately the care and conduct of his clients’ matters. Unlike many cases of unprofessional conduct, this did not involve repeated failures to attend to clients’ matters. Once the practitioner became aware that his client had a judgment entered against him, he took steps to remedy the situation. There was no subsequent conduct such as misleading the Board or a failure to respond to investigator’s questions which are often the sequelae of unprofessional conduct. On the contrary, the practitioner admitted the conduct and gave candid evidence before the Tribunal.
The practitioner’s misconduct the subject of count 1 amounted to permitting his client to become the subject of a dispute between Ms Koulos and the practitioner’s firm. The practitioner failed to take steps to avoid Mr Begic being sued and, once aware that proceedings had been issued, failed to ensure that the proceedings were resolved without a judgment being entered against his client. The practitioner’s failure to protect his client’s position was conduct which involved a failure to meet the standard of conduct expected of a competent legal practitioner.
The evidence established that Ms Koulos’ usual practice was to accept invoice payments from settlement money. This is material in this case, as it goes some way to explaining the practitioner’s delay in settling the account, which led to the proceedings against Mr Begic the subject of this appeal.
The practitioner’s conduct the subject of count 2 involving the payment out of trust money does not amount to a dishonest dealing, or substantial or recurrent failure to meet the standard required. It is important to ensure that all dealings with trust money follow the strict requirements provided by the relevant legislation, but this instance is not one in which a finding of unprofessional conduct, and the resultant penalty, is justified.
The conduct in question is not an example of substantial or recurrent failures to meet the standard of conduct observed by practitioners of good repute. This is, on the evidence, an isolated incident that does not meet the threshold of the second definition of unprofessional conduct. The practitioner fell short of the standard of conduct required of a legal practitioner, but not in a manner justifying a finding of unprofessional conduct.
Appropriate penalty
When the conduct occurred and the charge was laid, section 82(6A) of the Act prescribed the available penalties on a finding of unsatisfactory conduct. Those penalties were imposition of a reprimand, an order for periodic inspection of the practitioner’s records or the imposition of conditions on the practitioner’s practising certificate.
Since 1 July 2014,[19] section 82(6) of the Act has extended the available penalties on a finding of unsatisfactory conduct to include also suspending the practitioner's practising certificate for up to 12 months, imposing a fine or recommending that disciplinary proceedings be commenced against the practitioner in this Court.
[19] Amendments made by the Legal Practitioners (Miscellaneous) Amendment Act 2013 (SA).
It is unnecessary to decide for the purposes of this appeal whether the amendments apply when a charge is found proved after the amending Act came into operation but the conduct occurred and the charge was laid before the amending Act came into operation. This is because we consider that the same penalty should be imposed in the circumstances of this case regardless of the applicable penalty regime.
The Tribunal rightly considered that this was not a case calling for the commencement of disciplinary proceedings in this Court and it was inappropriate to suspend or impose conditions on the practitioner’s practising certificate or order inspection of his records in circumstances in which he is not practising, does not hold a practising certificate and will be required to re-apply for a practising certificate if he wishes to resume legal practice. This leaves only a reprimand or fine as an available penalty if the new penalty regime applies.
The practitioner’s conduct was in the nature of negligence rather than deliberate misconduct and did not involve any dishonesty or intention to improperly obtain personal gain. He cooperated in the investigation and gave straightforward evidence before the Tribunal and had a good previous record as a practitioner. In the circumstances, the practitioner should be reprimanded rather than a fine being imposed on him.
Costs
The practitioner also appeals against the order made by the Tribunal that the practitioner pay the legal costs of the Commissioner in the proceedings.
The practitioner acknowledges that the award of costs was in the discretion of the Tribunal. His principal contention is that the Tribunal wrongly exercised its discretion by both imposing a fine and ordering payment of costs and he was doubly penalised. Whatever the merits of that contention, it is not applicable now that the fine is to be set aside.
The practitioner also contends that the Tribunal wrongly exercised its discretion by failing to have regard to his impecuniosity because he is an undischarged bankrupt. The Commissioner informed the Court that he does not intend to pursue payment of costs unless the practitioner is discharged from his bankruptcy and has the means to pay the costs.
In ordinary civil litigation, it is accepted that impecuniosity is not a ground on which an order for costs should not be made. While disciplinary proceedings are sui generis, there is no reason why a different approach should be taken to an order for costs in disciplinary proceedings.
The practitioner’s challenge to the costs order fails.
Conclusion
We set aside the decision of the Tribunal that the practitioner was guilty of unprofessional conduct and the fine imposed. We substitute a finding that the practitioner was guilty of unsatisfactory conduct on counts 1 and 2 and not guilty on count 3. We administer a reprimand to the practitioner. We do not set aside the costs order.