Howard and Howard and Anor
[2016] FCCA 1449
•4 February 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HOWARD & HOWARD & ANOR | [2016] FCCA 1449 |
| Catchwords: FAMILY LAW – Legal profession – conduct of solicitor – breach of order requiring solicitor to hold funds in an interest earning account for both parties – solicitor given opportunity to seek independent legal advice and file an affidavit with respect to conduct issues and whether or not his conduct should be referred to the Legal Services Commissioner. |
| Cases cited: Zimin & Nickson [2014] FCCA 206 H & A [2011] FMCAfam 29 In the Marriage of Burke (1992) 112 FLR 250 Bassi and Mass [1999] FamCA 1352 |
| Applicant: | MS HOWARD |
| Respondent: | MR HOWARD |
| Third Party: | MR JEFFERSON |
| File Number: | MLC 5276 of 2015 |
| Judgment of: | Judge Harland |
| Hearing date: | 4 February 2016 |
| Date of Last Submission: | 12 April 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 4 February 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Combes |
| Solicitors for the Applicant: | Alpass & Associates |
| Counsel for the Respondent: | Mr Baume |
| Solicitors for the Respondent: | David Joseph & Co Lawyers | |
| Counsel for the Respondent: | Mr Burns | |
ORDERS
I request that the Registrar of the Federal Circuit Court of Australia refer the conduct of Mr Jefferson of David Joseph & Co Lawyers to the Legal Services Commissioner of Victoria.
I request that the Registrar of the Federal Circuit Court of Australia provide a copy of these reasons, the affidavit filed by Mr Jefferson on 12 April 2016, together with orders made on 24 August 2015, 1 February 2016 and 4 February 2016.
IT IS NOTED that publication of this judgment under the pseudonym Howard & Howard & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 5276 of 2015
| MS HOWARD |
Applicant
And
| MR HOWARD |
Respondent
And
| MR JEFFERSON |
Third Party
REASONS FOR JUDGMENT
This matter was listed for final hearing on 1 February 2016. The proceedings were commenced by the applicant wife on 11 June 2015. It is clear from her initiating application that one of the major issues in dispute between the parties is the husband’s lump-sum redundancy payment. The wife sought urgent interim orders seeking to restrain (omitted) from making the redundancy payment to the husband. (omitted) named as third party.
The respondent filed a response on 27 August 2015 seeking that the wife’s application be dismissed.
The parties entered into interim consent orders on the first return date. Both parties were represented by counsel.
The matter was first before me on 24 August 2015, the issue of the treatment of the husband’s redundancy payment was identified as a central argument in the dispute between the parties.
The same counsel who appeared on the first return date were briefed and appeared at the final hearing.
Relevantly the parties consented to the following order:
a)The proceeds from the Husband’s termination redundancy and or long service payments currently being held by the Husband’s Solicitors in the sum of $60,420.99 be placed on trust for the parties in an interest bearing account for and on behalf of the parties and such sum and interest not to be released to the parties save by written consent of the parties or by Order of the Court.
The terms of the above order is clear. The wife became aware upon reading the husband’s trial affidavit that he had instructed his solicitor to release those funds and had spent them. The husband’s solicitor drafted the husband’s affidavit filed on 19 January 2016. In that affidavit the husband says that he denies that his redundancy payment which she received nine months after separation was part of the matrimonial pool. He further deposes to his poor financial circumstances and says that in the lead up to Christmas he did not have any funds and says at paragraph 10:
I have directed my solicitors to release the balance of the funds to me so that I can have the wherewithal to pay for my own requirements. This I did [sic] being aware of the orders of 24 August 2015 however also being aware that I need money to survive and considered that my health and security were paramount. This was done out of desperation.
Mr Jefferson prepared the husband’s affidavit and witnessed it.
Mr Combes, counsel for the wife brought these serious matters to the Court’s attention when the matter was first mentioned at the call over of that day’s hearings on 1 February 2016. He tendered a letter from his instructors to Mr Jefferson dated 21 January 2016. That letter is exhibit A. Mr Baume, counsel for the husband confirmed that he had that letter in his brief at Court. If the letter expressed extreme concern that Mr Jefferson had been party to approach of Court orders. In that letter he indicated that they required Mr Jefferson to attend Court in person at the hearing in order to address this issue and also to provide documentary evidence within 48 hours of the full sum being returned to their trust account and failing that they would make an application to join him as a party to the proceedings. They also indicated that given these circumstances he may need to consider whether he continued to act for the husband. The letter indicates that it was sent by email. Assuming that Mr Jefferson received the letter that day he had six full working days is to address these most serious issues. Not only did he fail to attend Court he failed to respond to the letter I had some doubts as to whether either he or his barrister appreciated the seriousness of his solicitors conduct that day.
I raised the issue of whether or not the husband and or Mr Jefferson should be dealt with for contempt of Court. I adjourned the matter to 4 February 2016 to enable Mr Jefferson to attend and to obtain advice about the consequences of his conduct and to consider these issues.
I made the following order:
The proceeding is adjourned for interim hearing on 4 February 2016 at 9.00am to deal with the following issues:
a)whether or not Mr Jefferson should be joined to the proceedings as a party;
b)the consideration of whether or not Mr Jefferson’s conduct is to be referred to the Legal Services Commissioner for investigation;
c)the costs of the applicant’s instructing solicitor and Counsel for their attendance at Court on 1 February 2016 and whether the husband or his instructing solicitor should be responsible for those costs; and
d)the future progress of the matter.
On 4 February 2016 the parties entered into final property orders. Order 3 of those orders required the husband and/or Mr Jefferson to pay the wife’s the sum of $47,000. The payment to the wife also resolved her claims for costs of the hearing on 1 February 2016. The Court made a notation that Mr Jefferson undertakes to the Court to comply with order 3 of the property orders. Mr Jefferson was represented by Mr Burns of counsel on that occasion. The Court acknowledged that the husband would need to get independent legal advice with respect to his breach of the orders and that Mr Jefferson had had limited opportunities to seek independent advice in relation to his position.
In light of the fact that by finalising the property proceedings the wife was no longer detrimentally affected by the breach of orders, the Court made orders giving both the husband and Mr Jefferson six weeks to file and serve affidavits addressing the facts and circumstances with respect to the withdrawal of funds. In the husband’s case a detailed account of how the funds were disbursed and written submissions with respect to the question of any contempt of Court that may have arisen from their actions together with any submissions as to penalty. Additionally, Mr Jefferson’s submissions were to address whether or not his conduct should be referred to The Legal Services Commissioner.
I am satisfied that the husband’s solicitor should not be dealt with for contempt of Court. Any contempt was purged when he gave the undertaking which assisted the resolution of the property proceedings.
The only remaining issue is whether or not I should refer Mr Jefferson’s conduct to the Legal Services Commissioner.
Mr Jefferson has filed an affidavit explaining his actions.
The husband has not complied with those orders. Mr Jefferson does not have a current address for the husband. In these circumstances the Court cannot actually consider the husband’s conduct any further at this time. However it appears from Mr Jefferson’s letter and the advice Mr Jefferson gave him that he may not have realised the seriousness of the breach of order.
Subsequently to this date the Court granted the husband and Mr Jefferson an extension of time to file their affidavits.
Mr Jefferson has complied with the Court order. Mr Jefferson says that after reading case law and having discussions with counsel he had:
[F]ormed the very clear understanding that the redundancy payment was not referable to the marriage. The wife’s solicitors maintained an alternative view however it is regrettable that no arguments were advanced from them as to why the wife might obtain interest in that money or any part of it.
In my view the case law is not nearly as clear cut as Mr Jefferson understands to be in the cases that he referred to in his affidavit and the case outline. They concerned quite different circumstances to the circumstances of these parties. It is not necessary for me to comment on the correctness or otherwise of Mr Jefferson’s understanding of the law on this issue any further because it is beside the point.
The husband and Mr Jefferson were on notice that the husband’s redundancy payment was a major issue in dispute. The wife sought an interim injunction with respect to the payment of that redundancy. The husband’s affidavit sworn on 18 August 2015 and filed on 27 August 2015 details the husband’s affairs at paragraph 27 that he received a redundancy payout on 2 July 2015 of $120,849.99 and that he had instructed his solicitor to retain half of that sum in his trust account pending the determination of the matter. The consent order simply reflects interim consent resolution of the dispute between them and provides for the money to be invested in an interest-bearing account rather than in a trust account. The order is clear on its face that the husband’s solicitor was holding the sum for both parties.
Mr Jefferson says that about 16 December 2015 his client was showing increased signs of distress and had told him that he only had $0.76 in his bank account and was unable to obtain Centrelink benefits because of his redundancy payment. Mr Jefferson says that he advised the husband that if order 4 of the orders of 24 August 2015 could be seen as applying to the redundancy money than he had been breach in of the orders. Order 4 is a general restraint on both parties from disposing of any assets of the parties without the consent of the other.
Mr Jefferson said that he was not aware of order 1 of the orders made 24 August 2015. That seems extraordinary particularly given that he knew the content of order 4 and refers to it as preventing the parties from dealing with assets of the marriage. He then talks about his understanding of possible interpretation of the order based on “a purely black-letter reading of paragraph 4” that the redundancy was not caught by that order. He again refers to the redundancy not being referable to the marriage however the order talks about assets of the parties. It did not refer to assets of the parties referable to the marriage.
Even Mr Jefferson’s own version of events he states that he was uneasy enough about the transaction to require the husband to indemnify him with respect to any losses incurred due to his carrying out the husband’s instructions.
The proper course would have been to prepare an urgent application in a case for release of funds if an approach to the wife’s solicitor seeking release of funds did not result in an agreement. Mr Baume submitted that even if such an application was made given that it was shortly before Christmas realistically it may not have been listed until the date of the hearing. That may well be the case but that misses the point.
It is clear from the case outlines for both parties that without the redundancy payment there is very little to divide between the parties apart from superannuation.
Mr Jefferson places great reliance on the decision of Zimin & Nickson [2014] FCCA 206 with respect to his argument about the redundancy payment. A cursory reading of that judgment shows that the circumstances in that case were quite different to this one as the redundancy payment received by the wife in that case were received several years after separation. Other cases have taken different approaches with respect to redundancy payments including H and A [2011] FMCAfam 29; In the Marriage of Burke (1992) 112 FLR 250; Bassi and Mass [1999] FamCA 1352, a Full Court decision of the Family Court of Australia. This is not an exhaustive search of judgments on this topic, nor have I carried out an exhaustive analysis. I simply point out the dangers of placing such heavy reliance on one case. This is particularly so in family law cases where much can turn on the facts of the particular case.
Mr Jefferson says that he was not present in Court on 24 August 2015 and “therefore I was not a party to the preparation of the order.” It is not uncommon in this Registry for the solicitors to brief counsel to appear at first return dates and other Court events and for the instructing solicitors not be present in Court. That does not mean that the solicitor is not instructing counsel. Indeed Mr Jefferson refers to having discussions with counsel throughout the day.
The orders were engrossed by the applicant and then sealed copies sent by the Court to the parties. Mr Jefferson’s postal address appears on the order and is identical with the address on his letterhead.
It seems extraordinary that Mr Jefferson did not check these orders when receiving them and did not refer to them when advising his client and preparing his client’s trial affidavit. It is also difficult to understand how he could refer to the wording of order 4 but at the same time say he was not aware[1] and/or mis-read or misunderstood order 1.[2]
[1] See paragraph 9 of his affidavit filed 12 April 2016.
[2] See paragraph 22 of his affidavit.
Mr Jefferson annexes his letter of advice to the husband with respect to the orders made on 24 August 2015. How can a lawyer competently and diligently advise a client about Court orders without looking at them?
The issues Mr Jefferson raises also suggest that the conduct of the barrister may also have been lacking. He raises various allegations with respect to that barrister’s conduct. However the barrister is not on notice of any concern. This may be something for another forum.
Regardless of Mr Jefferson’s understanding of the orders the proper course, given his knowledge of the issues in dispute and even on his own flawed understanding of order 4, was to have brought an urgent application in a case for a release of funds. If he had put the wife’s lawyers on notice of his intention to release the funds to his client they would have pointed out the content of order 1 to him, as they did once they received the husband’s trial affidavit. It is important to note that the matter was listed for final hearing on 1 February 2016.
Mr Jefferson then turns to the undertaking he gave. He says at paragraph 49 of his affidavit that the orders made on 4 February 2016 were made without reference to him. This is disingenuous. Mr Jefferson was personally in Court that day. He was separately represented by counsel. The matter was stood down whilst the matter was negotiated.
It is also very concerning that Mr Jefferson suggests that he was given no choice but to sign an undertaking and that he was since advised that he should never give an undertaking in his capacity as solicitor. Again this apparent lack of understanding of the import of solicitors’ undertakings.
Mr Jefferson’s conduct in this matter at the very least suggests negligence and conduct which is below the standard expected of a reasonably competent legal practitioner. Considering all of the above I am duty bound to refer Mr Jefferson’s conduct to the Victorian Legal Services Commissioner to determine what action, if any, should be taken with respect to Mr Jefferson’s conduct.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Harland
Date: 15 June 2016
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