JOSEPH PATRICK CUMMINGS No. SCGRG-81-3450 Judgment No. S6396

[1997] SASC 6396

In the matter of JOSEPH PATRICK CUMMINGS

and
In the matter of The Legal Practitioners Act 1981

Perry J

Joseph Patrick Cummings ("the applicant") was admitted to practise as a legal practitioner in South Australia on 21 December 1981.  He held a practising certificate from January 1982 to 31 December 1993.

A sequestration order in bankruptcy was made against his estate on 21 May 1993. He was discharged from bankruptcy on 21 May 1996. During the currency of his bankruptcy he did not apply under the Legal Practitioners Act 1981 ("the Act") for authority to practise the profession of the law:

For the calendar years 1994 and 1995 the applicant applied to the Registrar for the issue of a practising certificate. When making the applications, he disclosed the fact that a sequestration order had been made against him, but indicated that he did not intend to practise. He explained that he did not wish to relinquish his practising certificate "given the difficulties in subsequently obtaining a fresh one after discharge from bankruptcy" The Registrar declined to issue practising certificates for either of those two years, taking the view that it was inappropriate to do so in the absence of any application to the court pursuant to s49(2) of the Act.

Following the applicant’s discharge from bankruptcy he made a further application for the issue of a practising certificate.  That application is dated 12 July 1996.  In that application the applicant again asserted that he did not "currently intend to practise".

By letter dated 19 September 1996, the Registrar requested further information to be provided by affidavit as to whether Mr Cummings had been convicted of any offence, and whether there were any criminal proceedings pending against him, including any committal proceedings.

In an affidavit sworn by him on 29 October 1996 the applicant stated, inter alia:

*      That on 14 June 1996 he was acquitted by a jury of a charge under the Companies (WA) Code 1981.

*      That he had been charged with five additional counts under the Companies (WA) Code, but that the trial of those charges was stayed by order of Barlow DCJ made on 3 June 1995.

* That he had been further charged with eight counts under the Companies (SA) Code 1981 and nine counts under the Criminal Law Consolidation Act (SA) 1936. At the time of the swearing of his affidavit those charges were currently the subject of a reserved decision by Matheson J upon Mr Cummings application to stay the proceedings.

*      The applicant had, to the extent that pleas had been taken on the outstanding charges, pleaded not guilty to them and maintained his innocence in respect of all of them.

*      There were no committal proceedings pending against him

The applicant went on in his affidavit to assert that none of the pending charges "is or was related to" his practice of the law or his "conduct as a legal practitioner".

Subsequently, Matheson J refused an order staying the information filed in this Court in which the outstanding charges, which I have referred to above, were laid.  But Matheson J’s decision was reversed on appeal to the Court of Criminal Appeal, which substituted an order that the charges be stayed until such further time as:

1. proper and adequate legal representation for the duration of the trial is provided to such appellant; and

1. proper and adequate funds are provided to the appellants to enable them to secure the services of such professional and/or expert assistance and witnesses as they may reasonably require to mount proper defences to the prosecution cases against them."

The pending, albeit stayed, charges in the criminal jurisdiction of this Court relate to transactions which were the subject of earlier civil proceedings in the Federal Court. Von Doussa J delivered judgment in those proceedings on 16 June 1993. In his judgment von Doussa J made adverse findings against the applicant (and others) with respect to a number of alleged statutory contraventions, in particular contraventions against s56 of the Fair Trading Act 1987 and s229(1) of the Companies (SA) Code, and certain tortious causes of action. Specific findings made by him include the following:

"The respondents Messrs Fuller, Cummings, Main and Johnson were each participants in the Burbank scheme from not later than October 1988.  I hold that the cause of action in conspiracy alleged against them is clearly proved."

"To cause Beach to enter into the charge and option agreement, and then to exercise the option without obtaining the records of Mazeley, BPC and BOG, and knowing that the transaction was not at arm’s length, were gross breaches of duty which Messrs Fuller, Cummings and Main as directors, and Mr Johnson as a deemed director, owed to Beach."

"Moreover, for Messrs Fuller, Cummings and Main as directors, and Mr Johnson as a deemed director, to permit Beach to enter into these transactions knowing that the price had been ramped for the purpose of defrauding Beach, involved dishonesty and was a contravention of s229(1) of the Companies (SA) Code which required the officers of the company to act at all times honestly in the exercise of their powers and the discharge of their duties of office."

"The directors were also in breach of duty and acted dishonestly in causing Beach to enter into the currency swap and SCAFA transactions."

"I am also of the opinion that they are liable for the tort of deceit, and for contraventions of statutory obligations not to engage in misleading and deceptive conduct."

"In the present circumstances I consider that Messrs Fuller, Cummings and Main were guilty of the tort of deceit.  In the case of the currency swap, I consider that Messrs Fuller and Cummings impliedly represented that Spargos had at Rahn and Bodmer a deposit capable there and then of being assigned to Beach according to the tenor of the documents prepared under their direction and executed on Spargos’ behalf by Mr Fuller.  In the case of the SCAFA arrangements Messrs Fuller, Cummings and Main impliedly represented that SEJ each would have available at completion sums of money equal to the amounts of the deposits which were available and capable of being advanced to or at the direction of Beach.  At the time of the currency swap, and when entering into the SCAFA arrangements, SEJ did not have deposits or money available to enable those transactions to occur, and but for the fraudulent scheme then being implemented, SEJ would never do so, as Messrs Fuller, Cummings and Main well knew.  They never intended that genuine transactions of the kind agreed to by them on behalf of SEJ would occur.  False representations were made by SEJ’s agents with the intention that they should be acted upon, and they were acted upon when Beach entered the transactions.  If the respondent directors were acting within the scope of their authority, SEJ are vicariously responsible, even if under the Houghton principle the companies did not have imputed knowledge of the relevant directors’ fraudulent behaviour."

"It is alleged that Messrs Fuller, Cummings, Main and Johnson in causing Beach to enter into the charge and option agreement, to exercise the option, and to make payment of the consideration, impliedly represented to Beach that:

(a)     the acquisition of Mazeley was a bona fide transaction in the interests of Beach

(b)     the transaction was in accordance with the proper exercise of their fiduciary duties towards Beach

(c)     the price of US428 million was in all the circumstances fair and reasonable for Beach to pay

and failed to disclose to Beach that:

(d)     ‘the transaction was for the benefit of IRL, IRAG, SEJ, or some of them

(e)     the transaction had not benefit for but was detrimental to Beach

(f)     the Burbank interests had been acquired for approximately US43.6 million by BPC and BOG which represented the true value thereof

when they and each of them had a fiduciary and statutory duty to Beach as directors  to disclose or not conceal the same.  It is alleged that the representations were false and the omissions created a false picture such that their conduct was misleading and deceptive.’

It is alleged that this conduct was in trade or commerce within the meaning of s56 of the Fair Trading Act in that Beach was engaged in the business of producing oil, the acquisition of an interest in an oil producing property was a transaction of the kind usual for that business, the conduct was an integral part of the acquisition by Beach of the Burbank interest, the conduct was that of the directors of Beach who procured or arranged the acquisition, and Beach was a company listed on the Australian Stock Exchange.

The acquisition of interests in oil tenements by a producing oil company is a transaction in trade or commerce. In acting as agents for Beach in arranging the transaction, it is my opinion that Messrs Fuller, Cummings and Main were acting in trade or commerce within the meaning of the statute. For the reasons already given in relation to s52 of the Trade Practices Act, I hold that their conduct was misleading and deceptive. The case against them under s56 of the Fair Trading Act is even stronger than the case against SEJ under s52 as the directors of Beach were plainly under a duty to disclose to Beach that the transactions into which Beach was about to enter were part of a fraudulent scheme: Belmont Finance Corp v Williams Furniture Ltd (No 2) at 404."

"Similar claims are made against Messrs Fuller, Cummings, Main and Johnson under the Fair Trading Act in respect of their conduct which caused Beach to enter into the SCAFA agreement, and against Messrs Fuller and Cummings in respect of the heads of agreement. In light of the findings already recorded, in my opinion those claims must also succeed."

In an affidavit sworn on 21 January 1995 the applicant states, inter alia:

".... I have not practised the profession of the law without holding a practising certificate or during the course of my bankruptcy, nor have I committed any other act that might constitute a proper ground for disciplinary actions."

S17 of the Act provides in part:

1. If, for a period exceeding one month, a legal practitioner has not held a practising certificate, the Supreme Court may, on application for a practising certificate, require the practitioner to furnish evidence satisfying it that the practitioner-

(a)     has not practised the profession of the law without holding a practising certificate; or

(b)     has not committed any other act that might constitute a proper ground for disciplinary action.

1. ..........."

In a letter dated 19 March 1997 a Master, Judge Burley, wrote to the applicant drawing his attention to the terms of s17(1) and inviting him to put submissions-

(a)     on the question whether or not the alleged conduct, or any part of it referred to in the charges laid in Western Australia and in this State might constitute a proper ground for disciplinary action;

(b)     whether or not in the absence of evidence satisfying the court that he had not engaged in the alleged conduct, the court should refuse to issue a practising certificate; and

(c)     as to any other matter which he might consider relevant to the application.  At the same time Judge Burley indicated that he was referring the application for the issue of a practising certificate to a Judge.

In pursuance of that reference, I took the matter in hand.  I gave directions to the applicant and to the Legal Practitioners Conduct Board the Law Society of South Australia inviting further written submissions from them.  None of the parties required an oral hearing, and I was invited to deal with the matter on the basis of the written submissions and the other material placed on the court file.

While the applicant has asserted his innocence with respect to the outstanding criminal charges, he concedes that "if the alleged conduct or any material part thereof was engaged in by the applicant during the period for which he has not held a practising certificate it might constitute a proper ground for disciplinary action". However, the applicant contends that on a proper interpretation of s17 of the Act, it operates only in relation to "periods exceeding one month during which an applicant has not held a practising certificate. Its focus is upon acts committed during that period".

In my opinion, that interpretation cannot be sustained.

It is in the nature of things that evidence of acts which may constitute a proper ground for disciplinary action may come to light at some time well after the acts have been committed.  The letter dated 19 March 1997 from Judge Burley requiring the applicant to furnish evidence satisfying him that the applicant had not committed any other act that might constitute a "proper ground for disciplinary action", obliged the applicant to furnish such evidence with respect to any such act which might have occurred at any time in the past.

The transactions the subject of the outstanding charges in Western Australia and in this jurisdiction have at least the potential to provide evidence of a proper ground for disciplinary action.

It appears that no disciplinary action has been brought with respect to the transactions the subject of those charges.  The view of the Practitioners Conduct Board is that no such action should be brought until the criminal charges have been concluded.  This is in accordance with long-standing practice.  In ordinary circumstances, that practice is justifiable on the footing that to take any other course would be to oblige a practitioner to run the risk of prejudicing any defence he or she might have to criminal charges by forcing premature disclosure of matters going to the defence of those charges, or perhaps to make disclosures which could assist any prosecution.  The underlying principle is that legal practitioners, as is the case with other members of the community, are not obliged to incriminate themselves.

It has therefore been customary, in my experience, for any possible disciplinary action under the Act to be withheld until any pending criminal charges against the practitioner have been disposed of.

In this case it seems to me, however, that there are two circumstances which justify a departure from that practice.

In the first place, the criminal charges pending in Western Australia and in this State have been stayed until further order.  They may never proceed.  Whether or not they proceed depends upon the willingness of the Governments concerned to fund the cost of legal representation of the applicant.

The other circumstance is that there has been a series of adverse findings made by von Doussa J in the course of the decision to which I have referred.  On the hearing of any disciplinary proceedings against the applicant, those findings (and for that matter, any evidence given before von Doussa J) may be adopted, without further ado, by the Legal Practitioners Disciplinary Tribunal.

It seems to me that it could not be in the public interest if the criminal charges are, in practical terms, stayed indefinitely, that any disciplinary action against the applicant should likewise be held back indefinitely.  It would be wrong to allow any such stalemate to develop.

While I suppose in one sense so long as the applicant does not wish to practise, there might be thought to be no great urgency in pursuing the disciplinary proceedings, the relevant transactions go back some years.  It would be wrong to allow much further delay to take place, which could well result in an impairment in the recollection of witnesses, if not in the dissipation of some items of evidence.

In my opinion, if it appears after a reasonable time that there is no source of funding, whether from a Government or otherwise, that will enable one or other or both of the stays of the criminal proceedings to be lifted, appropriate disciplinary action should be brought against the applicant under the Legal Practitioners Act so that the question whether or not the applicant has been guilty of professional misconduct can be addressed.

Given that the outstanding charges in Western Australia were ordered to be stayed in June 1995, it would hardly be realistic to treat them as other than a dead letter.

Another way of expressing the matter is to recognise that no real possibility of self-incrimination arises when relevant charges have been stayed indefinitely, and there is no foreseeable prospect of them being proceeded with.

In those circumstances, in my opinion, the proper course to take is to intimate that a practising certificate will be issued after the lapse of a further short period of time unless in the meantime appropriate disciplinary proceedings have been commenced under the Act, or the stay lifted with respect to one or other or both of the criminal proceedings, with the result that they are pursued.

I would have thought that given the history of the matter, a reasonable period would be until 30 March 1998.

I will stand over the present application until Monday 31 March 1998.  I will on that day, or so soon thereafter as may be convenient, call the matter on in open court.  The parties will then be given an opportunity to make further submissions as to the course to be taken thereafter.

I intimate that it is likely that I will then favourably entertain the application, unless in the meantime one or other of the events to which I have referred has occurred.