Law Society of New South Wales v Waterhouse

[2002] NSWADT 204

CITATION:	Law Society of New South Wales v Waterhouse [2002] NSWADT 204
DIVISION:	Legal Services Division
PARTIES:	APPLICANT Council of the Law Society of New South Wales RESPONDENT Martin Otto Waterhouse
FILE NUMBER:	012023
HEARING DATES:	11/07/02, 26/08/02
SUBMISSIONS CLOSED:	08/26/2002
DATE OF DECISION:	10/18/2002
BEFORE:	Macfarlan R QC - Judicial Member; Hale S - Judicial Member; Kirkby E - Member
APPLICATION:	Professional Misconduct - fail to comply with undertaking to Practitioner - Unsatisfactory Professional Conduct - fail to comply with undertaking to Practitioner
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Legal Profession Act 1987
CASES CITED:	Wade v Licardy (1993) 33 NSWLR 1 Royal Bank of Queensland v Ryan (1987) QLJ 97 Vincent Cofini (1994) NSWLST 25 Law Society of New South Wales v Martin [2002] NSWADT 27 Allison v General Council of Medical Education and Registration (1894) 1 QB 750 Kennedy v Council of Incorporated Law Institute of New South Wales (1939) 13 ALJ 563
REPRESENTATION:	APPLICANT I Wales, SC RESPONDENT R Campbell, barrister
ORDERS:	1. That in light of the Tribunal's finding that he has been guilty of unsatisfactory professional conduct Martin Otto Waterhouse be fined the sum of $2,000.00.; 2. That Martin Otto Waterhouse pay the costs of the Law Society of and incidental to these proceedings before the Administrative Decisions Tribunal.

1 By Information dated 26 September 2001, the Council of the Law Society of New South Wales informed the Tribunal that as a result of the investigation of a complaint under Part 10 of the Legal Profession Act, 1987, the Council claimed that Martin Otto Waterhouse (“the Solicitor”) was guilty of professional misconduct on the ground that he had breached an undertaking given by him as a solicitor.

2 At the hearing before us it was not disputed that the Solicitor had given the undertaking as alleged, namely, one contained in a letter dated 18 October 1993 which he wrote to Messrs. Gillis Delaney Brown solicitors. The letter stated in part:

“We confirm:
…
6. We undertake to deliver to you as soon as we find them the following Certificates of Title:
…
(d) Lot 2 in the unregistered Plan of Subdivision of Lot 22 in Deposited Plan 231698 when the Plan of Subdivision has been registered.”

3 It was also not disputed that the relevant Certificate of Title subsequently came into the possession of the Solicitor and that he has not delivered it as he undertook to do in the letter of 18 October 1993.

4 In justification of his stance, the Solicitor proffers two excuses. The first is that at no relevant time has he had the instructions of his clients to deliver the Certificate of Title in accordance with the undertaking. The second is that the undertaking was procured from him by the deceit of those for whom Messrs. Gillis Delaney Brown acted.

5 The context in which these matters were raised may be understood by reference to the description given in the written submissions of the Solicitor filed on 23 July 2002. This was substantially as follows.

6 In August 1992, the Solicitor and his cousin Louise Raedler succeeded in resolving a lengthy case between warring branches of the Waterhouse family. The Solicitor and his immediate family (“the Plaintiffs”) alleged that his father’s two brothers (Bill and Jack Waterhouse) had dealt with the estate of the Solicitor’s deceased father (Charles Otto Waterhouse) dishonestly and so as to benefit themselves and their immediate family. The Plaintiffs were said to have been largely successful before the trial judge but at the time of the subsequent settlement both sides were contemplating appeals.

7 The settlement was relevantly negotiated by the Solicitor on behalf of the Plaintiffs and Louise Raedler on behalf of the Defendants to the proceedings. It required inter alia that the Defendants transfer various properties to the Plaintiffs and that adjustments be made for rents, rates and land tax.

8 The Solicitor asserts that in his settlement negotiations with Louise Raedler he insisted that the title to a farm in Wallacia be handed over at an early stage to secure performance of the Defendants’ obligations under the settlement. This property (known as Elizabeth Park Farm) was to be transferred to the Plaintiffs under the settlement save for 100 acres which was to remain with the Defendants. As the Plaintiffs were to hold the title documents they were to arrange for the registration of a subdivision and for two certificates of title to issue, one for the Plaintiffs’ part and another for the Defendant’s 100 acres. The latter certificate of title is that which was the subject of the undertaking contained in the letter dated 18 October 1993. It was issued by the Registrar-General’s Office in 1994 and apparently received by the Solicitor at that time.

9 The Solicitor gave evidence that in early to mid-1993 he had a conversation with Louise Raedler in which he specifically asked her whether she had paid the outstanding land tax referrable to the properties the subject of the settlement and she said that she had. The Solicitor said that he would not have given the undertaking in question had he known that the land tax was outstanding and soon to be the subject of a caveat on the subject property. The Solicitor also said that he had directed Ms. Raedler the previous year to use the Plaintiffs’ monies which were held in various accounts under the control of the Defendants to pay the Plaintiffs’ part of any applicable land tax and rates.

10 The Solicitor submits that the statement which he alleges was made by Ms. Raedler was false because relevant land tax had not in fact been paid. He submits also that it must have been false to her knowledge because she told him that she had paid it.

11 Despite requests having been made on behalf of the Defendants and considerable correspondence with the Law Society following upon a complaint being made to the Legal Services Commissioner in 1998, the Solicitor has steadfastly refused to comply with the undertaking upon the bases that he does not have his client’s instructions to do so and that it was procured from him by the deceit of Ms. Raedler.

12 The first of these matters, namely, absence of client’s instructions, was in our view no excuse for the Solicitor not complying with the undertaking.

13 A solicitor’s undertaking gives rise to a personal obligation of the solicitor. It is not an obligation undertaken on behalf of clients. The recipient of the undertaking is entitled to assume that the solicitor has taken all steps necessary to ensure that he will be in position to comply with the undertaking when the time arrives to do so. He cannot plead his failure to take such steps, for example obtaining instructions from his client, as an excuse for non-compliance with the undertaking.

14 The position is in our view accurately stated in the following extracts from The Guide to the Professional Conduct of Solicitors published by the Law Society of England and Wales in 1990:

“17.06 Principle
An undertaking is still binding even if it is to do something outside the solicitor’s control.

Commentary
1. Before giving any undertaking a solicitor must carefully consider whether he will be able to implement it. It is no defence to a complaint of professional misconduct that the undertaking was to do something outside the solicitor’s control.
…
17.1 Principle
A solicitor cannot avoid liability on an undertaking by pleading that to honour it would be a breach of his duty owed to his client.

Commentary
1. Since a solicitor will be personally bound to honour his undertakings, it is essential that before giving an undertaking he has his client’s express or implied authority to do so.

2. Where a solicitor gives an undertaking without such authority and as a result, the client suffers loss, the client’s remedies may include, where appropriate, a claim in negligence against his own solicitor.”

15 We turn then to the assertion by the Solicitor that the undertaking was procured by deceit.

16 It was in our view inappropriate for the Solicitor simply to refuse to comply with the undertaking and do nothing to have himself released from it.

17 The appropriate course for him to take, in light of his assertion that the undertaking was procured from him by deceit, was to apply to the Supreme Court of New South Wales for an order releasing him from the undertaking. There is no doubt that the Supreme Court has inherent jurisdiction in connection with solicitors as officers of the court and that this jurisdiction extends to enforcing undertakings given by solicitors. (Wade v Licardy(1993) 33 NSWLR 1; New South Wales Solicitors Manual by Riley paras 20.11-20.125; Cordery on Solicitors 8th Edition pages 110 to 112). This jurisdiction must, and in our view does, extend to releasing solicitors from undertakings in appropriate circumstances.

18 That it does is supported by the decision of Griffith CJ sitting as a member of the Supreme Court of Queensland in Royal Bank of Queensland v Ryan (1897) QLJ 97. He said in that case:

“A great deal of business is carried on by means of solicitors’ undertakings which are almost invariably observed. In fact, documents are allowed to be taken from the Court on an undertaking to return them. The greatest confidence is reposed in such undertakings, and I should be sorry to do anything which would throw any doubt upon their efficacy. In my opinion, such an undertaking cannot be discharged except by performance or impossibility of performance, or something in the nature of a release given by the persons in whose favour the undertaking is made, or by an order of the court having the effect of rendering it void . Nothing of the kind has happened in this case. I have no concern with the motives of the plaintiffs in asking for the cheques, or with the motives of the defendants in refusing them, or with the reasons of Messrs. Thynne and Macartney for thinking that, in the discharge of their duty to their clients, they ought not at present to comply with the undertaking. I am simply dealing with the undertaking, which ought, in my opinion, to be performed … I have jurisdiction, on a motion properly brought forward, to order performance of the undertaking.” (at 98-9, emphasis added)

We should note that his Honour was not there dealing with an undertaking to the court but with an undertaking given by one firm of solicitors to the Royal Bank of Queensland. His comments may therefore be taken as applicable to the present case.

19 The following extracts from the England and Wales Law Society’s Guide to the Professional Conduct of Solicitors also provide support for the view we have taken:

“17.02 Commentary
3. The Council have no power to order the release of a solicitor from the terms of an undertaking. This is a matter for the court, or the persons entitled to the benefit of the undertaking.

….

6. The Council will not intervene where:

(a) the undertaking has been procured by fraud, deceit or in certain circumstances by innocent misrepresentation; or

(b) the performance of the undertaking turns on a disputed point of law.

17.14 Principle
In general, no terms will be implied into a professional undertaking and extraneous evidence will not be considered.

17.4 Principle
The court, by virtue of its inherent jurisdiction over its own officers, has power of enforcement in respect of undertakings.”

20 Although some evidence has been led and submissions have been made as to the credibility of the Solicitor’s assertion that the undertaking was procured from him by deceit, there has not been any full litigation of the issue. For example, the Law Society did not call Ms. Raedler to give evidence. Whilst we would not have expected it to do so, as we do not consider that this is the proper forum for litigation of this issue, it leaves us in a position where the issue is unresolved. As we do not consider the Solicitor’s claims obviously groundless on the basis of the limited material we have, we must proceed upon the footing that his assertions are arguable ones.

21 Although the Solicitor might accordingly have had, or indeed might have, some prospects of having the court release him from his undertakings the course he took was in our view incorrect and not in accordance with his obligations as a solicitor.

22 The Solicitor did not have regard to the important role which undertakings play in the course of legal practice and to his duty to honour a personal commitment given in the form of an undertaking. His obligations in this regard are plainly stated in rule 33 of the Solicitor’s Revised Professional Conduct and Practice Rules which states that a solicitor must honour an undertaking “strictly in accordance with its terms, and within the time promised (if any) or within a reasonable time”.

23 Similarly the need for compliance with undertakings was spelt out by the Legal Services Tribunal in Vincent Cofini (1994) NSWLST 25 at page 6 and repeated by this Tribunal in Law Society of New South Wales v Martin (2002) NSWADT 27 at para 28 in the following terms:

“There are limited circumstances in which an undertaking should not be honoured … Undertakings are given by legal practitioners for the specific purpose of enabling legal activities to be carried out. Other persons rely on those undertakings. The undertakings are personal to the legal practitioner and bind that practitioner, not as a matter of contract but as a matter of professional conduct and comity, and will be enforced by the Courts because legal practitioners are officers of the Court and because without enforcement undertakings would be worthless, persons and Courts would be unable to rely on the word of the legal practitioner and this aspect of legal practice, that demands compliance for legal efficiency, would collapse.”

24 As is said in the New South Wales Solicitors Manual by Riley, “it is of fundamental importance to the administration of justice, and to the orderly transaction of their clients’ business affairs, that legal practitioners can trust one another and that they can be relied upon to do what they say they will do” (para 20,005).

25 We consider therefore that the Solicitor’s conduct was in breach of his professional obligations. However, did it amount to professional misconduct or did it simply constitute unsatisfactory professional conduct?

26 Although ordinarily we would expect that non-compliance with a solicitor’s undertaking would be regarded as professional misconduct, there are in our view particular circumstances here which put the conduct in the less serious category of unsatisfactory professional conduct.

27 The circumstances we refer to are that the Solicitor has asserted that the undertaking in question was procured from him by deceit and for reasons which we have described above, we are constrained to treat that assertion as an arguable one. If the Solicitor had been able to persuade the court that his assertions were well founded and that there had not been reliance on the undertaking by anyone not bound by the allegedly deceitful conduct, he would in our view have had reasonable prospects of obtaining a release from his undertaking. His error was in not applying to the court for a release. His view that the alleged deceit entitled him to ignore the undertaking was wrong but how obviously wrong was it?

28 We have been informed by the Law Society that there does not appear to be any New South Wales publication which would suggest that an application to the court by a solicitor is the appropriate course to be taken in these circumstances. Although, as we have pointed out above, the decision in Queensland of Griffiths CJ and the English and Welsh practice book point in that direction, we do not consider that the Solicitor’s failure to take the appropriate course was so obviously wrong that it was conduct that, to use the well known description in Allinson v General Council of Medical Education and Registration (1894) 1 QB 750, would be regarded “as disgraceful or dishonourable by” the Solicitor’s “professional brethren of good repute and competency”. Nor was it conduct that “amounts to grave impropriety affecting” the Solicitor’s “professional character” and “indicative of a failure either to understand or to practice the precepts of honesty or fair dealing in relation to the courts” the Solicitor’s “clients or the public” (Kennedy v Council of Incorporated Law Institute of New South Wales (1939) 13 ALJ 563).

29 We derive some support for this view from the fact that it was accepted by the Law Society during the hearing before us that the course of applying to the Court for release from the undertaking was not brought by the Law Society to the Solicitor’s attention during the course of the correspondence that passed between them. It was not of course the Law Society’s job to advise the Solicitor what to do but nevertheless the absence of any reference to an application to the court tends in our view to confirm that the appropriateness of that course was not glaringly obvious.

30 There is no comprehensive definition of “unsatisfactory professional conduct” in the Legal Profession Act1987. It is stated in s.127 that that concept includes conduct falling short of the “standard of competence and diligence that a member of the public is entitled to expect” but the definition is not exhaustive. We see no reason why conduct of the character we have described above which is a breach of a solicitor’s professional obligations but is not sufficiently serious to constitute “professional misconduct” should not fall within the concept of “unsatisfactory professional conduct”.

31 The Information in this matter alleges only professional misconduct but in our view this is a case where the greater includes the lesser, that is, it is open to us to find that the conduct relied upon by the Law Society constitutes unsatisfactory professional conduct but not the more serious complaint of professional misconduct. There was discussion at the hearing as to whether the facts warranted a finding of unsatisfactory professional conduct and it was not suggested to us that the terms of the Information were such that we were precluded from making such a finding.

CONCLUSION

32 We accordingly find that by reason of his failure to comply with an undertaking given by him as a solicitor, the Solicitor was guilty of unsatisfactory professional conduct.

FOR THESE REASONS, WE MAKE THE FOLLOWING ORDERS:

1. That in light of the Tribunal’s finding that he has been guilty of unsatisfactory professional conduct Martin Otto Waterhouse be fined the sum of $2,000.00.

2. That Martin Otto Waterhouse pay the costs of the Law Society of and incidental to these proceedings before the Administrative Decisions Tribunal.