Law Society of NSW v. Martin

[2008] NSWADT 305

CITATION:	The Council of the Law Society of New South Wales v Martin [2008] NSWADT 305
DIVISION:	Legal Services Division
PARTIES:	APPLICANT The Council of the Law Society of New South Wales RESPONDENT Cameron David Charles Martin
FILE NUMBER:	082014
HEARING DATES:	10 October 2008
SUBMISSIONS CLOSED:	10 October 2008
EXTEMPORE DECISION DATE:	10 October 2008
BEFORE:	Molloy G - Judicial Member; Riordan M - Judicial Member; Hayes E - Non-Judicial Member
CATCHWORDS:	Undertakings
LEGISLATION CITED:	Legal Profession Act 2004
CASES CITED:	Law Society v Jayawardena [2008] NSWADT 187
REPRESENTATION:	APPLICANT A Matalani, solicitor RESPONDENT E Picker, solicitor
ORDERS:	1. The Application for Original Decision filed 2 July 2008 be and is hereby dismissed 2. The costs of the Respondent are reserved 3. Liberty is granted to the Respondent to apply for costs if so advised. Any such application should be made by formal Application filed in this Tribunal within 21 days of the date of the publication of this decision. The Tribunal Registry will allocate a date at a convenient time for directions before the Presiding Member of this Tribunal; and the matter of costs (of so agitated) can move forward from that point.

1 The proceedings instituted by the Law Society came before this Tribunal for hearing 10 October 2008. Evidence and submissions were completed on that day.

2 At the conclusion of the hearing the Tribunal dismissed the proceedings against the practitioner and granted liberty to apply with regard to costs. The Tribunal advised the parties that it would publish its written reasons in due course. This Judgment is those reasons.

Background

3 By Application for Original Decision filed 2 July 2008 the Council of the Law Society of NSW (“the Law Society”) brought proceedings against the Respondent legal practitioner/solicitor alleging that he had breached an undertaking “and in so doing was guilty of professional misconduct”.

4 The Law Society sought orders that the Respondent be publicly reprimanded; that he pay “a substantial fine”; and that he pay the Law Society’s costs of and incidental to the proceedings.

5 It goes without saying, and is now perfectly clear trite law, that the breach of a professional undertaking given by a legal practitioner in the course of his/her practice, is regarded by the profession generally, the Law Society and this Tribunal, as a very serious matter. There is no need to review the law on this aspect save to observe that legal matters between legal practitioners acting on behalf of their respective clients often proceed on the basis of personal undertakings given by one legal practitioner to the other, and upon which the other legal practitioner relies in taking the next step in the legal transaction.

6 A classic example is an undertaking given on completion of a conveyancing transaction where the purchaser’s solicitor gives an undertaking to provide an order on agent – upon giving that undertaking the vendor’s solicitor will complete the conveyancing transaction in reliance upon that undertaking. Serious commercial consequences could well flow from breaches of undertakings; professional activities would be seriously curtailed if such undertakings were not given and received as part of the legal practise milieu; and that is why the legal profession firstly, is somewhat reluctant (understandably) to give personal undertakings and secondly, the legal profession and this Tribunal regards the breach of such an undertaking as a very serious professional conduct matter.

7 However, in order to result in such a conclusion it is always necessary to construe the alleged undertaking; firstly, to determine whether it is in fact an undertaking; secondly, to determine whether it is an undertaking given by the legal practitioner; and thirdly, and with some precision, precisely what is the undertaking and how it is that the legal practitioner is asserted to have breached it.

8 This Tribunal has been at pains in the past to point out that proceedings against legal practitioners asserting inappropriate professional conduct should only be brought in serious, grave and weighty matters; such that it is necessary, in order to make a finding against a legal practitioner, that the conduct complained of is, not only properly proved, but is also conduct that warrants a finding against the practitioner.

9 So, in looking at the issue placed before us we carefully studied the form of the asserted undertaking and, as importantly, the factual circumstances surrounding the asserted undertaking. It is only by this careful analysis that the Tribunal can be satisfied that a finding one way or the other can properly be made.

The Facts

10 In writing this Judgment the Tribunal proposes to refer to the facts (which were not in issue) and deal with those facts seriatim as appropriate. This is a convenient approach because it permits the parties, and the reader, to understand (without going backwards and forwards) the reasoning of the Tribunal and how it has come to the very clear conclusion that the proceedings should be dismissed.

11 At all relevant times the Respondent was an employed solicitor with the firm Friedlieb Byrne Pty Limited of Wagga Wagga. The Respondent is now a director of that firm with Mr Byrne.

12 Friedlieb Byrne acted for CRK Holdings Pty Limited (“CRK”), which was the first registered mortgagee over property situate at 117 Percival Road Stanmore (“the property”) pursuant to a registered mortgage 951123Y dated 26 March 2003 in an amount of $525,000.00.

13 Over the property was a second registered mortgage (charge 944985 22 May 2003). The second mortgagees were Bruce Jones and Leigh McDonagh (“the Complainants”). CRK consented to the second mortgage and advised the Complainants as second mortgagees that no further moneys would be advanced under the first mortgage.

14 On or about 10 October 2003 CRK advanced an additional amount of $100,000.00. This additional sum was apparently secured by and formed part of CRK’s first mortgage.

15 The mortgagors defaulted. CRK entered into possession of the property and sold the property as mortgagee exercising power of sale. The Respondent acted for CRK in relation to this mortgagee sale. Contracts were exchanged on 22 June 2006 for a sale price of $807,000.00 plus GST.

16 CRK claimed the full proceeds of the sale under the first mortgage. The Complainants as second mortgagee considered they were entitled to some of the sale proceeds. They consulted their own lawyers Messrs Marks Griffiths and Bova. There was an argument regarding the amount that was due to CRK – as at 22 July 2005 the parties were in dispute in about $70,000.00 difference – CRK seeking $745,883.00 and the Complainants as second mortgagee calculating CRK’s payout at $679,000.00.

17 There was a continuing debate between the first and second mortgagees over the amount required to discharge the first mortgage, the accounting and other ancillary and consequent issues. What coloured the debate, and the deteriorating “relationship” between the Complainants and the Respondent, was the plain fact that CRK as first mortgagee wanted the whole of the sale proceeds, asserting the amount due to it was in excess of the nett sale proceeds, such that there was no money at all left available to be paid to the Complainants as second mortgagee neither, as it turned out, any money at all payable to the third mortgagee (there was, curiously, a third mortgagee too).

18 In what follows in this recitation of facts the Tribunal will use italics to emphasise particular words or phrases in the correspondence and then, as indicated above, will seek to analyse (as appropriate) the passages from the correspondence as quoted in this Judgment.

19 By letter 22 July 2005 the then solicitors for the Complainants (Messrs Marks Griffiths and Bova) wrote to the Respondent by letter addressed to him personally at his firm Friedlieb Byrne Pty Limited. In this letter the solicitors asserted the difference in their client’s calculation in over $70,000.00 and then said:

“We remind you of your duty as trustee of the funds [i.e. the moneys received on the mortgagee sale] and seek your urgent undertaking not to disperse any settlement proceeds until agreement on all the figures. If you fail to act reasonably and do not give the requested undertaking by 1.00pm Monday 25 January, 2005, we will instruct counsel to seek injunctive relief”.

20 The Tribunal is of the very clear opinion that the Respondent was not the “trustee of the funds” and could not give any personal undertaking as sought. Indeed, in our respectful opinion the words used were, not only incorrect but also offensive, if directed to the Respondent. After all, the letter was addressed to the Respondent personally. It is plain, in our view, that any undertaking could only have been properly given by the Respondent’s client, CRK. CRK was “the trustee of the funds” and it was up to CRK to give any undertaking if it was so minded.

21 Doing the best that we can, and having regard to what follows in this Decision, in our view the best interpretation that could be put on the quoted paragraph was that the then solicitors for the Complainants were seeking an undertaking, not from the Respondent personally but rather from his client, CRK. This view is supported by the next following letter 25 July 2005 where the Complainant’s solicitors write, inter alia:

“We enclose of copy of Charge No. 944985 in favour of our clients (the Complainants) over the equipment referred to. What right has your client to sell the equipment? How were values placed on it?

In the absence of a reply from you , we will assume that you are ignoring our concerns leaving us with no option but to seek our injunction to prevent the sale from proceeding. We reserve our rights as to costs”.

22 It is plain from this letter that the letter is written, although addressed again to the Respondent personally, on behalf of the Complainants as clients of Messrs Marks Griffiths & Bova – after all, that firm has no rights as to costs – any such rights reside in its client. So, plainly, the letter (although inelegantly drafted) is written on behalf of the client to the Respondent on behalf of his client.

23 The next relevant letter is also written by the Complainants’ solicitors and also on 25 July 2005. That letter relevantly stated:

“We confirm that you were to provide a substantive response to our client’s concerns in writing today (not yet received at 5.00pm).

Please confirm the settlement is not proceeding on 29 July 2005 and that settlement will not proceed until agreement has been reached between our respective clients as to amounts payable at settlement”.

Plainly, that is a letter written on behalf of the Complainants and to the Respondent on behalf of CRK.

24 The Respondent replied on the following day 26 July 2005. His letter enclosed a recent company search and noted that the charge in favour of CRK was registered in priority over the charge registered in favour of the Complainants. The letter referred to various other matters and then, in the last paragraph, the Respondent wrote:

“For these purposes, our client agrees not to settle the matter until reasonable notice is provided to your client of these figures and the proposed settlement date”.

Clearly, again, that letter was written on behalf of CRK.

25 However, things continued to deteriorate. On the following day 27 July 2005 the Complainants’ then solicitor wrote, inter alia:

“Please give us your written undertaking that you will provide us with seven (7) days written notice of any proposed settlement”.

Clearly, the Respondent could not provide such a written undertaking and it must have been assumed, as a necessary inference, that any written undertaking as so sought would have been given strictly on the part of and on behalf of the client. In any event, by letter 29 July 2005 the Respondent declined to give any such undertaking but did say that he would “ensure that as much notice as is possible would be provided”.

26 There was some subsequent correspondence. A proposed settlement statement was provided 11 August 2005; there was a reference to $46,440.00 leasing moneys due on equipment within the property, an assertion that “the equipment was sold with the property for the purposes of increasing the sale price” and noting that there would need to be “further discussion between our offices in respect of” the proposed settlement figures. The proposed settlement statement showed a deficiency of $15,117.81.

27 These figures were challenged and by letter 22 August 2005 the solicitors for the Complainants stated, inter alia:

“Until such time as all matters in issue have been resolved to the satisfaction of our clients we require your immediate undertaking not to disburse the proceeds of sale as per your obligations as trustee of the funds”.

28 Again, the Tribunal observes that the only “trustee of the funds” is CRK, and certainly not the Respondent personally. The paragraph in question was clearly not directed to the Respondent’s solicitor personally and, in our respectful opinion, could not reasonably have been so interpreted.

29 The next following day, 23 August 2005, the solicitors for the Complainants wrote again seeking further information and making certain assertions. In their penultimate paragraph the solicitor said:

“If your client does not provide the information requested and provide an undertaking to hold the proceeds of settlement in Friedlieb Byrne Pty Limited’s Trust Account, we will be forced to again approach counsel to bring the matter before a Duty Judge on Thursday to compel your client to comply with our reasonable requests.”

Clearly, this is addressed to the Respondent, not in his personal capacity but simply as the solicitor for CRK. This is underlined by the next paragraph which states:

“In our appearance before the court, we will be asking for a costs order against your client. ”

30 The Respondent replied by detailed letter 24 August 2005. There is no need to refer to most of that letter. However, relevantly, the Respondent said that the firm was “instructed to reply as follows”, and (on pages 3 and 4):

“After discussions with our client today, our client is prepared to have the sum of $42,093.00 paid into our trust account on account of the queried disbursements, but not including the costs payable to this firm on the sale of the property. Our client will also allow an estimate of $2,000.00 towards the interest which has been calculated on these disbursements.

We are instructed by our client to retain these moneys pending resolution of the dispute over the queried disbursements. We will only release these moneys or such parts thereof as resolved, and then only to the party in whose favour resolution has been reached.

We do not believe that your client has any grounds to dispute the payment of the initial advance and interest calculated thereon under the first mortgage. We do not believe that your client has any grounds to dispute the payment of the equipment lease moneys. If your client has a dispute, it can only be with respect to the queried disbursements and our client has agreed to have these moneys paid into our trust account pending resolution of that dispute.”

31 The Law Society and (indeed) the Complainants (in their letter to the Law Society 8 March 2006) asserted that the second paragraph quoted above amounted to a personal undertaking by the Respondent to hold the sum of $42,093.00 in his trust account upon the terms as stated. That, we think, was the gravamen of the case.

32 This assertion was said to be supported by letter 25 August 2005 to the Respondent from the solicitors for the Complainants as follows:

“We refer to your letter dated 24 August 2005 and confirm our agreement to your firm retaining the sum of $42,093.00 in your (t) rust account pending resolution between our respective clients’ claims.

This is only to allow settlement to proceed tomorrow, not as a result of our clients “letting go” of any rights to force your client to justify its figures”.

33 Pausing at this point, and if that was all the information that was before the Tribunal, we are very clearly of the opinion that whatever way one looks at the alleged undertaking it could not be properly construed as being a personal undertaking of the solicitor. Clearly, the words used in the letter 24 August 2005 (at [30] above) were written upon the instructions of the Respondent’s client, CRK. The words “we are instructed by our client …” are quite clear. The Respondent as its solicitor could not be interpreted as acting on his own, in some form of personal capacity, but rather clearly as the solicitor for the first mortgagee CRK. The last sentence of the second paragraph is clearly predicated on the preceding three sentences. In our view it could not be interpreted any other way. This view is supported by the following paragraph were the words “and our client has agreed to have these moneys paid into our trust account pending resolution of that dispute” and by the letter from the Complainants’ solicitors 25 August 2005.

34 Pausing again at this point it is clear that the dispute was between the first and second mortgagees and the lawyers for each of them were acting strictly in that role, i.e. as lawyers for their respective clients. To attempt to read some sort of personal liability into a commercial dispute between a first and second mortgagee is clearly, in our very respectful opinion, stretching the bounds of credulity.

35 However, the situation further deteriorated. Settlement apparently took place on 26 August 2005. There was some further correspondence and by letter 29 September 2005 the Respondent informed the solicitors for the Complainants:

“We advise that our client is neither unwilling or unable to answer the issues raised in your previous correspondence. Our client is finalising the settlement figures and payments made, and we will provide you with these figures in the near future. This will also include justification of the monies totalling $42,093.00 held in our trust account being paid to our client” .

Again, whatever spin is put upon those words it is plain that the letter is being written on behalf of the client.

36 On the same day the Respondent wrote to his client CRK. In the penultimate paragraph he made this observation:

“We note the monies held in our trust account cannot be paid until the second mortgagee is satisfied that these amounts have been properly incurred”.

37 Thereafter the Complainants changed solicitors. In a detailed letter from their new solicitors (Messrs R A Bayliss & Co) 11 January 2006 the new solicitors made this statement at page 3:

“In the event that we do not receive positive confirmation within ten days that your client will provide satisfactory details as requested above we are instructed to advise that our client will approach the Supreme Court to obtain orders for an accounting to be carried out by you and will seek the necessary order for legal costs”.

Clearly, again, the reference to “you” is a reference to the client of the Respondent.

38 Curiously, and without any satisfactory explanation, the Respondent provided a detailed accounting to the solicitors for the third mortgagee 17 February 2006; but omitted to provide any detailed accounting to the Complainants or their new solicitor.

39 The Complainants by letter by 8 March 2006 complained to the Law Society. In paragraph 7 of that letter the Complainants stated:

“We agreed to allow settlement of the sale of the property to proceed on the basis that a full and proper accounting of the amount payable to the first mortgagee was received. Until this was received the solicitor undertook to hold the sum of $42,093.00 in his trust account.

40 Then, in paragraph 8, the Complainants said:

“Despite numerous letters and telephone calls no satisfactory response has been received from the solicitor as to details of the amount claimed by the first mortgagee, nor do we know whether or not the funds are still held in trust in accordance with the undertaking given”.

41 The Complainants then set out “what we are seeking” by stating that they were seeking:

“1. A full and proper accounting of the amount payable to the first mortgagee in accordance with their undertaking and as requested in correspondence forwarded on our behalf.

2. Whether or not the funds of $42,093.00 are still held in Friedlieb Byrne Pty Limited Trust Account also in accordance with the undertaking given.”

42 Although the formal complaint letter was addressed to the Law Society it apparently was referred to the Legal Services Commissioner and he, in turn, passed the matter on to the Law Society on 17 March 2006.

43 There followed the most extraordinary correspondence between the Law Society and the Respondent. The Law Society responded to the Complainants 3 April 2006, noting the two issues the subject of the complaint. The Complainants responded 10 April 2006 agreeing with the conduct issues but, curiously, downgrading the undertaking issue to “a possible failure to comply with undertaking to hold money.”

44 The Respondent replied in considerable detail to the Law Society 9 May 2006. He supplied 18 pieces of correspondence, provided additional details, and at page 2 made, inter alia, the following relevant observations:

“The whole of the proceeds of sale have been paid to the first mortgagee. We note that at the time these moneys were paid, I had not provided the abovementioned invoices and receipts to the solicitors for the complainants. This was an oversight on my behalf and I do apologise for my failure to communicate these figures. On the basis of the correspondence with the solicitors for the complainant, wherein I agreed to hold these moneys in trust pending the provision of the invoices, I should have retained these funds. I have therefore requested that our client return the funds to our trust account, and I expect this will take place in the next few days.

These moneys are not however the property of the complainants. They were only to be held pending evidence of the expenditure, and this has now been provided with this letter. Whilst I will hold these moneys from our client, I believe that the complainants should confirm acceptance of the amounts, whereupon the moneys can again be released.

On the instructions provided by the first mortgagee, and after payment of the various costs, commissions and leases associated with the sale, the net proceeds of sale were less than the amount due. On that basis, the first mortgagee has suffered a loss, and there were no excess moneys available for either the second or third mortgagees.

The question of whether a proper accounting has been done in respect of these moneys is not a conduct issue . This is a matter between the mortgagees. All moneys have been paid to the first mortgagee in accordance with their accounting and their instructions. If the complainants feel that they have been dealt with unfairly in respect of these payments, they are at liberty to seek the Court’s intervention against the first mortgagee. It is not a matter that should be dealt with as a conduct issue through the Legal Services Commissioner or the Law Society. …

As I have stated in this letter, the whole of the proceeds of sale have now been disbursed by or to the first mortgagee. Whilst the second issue arising from this complaint relates to an alleged undertaking to retain these moneys for these complainants. I disagree that this was ever the case. The moneys were part of the proceeds of sale, and were held for the first mortgagee. A proper accounting of these moneys has been completed, as per the letter to (the solicitors for the third mortgagee) and the money therefore rightly belonged to the first mortgagee. Again, if the complainants wish to dispute the moneys paid to the first mortgagee, then it is a matter for the Courts, rather than a question of professional conduct . The complainants as second mortgagee are at liberty to enquire as to that accounting, and copies of the relevant documents are enclosed with this letter. It is a matter for them as to whether they chose to take it further. If they are successful, the first mortgagee would be required to repay any such moneys, no doubt with interest”.

45 Pausing at this point one would not unreasonably think that the matter would have stopped there. An accounting had been provided from which (we infer) it was plain that all sale proceeds were properly payable to the first mortgagee CRK, and that should have been the end of the matter. There was not, neither was there in the future, any proof at all that the Complainants were entitled to any money at all. Furthermore, there was absolutely no obligation on the Respondent personally to supply any documentation to the second mortgagee Complainants. The obligation only rested upon the first mortgagee client. A careful analysis, we think, at this point of time (in addition to the earlier time upon a consideration of the alleged undertaking as we have set out at [30]-[34] above) would have resulted in the complaint against this practitioner being dismissed.

46 However, the matter rolled forward. By letter 19 May 2006 the Complainants stated they were “not satisfied with the explanations provided by (the Respondent)”. One might say, “so what?” It is not a matter for the Complainants to be satisfied but rather whether the Respondent has offered an explanation for his conduct. The Complainants pushed forward with the argument that they had not received “the requested information”; that there was “no way the dispute can be resolved without this information” and that accordingly the failure by the Respondent “to retain the disputed funds in trust as undertaken … is in our view very serious”.

47 There was some further correspondence and by letter 21 August 2006 the Law Society requested a copy of the trust account record relating to CRK. Those trust records show that on 1 September 2005 $47,715.45 was received into the Respondent’s trust account; on 5 December 2005 the whole of those moneys was paid out to CRK; and on 25 October 2006 CRK deposited into the trust account the $47,715.45. This Tribunal concludes, even from that information, that the client CRK recognised, properly, that whatever the terms of the undertaking might have been, it was certainly not an undertaking given by the Respondent personally but rather it was an undertaking given by CRK.

48 The Respondent provided a detailed letter to the Law Society 4 December 2006. He stated, and confirmed in oral evidence, that there was some delay in CRK returning the moneys into his trust account. Understandably, one would think! The Respondent went on to say, inter alia:

“At all times, this firm acted on the basis of instructions and figures provided by the first mortgagee. It is not for this office to calculate the amount due to the first mortgagee, but rather to act on the instructions received there from. I therefore take exception to any suggestion that this firm has acted improperly in the matter.

I believe that the first mortgagee has accounted for the moneys they are rightly owed, and to which they are rightfully entitled. If there is a question of priority or calculation this, should be raised with the first mortgagee or with the Courts. A complaint to the Law Society is not the proper forum in which the Complainants should seek some resolution of these matters.”

This Tribunal respectfully fully agrees with those expressed sentiments.

49 In the third last paragraph the Respondent said this:

“I do accept that my conduct in this matter has caused some confusion and distress for the complainants. At no stage had this conduct been intentional or malicious and I have provided an apology to the complainants in this regard through my earlier correspondence. I have previously offered to meet with the complainants to discuss the matter and apologise in person, if this would assist, and I am still prepared to do so”.

We pause again to observe that there was no proven loss. The matter should have been there and then resolved and put to bed. No harm was intended and no harm was given.

50 However, the Complainants persisted. By letter 5 February 2004 they provided “a short history” in which they asserted that the Respondent provided “an undertaking … to hold the sum of $42,093.00 in trust … (and noted that) “the amount was returned to the trust account following on our complaints to the Society”. They then complained that “even now full and proper information has not been provided … a proper and accurate accounting has not been made. The quality of the accounting leaves a lot to be desired …”; then referred to various specific information sought, expressed a belief that they are entitled “to part of the sum of $43,093.00 held in trust. An explanation of the discrepancy of the amount paid to the first mortgagee is required”; then referred to Bank of NSW v Adams [1982] 2 NSWLR 659; and stated that they were “prepared to concede some matters and not press some issues”.

51 The Complainants also wrote to the Respondent 5 February 2007 in which they expressed the belief “that we have not yet been provided with full and accurate information relating to the proceeds of sale”. They then sought numerous details, and in considerable detail, of the sale disbursement moneys.

52 By letter 12 February 2007 the Law Society responsible officer expressed the view to the Complainants that she considered “that the dispute about whether or not a proper accounting has been done in respect of the settlement moneys is a matter between the mortgagees rather than a conduct issue on the part of the solicitor. If you (the Complainants) are not satisfied with the accounting (or lack of accounting) provided by the first mortgagee in respect of the sale then you are entitled to seek orders from the Supreme Court for a proper accounting from the first mortgagee”.

53 Curiously, the Law Society went on to say that “notwithstanding the above” it had asked the Respondent “to advise on whether he has received his client’s instructions in relation to the information sought by you …: Why the Law Society was persisting in this aspect is a mystery to us. The Society then told the Respondent that the relevant officer was “preparing a draft report for consideration of the Professional Conduct Committee in relation to the conduct issues raised in the complaint”.

54 By letter 19 February 2007 the Complainants stated that they “would like to reiterate that we are not satisfied with the accounting provided by (the Respondent) and note that he has not complied with his undertaking”. Quite frankly, we do not know to which undertaking the Complainants are now referring. By this date the moneys in issue had been returned to the trust account! The Complainants went on to tell the Law Society that until “this matter is resolved (the Respondent) is not authorised to account to his client for the funds held in trust”. From where that observation or assertion comes is again not entirely clear.

55 By letter 2 April 2007 the Respondent made a number of observations, relevantly as follows:

“I do however reiterate that a complaint to the Law Society is not the proper forum for the complainants to air these matters. An accounting has been provided to the complainants of the proceeds of sale in this matter. The complainants have prepared an alternative accounting, which they believe is a proper accounting of the moneys involved. As it would appear that the parties are not going to reach agreement, it is a matter for the complainants to take further action against the mortgagee should they so desire.”

With respect, we agree with that observation.

56 Nextly, and relevantly, the Respondent said:

“The undertaking provided to the complainants in this matter was to retain moneys from the sale of the property in our trust account until evidence of the expenditure in that regard had been provided. That evidence has been provided. Any question as to that evidence is a matter for the complainants to explore through the proper channels, not through the Law Society.

The funds retained were retained for a specific purpose. That purpose has been satisfied and the funds should now be released to my client. They should not be held at the whim of the complainants or pending satisfaction of any claim they may chose to make against the mortgagee”.

57 The Law Society through its officer wrote to the Respondent 12 April 2007. Why this letter was ever written and sent is not entirely clear. The Society’s officer stated that she had written to the Respondent and had “asked for his further submissions in relation to the matter”. (What was the point of this? The Respondent had provided, on numerous occasions previously, detailed submissions). She then wrote: “As you are aware the complaint relates to an undertaking that moneys should be retained in your firm’s trust account pending resolution of a dispute between your client (the first mortgage) and the second mortgagee. (The officer noted that the matter had been considered by the Professional Conduct Committee at its meeting 29 March 2007 and advised that the Committee) “has also requested clarification of your role and involvement in respect of the matter”.

58 Why was this letter ever sent? Surely it was absolutely plain, crystal clear, the role of the Respondent in the matter. We have been at pains to go through the correspondence, the explanations and the assertions. It could not be contended other than the Respondent was acting as solicitor for CRK, the first mortgagee.

59 In any event, and without waiting for any reply, by letter of the same date 12 April 2007 the Law Society advised that the Professional Conduct Committee had already resolved on 29 March 2007 that “issues of professional conduct … are involved … (and that the Committee’s opinion was that) “subject to any submissions, it should resolve that it is satisfied there is a reasonable likelihood the practitioner will be found by the Tribunal to have engaged in professional misconduct and that proceedings be instituted in the Tribunal with respect to the complaint pursuant to Section 537(2) of the Legal Profession Act 2004”. The asserted professional misconduct was failure to comply with an undertaking.

60 The Respondent responded 18 April 2007 noting that he would prepare “further submissions” but asserted that as “the undertaking given to the complainants was to retain the moneys in trust pending the provision of (evidence/details of disbursements) could you please confirm that it would now be reasonable for those moneys to be released to my client to enable payment of those disbursements”. There was no response to that part of the letter.

61 The Respondent again provided detailed submissions in his letter 3 May 2007. He explained how the $47,715.45 was made up. He referred to the asserted undertaking. He stated that he:

“Obtained the necessary evidence from my client regarding the disputed disbursements, finalised the accounting and then accounted to my client for the moneys retained in the trust account. Regretfully I did so without first reporting to the solicitors for (the Complainants).

This was not an action that I took out of malice to (the Complainants) or for any financial benefit either to myself or my client. Whilst I admit I was mistaken in doing so, my motive in this was solely for completion of the matter … (the Respondent observed that he had) made what I believe was a full and frank disclosure to you in response to the complaint. I offered to meet with yourself and the complainant for the purposes of providing a verbal apology and to attempt to resolve the matter, although that offer has never been accepted. It may be that, had such a meeting taken place, the complaint would have been resolved some months ago.

I also contacted my client, advised my client what had happened, and requested that the funds be returned to the trust account pending resolution of the complaint. The funds were returned, and they remain in the trust account at this time. … I very much regret my actions in this matter, which gave reason for the complaint … I can only reiterate there was no malice nor personal gain involved in my actions, and the funds were restored to the trust account by my client once the complaint had arisen. To this time, no party has received any benefit or suffered any loss on the basis of the funds left and then were returned to the (trust) account.”

62 The Respondent went on to suggest that he “would accept a public reprimand and an order requiring (him) to pay the costs of the Law Society”. He objected, understandably, to the Society “seeking a substantial fine”. He ultimately stated that he suggested “however that my actions in dealing with those funds were not an intentional act but rather a mistake on my part. I understand that, had my client not agreed to return those moneys to the trust account, then I would have been liable for same. I do accept that I must be responsible for my actions, and I am remorseful in that regard”.

63 We must say that, in view of the clear views that we have formed about this matter, the Respondent was more than generous, excessively so, in his submissions. Once it is accepted that the undertaking was not his undertaking but rather the undertaking of the client, then all this mea culpa was unjustified and unsupportable. It may well be that the Respondent was feeling painted into a corner and, although acting reasonably correctly in the matter, was finding himself the subject, not only of a formal complaint but, in addition, the matter going forward to a hearing in this Tribunal.

64 As it turned out, the professional conduct solicitor dealing with the matter went on leave. The Manager, Professional Standards, then picked up the ball and noted that it appeared to him “that it could be possible to resolve all outstanding issues if the parties could be brought together for an informal mediation”. This Tribunal is rather at a loss to work out or identify what were the “all outstanding issues”. The question of an accounting was a matter between the complainants and the first mortgagee. And that incorporated the moneys put back into the trust account – after all, those moneys were part of the accounting. The Respondent had made it plain in his correspondence that if the complainants wished to agitate issues relating to accounting then they were at liberty to approach the Supreme Court. They did not. Somehow or other, and for whatever reason, the Law Society persisted with the matter. What a mediation could resolve, on a professional conduct issue of this nature, is not clear to us.

65 In any event, by letter 17 May 2007 the Complainants indicated that they were “prepared to meet with (the Law Society and the Respondent) in an informal session in an effort to resolve this matter”. What matter? What was outstanding that needed to be resolved between the Complainants and the Respondent in his personal capacity? This Tribunal is unable to see any issue that could possibly have been resolved at a mediation.

66 In any event, a mediation was scheduled for 27 July 2007. As a result of that the Complainants wrote a long and detailed letter 30 June 2007, this time (curiously and importantly) to the Respondent’s client CRK. In that letter they formulated the dispute relating to the amount paid to CRK, the asserted lack of proper accounting, asserted “a discrepancy in the figures provided” and asserted “clearly there have been amounts which were not properly or legally payable to” CRK. They concluded by asserting they were “entitled to the sum of $69,305.52 as a minimum which we require to be paid to us immediately”. The Complainants also wrote a “without prejudice except as to costs” letter 30 July 2007, again to CRK, noting that they were “prepared to settle this matter without resort to litigation on the basis that the sum of $55,000.00 is paid to us immediately. This is our first and last offer and is opened for acceptance until …”.

67 There was some further correspondence. By letter 24 September 2007 the Complainants complained about not getting any reply and stated that in “view of the lack of response from (the Respondent), we do not withdraw our complaint and we do not authorise release of the funds held in trust”. What all of this has to do with the Law Society’s complaint on personal professional conduct is not entirely clear.

68 In any event, the Complainants persisted. By letter 19 November 2007 they advised the Law Society that they did “not authorise release of (the trust account funds) until the matter has been resolved”.

69 A detailed accounting was provided (again) to the Complainants by the Respondent (under instructions) by letter 16 January 2008. There is no need to go through that letter in detail except to observe that in the penultimate paragraph the Respondent states:

“As evidence of the disbursements in dispute has now been provided, on more than one occasion, we believe that we have complied with our undertaking in the matter and are therefore entitled to release those moneys to our client accordingly. As such, unless we receive Court Orders to the contrary with 10 days, we will release these moneys”.

And, by letter 23 January 2008, the Respondent told the Complainants:

“As evidence of the disbursements in dispute has now been provided, on more than one occasion, we believe that we complied with our undertaking in the matter and are therefore entitled to release those moneys to our client accordingly.

Please let us have your confirmation that we may therefore release these moneys to our client. Unless that confirmation is received within 14 days of the date of this letter we will seek our clients’ instructions regarding the commencement of proceedings for the recovery of same. Our client would of course be seeking the payment of any costs for such proceedings from yourselves”.

The Complainants on 7 February 2008 refused to authorise the Respondent to release the funds held in trust.

70 The Professional Conduct Committee resolved on 24 January 2008 that “there is a reasonable likelihood that the legal practitioner … will be found by the Tribunal to have engaged in professional misconduct …” and that proceedings be instituted. The Committee observed that “the basis upon which the settlement monies were to be retained in trust is contained in a sequence of correspondence between the legal practitioner and the complainants’ solicitors. The Committee notes that the precise terms of the agreement and undertaking are the subject of some dispute. The legal practitioner accepts he undertook to hold the monies in trust pending provision of invoices and receipts of disbursements justifying the payments following settlement. The Committee considers that it is also arguable that the implied undertaking on the part of the legal practitioner was broader and was to hold monies in trust pending resolution of the dispute.”

71 The Committee went on to note that the “breach of undertaking was remedied by the repayment of the monies into trust on or about 25 October 2006”.

72 In his Reply the Respondent stated that he had “always admitted that the funds were originally released from the trust account in error, and I reiterate that I have apologised to the complainants in this regard on a number of occasions both in writing and in person. Once I explained the situation to our client (CRK), it took our client some months to agree to return the moneys to the trust account. … The funds were returned by the client and, as at the date of making this reply (filed 10 October 2008) remain in our trust account”.

73 But the piece de resistance, the icing on the cake, or final determining factor, is this: CRK commenced proceedings against the Complainants in the Supreme Court, Common Law Division, No. 12301 of 2008, seeking return of the moneys held in the Respondent’s trust account. Consent Orders were signed by the Complainants through their legal representative on 24 September 2008. The first paragraph of those Consent Orders is in the following terms: -

“That the plaintiff (CRK) has satisfied the undertaking given by the plaintiff to the defendants on 24 August 2005”.

74 Nothing could be plainer. The Complainants by the use of those terms have clearly conceded that at all material times the undertaking in issue was not an undertaking by the Respondent but an undertaking by his client, the first mortgagee, CRK.

75 This was a conclusion independently reached by the members of this Tribunal very early in the correspondence (as we have stated above) and should have been clearly apparent to all persons who had occasion to look at the correspondence. The Complainants ultimately (after putting the Respondent personally through the hoops), conceded that the undertaking was that of the Respondent’s client. The Respondent should never have been the subject of a complaint, should never have been brought before this Tribunal and the complaint should never have been entertained.

76 A careful analysis of the material (as this Tribunal was at pains to point out in Law Society v Jayawardena [2008] NSWADT 187, in particular at [67-68]) is an absolute pre-requisite to forwarding a complaint on to a practitioner, persisting with a complaint, persisting with correspondence and commencing proceedings. At each of those times those in charge should carefully review the material in a quite dispassionate way and form an independent view without regard to the views of any complainant.

77 It is plain to us that the Complainants themselves, and also the Law Society, confused the issues by getting bogged down in the assertions of the Complainants as to their loss and not separating those assertions from the actual form of the asserted undertaking and the circumstances in which the asserted undertaking was given. The flavour of the proceedings against this Respondent was punitive, made without actually assessing the practicalities and realities of the situation and failed to take into account the totality of the material.

78 Finally, if we are wrong in our conclusion that the undertaking was not personal but rather given on behalf of and on the instructions of the client, the plain fact is that the disputed moneys were re-deposited into the trust account. Thus any breach, if so categorised, was remedied; there was no loss to any party; and the only issue (if there ever was one) was the accounting. Consequently, the breach being remedied, and without intent, mala fides or loss, could only be technical and could only be regarded as de minimus and certainly did not warrant pursuing or bringing before this Tribunal.

79 This Respondent is entitled to a clean bill of health in relation to this matter. The proceedings against him are dismissed.

80 The Respondent seeks to have his position relating to his costs reserved. This Tribunal does so. It grants liberty to the Respondent to reply in respect of costs.

Orders

1. The Application for Original Decision filed 2 July 2008 be and is hereby dismissed

2. The costs of the Respondent are reserved

3. Liberty is granted to the Respondent to apply for costs if so advised. Any such application should be made by formal Application filed in this Tribunal within 21 days of the date of the publication of this decision. The Tribunal Registry will allocate a date at a convenient time for directions before the Presiding Member of this Tribunal; and the matter of costs (of so agitated) can move forward from that point.