LEGAL SERVICES AND COMPLAINTS COMMITTEE and HARDIE
[2025] WASAT 50
•9 JUNE 2025
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: LEGAL PROFESSION ACT 2008 (WA)
CITATION: LEGAL SERVICES AND COMPLAINTS COMMITTEE and HARDIE [2025] WASAT 50
MEMBER: PRESIDENT GLANCY
DR M EVANS-BONNER, SENIOR MEMBER
MR R POVEY, MEMBER
HEARD: 26 FEBRUARY 2025
DELIVERED : 9 JUNE 2025
FILE NO/S: VR 18 of 2024
BETWEEN: LEGAL SERVICES AND COMPLAINTS COMMITTEE
Applicant
AND
PAUL ANDREW HARDIE
Respondent
Catchwords:
Vocational regulation - Legal practitioner - Two allegations of professional misconduct - Legal practitioner prepared an enduring power of attorney (EPA) that was used in a fraud - Whether the donor of the EPA was the legal practitioner's client - Whether the legal practitioner acted in a position of conflict by accepting instructions to prepare mortgage documents in a transaction which relied upon the EPA - Both allegations of professional misconduct established
Legislation:
Interpretation Act 1984 (WA), s 37
Land Administration Act 1997 (WA)
Legal Profession Act 2008 (WA), s 217(1), s 402, s 403, s 403(1)(a), s 403(1)(b), Pt 13 Div 10, s 438, s 438(1), s 438(2), s 439, s 440, s 441
Legal Profession Uniform Law Application Act 2022 (WA), s 57(1), s 260(a), s 313(1), s 313(2)
Mental Capacity Act 2005 (UK), s 9(2), Sch 1 cl 2(1)(e)
Powers of Attorney Act 1998 (Qld), s 44(4)
Powers of Attorney Act 2003 (NSW), s 19(1), s 19(2)
Powers of Attorney Act 2014 (Vic), s 36
Settlement Agents Act 1981 (WA), s 26(1), s 34(1), s 46(1), s 46(4), s 46(5), Sch 2 cl 1(1), Sch 2 cl 1(1)(h), Sch 2 cl 1(2A), Sch 2 cl 1(2)(c)
Settlement Agents Code of Conduct 2016, r 7
Settlement Agents Act 1981 (WA), s 26(1), s 34(1), s 46(1), s 46(4), s 46(5), Sch 2 cl 1(1), Sch 2 cl 1(1)(h), Sch 2 cl 1(2A), Sch 2 cl 1(2)(c)
State Administrative Tribunal Act 2004 (WA), s 32(2), s 60(2)
Transfer of Land Act 1893 (WA), s 208
Result:
Findings of misconduct
Category: A
Representation:
Counsel:
| Applicant | : | Mr A Crocker & Mr C Bailey |
| Respondent | : | Mr M McCusker KC & Mr T R Stephenson |
Solicitors:
| Applicant | : | Legal Services and Complaints Committee |
| Respondent | : | Hardies Lawyers Pty Ltd |
Case(s) referred to in decision(s):
Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Chatenay v Brazilian Submarine Telegraph Co [1891] 1 QB 79
Commissioner for Consumer Protection and The King and I Pty Ltd [2016] WASAT 125
Doney v R [1990] HCA 51; (1990) 171 CLR 207
In the matter of the Legal Practitioners Act 1981 and Cleland (Unreported, Legal Practitioners' Disciplinary Tribunal (SA), 3 June 2020)
Kyle v Legal Practitioners' Complaints Committee [1999] WASCA 115; (1999) 21 WAR 56
Legal Profession Complaints Committee and Wells [2014] WASAT 112
Legal Profession Complaints Committee and Wells [2014] WASAT 112 (S)
Legal Profession Conduct Commissioner v Cleland [2021] SASCA 10
Legal Services and Complaints Committee and Butler [2023] WASAT 124; (2023) 114 SR (WA) 1
Legal Services and Complaints Committee and Lourey [No 2] [2023] WASAT 77; (2023) 110 SR (WA) 113
Pegrum v Fatharly (1996) 14 WAR 92
Richard Evans & Co Ltd v Astley [1911] AC 674
Szozda v Szozda [2010] NSWSC 804
Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321
Westgyp Pty Ltd v Northline Ceilings Pty Ltd [2018] WASC 244
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
Mr Hardie (the Practitioner) prepared an Enduring Power of Attorney (EPA) at the request of a Mr King. Mr King had previously instructed the Practitioner to prepare loan and mortgage documents in unrelated matters. According to the terms of the EPA which was prepared, Ms Marai (as donor), was to appoint her brother, Mr Marai, as her enduring attorney. The terms of the EPA provided that it was to come into effect upon its execution. The Practitioner did not know Ms Marai and never met or spoke with her about the terms of the EPA which he prepared. He emailed the EPA to Mr King and, some days later, to a settlement agent, Ms Jarvis, who he had been told would be arranging a survivorship application and a lost title application, relying upon the EPA.
The Practitioner did not open a file in relation to the matter and did not bill Mr King or Ms Marai for the preparation of the EPA.
Following the preparation of the EPA, the Practitioner acted for the lender/mortgagee in a transaction where the mortgagor was Ms Marai.
The EPA had been fraudulently executed and was used, without Ms Marai's knowledge or consent, to mortgage a property she had inherited from her late mother's estate. She received no value from the transaction pursuant to which her property was mortgaged to secure a loan of approximately $400,000 plus interest.
Ms Marai made a successful claim for compensation under s 208 of the Transfer of Land Act 1893 (WA) (TL Act) to pay for the discharge of the mortgage and her legal fees.
By Ground 1, the Applicant (also referred to as the Committee) alleges that the Practitioner engaged in professional misconduct in preparing the EPA in the way, and in the circumstances, that he did. It is important to note that the Applicant does not allege that the Practitioner knew of, or was a party to, the fraud.
The Practitioner denies that his conduct amounted to professional misconduct or unsatisfactory professional conduct. He says that Ms Marai was not his client and that he was entitled to repose trust in Mr King. The Practitioner says that it was reasonable for him to rely on the settlement agent, who had been engaged to handle the survivorship application and the lost title application, to ensure the document was prepared in accordance with Ms Marai's wishes and properly executed.
The Applicant alleges by Ground 2 that in acting for the lender/mortgagee in a transaction which relied upon the EPA before the Practitioner had discharged his obligations to Ms Marai, the Practitioner acted in a position of conflict. That was because he had not yet taken any instructions from Ms Marai to ascertain that the EPA was prepared in accordance with her own wishes or whether she had capacity to execute it. The Applicant alleges that doing so amounted to professional misconduct.
The Practitioner submits that he had no solicitor-client relationship with Ms Marai, he was not asked to act for her and was not engaged by her. He submits that a simple request to draft an EPA without more, cannot be elevated into a retainer to act for the donor of an EPA. Accordingly, he submits that he did not act in a position of conflict when he acted for the mortgagee in the mortgage transaction, and did not engage in professional misconduct.
Outcome
For reasons which we set out below we have reached the following conclusions in relation to the allegations.
Ground 1
In preparing the EPA, the Practitioner had a professional obligation to the donor, Ms Marai, who was his client. Failing to take any instructions from her at all was a breach of the Practitioner's professional obligations. His conduct amounted to professional misconduct within the meaning of s 403(1)(a) of the Legal Profession Act 2008 (WA) (LP Act).
Ground 2
In acting for the lender/mortgagee in the loan transaction before his professional obligations to Ms Marai had been discharged, the Practitioner acted in a position of conflict. His conduct in doing so amounted to professional misconduct within the meaning of s 403(1)(a) of the LP Act.
Jurisdiction and applicable law
The disciplinary proceeding was commenced in the Tribunal by application made on 23 February 2024.
The application arose from an investigation which had been commenced, but not concluded, by 1 July 2022. That is the date on which the LP Act was repealed.[1]
[1] See s 260(a) of the Legal Profession Uniform Law Application Act 2022 (WA) (Application Act). By s 313(1) and s 313(2) of the Application Act, the LP Act continues to apply to this case.
The transitional provisions in the Application Act provide that the Legal Services and Complaints Committee[2] (that is, the Applicant) is entitled to deal with the matter as if the LP Act had not been repealed. The Tribunal proceeds on the same basis by reason of s 37 of the Interpretation Act 1984 (WA).[3]
[2] So named as a consequence of s 57(1) of the Application Act.
[3] See Legal Services and Complaints Committee and Butler [2023] WASAT 124; (2023) 114 SR (WA) 1, [7] ‑ [14].
What can the Tribunal do upon referral of a complaint?
The Tribunal's role in dealing with complaints about the conduct of practitioners is dealt with in Div 10 of Pt 13 of the LP Act.
Section 438(1) of the LP Act provides that the Tribunal has jurisdiction to make a finding that an Australian legal practitioner has engaged in unsatisfactory professional conduct or professional misconduct. Section 438(2) of the LP Act provides that, where the Tribunal makes such a finding, it may:
(a)make and transmit a report on the finding to the Supreme Court (full bench); or
(b)make any one of more of the orders specified in s 439, s 440 and s 441 of the LP Act.
As the issue of any penalty which we might impose in this case was not the subject of the hearing, that issue and the question of costs will be deferred until after liability is determined. Therefore, we will not presently set out the sanctions which can be imposed under s 439, s 440 and s 441 of the LP Act.
The burden and standard of proof
The Committee bears the onus of proof in relation to the allegations it makes against the Practitioner. The civil standard applies, bearing in mind the Briginshaw approach.[4]
[4] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361 - 362, per Dixon J : 'Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of the allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been provided to the reasonable satisfaction of the Tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences'.
In these reasons, wherever we express ourselves as being satisfied, and make a finding, we are to be understood as doing so on the balance of probabilities and on the basis of evidence which we regard as clear and cogent, having regard to what was said in Briginshaw.
Conduct of the hearing and our approach to evidence
This matter was listed for a two-day hearing on the understanding that the Practitioner, who had filed an outline of evidence in accordance with programming orders, would be giving evidence.
The Applicant's case was a documentary one which depended on inferences to be drawn from certain documents.
In fact, the hearing was concluded in only one day because the Practitioner elected neither to give or adduce any evidence.
In its case, the Applicant tendered a statutory declaration of the Practitioner dated 27 November 2023[5] (Statutory Declaration). It had been prepared and provided to the Applicant during its investigation into the matter.
[5] Statutory Declaration of the Practitioner dated 27 November 2023, Exhibit 1.48(b).
Because the Practitioner was not cross-examined on its contents, where the Statutory Declaration contains statements against the Practitioner's interests, we accept those statements and make findings of fact in accordance with them. However, where it contains self‑serving statements, we have approached them with caution and have considered the weight to be given to each having regard to whether they are consistent with documentary records or the logic of the case. We identify our approach to each specific fact where it is relevant below.
The Applicant sought to tender documents related to, and to make submissions about, the Practitioner's involvement in three other transactions involving Mr King. During the hearing, those transactions were referred to as 'the Greenlight Transactions'. The Applicant's intended purpose for doing so was to rebut the Practitioner's assertion, set out in the Statutory Declaration, that he always believed Mr King to be honest in his dealings with him.[6] The Practitioner objected to their tender.
[6] See Exhibit 1.48(b), answers to question 4.
We will return to these documents and identify our approach to them later in these reasons commencing at [116].
Meaning of unsatisfactory professional conduct and professional misconduct
As set out above, the Applicant has alleged that we should find that, by engaging in the conduct alleged in Grounds 1 and 2, the Practitioner has engaged in professional misconduct. Before turning to the factual findings we make in relation to each Ground, we therefore set out the meaning of the term 'professional misconduct', as well as 'unsatisfactory professional conduct' for the purposes of the LP Act.
The expressions 'unsatisfactory professional conduct' and 'professional misconduct' are defined in s 402 and s 403 of the LP Act respectively.[7]
[7] LP Act s 3.
The term 'unsatisfactory professional conduct' is defined in s 402 of the LP Act as follows:
For the purposes of this Act -
unsatisfactory professional conduct includes conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.
The term 'professional misconduct' is defined in s 403 of the LP Act as follows:
For the purposes of this Act -
(1)professional misconduct includes -
(a)unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and
(b)conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice.
(2)For the purposes of finding that an Australian legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the suitability matters that would be considered if the practitioner were an applicant for admission or for the grant or renewal of a local practising certificate.
In Ground 1 the Applicant alleges that the Practitioner's conduct was professional misconduct within the meaning of s 403(1)(a) and (b) and s 438 of the LP Act, and that it would also be regarded as disgraceful or dishonourable to practitioners of good repute and competence and/or fell short, to a substantial degree, of the standard observed or approved by members of the profession of good repute and competence.[8]
[8] Kyle v Legal Practitioners' Complaints Committee [1999] WASCA 115; (1999) 21 WAR 56 [61].
There are, therefore, three bases upon which the Tribunal might find that the Practitioner engaged in professional misconduct in Ground 1, two being the statutory tests set out in s 403(1)(a) and (b) and the third being on the so-called 'Kyle test', which is separate and distinct from the 'fit and proper person' test in s 403(1)(b) of the LP Act.[9]
[9] Legal Services and Complaints Committee and Lourey [No 2] [2023] WASAT 77; (2023) 110 SR (WA) 113 [234]. It is not necessary to consider in this proceeding whether, under the Uniform Law, the Kyle test remains a separate basis for a finding of professional misconduct.
In Ground 2, the Applicant alleges that the Practitioner's conduct amounted to professional misconduct only within the meaning of s 403(1)(a) and s 438 of the LP Act.
We next turn to deal with the specific Grounds alleged by the Applicant.
Ground 1
The allegation
The Applicant alleges that the Practitioner, on or around 26 April 2017, engaged in professional misconduct by preparing the EPA for a proposed donor, Ms Marai, where the Practitioner:[10]
[10] Page 1 of Annexure A to Applicant's Application.
(a)did not meet, or communicate in any way, with the proposed donor;
(b)did not take any steps to ascertain or assess the donor's capacity to make the EPA;
(c)did not take any steps to ascertain whether the donor understood and freely assented to the EPA;
(d)knew the EPA would be, or may be, used in connection with a property transaction;
(e)provided a copy of the EPA, in executable form, to a third party who had no legitimate or lawful interest in connection with the EPA, with knowledge that the EPA would be, or was likely to be, executed,
which contributed to a fraud being perpetrated against Ms Marai, whereby she became liable for a mortgage she had no knowledge of.
The facts
The relevant facts are largely agreed. We are satisfied of and make the findings of fact set out in [38] - [54].
The Practitioner was admitted to practice in 1999.[11]
[11] Applicant's Statement of Facts and Contentions (SOFAC) at [1] and Respondent's Amended Response (Amended Response) at [1].
At all relevant times the Practitioner practised as a sole practitioner trading as Hardies Lawyers Pty Ltd.[12]
[12] SOFAC at [1] and Amended Response at [1].
On 30 May 2016, probate was granted to Ms Marai as executor of the estate of her mother, the late Ms K Marai.[13] Ms K Marai's will bequeathed her residuary estate, including a residential property at 20 [address] (the Property) to Ms Marai.[14]
[13] See Grant of Probate at Exhibit 1.1.
[14] See Last Will and Testament dated 9 February 2016 of Ms K Marai at Exhibit 1.1(a).
On 24 April 2017, the Practitioner received an email from Mr Michael King which was also addressed to a licensed settlement agent, Ms Vanessa Jarvis.[15] The email said:
[15] Exhibit 1.11.
Dear Paul and Vanessa,
Under the request of Daniel Marai please prepare the following:
EPA from MELANIE KATE MARAI of 18 [address] to DANIEL PETER MARAI of 20 [address]. (Paul)
Survivorship Application and Lost Title application will be signed by Daniel Peter Marai as Enduring Power of Attorney. (Vanessa)
Vanessa Daniel advises that his sister is Executor and Beneficiary holding his interest. I will have probate as proof of this Wednesday AM.
Attached please Find Original death certificate and request for Probate lodged last Thursday.
Vanessa, Daniel has emailed his Drivers License and medicare etcetera and authority for you to Locate title.
I will forward these to you to check above address and last time you searched landgate for the title for me it was with CBA in 2005.
Thank you both
The email is addressed to two people, the Practitioner and Ms Jarvis. However, we infer from the specific reference to the Practitioner (Paul) in the second paragraph and to Ms Jarvis (Vanessa) in the third, fourth and sixth paragraphs that the instruction to prepare the EPA was specifically directed to the Practitioner. We make that finding.
Because the instruction to prepare the survivorship application and the lost title application had Ms Jarvis's name in brackets beside it, we infer and find that Ms Jarvis was being instructed in relation to those matters. Nevertheless, we are also satisfied and find that as a result of the email the Practitioner was put on notice that the EPA which he had been instructed to prepare was intended to be the source of authority for Mr Marai's execution of those applications.
The Practitioner had previously performed legal work for Mr King preparing loan and mortgage documents.[16]
[16] Exhibit 1.48(b).
On 26 April 2017 at 8.54 am, the Practitioner sent Mr King an email attaching the draft EPA in executable form and stating that if Mr King required a hard copy, he would leave one at his reception.[17] The copy of the EPA attached had 'draft' stamped on the cover page. That email was not copied to Ms Jarvis.
[17] See Exhibit 1.12 for the email and the draft EPA attached.
Later that same day, at 10.36 am, Mr King replied to the Practitioner's email stating, relevantly '[T]hank you mate, please print two hard copies'.[18]
[18] Exhibit 1.13.
On 29 April 2017 at 8.02 pm the Practitioner sent Ms Jarvis an email[19] which was courtesy copied to Mr King. It stated:
Hi Vanessa,
Draft Marai EPA attached.
Regards,
[19] Exhibit 1.14.
There is no evidence that the hard copies were provided to Mr King in accordance with his instructions. In his Statutory Declaration the Practitioner states that he cannot recall if he left the unsigned EPA at the firm's reception or not.[20] We approach that statement with caution for the reasons set out at [25]. There is also no evidence as to whether, if he did print the hard copies, the cover page still contained the draft stamp which is not on the (fraudulently) executed EPA.
[20] Exhibit 1.48(b).
It would seem more likely than not that, having complied promptly with Mr King's instruction to prepare the EPA and having offered to provide hard copies, the Practitioner did provide the hard copies to him as he had offered, and as Mr King has asked him, to do. Nothing turns on that issue.
On 1 May 2017, the EPA, purportedly signed by Ms Marai, was registered with Landgate.[21]
[21] Exhibit 1.15.
Ms Marai's signature was forged. It is not known by whom.
On 1 May 2017, a lost title application was made.[22] The application was signed by Mr Marai as applicant 'as attorney for Melanie Kate Marai' (Ms Marai). The application says that the applicant applied for 'a replacement certificate of title as duplicate certificate of title edition 2 has been lost or destroyed'.
[22] Exhibit 1.16.
The draft EPA and the (forged) executed EPA were in identical terms. The EPA conferred plenary powers upon the donor, Mr Marai, and is expressed to be effective immediately upon execution.[23] There is no evidence of anyone instructing the Practitioner to draft it in that way.
[23] Exhibit 1.12 and Exhibit 1.15.
At no time did the Practitioner have any contact with Ms Marai.[24]
Red flags
[24] Exhibit 1.48(6).
The Applicant submits that the following matters were 'red flags' that should have put the Practitioner on notice that he needed to make inquiries of Ms Marai concerning the preparation of the EPA, rather than rely on Mr King's request:
1.It was a request to prepare an EPA for someone other than Mr King, which should have put the Practitioner on notice of the possibility that the proposed EPA was not, in fact, requested by Ms Marai and that she may not have the capacity or desire to enter into an EPA.
2.There was no indication as to why Mr King was involved in the matter and no evidence of his authority to issue instructions on behalf of Ms Marai.
3.The Practitioner knew from the email of 24 April 2017 that the EPA was to be relied upon for the purposes of the proposed survivorship application and the lost title application. He also knew that Ms Marai was the executor of her late mother's estate and yet there was no explanation about why she could not sign those applications herself and why they would need to be made by Mr Marai acting as her attorney.
4.Mr King provided no contact details for Ms Marai or Mr Marai in his emailed 'instructions'.
Did the Practitioner have a client? If so, who was it?
The Applicant submits that whenever a legal practitioner prepares an EPA, the donor is the client and the person to whom the relevant practitioner owes professional obligations. Accordingly, the Applicant submits that Ms Marai was the Practitioner's client.
The Applicant also submits that the Practitioner failed to discharge the professional obligations he owed to his client, Ms Marai, by not obtaining any instructions from her in relation to the preparation of the EPA.
In making that submission the Applicant expressly acknowledged that instructions are frequently conveyed to lawyers by third party intermediaries such as family members who have no formal authority to provide instructions. The Applicant says that there is nothing wrong with that practice provided that the lawyer takes appropriate steps to verify the instructions with the donor before completing the retainer.[25]
[25] Applicant's outline of Opening Submissions dated 11 February 2025, [22].
The Practitioner says that all he did was prepare an EPA for Mr King as a favour. He did not open a file and did not bill for the work. He submits that in doing so, he had no solicitor‑client relationship with anyone, including Ms Marai.
The Practitioner submits that the Applicant's contention which he summarises as whenever a practitioner is asked to draft an EPA - even though not asked to act, and where they do not agree to act for the named donor, who they have never met or dealt with - the practitioner has an absolute duty to be satisfied of the donor's capacity, is untenable and unsupported by either authority or common sense. The Practitioner says that it is even more untenable in this case where he was asked to and complied with the request to send the unexecuted EPA to Ms Jarvis, who was a licensed settlement agent whose statutory function and duty it was to see to its valid execution and registration.
In our view, in making that submission the Practitioner has conflated a statutory power with a statutory duty, and fails to address the timing of the sending of the EPA to Mr King and to the settlement agent Ms Jarvis, the latter of which occurred two days after the former.
Pursuant to s 26(1) of the Settlement Agents Act 1981 (WA) (SA Act), settlement agents must be licenced. Section 46(4) of the SA Act provides that in arranging or effecting any settlement referred to in subsection (1), a licensee (that is, a licensed settlement agent) may perform the functions set forth in Sch 2 cl 1(1) or (2A), but in performing any or all of those functions, a licensee shall not give or attempt to give advice on a matter of law. Subsection 46(5) further provides that the licensee may draw or prepare the documents set forth in clause 1(2) of Sch 2. Settlements referred to in s 46(1) are (subject to some exceptions) settlements of any real estate transaction that is in respect of land under the TL Act or the Land Administration Act 1997 (WA).
Relevantly, cl 1(1)(h) of Sch 2 of the SA Act provides that the functions a licensee may perform include completing powers of attorney. Pursuant to cl 1(2)(c) the licensee may also draw or prepare and arrange the execution of documents that are to be registered or lodged for the purposes of several enactments including the TL Act.
Thus, settlement agents may prepare, and arrange the execution and lodgement of, powers of attorney which are relevant to transactions in respect of which they are involved as a settlement agent.
Subsection 34(1) of the SA Act provides that it is a condition of every settlement agent's licence that the licensee must comply with the provision of the SA Act and the settlement agents' code of conduct. Rule 7 of the Settlement Agents' Code of Conduct 2016, which applied at the relevant time, provides that when acting for a client, a licensee must exercise due care, diligence and skill.
Clearly, Ms Jarvis had professional duties when exercising the statutory functions of a settlement agent. However, in our view, the existence of such duties does not, of itself, relieve the Practitioner of any duties which he may have had in relation to the preparation of the EPA.
The ultimate issue is whether the Practitioner had any obligation to Ms Marai. His answer was that he did not, because she was not his client. Further, he says that there is no Western Australian authority in support of the Applicant's contentions, nor are there any Western Australian practice guidelines to the effect that the preparation of an EPA by a lawyer, without more, makes the donor the client of the lawyer.
The Practitioner submitted that a determination of whether there is a solicitor‑client relationship requires an examination of all the facts and circumstances of the case. The Practitioner says that in his case, 'the mere drafting of an EPA without any engagement to act for the donor, does not make the donor the client.'[26] The Practitioner relies upon two cases in support of this submission.
[26] Ts 10.
The first is Townsend v Roussety & Co (WA) Pty Ltd[27] in which Buss JA observed that '[t]he existence of a contract for the provision of professional services, and the terms of the contract, may be implied or inferred'.[28]
[27] Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 (Townsend).
[28] Townsend, per Buss JA, at [77], with whom Wheeler JA and McLure JA agreed.
Buss JA continued:[29]
It is apparent, from the authorities I have reviewed, that, in the present case, the facts and circumstances established at trial must be examined for the purpose of determining whether the existence of a professional retainer should be inferred, and if so, the nature and scope of the retainer.
[29] Townsend, per Buss JA, at [79].
These observations were made as part of the Court of Appeal's consideration of whether the appellants had retained an accountant to act for them, and if so, what the terms of the retainer comprised.
One of the authorities referred to by Buss JA in Townsend was Pegrum v Fatharly,[30] which was also relied upon by the Practitioner. In Pegrum, the respondent solicitor prepared loan documents, took instructions from the borrower and one of the lenders, and was the only solicitor involved in the transaction. The borrower was unable to repay the loan and the security was inadequate. The appellant lenders sued the solicitor for damages for negligence and breach of fiduciary duty alleging that the solicitor had known the borrowers to be a 'bad risk' and the security to be inadequate, but had failed to advise the lenders. The Full Court of the Supreme Court concluded that there was a retainer between the solicitor and the appellant lender. With reference to relevant authorities, Anderson J confirmed that 'a professional engagement may be implied' and that '[a] retainer will be presumed if the conduct of the parties shows that the relationship of solicitor and client has, in fact, been established between them'.[31]
[30] Pegrum v Fatharly (1996) 14 WAR 92 (Pegrum)
[31] Pegrum, page 102.
The Applicant relies upon the nature of an EPA itself and practice guidelines from other jurisdictions which make clear that, where they apply, there is an obligation on the solicitor drafting an EPA to take instructions from the donor, who is the client. It also says that a practice guideline is not required in order for the obligation to exist, but simply highlights for the profession the position which arises as a result of the nature of an EPA.
In Szozda v Szozda,[32] Barrett J made the following observation about EPAs in the context of determining what test of capacity was required to be applied in determining capacity to create a general power of attorney:
34The central concept is thus one of complete and lasting delegation to a particular person, albeit with the ability to put an end to the delegation while capacity to do so remains. That concept of empowering another person to act generally in relation to one's affairs raises two basic questions. First, is it to my benefit and in my interests to allow another person to have control over the whole of my affairs so that they can act in those affairs in any way in which I could myself act - but with no duty to seek my permission in advance or to tell me after the event, so that they can, if they so decide, do things in my affairs that I would myself wish to do (such as pay my bills and make sure that cheques arriving in the post are put safely into the bank) and also things that I would not choose to do and would not wish to see done - sell my treasured stamp collection; stop the monthly allowance I pay to my grandson; exercise my power as appointor under the family trust and thereby change the children and grandchildren who are to be income beneficiaries; instruct my financial adviser to sell all my blue chip shares and to buy instead collateralised debt obligations in New York; have my dog put down; sell my house; buy a place for me in a nursing home? Second, is it to my benefit and in my interests that all these things - indeed, everything that I can myself lawfully do - can be done by the particular person who is to be my attorney? … The decision is one in which considerations of surrender of personal independence and considerations of trust and confidence play an overwhelmingly predominant role: am I satisfied that I want someone else to be in a position to dictate what happens at all levels of my affairs and in relation to each and every item of my property and that the particular person concerned will act justly and wisely in making decisions?
35The decision to create a general and enduring power of attorney differs from that involved in the making of a will but must be regarded as of a similar degree of complexity or even greater complexity. I quote, in that connection, a passage from the decision of the Queensland Guardianship and Administrative Tribunal in Re HAA [2007] QGAAT 6 at 34:
Expert medical opinion provided to (and which appears to have been accepted by) the Court in Adult Guardian (In Re Enduring Power of Attorney of Vera Hagger) v Vera Hagger, Declan James Barry and Albert Craig Ray SC Qld No 1083 of 2001 (Unreported), was that an Enduring Power of Attorney was both more unfamiliar and more complex (for most members of the community) than a will. Accordingly, a higher cognitive ability and therefore standard of capacity would be required for an Enduring Power of Attorney.
[32] Szozda v Szozda [2010] NSWSC 804, [34] - [35].
In summary, this passage from Barratt J's judgment explains that an EPA is a powerful document, of similar or greater complexity to a will, whereby a person surrenders their independence by giving another person the power to make decisions on their behalf about their estate, including decisions in relation to their property. As was noted by the learned Judge, it is a 'complete and lasting delegation to a particular person' with potentially serious consequences to the donor if misused. Thus, an assessment of the capacity of the donor to appoint an attorney is vital.
The broad reaching nature of an EPA was also noted in Chatenay v Brazilian Submarine Telegraph Co.[33] In that case Lindley LJ referred to a power of attorney as a 'one-sided document, an instrument which expresses the meaning of the person who makes it, but is not in any sense a contract'.
[33] Chatenay v Brazilian Submarine Telegraph Co [1891] 1 QB 79, 85.
The Applicant submitted that an EPA is akin to a will where the position is clear that when making a will the solicitor's client is always the testator.
That analogy was drawn by the Tribunal in Legal Profession Complaints Committee and Wells[34] (Wells) where the Tribunal outlined that a solicitor has similar professional obligations when taking instructions for an EPA and a will:
When taking instructions for an EPA and supervising the execution of a will, a solicitor has, at least the following obligations:
a)to determine whether the donor has capacity;
b)if capacity is in doubt, to ask non-leading questions designed to properly probe that capacity;
c)if capacity is in doubt, to seek medical advice;
d)to be alert to possible conflicts of interest where the person instigating the EPA is a donee, or associated with a donee; and
e)to take proper notes.
[34] Legal Profession Complaints Committee and Wells [2014] WASAT 112 [17].
In that case the Practitioner, Mr Wells, was found to have engaged in professional misconduct. He had attended a hospice, where Mr Coe was receiving palliative care, at the request of Mr McKenzie in order to prepare a will and an EPA pursuant to which the only beneficiary of the will and the donee of the EPA was Mr McKenzie. The practitioner had doubts about Mr Coe's capacity when he attended at the hospice. However, he refused an offer from a doctor to answer questions about Mr Coe's condition. The Tribunal found that he took instructions in relation to the will and the EPA from Mr McKenzie and Mr McKenzie's mother. The Tribunal observed, at [136]:
It is a measure of Mr Wells' failure to appreciate his duties as a solicitor that in crossexamination he gave evidence that he regarded Mr Coe, Mr McKenzie and Mrs McKenzie as his clients. Mr Wells was either acting for Mr Coe or he was acting for the McKenzies. It is difficult to see how, in the context of preparing a will for Mr Coe, Mr Wells could ever have regarded himself as acting for the McKenzies.
In the paragraph of Wells quoted at [78], the Tribunal expressly recognised that there will be occasions where initial approaches to a solicitor for the preparation of an EPA (or a will) will come from someone other than the donor. That did not however, alter their view of the obligations which the practitioner concerned then has to the donor.
Various statutes concerning EPAs seek to protect donors by requiring the document to be explained to them, and for an assessment that they have capacity to enter into the EPA to be made.
In New South Wales, s 19(1) of the Powers of Attorney Act 2003 (NSW) (NSW Act) sets out the legal requirements for the creation of an EPA. Section 19(1) of the NSW Act provides that an instrument that creates a power of attorney creates an EPA if -
(a)the instrument is expressed to be given with the intention that it will continue to be effective even if the principal lacks capacity through loss of mental capacity after execution of the instrument, and
(b)execution of the instrument by the principal is witnessed by a person who is a prescribed witness (not being an attorney under the power), and
(c)there is endorsed on, or annexed to, the instrument a certificate by that person stating that —
(i)the person explained the effect of the instrument to the principal before it was signed, and
(ii)the principal appeared to understand the effect of the power of attorney, and
(iii)the person is a prescribed witness, and
(iv)the person is not an attorney under the power of attorney, and
(v)the person witnessed the signing of the power of attorney by the principal.
Subsection 19(2) of the NSW Act defines a 'prescribed witness' to mean:
(a)a registrar of the Local Court, or
(b)an Australian legal practitioner, or
(c)a licensee under the Conveyancers Licensing Act 2003, or an employee of the NSW Trustee and Guardian or a trustee company within the meaning of the Trustee Companies Act 1964, who has successfully completed a course of study approved by the Minister, by order published in the Gazette, for the purposes of this paragraph, or
(d)a legal practitioner duly qualified in a country other than Australia, instructed and employed independently of any legal practitioner appointed as an attorney under the instrument, or
(e)any other person (or person belonging to a class of persons) prescribed by the regulations for the purposes of this paragraph.
As can be seen then, the NSW Act does not require that the solicitor who prepares the document explain the effect of it to the donor. It expressly contemplates that the matters to be certified can be undertaken by others.
Queensland and Victoria have also enacted similar legislation requiring a prescribed witness to verify in writing that the donor of the power of attorney appeared to understand the document and to have determined that the donor appeared to them to have capacity to execute it.[35] A similar requirement has been enacted in the United Kingdom in relation to what are referred to as 'lasting powers of attorney'.[36]
[35] See Powers of Attorney Act 1998 (Qld) s 44(4) and Powers of Attorney Act 2014 (Vic) s 36.
[36] Mental Capacity Act 2005 (UK) s 9(2) read with Sch 1 cl 2(1)(e).
In 2003, the Law Society of New South Wales issued guidelines to practitioners concerning their involvement in the preparation of EPAs. The guidelines are entitled 'Guidelines for Solicitors Preparing an Enduring Power of Attorney, Law Society of NSW, December 2003' (NSW Guidelines). The NSW Guidelines provide, at cl 1, that a solicitor may be 'asked by a client to prepare an enduring power of attorney and/or to the certificate attached to the enduring power of attorney'. It then provides:
In both cases, the solicitor has an obligation under the Act to explain the nature and effect of the enduring power of attorney to the donor and to be satisfied that the donor has the mental capacity to make the enduring power of attorney.
By its terms cl 1 applies when a client asks the solicitor to prepare the EPA or to complete the certificate required under s 19.
Clause 2 of the NSW Guidelines is headed 'Who is the client?'. It provides:
Where a solicitor is instructed to prepare an enduring power of attorney the donor is the client. In carrying out the terms of the power, the client's interest are paramount and remain so after the client has become mentally incapable.
Clause 3 of the NSW Guidelines, headed 'Taking Instructions' provides:
(a)The solicitor should personally attend the client to obtain instructions for the granting of the power of attorney. This is particularly so in any of the following cases where:
(i)instructions are communicated by a third party, whether or not related to the client,
(ii)there is no written instruction or confirmation of instructions signed by the client,
(iii)the client is of advanced age, or is hospitalized or resides in a nursing home,
(iv)the client is suffering any physical disability, or a condition raising the question of mental capacity.
(b)The solicitor should seek instructions directly from the donor and advise the donor in the absence of the proposed attorney.
(c)If the solicitor suspects that instructions have been given under duress or undue influence, further enquiries must be made and these suspicions allayed before accepting instructions.
(d)The solicitor must not accept where the solicitor is aware that the donor does not have capacity to grant the enduring power of attorney.
(Original emphasis.)
The NSW Guidelines make clear that a solicitor should not prepare an EPA on instructions from a person other than the donor and should ensure that the terms of the proposed EPA are in accordance with the wishes of the donor, who has capacity to understand the effect of the grant of the EPA.
They also indicate, in their introduction, that they are intended to assist practitioners who are advising clients who wish to draw up an EPA and sets out general points for consideration. They appear to have been drafted because of the changes to the law relating to certifying and witnessing EPAs coming into force as a result of the commencement of the Powers of Attorney Act 2003 (NSW) on 16 February 2004.
In the United Kingdom, the Law Society has a practice note for lawyers entitled 'Lasting Powers of Attorney' (LPA). The version which was applicable at the time the Practitioner prepared the EPA in this matter, provides, at para 5, the following instruction to lawyers:
Where you are instructed to prepare an LPA, the donor is the client. You should ensure that you have taken and recorded instructions from the client.
And at para 5.1 it says:
Where instructions for the preparation of an LPA are given by someone other than the client, you must not proceed without checking that the client agrees with the instructions given.
The academic commentary on EPAs also clearly supports the conclusion that when preparing an EPA the donor is the client. For example, the LPA practice note has been referred to in Aldridge: Powers of Attorney[37] in which it is stated that:
The donor of the power is the solicitor's client. If a third party purports to give the client instructions, the solicitor should obtain the client's written confirmation.
[37] GA Shindler & PM Wass, Aldridge: Powers of Attorney (12th ed, 2002) [1.09].
The fourth edition of Cretney & Lush's text entitled Enduring Powers of Attorney was published in 1996, well before the Mental Capacity Act 2005 (UK) was enacted and before there was any legislative requirement for a prescribed witness to certify that the donor appeared to understand the EPA and appeared to have the necessary capacity to make it. In that text, the authors stated that '[w]here a solicitor is instructed to prepare an enduring power of attorney, the donor is the client.'[38]
[38] Cretney & Lush Enduring Powers of Attorney (4th ed, 1996), page 123.
The authors continue to explain:[39]
Where instructions for the preparation of an enduring power are received not from the donor, but from a third party purporting to represent him, a solicitor should obtain the written instructions from the donor that he wishes the solicitor to act. In any case of doubt, the solicitor should see the client personally or take other appropriate steps to confirm the instructions. The solicitor must also advise the donor without regard to the interest of the source from which he or she was introduced.
[39] Cretney & Lush Enduring Powers of Attorney (4th ed, 1996), pages 123 - 124.
This commentary represents an understanding dating back at least to 1996, at least in the UK, that the donor is the client and that instructions regarding the preparation of an EPA need to come directly from the donor.
The UK and NSW guidelines are not binding in this jurisdiction. However, they do, in our view, reflect the position which also applies in Western Australia.
In an Australian context, in his text, Powers of Attorney, Professor Dal Pont compared the functions of an executor under a will to those of an attorney. He observed that 'like an attorney, an executor is vested with authority to act on a principal's behalf'. He further observed that fiduciary duties are owed by both the attorney and the executor and there is a duty for them to account.[40] Those similarities suggest that an EPA is a document that is akin to a will, and that similar obligations would apply to the lawyer who prepares those documents, including the recognition that the donor is the client in the same way as the testator/testatrix is the client.
[40] G E Dal Pont, Powers of Attorney (3rd ed, 2020), [2.17] - [2.18].
From our review of the above authorities, guidelines and commentary, we conclude that a practitioner preparing an EPA owes a duty to the donor to ensure capacity and voluntariness of the EPA irrespective of who asks them to prepare the document or who else might be involved in any associated transactions.
Those duties were not created in the United Kingdom, New South Wales, Victoria or Queensland by the enactment of the legislation to which we have just referred. The obligations to the donor arise from the nature of an EPA itself. Rather, in our view, the legislation was enacted to now require a certificate to accompany an EPA confirming an assessment of capacity has taken place, and that the donor understands the effect of the document for it to be valid, and the NSW Guidelines are in place to identify clearly for practitioners what the profession regards as good practice, to ensure professional obligations are met.
It therefore follows that the cases relied upon by the Practitioner (Townsend and Pegrum) can be reconciled with the cases, guidelines and legislation relied upon by the Applicant. Townsend and Pegrum illustrate that whether there is a professional services relationship, such as a solicitor-client relationship, can be implied or inferred from an examination of the facts and circumstances of the case, including the nature of the legal work being performed.
Having regard to the facts and circumstances of this case, and the nature of the legal work undertaken by the Practitioner, we are satisfied that although he failed to appreciate it at the time, in agreeing to Mr King's request that he draft the EPA by which Ms Marai was to appoint Mr Marai to be her attorney, the Practitioner had a solicitor-client relationship with Ms Marai, and a duty to ensure that the EPA's terms reflected Ms Marai's wishes and that he had no concerns about her capacity to understand the effect of the EPA.
In our view, had the Practitioner done no more than provide a blank, pro forma EPA to a friend, with no details completed, no obligations to a donor would have arisen. But where, as was the case here, the Practitioner completed the EPA with operative provisions, including details of the name of the donor and the attorney, and provided it, in a form capable of execution, to a third party who had requested its preparation, the Practitioner must be regarded as having prepared the document on behalf of the donor who was his client. It is not necessary for a practitioner to be paid for there to exist a solicitor-client relationship.[41] The Practitioner therefore had a professional obligation to ensure the donor, Ms Marai, had capacity to execute the EPA and that the draft prepared by him accorded with her wishes.
[41] See G E Dal Pont, Lawyers' Professional Responsibility (6th ed, Lawbook Co, 2017) at [3.05]; 'There is some suggestion that consideration moving from the client is not essential to creating a retainer – whether as a means of encompassing services supplied pro bono (see, for example, Legal Practitioners Complaints Committee and Trowell [2009] WASAT 42; (2009) 62 SR (WA) 1 at [155]) or otherwise to reflect the client-focused nature of the retainer (see, for example, Bartle v GE Custodians [2010] 1 NZLR 802 at [132] per Randerson J) – but insofar as consideration goes to the client's ability to enforce the retainer, there seems no impediment given coexisting tortious and equitable duties inherent in the consensus underscoring it' (We have included the footnote references in the text for ease of reference).
In our view, the fact that the Practitioner was aware that the settlement agent would be involved in a transaction that hinged upon the use of the EPA prepared by the Practitioner, without more, did not relieve the Practitioner of those obligations.
Characterisation of the conduct
Having found that the Practitioner breached his professional obligations by acting as he did in Ground 1, we next turn to how we characterise that conduct.
The Practitioner's culpability in not complying with his obligations may be lessened if he reasonably relied upon the settlement agent to undertake certain actions.
We accept that the matters identified by the Applicant as red flags should have highlighted in the Practitioner's mind the need to ensure that Ms Marai wanted to execute a document in the terms in which the EPA was prepared and had the capacity to do so.
There is no evidence before us that the Practitioner and Ms Jarvis had any communication at all about who it was that would see to ensuring that the terms of the draft EPA accorded with Ms Marai's wishes, that she understood its contents and effect and that she had capacity to enter into the EPA. Nor is there any evidence of communications between Mr King and the Practitioner about who would see to those matters.
In those circumstances it was not, in our view, reasonable for the Practitioner to expect that Ms Jarvis would take all steps (including satisfying herself as to the consent and capacity of Ms Marai to the making of the EPA) in order to ensure that the EPA was properly executed so that it was valid for registration and/or use in the transaction merely because she was to be involved in applying for the replacement certificate of title and in other aspects of the transactions which were to take place relying on the authority conferred upon Mr Marai under the EPA.
On the facts before us, and particularly due to the fact that an unexecuted copy of the EPA was sent to Ms Jarvis electronically two days after it was sent to Mr King, there is no basis upon which the Practitioner could have had any reasonable belief about what Ms Jarvis would do on receipt of the document.
The Practitioner also says that he had no basis for thinking that the draft would be executed by someone other than Ms Marai and that his prior knowledge of Mr King had led him to repose full faith and trust in him.
We accept that there is no evidence that the Practitioner knew the document would be forged. However, that is not the entire point. He also did not know, because he took no steps to inquire and confirm, that Ms Marai had given the instructions for an EPA to be prepared, or had capacity to execute an enduring power of attorney, or that she wished to do so or if so, that the draft was in the terms she wanted.
In our view however, if the Practitioner did repose full faith and trust in Mr King, it might be relevant to how we characterise his conduct and might also reduce the sanction to be imposed.
However, the Practitioner's statement about his belief in Mr King was set out in his Statutory Declaration which he provided to the Applicant during its investigation.[42] It is an uncorroborated self‑serving statement about which he was not cross-examined given he elected not to give evidence in the proceeding. Accordingly, we give it no weight. The result therefore is that there is no evidence from which we could find that he reposed full faith and trust in Mr King.
[42] Exhibit 1.48(b).
The Applicant says that the Practitioner's statement that he reposed trust in Mr King is not true. As we mentioned above, to establish the correctness of that assertion the Applicant sought to tender various documents relevant to the Greenlight Transactions in which the two men had been involved, which, it submits, demonstrate that the Practitioner could not reasonably have put his faith and trust in Mr King.
The Practitioner objected to the tender of the documents relating to the Greenlight Transactions on the basis of relevance. Because the Tribunal is not bound by the rules of evidence[43] we allowed the documents to be admitted into evidence and said that we would deal with the questions of relevance and the weight which we would give to the documents in our decision.
[43] State Administrative Tribunal Act 2004 (WA) (SAT Act), s 32(2).
Before turning to those issues and to the findings we could draw from the Greenlight documents, we must record that no allegations of professional misconduct or unsatisfactory professional conduct are made by the Applicant about the Practitioner's conduct in the Greenlight Transactions. The only purpose to be served from the Tribunal's consideration of those documents is said to be to show that the Practitioner could not have regarded Mr King as trustworthy and honest.
We are satisfied and find that the disputed documents establish the following facts:
1.In 2016 and 2017 the Practitioner operated a trust account in the name of Hardies Lawyers Ltd at the National Australia Bank (Trust Account).[44]
[44] Exhibit 1.6; Exhibit 1.42 and Exhibit 1.43.
2.On 9 March 2015 the Practitioner registered a company, Greenlight Legal Pty Ltd (Greenlight Legal).[45] Greenlight Legal did not operate a law practice.
[45] Exhibit 3.
3.The Practitioner was at all relevant times the sole director of Greenlight Legal[46] and operated a bank account in the name of Greenlight Legal (Greenlight Account).[47] The Greenlight Account was not a trust account for the purposes of Part 9 of the LP Act.
[46] Exhibit 3.
[47] References to the Greenlight Legal Account can be seen in the receipt at Exhibit 1.5; a payment direction at Exhibit 1.33; in an email dated 7 April 2017 at Exhibit 1.8; Exhibit 1.31. The Practitioner also answered questions about withdrawing funds in cash from the Greenlight Account with respect to the 3rd Greenlight Transaction at Exhibit 1.48(b), paras [41]-[42].
Greenlight transaction No 1
4.In late 2016 and early 2017 the Practitioner held trust funds on behalf of a Mr Gonzalez which were related to a property transaction.[48]
[48] Exhibit 1.6, Exhibit 1.42, Exhibit 1.43.
5.Prior to 24 April 2017, the Practitioner had carried out instructions from Mr King on at least two separate occasions.
6.At that time Mr King was acting as agent for Mr Gonzalez in some respects.[49]
[49] Exhibit 1.5.
7.On 21 December 2016 Mr Gonzalez instructed the Practitioner to transfer $73,750 from his firms' trust account to the Greenlight Account.[50]
[50] Exhibit 1.3.
8.The Practitioner carried out that instruction.[51]
[51] Exhibit 1.6.
9.The sum of $73,750 was then withdrawn in cash from the Greenlight Account by the Practitioner and paid to Mr Gonzalez.
10.A bank cheque for $10,000 payable to LJ Hooker Thornlie Trust Account was drawn from the Trust Account.[52]
[52] Exhibit 1.2.
11.On 5 January 2017 Mr Gonzalez wrote to Mr King by email instructing him to cancel the cheque to LJ Hooker's trust account and instead to pay the money to the Greenlight Account.[53]
[53] Exhibit 1.4.
12.Mr King forwarded Mr Gonzalez's email to the Practitioner.[54]
[54] Exhibit 1.4.
13.On 6 January 2017 the Practitioner complied with Mr Gonzalez' instructions[55] and then withdrew $10,000 in cash from the Greenlight Account which he then gave to Mr King.[56]
[55] Exhibit 1.6.
[56] Exhibit 1.5.
Greenlight Transaction No 2
14.In early April 2017 the Practitioner held trust funds on behalf of Free Tucker Pty Ltd (Free Tucker).[57]
[57] Exhibit 1.7.
15.Free Tucker was a company of which a Mr Barnes was the sole director and company secretary.[58]
[58] Exhibit 1.50, page 2 of ASIC: Current & Historical Company Extract as at 23 July 2024.
16.On 7 April 2027, acting as the agent of Free Tucker Mr King directed the Practitioner to disburse $26,900 from the Trust Account to Free Tucker.[59]
[59] Exhibit 1.7.
17.The same day, Mr King wrote to the Practitioner by email[60] directing him to transfer these funds as follows:
[60] Exhibit 1.8.
(a)$1,900 to the Practitioner's firm; and
(b)$25,000 to Greenlight Legal.
18.The Practitioner complied with those instructions.[61]
[61] Exhibit 1.43.
19.Mr King, as agent for Free Tucker, then instructed the Practitioner to withdraw $25,000 in cash from the Greenlight Account and to pay it to him.[62]
[62] Exhibit 1.10.
20.The Practitioner complied with that instruction. Mr King signed an acknowledgement of receipt of the funds.[63]
[63] Exhibit 1.9 and 1.10.
Greenlight Transaction No 3
21.On 23 May 2017, after the EPA had been entered into, and the associated property transaction had taken place using the (forged) EPA, Mr King, as agent for Uncle 8 Pty Ltd (Uncle 8), provided the Practitioner with a signed direction in which he instructed the Practitioner how to disburse monies held in the Trust Account which related to that transaction.[64]
[64] Exhibit 1.32.
22.Uncle 8 was also a company of which Mr Barnes was the sole director and company secretary.[65]
[65] Exhibit 1.51, page 2 of ASIC: Current & Historical Company Extract as at 23 July 2024.
23.The instructions included that the Practitioner disburse the sum of $125,650 to Uncle 8.[66]
24.Mr King, as agent for Uncle 8, also provided a signed payment direction directing the Practitioner to pay the $125,650 to Greenlight Legal.[67]
25.The Practitioner transferred the $125,650 to the Greenlight Account from his Trust Account.[68]
26.On 24 May 2017 Mr King, as agent for Uncle 8, directed Greenlight Legal to pay him the sum of $60,000 in cash.[69]
27.The Practitioner arranged that payment from the Greenlight Account and Mr King acknowledged receipt of the funds.[70]
28.On 25 May 2017 Mr King, as agent for Uncle 8, directed Greenlight Legal to pay him the sum of $65,000 in cash[71]
29.On 25 May 2017, the Practitioner complied with that direction and paid the cash to Mr King from the Greenlight Account, who acknowledged receipt of the funds.[72]
The parties' submissions and our conclusions concerning the Greenlight Transactions
[66] Exhibit 1.32.
[67] Exhibit 1.33.
[68] Exhibit 1.42.
[69] Exhibit 1.36.
[70] Exhibit 1.36 and Exhibit 1.37.
[71] Exhibit 1.38.
[72] Exhibit 1.38 and Exhibit 1.39.
The Applicant submits that the facts of Greenlight Transactions No 1 and No 2 demonstrate that prior to the preparation of the EPA the Practitioner had, on two occasions, carried out instructions he had received from Mr King which were improper and which Mr King knew to be improper. That was because Greenlight Legal and the Greenlight Account had been used to circumvent the prohibition in s 217(1) of the LP Act of cash withdrawal of trust monies.
Accordingly, the Applicant submits, the Practitioner's statement that he regarded Mr King as honest and reposed faith and trust in him must be false.
The Applicant submits that Mr King would not have known about the Greenlight Account unless the Practitioner had informed him of its existence and offered it to him as a means of disbursing trust monies as cash.
Before we can draw that inference from the facts which we have found, we must find that that inference is more probable than the inference that he did not use the Greenlight Account as a conscious strategy to circumvent the prohibition in s 217(1) of the LP Act. As the High Court said in Bradshaw v McEwans (Bradshaw):[73]
Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstancial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough in the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture: (see per Lord Robson, Richard Evans & Co Ltd v Astley [1911] AC 674, at 687). But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as mere conjecture or surmise …
[73] Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, 5.
In Doney v R[74] Deane, Dawson, Toohey, Gaudron and McHugh JJ said that when dealing with a standard of proof less that the criminal standard, 'the existence of other reasonable hypotheses is simply a matter to be taken into account in determining whether the fact in issue should be inferred from the facts proved'.
[74] Doney v R [1990] HCA 51; (1990) 171 CLR 207, 211.
Where competing possibilities are of equal likelihood, or the choice between them cannot be resolved other than by conjecture, the allegation is not proved.[75]
[75] Per Lord Robson, Richard Evans & Co Ltd v Astley [1911] AC 674 at 687 cited in Bradshaw at page 5.
As Vaughan J (as he then was) said, in Westgyp Pty Ltd v Northline Ceilings Pty Ltd [76] referring to Bradshaw:
It suffices if the circumstances raise 'a more probable inference' in favour of what is alleged, ie the evidence gives rise to a reasonable and definite inference rather than conflicting inferences of equal degrees of probability.
[76] Westgyp Pty Ltd v Northline Ceilings Pty Ltd [2018] WASC 244, [57].
From the facts which we have found, we are unable to draw the conclusion advanced by the Applicant, even on the balance of probabilities. It is not the only reasonable inference open. It may have been that some other person informed Mr King of the existence of the Greenlight Account and the possibility that the Practitioner would disburse trust monies in cash via that Account. The evidence is that Mr Gonzalez was aware of the existence of the Greenlight Account. However, for the resolution of this matter it probably does not matter how Mr King came to know of these matters.
The Applicant then submits that because the Practitioner was aware that s 217(1) of the LP Act prohibited the disbursement of monies from Trust Accounts as cash, a fact he admitted in his answers to inquiries made by the Applicant in the course of its investigation,[77] and which we do accept, the use of the Greenlight Account to do so must have been a conscious strategy to circumvent that prohibition.
[77] Exhibit 1.48 and Exhibit 1.48(b), answers to questions 41 and 42.
As we have already identified, the Practitioner gave no evidence at the hearing and could not be cross-examined on the statements he made in his Statutory Declaration that he suggested funds could be disbursed in cash from the Greenlight Account because Mr King told him that Uncle 8 needed funds urgently to pay company expenses and that Uncle 8 did not have a bank account.[78]
[78] Exhibit 1.48(b), answer to question 41.
His answer, given in his Statutory Declaration, to the questions when and why he agreed to allow Greenlight Legal to be used as a vehicle for disbursing trust funds, was that he did so because he believed that the funds were held awaiting the direction of the borrower and that Mr King was agent for the borrower, and that the disbursement of the funds occurred on 23 May 2017.[79] In our view, those answers are largely non-responsive to the questions and unhelpful.
[79] Exhibit 1.48(b), answer to question 42.
The Practitioner could also not be cross-examined on statements that he made in his Statutory Declaration[80] that he did not do any due diligence on Mr King on behalf of any client, was unaware that Mr King was, at the time, an undischarged bankrupt, or of the findings that had been made against him in Commissioner for Consumer Protection and The King and I Pty Ltd;[81] and that he 'always believed him to be honest in his dealings with me'.
[80] Exhibit 1.48(b), answer to question 4.
[81] Commissioner for Consumer Protection and The King and I Pty Ltd [2016] WASAT 125.
We approach those self-serving statements with caution given that the Practitioner was unable to be cross-examined on them and we give them no weight. Accordingly, we have no evidence as to whether he did any due diligence on Mr King or 'always believed him to be honest'.[82]
[82] Exhibit 1.48(b), answer to question 4.
As we have noted, the Applicant says that the Greenlight Transactions show that the Practitioner could not have regarded Mr King as a trustworthy person at the time he drafted the EPA. We cannot draw that conclusion from the facts which we have found established in connection with the Greenlight Transactions.
Even giving no weight to his statement that he disbursed the funds in cash on 23 May 2017 because Mr King had told him that Uncle 8 urgently needed funds to pay company expenses and did not have a bank account, we would be merely speculating to say that Mr King knew that doing so on any occasion was wrong. We have no evidence from which we can draw that inference.
Accordingly, we cannot accept the Applicant's contention that we should find that the Practitioner could not have regarded Mr King as trustworthy at the time he prepared the EPA. We simply have no evidence from which we can make such a finding.
Returning to the characterisation of the conduct
The Applicant submits that the Practitioner's failure was of a most fundamental kind: a failure to appreciate who his client was in the preparation of the EPA.
The Applicant submits that a finding of professional misconduct is open where a solicitor fails to adequately assess the capacity of a donor or testator when they are on notice of capacity concerns[83] and the case should be no different if the solicitor never turns their mind to capacity because they fail to properly identify their client.
[83] Wells; Legal Profession Complaints Committee and Wells [2014] WASAT 112 (S); In the matter of the Legal Practitioners Act 1981 and Cleland (Unreported, Legal Practitioners' Disciplinary Tribunal (SA), 3 June 2020) at 31 - 36 as affirmed in Legal Profession Conduct Commissioner v Cleland [2021] SASCA 10.
The Applicant submits that Ground 1 cannot be characterised as anything other than:
1.gross negligence;
2.conduct which is substantially below the standard of competence and diligence expected of an Australian legal practitioner; and
3.conduct which would not be engaged in by a person who is fit and proper to engage in legal practice.
The Applicant also submits that the conduct should also be characterised as professional misconduct on the basis that it is disgraceful and dishonourable and therefore meets the first limb of the Kyle test of professional misconduct because:
1.the request to prepare the EPA did not come from anyone with a modicum of legitimacy (for example a son or daughter of Ms Marai);
2.there was no indication as to why Mr King was involved in requesting that an EPA be prepared with Ms Marai as the donor;
3.there was no evidence of Mr King having any authority to issue instructions for the preparation of an EPA on Ms Marai's behalf;
4.none of Ms Marai's contact details were provided by Mr King to the Practitioner; and
5.Mr King had informed the Practitioner that Ms Marai was the executor of the deceased estate and yet provided no explanation as to why Ms Marai could not execute the survivorship and lost title applications herself instead of needing the donee to do so under the authority to be conferred by the EPA.
The Practitioner made no submissions as to how the conduct should be characterised if we were to find that he did have a professional obligation to take instructions from and ensure that Ms Marai had capacity to give instructions in relation to the EPA.
In our view, the conduct undoubtedly meets the test of unsatisfactory professional conduct in s 402 of the LP Act in that it is conduct of an Australian legal practitioner which occurred in connection with the practice of law which in our view fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.
In addition, we find that it meets the definition of professional misconduct in s 403(1)(a) of the LP Act, in that it is conduct which fell substantially below the reasonable standard of competence and diligence expected of an Australian legal practitioner. Knowing who your client is and to whom you owe professional obligations, and the nature of those obligations, in any matter in which you are instructed is an essential part of legal practice. That is even more so when dealing with such a significant document as an EPA. The Practitioner's failure to consider these issues when he prepared the EPA in this case was conduct falling substantially below that expected of a competent legal practitioner.
However, we do not find, on the evidence before us, that it amounted to conduct which would justify a finding that the Practitioner is not a fit and proper person to engage in legal practice or which would be regarded as disgraceful or dishonourable to practitioners of good repute and competence, and/or which fell short, to a substantial degree, of the standard observed or approved by members of the profession of good repute and competence.
We have reached that view because, although there were red flags which should have raised concerns in the Practitioner's mind, we have no evidence before us which would lead us to find that the Practitioner had any knowledge that the EPA which he prepared would be fraudulently executed and used against Ms Marai's interests. Nor can we be satisfied to the requisite standard that the Practitioner's knowledge of Mr King was such that he was recklessly indifferent to that possibility in circumstances where there we have not found that he had prior knowledge of any dishonesty on the part of Mr King.
Ground 2
The allegation
By Ground 2 the Applicant alleges that between 5 to 10 May 2017, the Practitioner engaged in professional misconduct within the meaning of s 403(1)(a) and s 438 of the LP Act by drafting and facilitating the execution of a loan agreement and mortgage in circumstances where:
(a)The Practitioner was in a position of conflict, in that:
i.the Practitioner drafted and facilitated the execution of the loan agreement and mortgage on instructions from the lender (or agents of the lender);
ii.the donor was the mortgagor and a guarantor to the loan agreement;
iii.the loan agreement and mortgage relied upon the EPA to bind the donor;
iv.the Practitioner owed duties to the donor, as his client, having prepared the EPA for her benefit (notwithstanding that the instructions came from a third party);
(b)due to the conflict, the Practitioner was unable to advise, and did not, in fact, advise, the donor (via her attorney or at all) in respect of the loan agreement and mortgage (including as to the lack of commercial benefit to the donor);
(c)the Practitioner knew or ought to have known he was in a position of conflict; and
(d)the Practitioner did not obtain, or take any steps to obtain, the donor's consent as to him continuing to act in the conflicted position referred to in (a) above.
The facts
The facts which we have found in relation to Ground 1 are also relevant to Ground 2.
Additionally, we are satisfied of and make the findings of facts at [148] ‑ [156] below which are relevant to Ground 2.
On 3 May 2017, just four days after the Practitioner had completed the work on the EPA, he received an email from a mortgage broker, Mr Eonnis (John) Eoannidis.[84] By that email the Practitioner was instructed to prepare a loan agreement and mortgage in which:
1.the loan was to be for the sum of $400,000;
2.the loan was to be secured by a first mortgage over 29 [address];
3.the lender was Bill Sheehy;
4.the borrower was Uncle 8;
5.the guarantors were Bradley Barnes and Mr Marai.
[84] Exhibit 1.17.
Uncle 8 was a company controlled by Mr Barnes, who, as we have stated above was the company's sole director and secretary.[85]
[85] ASIC: Current & Historical Company Extract as at 23 July 2023 in Exhibit 1.51. See also Exhibit 1.50.
Although the email did not specify for whom the Practitioner was acting, in his Amended Response he accepts that he was acting for Mr Sheehy[86] and we so find.
[86] Amended Response, para 14.
In his Statutory Declaration the Practitioner attests that on 5 May 2017 the Practitioner received a phone call from Mr Eoannidis and that as a result of that call, he became aware that, among other things:
1.Mr King was acting as agent for Uncle 8 in the transaction;[87]
2.Mr Marai would sign the loan agreement and mortgage as enduring attorney for Ms Marai, who was the owner of the property which was to be security for the loan;[88] and
3.the property which was to be security for the loan was in fact 20 [address] rather than 29 [address], being the Property owned by Ms Marai.[89]
[87] Exhibit 1.48(b), Statutory Declaration, answer to question 27.
[88] Exhibit 1.48(b), Statutory Declaration, answer to question 28.
[89] Exhibit 1.48(b), Statutory Declaration, answer to question 23.
We accept that evidence and we so find.
The Practitioner prepared a loan agreement and mortgage in accordance with the instructions given by Mr Eoannidis.[90]
[90] SOFAC, para [15] and Amended Response, para [12].
Mr Sheehy executed the loan agreement at the Practitioner's office on 8 May 2017.[91]
[91] SOFAC, para [18] and Amended Response, para [15]; Exhibit 1.48(b), answer to question 29.
Mr Marai executed the loan agreement and mortgage at the Practitioner's office on 10 May 2017.[92] He did so as Ms Marai's attorney relying on the EPA which had not been validly executed by her.[93]
[92] SOFAC, para [19] and Amended Response, para [16].
[93] SOFAC, para [20.1] and Amended Response, para [17], but [90] is about the loan agent.
The Practitioner lodged the mortgage with Landgate on 23 May 2017.[94]
Did the Practitioner owe any professional obligations to Ms Marai at the time he acted for Mr Sheehy in relation to the loan agreement and mortgage?
[94] See mortgage in Exhibit 1.34.
The Applicant submits that the duty which the Practitioner owed to Ms Marai as his client in connection with the preparation of the EPA was not extinguished by the signing of the EPA or the lodging of the EPA with Landgate and instead submits that they remained extant until they were discharged by him.
Accordingly, the Applicant submits that once the Practitioner knew, or ought to have known, that the EPA which he had prepared was to be relied upon in a transaction which was of no commercial benefit to Ms Marai, the importance of discharging the duty should have been heightened in his mind.
It submits that in those circumstances:
1.there was a clear conflict between the Practitioner's undischarged duty to Ms Marai; and
2.his duties to Mr Sheehy in connection with the loan agreement and mortgage.
The Applicant submits that until such time as the Practitioner had discharged his obligations to Ms Marai, he was unable to act in respect of any transaction in which the EPA was to be used to impose a burden upon her.
The Practitioner submits that he never had a duty to Ms Marai because she was not his client and, therefore, he was not in a position of conflict when he acted for Mr Sheehy in the loan and mortgage transaction.
Given we find that the Practitioner did have an obligation to Ms Marai, who was his client in the preparation of the EPA, we also find that his acting for Mr Sheehy was, at the time, a conflict with his obligations to Ms Marai which he had not, at that time, discharged.
He should not have acted for Mr Sheehy, who was relying on the execution of contractual documents by the donee of the EPA, until such time as he had taken the necessary steps to ensure that Ms Marai had had the capacity to enter into the EPA and that doing so was in accordance with her wishes. If he had done so it would almost certainly have brought the fraud to light.
Characterisation of the Practitioner's conduct
The Applicant does not contend that the Practitioner's conduct, in failing to appreciate the conflict, amounts to professional misconduct of a kind that would render him not to be a fit and proper person to practise law, or which would be regarded by practitioners of good repute and competence to be disgraceful and dishonourable (that is either the Kyle test or the test in s 403(b) of the LP Act).
The Applicant submits, however, that:
1.the fact that the two sets of instructions were given only four days apart;
2.Ms Marai was a potentially vulnerable person, as indicated by reliance upon the EPA;
3.the fact that there was obviously no commercial benefit to Ms Marai from the loan agreement;
4.the severity of the consequences for Ms Marai and the lender if the EPA were found to be invalid; and
5.the fact that the Practitioner knew that under the principles of agency, the Practitioner's knowledge of the potential vitiating factors affecting the EPA could potentially be imputed to the lender,
meant that his conduct, in acting while having the conflict, made his conduct particularly serious and therefore was conduct amounting to professional misconduct under s 403(1)(a) rather than merely unsatisfactory professional conduct.
We find that the conduct of the Practitioner amounts to professional misconduct as defined in s 403(1)(a) of the LP Act in that it constituted a substantial failure to reach a reasonable standard of competence and diligence expected of an Australian legal practitioner. Being able to identify conflicts is an essential requirement of legal practice. The public is entitled to expect that competent and diligent legal practitioners will identify conflicts that arise in their practise of law and take steps to ensure that they do not act where such conflicts arise. That the Practitioner did not turn his mind to the issue was a significant failure on his part to meet the reasonable standards expected of a competent and diligent legal practitioner.
We do not consider that any evidence of what would be expected of a competent and diligent legal practitioner is required to reach that conclusion. It was a basic failure which flows directly from the Practitioner's first failure to recognise that Ms Marai was his client in respect of the EPA he prepared.
Orders
We make the following orders:
1.The parties are to confer and provide to the Tribunal by 16 June 2025 a minute of agreed proposed orders:
(a)to be made as a consequence of the findings which we have reached in these reasons; and
(b)programming the matter for the provision of evidence to be relied upon and submissions which are to be made in relation to the issues of the penalty which is to be imposed as a consequence of the findings of professional misconduct and as to costs.
2.If the parties are unable to reach agreement as to those matters, each party is to provide a minute of proposed orders addressing the issues referred to in order 1 by 16 June 2025.
It is of course open to the parties to seek to reach agreement in relation to the issue of penalty and to provide the Tribunal with a minute of proposed consent orders as to penalty and costs and any materials on which they rely in support of that agreement, which the Tribunal might then consider on the papers pursuant to s 60(2) of the SAT Act.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
JD
Associate to the Hon Justice Glancy
9 JUNE 2025
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