Legal Services Commissioner v Ball

[2001] NSWADT 86

CITATION:	Legal Services Commissioner v Ball [2001] NSWADT 86
DIVISION:	Legal Services Division
PARTIES:	APPLICANT Legal Services Commissioner RESPONDENT Michael Lee Ball
FILE NUMBER:	9813
HEARING DATES:	10/12/1999 , 27/07/2000, 01/09/2000
SUBMISSIONS CLOSED:	09/15/2000
DATE OF DECISION:	05/29/2001
BEFORE:	Toomey B QC - Judicial Member at 1; Pheils J - Judicial Member at 1; Sartore G - Member at 1
APPLICATION:	Dismissal of information - frivolous, vexatious, misconceived or lacking in substance
MATTER FOR DECISION:	Preliminary matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Crimes Act 1900 Legal Profession Act 1987
CASES CITED:	Nagasinghe v Worthington (1994) 53FCR 175 Ebber v Human Rights & Equal Opportunity Commission (1995) 129 ALR 455 GVR v Department of Health, Housing & Community Services (23 August 1993) State Electricity Commissioner v Rabel (1998) 1 VR 102 Walsh v Law Society (NSW) [1999] 198 CLR 73 Kerridge v Simmonds [1906] 4 CLR 253
REPRESENTATION:	APPLICANT W Haylen QC RESPONDENT J Sackar QC
ORDERS:	1 Application for summary dismissal granted; 2 Liberty to apply on 7 days notice including the right to the applicant legal practitioner to seek costs under s 171E of the Act

INTRODUCTION

1 Mr Michael Lee Ball (“Ball”) is a solicitor and partner in the firm of Allen Allen & Hemsley (“AAH”). He was responsible for giving instructions on behalf of the firm in attempts to settle long standing litigation between Tectran Corporation Pty Ltd (“Tectran”) and AAH, and Mr Leszek Rajski (“Rajski”) and Raybos Australia Pty Limited (“Raybos”), the circumstances of which will be fully described later in this judgment.

2 On 4 May 1998 the Legal Services Commissioner filed an Information in the Legal Services Tribunal against Ball containing five grounds of complaint of unsatisfactory professional conduct or professional misconduct. Particulars of those complaints were sought and when the answers were deemed by Ball to be unsatisfactory application was made to the Tribunal which on 13 August 1998 ordered further particulars to be provided by the Commissioner. Dispute arose between the parties about the particulars provided in purported satisfaction of that order, and on 29 June 1999 the Tribunal made a further order for the Commissioner to provide the particulars sought by Ball. Those particulars were ultimately provided on 30 July 1999.

3 After consideration of the particulars provided Ball moved the Tribunal for an order that the information should be dismissed on the grounds that “it is frivolous, vexatious, otherwise misconceived or lacking in substance pursuant to s.73(5)(h) of the Administrative Decisions Tribunal Act 1997”. It is that application, in effect for summary dismissal of the proceedings, which is the subject of this judgment.

BACKGROUND FACTS

4 It is impossible to understand these proceedings without knowledge of the web of civil claim and counterclaim, charges of contempt and of crime which have enmeshed what can compendiously be called the Rajski interests, the AAH interests and the Tectran interests since 1979. A brief summary of the relationships between the parties follows: -

(i) In 1979 Rajski and Raybos – a company effectively owned by him – entered into negotiations with Tectran and associated companies concerning a possible joint venture to develop and market computer software known as Raybol, a product developed by Rajski, and on 15 February 1980 an agreement was entered into between the two interests for the development and marketing of the product. AAH were Tectran’s solicitors.

(ii) Later in 1980 Tectran began proceedings in the Supreme Court of New South Wales claiming damages from the Rajski interests for alleged deficiencies in the product and alleged misrepresentations; the Rajski interests cross-claimed for moneys claimed to be due pursuant to the original agreement.

(iii) In 1985 the Rajski interests took action against the Tectran interests and AAH alleging conspiracy and abuse of process in that the 1980 proceedings were commenced by Tectran and its solicitors for an improper purpose and knowing that there was no proper foundation for the proceedings.

(iv) An application by the Tectran interests and AAH to strike out the Statement of Claim failed, Miles J holding that a prima facie case existed. AAH thereafter obtained independent representation and Tectran retained Blake Dawson Waldron (“Blakes”) to act for its interests.

(v) In 1986 the Rajski interests began proceedings against Blakes alleging conduct by that firm in direct continuance of the conspiracy alleged against Tectran and AAH in the 1985 proceedings but occurring since those proceedings had begun.

(vi) The three civil actions described above have been referred to as “the main civil proceedings between the parties”. There have however been many other proceedings directly or indirectly involving the parties including numerous applications by the Rajski interests for judges to disqualify themselves on the ground of apprehended bias or alternatively for decisions of judges to be set aside on the basis of failure to disqualify themselves for apprehended or actual bias. There have been defamation proceedings between Rajski and a partner in Blakes and at least seven attempts by the Rajski interests to have lawyers and others associated with the Tectran interests dealt with for alleged contempt of court.

(vii) In 1988 charges of perjury were laid by the police against one Yerushalmy and one Cowper, officers in Tectran, based on allegedly false evidence given by them before Justice Yeldham in the Supreme Court in 1981 during an interlocutory hearing relating to the first civil proceedings. On application by the defendants to those charges the hearing of the committal proceedings was adjourned until after the determination of the civil proceedings which have been compendiously referred to above. The perjury proceedings have continued to be adjourned from time to time and have still not been heard twenty years after the impugned evidence was given.

(viii) As well as the various proceedings specified or generally described above there have been myriad interlocutory proceedings in the various matters over the years. We think it not unfair to say that Rajski has devoted himself almost obsessively to what he perceives as the vindication of his rights.

(ix) The civil proceedings have not been brought on for hearing to this date and no evidence was placed before the Tribunal which suggested that that might happen at any particular time or indeed at all.

(x) In August 1994 AAH reached agreement with Lawcover that the latter would indemnify AAH to a limited extent in respect of the proceedings. At some time which is not precisely revealed by the material before the Tribunal but probably in early 1993 discussions had begun between AAH, Blakes and Tectran on the one side and the Rajski interests on the other with the intention of settling at least all the civil proceedings. In those negotiations AAH were represented by Mr David Hill, of Minter Ellison Morris Fletcher, solicitors (“Hill” and “Minters” respectively), and the partner who had the conduct of the matter and who gave instructions to Hill on behalf of AAH was the present respondent, Mr Michael Lee Ball (“Ball”).

(xi) The first draft Deed of Settlement appears to have been prepared in September 1994. The terms of that Deed are not before the Tribunal, but a Deed bearing a heading “Draft 2 29.9.94” contains what has been treated as the basis of continuing negotiations between the parties. Clause 2 of the draft provided for the termination of all civil proceedings among all the parties to the Deed and is not controversial. Clause 3 provided for the parties to join in seeking orders from the Court of Appeal for dismissal of all contempt proceedings before that Court, and no issue has arisen about that Clause. Clause 4 was in the following form:-

“Raybos and Rajski shall join in representations to the Attorney General, the Director of Public Prosecutions and/or the Commissioner of Police to have them withdraw or not pursue further the criminal proceedings and agree not to bring further criminal charges against any person in any way arising out of the product or agreement or any of the Schedule 3 proceedings.” – (“Schedule 3 proceedings” are all the proceedings among and concerning the parties, civil, criminal and for contempt of court).

Clause 5 of the Deed provided that the settlement should be given effect to “upon the termination, in accordance with Clauses 2-4 inclusive above, of all of the Schedule 3 proceedings …”.
(xii) Upon receipt of this draft Mr John Basten QC (“Basten”) who represented the Rajski interests in the negotiations wrote to Hill on 14 October 1994 raising one objection to the machinery suggested for the settlement and several substantive objections to the proposal relating to the attempted termination of the criminal proceedings. Two objections were that it was not appropriate that the payment of money to his clients under the settlement be conditioned upon termination of criminal proceedings and that it was inappropriate “to accept such a payment conditioned upon seeking to have criminal proceedings terminated” (sic). In respect to the representations to be joined in by his clients under Clause 4 Basten said:

“Whilst my clients would not oppose or take any steps to hinder the presentation and consideration of such representations, they could not in all honesty join in them. However, in so far as the representations to be made are simply based upon the settlement of the disputes between the parties in the civil proceedings, my clients would of course be happy to confirm that such an agreement has been reached.”

(xiii) On or about 1 December 1994 a further draft of the Deed was presented to Basten on behalf of the AAH and Tectran interests. The new draft omitted the old Clause 4 (see paragraph (xi) above) and in its place substituted the following:-

“[The criminal proceedings]”.

5 Clause 5 provides for the settlement to be effected “upon determination, in accordance with Clauses 2 and 3, of the 1980 proceedings, all of the other civil proceedings and the contempt proceedings …”. It would thus appear that the AAH and Tectran interests had abandoned their precondition for settlement that the criminal proceedings as well as the other proceedings should have been terminated.

6 However, the recitals to the draft included references to the criminal proceedings which were set out in Part D of Schedule 3 of the draft after the 1980 proceedings, the civil proceedings and the contempt proceedings in Parts A, B and C of Schedule 3. The recitals included the following:

“G. The parties have agreed to settle the claims made in, and resolve, the proceedings referred to in Schedule 3 (all of which proceedings are together referred to as ‘the Schedule 3 proceedings’) and all differences and disputes between them arising out of or in anyway connected with the product, the agreement and the Schedule 3 proceedings. That settlement and resolution is without admission of liability by any party.

H. It is the intention of all parties to this Deed that the settlement recorded in this Deed is to be a complete and comprehensive settlement of all disputes and allegations between the parties hereto and that following settlement, and except as may be expressly provided for herein, there will be no further public airing by any person in any forum or by any means of any such disputes and allegations.”

7 It appears from what follows that Basten must have read the draft as perpetuating the termination of the criminal proceedings as a condition for payment of the settlement moneys. The Tribunal is of the view that such a reading is unsustainable.

(xiv) On 7 December 1994 Basten wrote to Hill a letter which set out detailed concerns Basten had with the 1 December 1994 draft. It included the following paragraph:

“Criminal Proceedings

I refer to my previous letters of 14 October, 7 November and 22 November 1994. I confirm my advice in conference that I do not think it possible to make a payment of a sum of money under the settlement contingent upon termination of the criminal proceedings.”

8 As we have said, this suggests that Basten was of the view that the requirement for termination of the criminal proceedings before payment of the settlement moneys was still to be found in the draft Settlement Deed of 1 December 1994. With his letter of 7 December 1994 Basten annexed his own draft Deed which incorporated changes made to the draft provided to him and, of course, omitted any reference to termination of the criminal proceedings. On 9 December 1994 Hill replied to Basten’s letter of 7 December, answering in detail the objections and suggested changes raised by Basten in his letter. Point 9 of Hill’s letter said:

“Some arrangement needs to be made and included in the Deed in relation to the criminal proceedings even if payment is not made contingent upon such termination. This needs to be discussed. Craig [Craig Murray – “Murray” – the Blakes solicitor acting for Tectran] should produce for consideration the clauses he suggests in relation to the criminal and contempt proceedings.”

9 It is not clear what Hill meant by the words “such termination”. In Point 8 he had referred to “termination of the proceedings … by verdict in favour of the defendants in each case”. No like termination of the criminal proceedings could ever have happened. Putting that aside, it became apparent from Hill’s letter that despite the lack of inclusion of the clause relating to termination of the criminal proceedings in the 1 December 1994 draft the AAH and Tectran interests were still propounding it to some limited and undefined extent.

(xiv) While these negotiations had been going on and in anticipation of a completed agreement AAH had informed Lawcover on 16 September 1994 of the terms of the agreement in principle and of the amount which would have to be contributed by each of AAH and Lawcover towards the total settlement sum. Without going into detail it can then be said that on 22 November 1994 Lawcover provided the underwriters’ cheque for its agreed part of the settlement sum to AAH, AAH added its share of the settlement to the moneys received from Lawcover and provided those combined funds to Blakes on 12 December 1994. Blakes added to those funds the contribution to be made to the settlement by the Tectran interests and on the same day – 12 December 1994 – paid the total moneys into an interest bearing controlled moneys account with BankWest. On 20 October 1995 those funds were transferred to a Commonwealth Bank account on more or less the same terms. On 31 October 1996, after all hope of settlement had been lost, the funds together with interest were repaid to the AAH interests and the Tectran interests. It is important to note that understanding had been reached among all the parties that if settlement had been reached the amount to be paid to the Rajski interests would have been not only the settlement amount but all the interest accrued between the date of initial deposit of the funds on 12 December 1994 and whatever was the date of final payment of the settlement moneys.

(xv) In the meantime settlement negotiations dragged on. On 2 May 1995 in a memo to Rajski Basten summarised the progress of the matter to that date and noted that agreement had not been reached in part because of the clause conditioning payment on determination of the criminal proceedings and in part “because of a significant variation required by the Tectran/Allens parties, being a departure from the express term of the in-principle agreement of 16 September 1994.” It is not easy to isolate the issues at this remove – although no doubt they were crystal clear to the parties at the time – but it seems that Basten was referring to a term concerning software of which he had complained in his letter to Hill of 7 December 1994. In any event, it became apparent that so far as Basten was concerned the reasons for failure to reach final agreement lay with disputes between the Rajski interests and the Tectran interests, not involving AAH. Accordingly, on 14 July 1995 Basten wrote to Hill a letter containing the following passage:-

“Further, there have been now some two years of mediation and negotiations. The vast bulk of this time has been devoted to solving issues relevant to Tectran or Blake Dawson Waldron interests, and having no direct concern for Allens. Further, it is understood that of the [settlement moneys] placed on deposit following the in-principle agreement in September 1994, the bulk comes from Lawcover or Lawcover and Allens partners. On that assumption, my instructions are to seek a separate settlement with Allens for that amount. Obviously, my clients would need to be satisfied by documentary material as to the amount deposited from those sources.”
10 The fact is that the understanding referred to by Basten was wrong. Substantially more had been deposited towards the settlement moneys by the Tectran interests than had been by the AAH interests including Lawcover.

(xvi) Not surprisingly, AAH appear to have taken no steps to correct Basten’s misapprehension as to the relative size of the contributions made to the settlement moneys. Nothing seems to have come from another suggestion Basten had made in his letter of 14 July 1995 – “… if there are any issues concerning the basis on which Lawcover moneys were paid on behalf of Allens, or the amount thereof, we would ask for a representative of Lawcover to attend any future meetings.” It can only be said that there is no evidence that any Lawcover representative did attend any future meetings. Basten’s letter concluded:

“We do not intend that a copy of this letter be provided to the other parties. If you feel that the letter or its contents should be revealed to them, could you please advise me prior to taking that step.”
11 There is nothing in the material before the Tribunal which suggests one way or the other whether the letter was given to the Tectran interests and whether Basten was informed before that was done, if it was done.

(xvii) Nothing seems to have arisen out of Basten’s suggested attempt to resolve the matter between the AAH interests and Rajski interests alone although it was renewed on 5 October 1995 in another Basten letter to Hill, and overall settlement attempts continued at least until the moneys which had been deposited on 12 December 1994 were withdrawn and repaid to the Tectran interests and the AAH interests on 31 October 1996. It was then more than two years since agreement in principle had been arrived at on 16 September 1994. A substantial and unavoidable part of the delay between mid-1995 and late 1996 was occasioned by the unavailability of Rajski by reason of sickness. It appears from the documents before the Tribunal that when the settlement moneys were withdrawn on 31 October 1996 a further settlement meeting among the parties was planned for 22 November 1996, but there is no evidence of what happened on that date. That it failed, however, is certain. It also seems certain that failure of the settlement negotiations had been anticipated before August 1996, since part of the material before the Tribunal is a memorandum from Basten to Rajski dated 17 December 1996 referring to a conference between Basten and Detective Senior Sergeant Eric Grimmond of the Fraud Enforcement Agency on 29 August 1996. Basten’s memorandum refers to Sergeant Grimmond showing him a copy of a statement taken from Rajski and a copy of Basten’s memorandum of 2 May 1995 to Rajski, from which it seems to us it must be inferred that the Police had been approached by Rajski. Basten’s memorandum continues:

“Sergeant Grimmond asked me to read paragraphs 30-33 and 35 of the statement, which included conversations at meetings with Mr David Hill and Mr Craig Murray on 1 and 3 March 1995 and with Messrs Hill and Murray and Mr Michael Ball on 10 April 1995. I read each paragraph of the statement and confirmed to Sergeant Grimmond that the discussions which occurred on those dates were substantially to the effect of the words in the statement, according to my recollection and my notes.”
12 There is nothing before the Tribunal to suggest that the AAH and the Tectran interests were informed of the approach to the Police authorities. In circumstances where professional probity is brought into question by Rajski with the support of Basten we feel we must make the comment that the approach to the Police on the one hand while purporting to continue to negotiate on the other does not demonstrate good faith.

(xviii) On 20 January 1997 a solicitor from Lawcover wrote to Ball to confirm “my oral advice that officers of the Fraud Enforcement Agency of the New South Wales Police Service attended at these offices during the afternoon of 17 January 1997 to execute a search warrant, a copy of which I enclose for your records.” Effectively, the search warrant was directed to documents, files, computer records and the like relating to payments made by Lawcover to AAH in respect of the litigation between AAH and Tectran and Rajski and Raybos. Again, there is no evidence before the Tribunal of what arose out of the warrant, although the letter from Lawcover stated that a claim for legal professional privilege had been made. On 20 February 1997 Rajski complained to the Legal Services Commissioner about the matters which are the subject of the present information.

THE DEALINGS WITH THE LAWCOVER FUNDS
13 The first three grounds of complaint are as follows:-

a. That the legal practitioner, on behalf of AAH, sought and obtained the Lawcover settlement funds, under the terms of AAH’s insurance cover with Lawcover, for the purpose of payment to Raybos and Rajski in respect of the settlement of the claim by Raybos and Rajski against AAH (the 1985P) by deception, in that the legal practitioner did not disclose to Lawcover, at any time, that payment of the Lawcover settlement funds to Raybos and Rajski was contingent upon termination of the criminal proceedings.

b. That the legal practitioner, on behalf of AAH, retained for two years the Lawcover settlement funds obtained under the terms of AAH’s insurance cover with Lawcover for the purpose of payment to Raybos and Rajski in respect of the settlement of the claim by Raybos and Rajski against AAH (the 1985P) by deception, and that the legal practitioner did not disclose to Lawcover, at any time, that payment of the Lawcover settlement funds to Raybos and Rajski was contingent upon termination of the criminal proceedings.

c. That the legal practitioner, on behalf of AAH, sought and obtained the Lawcover settlement funds under the terms of AAH’s insurance cover with Lawcover on terms requiring it (AAH) to pay the Lawcover settlement funds to Raybos and Rajski in respect of the settlement of the claim by Raybos and Rajski against AAH (the 1985P), whereby the legal practitioner misappropriated the Lawcover settlement funds by using those funds in breach of the terms of upon which the moneys were received.

14 It will be seen that the first two complaints allege the obtaining of funds by deception and the retention of those funds by deception and the third complaint alleges the misappropriation of the funds once they had been obtained by deception. They are extremely serious charges and on the face of it the deception charges would fall within s.178BA of the Crimes Act 1900 (as amended) and the misappropriation charge would fall within s.178A of that Act. Indeed in his letter to Ball of 21 February 1997 informing him of Rajski’s complaints the Commissioner said it was alleged that Ball’s action “constituted a criminal offence under S178A of the Crimes Act…”. They are the most serious charges that can be laid against a solicitor in the course of his practice, since they allege criminal breach of trust, and they were in this case laid by a public official whose duty it must be to ensure that no such charges, with the possibly catastrophic consequences which might ensue to a practitioner, are laid without proper basis. In our judgment the Legal Services Commissioner had no basis for bringing these charges, nor for persisting in them as it became more and more clear that they were without foundation.

15 In a summary of the case of the Legal Services Commissioner provided to the Tribunal on 13 September 2000 Mr Haylen QC summarised the Commissioner’s complaint on grounds 1-3 as follows:-

“6. In each ground the essential complaint is that the practitioner was not open and honest with Lawcover. The practitioner did not indicate to Lawcover that an important, indeed essential, purpose was to settle the separate criminal proceedings; further the practitioner failed to inform Lawcover that the major sticking point in settlement was the contingent term yet was asked and otherwise informed Lawcover what were other sticking points preventing settlement. The conduct involved misappropriation in the sense that the funds were appropriated for the purpose of settling Rajski’s civil claims yet a substantial purpose was to have withdrawn or terminated separate criminal proceedings when this was not a purpose for which the funds were appropriated.

7. The ethical duty to act honestly required the practitioner to inform the professional indemnity insurer, Lawcover, in obtaining and retaining the funds for settlement of the civil litigation, that the funds were being used for the settlement of separate criminal proceedings (which were not covered by the Lawcover Indemnity) and in circumstances where the civil litigation would not be settled until the separate criminal proceedings had been withdrawn or terminated.

8. The gravamen of the allegations in grounds 1 and 2 is that the legal practitioner engaged in deceptive conduct; as in other areas of the law it is not necessary to show that anybody was in fact deceived or misled. The act of deception alone is sufficient.

9. In relation to ground 3, the terms upon which the practitioner received the Lawcover settlement funds were that the funds were to be used for the purposes of settling the civil claim – no other legal proceedings including the separate criminal proceedings were ever mentioned to Lawcover …”

16 In the opinion of the Tribunal the passage just quoted includes a number of insupportable propositions which are crucial to the Legal Services Commissioner’s defence of the information. The first proposition is that:

“The practitioner did not indicate to Lawcover that an important, indeed essential, purpose was to settle the separate criminal proceedings … “.

17 The first objection to this statement is that it grossly misstates what was intended to be done about the criminal proceedings – that is, by legitimate means to attempt to persuade the DPP not to proceed. The second objection is that it is no more true to say that the money was sought from Lawcover “to settle the separate criminal proceedings” than it would be true to say that a person borrowing money to buy a property subject to easements who had the intention of stipulating that the easements be removed as a condition of the purchase is “borrowing the money for the purpose of removing the easements”.

18 The next proposition which the Tribunal thinks cannot be supported is that:-

“The conduct involved misappropriation in the sense that the funds were appropriated for the purposes of settling Rajski’s civil claims yet a substantial purpose was to have withdrawn or terminated separate criminal proceedings when this was not a purpose for the which the funds were appropriated.”

19 Again, it seems clear to the Tribunal that the Commissioner has confused a condition upon which payments will be made with the purpose for which the payments will be made. It is also to be remembered that the perjury charges did not affect the AAH interests, and as appears from all the material before the Tribunal the Tectran interests were those insisting upon the inclusion of the termination of the criminal proceedings as a precondition for payment of the settlement moneys. At the most, AAH acquiesced in the inclusion of the term. The AAH interests were caught in that situation whether they liked it or not, since the only practical approach to settlement of the web of litigation which had ensnared AAH and Tectran was to reach an overall settlement involving every party. After all, the allegations against AAH and Tectran in the 1985 proceedings were that they had conspired together to commence proceedings for an improper purpose; had AAH settled separately they must still, from the very nature of allegations of conspiracy, have been targets in any continuing proceedings between the Rajski interests and Tectran. Although the parties are entitled to have the amount of the proposed settlement kept confidential it needs to be said that the amount to be contributed by the AAH interest was less than 40% of the total, and half of the AAH contribution was provided by Lawcover. It is clear that the Tectran funds came from private sources and the material before the Tribunal, inferences from that material and commonsense all suggest that the Tectran interests would have had the final say on terms of settlement.

20 The further statement that:

“The ethical duty to act honestly required the practitioner to inform the professional indemnity insurer, Lawcover, in obtaining and retaining of funds for settlement of the civil litigation, that the funds were being used for the settlement of separate criminal proceedings”,

suffers from the flaws pointed out above, particularly that the funds were never being used for the settlement of criminal proceedings. But the most fundamental objection to the last proposition and that contained in the paragraph beginning. “The gravamen of the allegations …”, is that it ignores the nature of the relationship between the underwriter and AAH. As appears from annexures SAM 17 to SAM 37 to the affidavit of the Legal Services Commissioner sworn 1 May 1998, the underwriters to the AAH professional indemnity policy took the view that Rajski’s claim against AAH involved allegations of dishonesty or fraud, and cover for dishonesty or fraud was excluded from the policy. On 25 June 1993 Mr I S Bowden, solicitor for the underwriters, wrote to AAH a letter including the following:

“As you have always recognised, the firm’s entitlement to indemnity under the policy can only arise if the claim fails. A settlement with the plaintiff for any substantial sum could be seen as an indication of some liability on the firm’s part. Put shortly, an early resolution will leave the question of entitlement open.

Nevertheless, underwriters recognise the commercial sense of an early resolution. While it is not appropriate for me to take part in the mediation itself, you should keep me informed of progress so that I may seek instructions from underwriters as to whether they consider it appropriate to contribute to a commercial settlement.”

21 Negotiations continued between AAH and the underwriters for more than a year after that letter before on 29 August 1994 Mr Bowden wrote to AAH informing them that

“underwriters have instructed me that they are prepared to contribute to a settlement on the following basis:

1.they will pay 50% of the AAH contribution to Rajski;

2.they will pay 50% of Minter Ellison Morris Fletcher costs incurred since 21 December 1992 in defending the litigation up to a maximum payment for underwriters for costs of [a stated amount]”.

22 21 December 1992 was the date of the first letter from AAH seeking indemnity.

23 The Tribunal is of the view that the proper reading of the correspondence between Lawcover and AAH is that it evidences a dispute between the parties as to whether or not there was an entitlement to indemnity, and a resolution of that dispute by an agreement between Lawcover and AAH that Lawcover would contribute 50% of whatever was paid by AAH as their share of the settlement with Rajski, not as a payment under an insurance policy but as a payment in settlement of a dispute as to whether AAH were entitled to indemnity in respect of the particular claim. Such a settlement is very common in circumstances where one side or the other must lose entirely. On a simple view of the matter, AAH would have been entitled to full indemnity had they successfully defended the Rajski action – with, perhaps, millions of dollars incurred in costs – and if AAH had lost the action they would have been left without indemnity and facing a verdict and the costs of both sides. That this was the view taken by AAH and Lawcover seems clear from the annexures to the Legal Services Commissioner’s affidavit; nowhere is there any document which demonstrates that Lawcover sought information on the details of the settlement. The only correspondence from Lawcover demonstrates concern and impatience about the fate of the money lying in a trust account, but no real concern about the progress of negotiations except in so far as that would affect the payment out or return of the moneys.

24 If the Tribunal is right in its view of the relationship between Lawcover and AAH there can be no question either of deception or misappropriation. Lawcover had no interest in the precise terms of the settlement and the moneys were appropriated by AAH to the only purpose for which they had been paid – as a contribution to a settlement with the Rajski interests for a certain amount but on terms which were otherwise a matter for AAH and not Lawcover.

25 There is a tension in the Australian law between the view espoused in the Federal Court of Australia as to the meaning of the term “lacking in substance” and the view expressed by the Victorian Court of Appeal. The Federal Court in a number of cases (see, eg, Nagasinghe v. Worthington (1994) 53 FCR 175 at 178 and Ebber v. Human Rights & Equal Opportunity Commission (1995) 129 ALR 455 at 466) has endorsed the statement of Sir Ronald Wilson, sitting in the Human Rights & Equal Opportunity Commission, in GVR v. Department of Health, Housing & Community Services (23 August 1993) that:

“The meaning of the term ‘lacking in substance’ has been considered in a number of decisions of this Commission. My view … is that a claim which presents no more than a remote possibility of merit and which does no more than hint at a just claim would ordinarily be found to be lacking in substance.”

26 In State Electricity Commissioner v. Rabel (1998) 1 VR 102, the Victorian Court of Appeal declined to accept that formulation of the test and held that to be “lacking in substance” a claim must disclose no arguable case.

27 The distinction is of such subtlety as to make it unlikely that a choice between one formulation or the other would affect the decision in any but an exceptional case. However that may be, in this case the Tribunal is satisfied that on the three grounds of the information relating to deception and misappropriation no arguable case has been disclosed and the grounds should be struck out as lacking in substance.

THE PROVISION FOR TERMINATION OF THE CRIMINAL PROCEEDINGS

28 The fourth and fifth grounds of complaint are as follows:-


d. That the legal practitioner, on behalf of AAH, was involved in the insertion and maintenance of improper terms in the terms of settlement of the Tectran and Raybon civil litigation, those improper terms making payment of the settlement money (which included the Lawcover settlement funds) contingent upon the determination of the criminal proceedings.

e. That the legal practitioner, on behalf of AAH, together with Mr Murray, on behalf of the Tectran interests, used the settlement moneys (which included the Lawcover settlement funds) together with interest on those settlement moneys to put improper pressure upon Rajski, the complainant in the criminal proceedings, to seek determination of the criminal proceedings.


29 The Legal Services Commissioner’s case on these grounds may be summarised as follows:

(a) Ball was party to propounding terms of settlement in civil matters which provided that the payment of a substantial sum of money to Rajski would be contingent upon certain criminal charges being terminated.

(b) Rajski was not the informant in the criminal charges – they were laid by the Police, nor is it alleged that he will be a witness, only that he might be. However, the Commissioner alleges Rajski was the “complainant” in that he brought the matters to the attention of the Police.

(c) The term objected to was in the following words:

“Raybos and Rajski shall join in representations to the Attorney General, the Director of Public Prosecutions and/or the Commissioner of Police to have them withdraw or not pursue further the criminal proceedings and agree not to bring further criminal charges against any person in any way arising out of the product or the agreement or any of the Schedule 3 proceedings” (see para.(xi) above under Background Facts).

(d) Another term provided that the settlement should be given effect to (and that, of course, would include the payment out of the settlement moneys) “upon the termination, in accordance with clauses 2-4 inclusive above, of all of the Schedule 3 proceedings …”; the criminal proceedings were included in the “Schedule 3 proceedings”.

(e) The mere fact that the payment to Rajski was conditioned upon the termination of the criminal proceedings was according to the Commissioner, enough to constitute impropriety on the part of Ball amounting to professional misconduct, since he “was involved in the insertion and maintenance” of the terms and since that condition imposed “improper pressure” on Rajski.

(f) In addition, the Commissioner claims not only that the insertion of the terms which he characterises as “improper” constituted professional misconduct, but also that the use of the “settlement moneys together with interest on those settlement moneys” to put “improper pressure” upon Rajski to seek determination of the criminal proceedings also constituted misconduct.


30 In a number of robust exchanges between Mr Haylen QC for the Legal Services Commissioner and the presiding judicial member during argument it was pointed out that the characterisation of an activity as “improper” is sterile. The adjective is merely an expression of opinion; to have any force it must be expounded and justified. Mr Haylen’s exposition and justification were that the proposed settlement terms were improper in that they imposed pressure upon Rajski to do something he otherwise would not do – to join in representations to terminate criminal proceedings; and that Ball used the settlement moneys to put improper pressure on Rajski because he joined in a proposal to Rajski that he would receive the settlement moneys only if he joined in the representations seeking determination of the criminal proceedings, which Rajski would not otherwise have done. It seems to the Tribunal that it is necessary to combine the fourth and fifth grounds of complaint to mount the argument that Mr Haylen does, since there would be no point inserting and maintaining improper terms unless they were used, and they could not be used unless they had been inserted and maintained. In other words, there is really only one occasion of misconduct alleged, the propounding and use of improper terms.

31 Before considering whether or not the material before the Tribunal is capable of establishing the professional misconduct alleged, it is appropriate that we set out some of the material which governs the Tribunal’s conduct or defines it powers for the purpose of this hearing.

32 Applications to the Tribunal are governed by Division 7 of the Legal Profession Act 1987 (as amended). S.167(2) of the Act provides:

“The Tribunal is to conduct a hearing into each allegation particularised in the information.”

33 There is within the Division power to vary an information so as to omit allegations or to include additional allegations. In this case there has been no application for that to be done, so the hearing must be into “each allegation particularised in the information” and nothing else. In Walsh v. Law Society (NSW) [1999] 198 CLR 73 at 95, McHugh, Kirby and Callinan JJ, after referring to s.167(2) and the powers of amendment under s.167A, said:

“Given the scheme of the legislation, and the introduction of new statutory bodies for the task of discipline of the members of the legal profession formerly conducted by professional bodies and by the Supreme Court, the requirements of particularity contained in the Act (and the safeguards thereby introduced for the practitioner concerned) would not be narrowly construed.”

34 The Tribunal accepts the argument advanced by Mr Sackar QC on behalf of Ball that the requirement for particularity extends to confining the case against the respondent to a complaint not only to the allegations particularised in the information, but to those allegations as detailed and explained by particulars provided by the Commissioner. So if the complaint alleged that the respondent had stolen money from “X” in March 1999 and further particulars were given that the theft occurred at Sydney on 1 March and the sum stolen was $10,000, the Commissioner could not succeed on that complaint by proving the theft at Bathurst on 25 March of $1,500.

35 We make these remarks about matters which might appear to be axiomatic because some of the arguments advanced by Mr Haylen QC for the Commissioner seem to suggest a contrary view. In the submissions filed on behalf of the Commissioner on 13 October 1999 in opposition to the strike-out motion, the following paragraph appears:

“41. The fact that the disciplinary jurisdiction does not have fixed categories of offence – simply broad headings of professional misconduct and unsatisfactory professional conduct to which the facts alleged in each information are to be applied – is a further consideration in favour of putting all of the evidence, including the evidence of the legal practitioner, before the Tribunal at a full hearing. It is only at such a hearing that the Tribunal can decide whether the facts that it finds give rise to a determination that the legal practitioner is guilty of professional misconduct or unsatisfactory professional conduct.”

36 In this case, as we have already ruled, (see separate judgment on jurisdiction question) where the whole of the evidence relied on by the Commissioner is before the Tribunal – see letter to Minters of 16.10.98 - the legal practitioner is entitled to have the matter decided by a consideration of whether “each allegation particularised in the information” or any of them can be sustained by the evidence upon which the Commissioner relies having regard also to any further particulars given by the Commissioner.

37 We set out below requests for particulars on behalf of Ball and the answers given to them on behalf of the Commissioner.

38 In regard to Ground 4 of the information:-

“15.3 In relation to the allegedly improper terms in the ‘terms of settlement’ please specify whether the impropriety is alleged to arise:

(i) by reason of a breach of statute – if so, please identify the statute and the provisions of the statute which are alleged to have been breached;

(ii) by reason of a breach of duty owed by [Ball]- if so, please identify the precise content of that duty and the manner in which that duty is alleged to have been breached;

(iii) by reason of a breach of a statutory duty including the Solicitors Admission Rules – if so, please identify the precise rules which allegedly have been so breached by [Ball] and the manner in which they have been breached;

(iv) by reason of a breach of some ethical duty – if so, please identify the precise content of that duty, how it was allegedly breached and to whom it was allegedly owed.”

39 The answers given were:-

“15.3 (i) No.

(ii) See (iv) below.
(iii) No.
(iv) The impropriety arises from a breach of the ethical duties of legal practitioners. The relevant duties are:
Not to seek to have criminal proceedings, brought by the Director of Public Prosecutions in the name of the Crown, withdrawn or not pursued on any basis other than insufficiency of evidence or public interest factors such as those identified in Policy 5 of the Director of Public Prosecutions, New South Wales Prosecution Policy.
Not to seek to have criminal proceedings withdrawn or not pursued pursuant to agreement between private parties to civil litigation.
Not to seek to make an agreement whereby payment of a sum of money is contingent upon the termination of criminal proceedings.
The legal practitioner’s ethical duty was breached by terms to the above effect being inserted and maintained in the draft Deed of Settlement prepared on his instructions and pursuant to his agreement with Mr Murray on behalf of the Tectran interests. Legal practitioners’ ethical duties are owed to the Supreme Court of which they are officers.”
40 In respect of Ground 5 of the information the following questions were asked and answered:-
“20. As to the alleged improper pressure upon Rajski, please advise whether the pressure is improper:
20.1 By means of a statute and if so, please identify the statute and the provisions of the statute which are alleged to have been breached.
20.2 By breach of a statutory rule including the Solicitors’ Admission Rules, and if so, please identify the precise rule which is said to have been breached by the legal practitioner and the manner in which it has been breached.
20.3 By breach of ethical duty, please identify the precise content of that duty, and if so, how it was allegedly breached and to whom it was allegedly owed.
20.4 By breach of duty owed by the legal practitioner, and if so, please identify the precise content of that duty and the manner in which that duty is alleged to have been breached.”
41 The answers were:-
“20.1 N/A.
20.2 N/A.
20.3 The pressure is improper through being applied in breach of an ethical duty of the legal practitioner. See 15.3 as above as to the content of that duty, how it was breached and to whom it was owed.
20.4 See 20.3 above.”
42 It will be seen that Grounds 4 and 5 of the information stand or fall on the answers given to particular 15.3(iv). We will deal with each breach of ethical duty set out in that answer.

A. The duty not to seek to have criminal proceedings, brought by the Director of Public Prosecutions in the name of the Crown, withdrawn or not pursued on any basis other than insufficiency of evidence or public interest factors such as those identified in Policy 5 of the Director of Public Prosecutions, New South Wales Prosecution Policy.

43 It is not explained in the particulars and was not explained in any other evidence or submissions how it is alleged the policy of the Director of Public Prosecutions might bind a private legal practitioner. Nor was it explained why the considerations which might bind or influence a prosecutor in deciding whether or not to lay or continue with a prosecution provide the basis for any ethical duty on the part of a private legal practitioner. We can see no parallel between the position of a prosecutor deciding whether or not to prosecute and a private legal practitioner deciding on the basis upon which to make application for a prosecution to be abandoned or withdrawn. In a very broad sense one is in the position of a judge and the other in the position of an advocate. It is plain beyond argument that the duties which bind a judge and an advocate are not the same and even allowing for the inexactness of the illustration, it is equally plain that the attempted assimilation by the Commissioner of the duties of a prosecutor to those of a private legal practitioner is baseless.

44 It has never been made clear by the Commissioner on what basis he claims a duty on private legal practitioners not to seek to have criminal proceedings withdrawn or not pursued “on any basis other than insufficiency of evidence or public interest factors”. It appears to the Tribunal that it must be proper for private legal practitioners to urge withdrawal or abandonment of prosecutions on any number of grounds individual to their clients. For instance, we do not think it could be said to be improper to urge the authorities not to prosecute on the basis of sickness, the intention of a migrant to return imminently to his or her home country, the fact that a woman was pregnant, the existence of sincerely held religious beliefs contributing to the commission of the alleged crime, or the possibility of severe social disharmony arising from a prosecution. Whether the prosecuting authorities would regard it as proper to accept the submissions is another thing, but in our view it could not be improper of a private legal practitioner to make submissions for the termination of criminal proceedings on any of those bases and, no doubt, on myriad other bases which are not within the limits sought to be drawn by the Commissioner.

45 Accordingly we believe that the first breach of ethical duty alleged could not be made out.

B. Not to seek to have criminal proceedings withdrawn or not pursued pursuant to agreement between private parties to civil litigation.

46 Ultimately the question must be answered whether it could be said that the agreement propounded was improper in the circumstances of this case, but we think that it is not supportable for the Commissioner to claim the blanket impropriety that he has. There may be circumstances where it is improper to seek the withdrawal of criminal proceedings by way of agreement; there may be other circumstances where it is not. But before we consider the case before us we must point out that there was not here, nor could there have been, an attempt to have these criminal proceedings withdrawn by private agreement. The agreement sought was that Rajski would “join in representations” to the authorities to have them withdraw or not pursue the criminal proceedings. The constant misstatement of the burden of the agreement which is to be found in the submissions on behalf of the Commissioner does not help his case. Except in the limited case of the sort dealt with by the High Court of Australia in Kerridge v. Simmonds [1906] 4 CLR 253, where the prosecution agreed to be withdrawn in consideration for the payment of money was for what Griffith CJ described as “a purely personal injury”, the general rule of law is that an agreement to stifle a prosecution is contrary to public policy and void. But the cases referred to in Kerridge and the other authorities to which we have been referred all deal with the case of a direct interference with the continuation of a case by the payment of money or the agreement to pay money to what might be called the prosecuting power. That payment would probably always constitute bribery (except in the Kerridge class of case) and we cannot imagine a case in which such a payment or the promise to make it would not amount to professional misconduct.

47 That, however, is not the case with which we are dealing here. What was sought in consideration for the payment of money was the termination of civil proceedings and the performance by Rajski of an act which was not in any way illegal or improper – that he join in representations to the appropriate authority not to continue with prosecutions for perjury. Mr Haylen conceded that the writing by Mr Rajski of the words “I join in these representations” on the bottom of an application to the DPP for the termination of the prosecutions would have satisfied his obligations under the settlement. He may later have sought to resile from that but in fact the Tribunal is of the view that it would not have been necessary for Rajski to go so far as Mr Haylen first conceded to satisfy the clause; we think that had he written the words “I do not object to the termination of these proceedings” that would have been enough. The situation would then have been that the appropriate authorities, without improper pressure of any sort, would have considered whether or not according to the guidelines which bound them the prosecution should proceed.

48 In our opinion it would have been open to the Crown authorities to consider the following matters in deciding whether or not to terminate the criminal proceedings:

Depending upon the time at which the representations were made to the Crown, it would have been 13-15 years since the alleged commission of the offences.

49 The perjury was alleged to have occurred in proceedings between private parties, not in criminal or other public proceedings.

50 The committal proceedings on the perjury charges had been stayed in 1988 until after the termination of the civil proceedings and had been stood over every six months since that time without demur from the Crown, or any attempt by the Rajski interests to prevent the formal adjournments continuing.

51 There was no sign of any attempt by the complainant in the perjury proceedings to bring on the civil proceedings – of which he had control – so that the criminal proceedings could be heard.

52 The likelihood, increasing year by year, that the criminal proceedings would never be heard. In respect of this point it must be noted that it is now 20 years since the commission of the alleged offences and there is no evidence that the civil proceedings are any nearer to being heard, nor, therefore, are the criminal proceedings.

53 It will be clear from what appears above that the Tribunal is of the view that the Crown authorities could have made a legitimate decision on proper grounds not to proceed with the perjury charges. It must follow, we think, that since it would not have been improper to make representations that the perjury charges be withdrawn, and it would not have been improper for the Crown authorities to accede to those representations then the matter could form no basis for a charge of professional misconduct unless there was indeed “improper pressure” placed upon Rajski to enter into the settlement. We will consider that question later in these reasons.

54 We are of the view that the second breach of ethical duty alleged could not be made out.

C. Not to seek to make an agreement whereby payment of a sum of money is contingent upon the termination of criminal proceedings.

55 The bald statement of the “ethical duty” set out above cannot be right. Strictly applied it would mean that an eccentric solicitor would be guilty of professional misconduct if he were to include in a contract which he drew a condition amounting to a condition precedent that the contract would not have effect unless the Crown withdrew charges against X, although neither the solicitor nor the other party to the contract had any interest in the criminal proceedings, and it was neither intended nor contemplated that they would take any steps or cause steps to be taken to bring about that end. Parties may stipulate for what they wish in a contract – and that they agree that a contract shall not come into effect unless certain criminal proceedings are withdrawn is no more a matter of concern than if they agree that the operation of the contract is contingent upon a certain number of crows flying over Parliament House.

56 We think to give proper effect to the complaint as set out above it must be read in the light of Mr Haylen’s submissions on “improper pressure” and the answers given to the particulars in relation to Ground 5 of the information set out in paragraph 2.6 above. The complaint as particularised is difficult to define and contains some circularity, but we read it as comprising at least the following elements:-

that there was an agreement to settle civil proceedings for a sum of money;

that that sum of money would not be paid unless representations for the withdrawal of criminal proceedings succeeded;

that one of the contractors (Rajski) who would not otherwise have been expected to do so was required to join in representations that the criminal proceedings should be withdrawn; and

that the linking of the making of the representations by, in this case, the Rajski interests, the termination of the criminal proceedings and the payment of the money meant that improper pressure had been applied to Rajski.

57 On the face of it the argument carries some conviction, but it will not stand analysis. The “impropriety” of the pressure put upon Rajski depends upon an analogy between that pressure and the pressure which is put upon someone who is offered a sum of money which they would otherwise not receive to do something which they would not otherwise do. The difficulty in this case is that Rajski claimed to have valuable rights of action against the AAH and Tectran interests and in the complete absence of evidence – even from the purely subjective view point of Rajski – that those rights of action were worth less than the amount offered in settlement the analogy falls to the ground. Rajski could simply have brought his civil proceedings to hearing without joining in any representations to the Crown authorities or without the criminal proceedings being terminated. The point is that he was not being given a choice between making the representations so that the criminal proceedings would be terminated and he would receive the money, and not making the representations and not receiving the money – he claimed that in any event he was entitled to the money and could recover it by going to court.

58 This conclusion disposes of the claim under this head, and of the separate allegation, if it was separate, that there was “improper pressure” applied to Rajski to take the settlement. We are therefore of the view that the complainant could not make out this breach or breaches of ethical duty and this head must also fail.

THE ULTIMATE RESULT

59 The ultimate result must be that the application for summary dismissal succeeds, and the proceedings should be terminated here. We wish to make it plain that the voluminous material placed before us has been fully considered, although it is not possible to reproduce in these reasons every part of that material which influenced our judgment.

60 We grant liberty to apply on seven days notice; that, of course, includes the right to the applicant legal practitioner to seek costs under s.171E of the Act.