Legal Services Commissioner v Bone
[2013] QCAT 550
| CITATION: | Legal Services Commissioner v Bone [2013] QCAT 550 |
| PARTIES: | Legal Services Commissioner (Applicant) |
| v | |
| Paul Ernest Bone (Respondent) |
| APPLICATION NUMBER: | OCR213-12 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 11 September 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Justice Alan Wilson, President Assisted by: Mr Geoffrey Sinclair Dr Margaret Steinberg AM |
| DELIVERED ON: | 16 October 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The application for disciplinary proceedings against the respondent is dismissed. 2. The applicant is to pay the respondent’s costs of and incidental to charge 3, incurred after 31 May 2013, as assessed on an indemnity basis. 3. The applicant is to pay the respondent’s costs of and incidental to charges 4-8 inclusive, up to the time of their withdrawal, as assessed on an indemnity basis. |
| CATCHWORDS: | PROFESSIONS AND TRADES – LAWYERS – COMPLAINTS AND DISCIPLINE – DISCIPLINARY PROCEEDINGS – PROFESSIONAL MISCONDUCT OR UNSATISFACTORY PROFESSIONAL CONDUCT – where the respondent’s articled clerk took instructions to prepare wills for a husband and wife – where the respondent was appointed as the executor of the wills – where the wills contained a clause entitling the respondent to charge professional fees in relation to the administration of the estates – where the respondent did not inform the husband and wife of the charging clause – where r 10.1 of the Legal Profession (Solicitors) Rule 2007 provided that, in those circumstances, a solicitor must inform the client of that clause, in writing, before the client signs the will – where the respondent charged fees for ‘care and consideration’ – where the costs agreement did not contain a provision allowing for a charge of that kind – where the applicant contends the respondent’s conduct amounts to unsatisfactory professional conduct – whether the respondent’s conduct has the requisite degree of seriousness or substance to come within the meaning of unsatisfactory professional conduct PRACTICE AND PROCEDURE – EVIDENCE – EXPERT EVIDENCE – where the respondent filed affidavits from legal practitioners experienced in wills, probate and succession practice – where the affidavits contain evidence about the operation of r 10.1 of the Legal Profession (Solicitors) Rule 2007 – where QCAT Practice Direction No 4 of 2009 limits parties to one expert; requires notice be given to the other party; and requires that all experts attend a conclave convened by a QCAT Member – where these requirements did not occur – whether the respondent may call expert evidence where the requirements for calling such evidence have not been met PROFESSIONS AND TRADES – LAWYERS – COMPLAINTS AND DISCIPLINE – DISCIPLINARY PROCEEDINGS – COSTS – where the applicant originally brought eight charges against the respondent, but withdrew six before the final hearing – where the respondent seeks an order that the applicant pay the costs in respect of the charges that were withdrawn as well as the costs associated with the remaining charges if they are dismissed – where s 462(4) of the Legal Profession Act 2007 provides that the Tribunal may make an order requiring the Legal Services Commissioner to pay a legal practitioner’s costs only when the practitioner has not engaged in prescribed conduct, and the Tribunal considers that special circumstances warrant the making of the order – whether s 462(4) applies in respect of charges that did not proceed to a hearing or a determination by the Tribunal – whether ‘not engaged in prescribed conduct’ is confined to circumstances in which the practitioner has been found not guilty of a disciplinary charge – whether the applicant should have brought the charges it then, later, withdrew – whether special circumstances exist that warrant the making of a costs order Legal Profession Act 2007 (Qld) ss 343(2), 418, 420, 456(1), 464(4) Legal Profession (Solicitors) Rule 2007 (Qld) rr 10, 28 Baker v Legal Services Commissioner [2006] QCA 145, cited |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr D Kent of counsel instructed by the Legal Services Commission |
| RESPONDENT: | Mr C Wilson of counsel instructed by Cartwrights Lawyers |
REASONS FOR DECISION
Mr Bone is a solicitor who has been in practice for 36 years. In 2008 he was practising on his own account at Cooroy when his articled clerk Mr Markert took instructions from a client, Mrs Q, to prepare new wills for her, and her husband Mr Q. The wills were prepared and executed on 18 December 2008. Tragically, Mr and Mrs Q committed suicide on that day, or shortly thereafter.
Mr Bone ultimately faced two disciplinary charges before the Tribunal concerning their wills and estates. The first alleged a breach of r 10 of the, now repealed, Legal Profession (Solicitors) Rule 2007 (Qld) (Solicitors Rule); each of the wills appointed Mr Bone as executor and contained a clause authorising him to charge for his legal work but, although Mr Markert told Mrs Q (he never met Mr Q) about the clause he did not inform both Mr and Mrs Q in writing about the charging clause before they signed their wills, as the rule required.
The second charge arose from the fact that when Mr Bone rendered fees for his legal work in the estates he charged about seven percent for ‘care and consideration’; but, the costs agreement Mr Bone entered into with himself – as, respectively, executor of the estates, and the solicitor undertaking work in those estates – did not contain a provision allowing for a charge of that kind.
At the hearing of those two charges on 11 September 2013 the Commissioner pressed for findings that, in respect of each, Mr Bone was guilty of unsatisfactory professional conduct, a term defined in s 418 of the Legal Practitioners Act 2007 (Qld) (LPA), a public reprimand, and no order as to costs.
Because, for the reasons that follow, the Tribunal is of the view that neither charge is made out, and because Mr Bone originally faced eight disciplinary charges in the proceedings brought by the Commissioner, and because he seeks his costs in the proceedings, it is useful to set out details of all of the original charges, a short history of the events surrounding the making of the wills and some aspects of the administration of Mr and Mrs Q’s estates (about which there is no contention, the parties having filed an agreed statement of facts) and, also, a history of these disciplinary proceedings themselves.
The original disciplinary charges
The first two have been described. The third was withdrawn shortly before the hearing. It alleged, in effect, that the failure to comply with r 10 and the creation of the costs agreement, in combination, placed Mr Bone in a position where he had a conflict of interest. In short, it is said that he could not properly discharge his obligations as executor of the estates, and as the solicitor doing legal work in the administration of them, because of that conflict.
The fourth charge was a very serious one, involving an allegation that Mr Bone provided misleading information to a bank from which, as executor, he borrowed $75,000 for necessary repairs to a property Mr and Mrs Q had owned, preparatory to its sale when, in truth, the cost of necessary repairs was much less and, it is alleged, he always intended (and did) use some of the borrowed funds to pay his outstanding professional fees.
The fifth charge is an associated one: that he failed to comply with his duty of candour to the bank by misrepresenting the need for, and nature of, the borrowing and his intentions with the borrowed sum.
The sixth charge involved the fact that, under Mr and Mrs Q’s wills and because of the circumstances in which they died, the sole beneficiary of both estates was the Australian Koala Foundation (AKF). It is alleged Mr Bone provided misleading information to the AKF concerning the borrowing from the ANZ when he informed it that the borrowed funds would be used on repairs and renovations to the property to achieve the best possible sale outcome. The AKF was concerned at this proposal but, it is alleged, Mr Bone informed its officials that a good part of the borrowed money had already been spent – when, it is further alleged, that was untrue.
The seventh charge alleged that, in light of the circumstances surrounding Mr Bone’s joint position as executor and solicitor acting in the administration of the estates, and the borrowing from the bank, he failed in his duty of candour to the AKF.
The eighth charge alleged that, in doing so, he breached r 28 of the Solicitors Rule.
After the disciplinary application with these eight charges was filed in QCAT on 14 June 2012 Mr Bone was the subject of Australia-wide publicity. A number of articles published in newspapers in large capital cities, each headed ‘A lawyer is fronting a Tribunal for allegedly taking fees from an estate left to the Koloa Foundation’ recited that he was facing disciplinary action for ‘… allegedly cheating a high-profile charity and a couple who died in a double suicide on the Sunshine Coast’. The AKF also lodged, in the Tribunal, a notice of its intention to seek compensation under the LPA.[1] (Representatives of the AKF appeared at the hearing and signified, through counsel for the Commissioner, that the application was withdrawn).
[1]See Part 4.10 of the LPA.
The making of the wills
Mr Bone practised in Cooroy under the name Bone Lawyers. On 10 September 2008 Mrs Q contacted the office by telephone on two occasions and told staff members that her husband was gravely ill in Nambour Hospital, and asked that someone attend to take instructions for his will. Arrangements were made for Mr Markert, an articled clerk in his final year, to attend at the hospital at 9:30 am on 15 December 2008. On 12 December Mrs Q rang again and spoke to Mr Markert and told him that her husband was too ill to see him on 15 December, and asked that he wait for a few days before making a further arrangement.
On 16 December she again telephoned Mr Markert to make an appointment for 3:00 pm the following day to give instructions for her husband’s will. She said her husband would attend one day after, 18 December, when he was released from hospital or, if he was not well enough, arrangements could be made for Mr Markert to attend at Mr and Mrs Q’s residence outside Cooroy.
On 17 December 2008 Mrs Q attended at Bone Lawyers’ office and gave instructions to Mr Markert for wills for both herself, and her husband.
By that time Mr Markert knew, then, that Mr Q was gravely ill, and that earlier arrangements for him to attend upon Mr Q at Nambour Hospital on 15 December had been cancelled by Mrs Q. When Mrs Q came into his office on 17 December Mr Markert understood that he was going to be taking instructions for her will, and a new will for her husband. He also understood the extreme urgency, given Mr Q’s health.
When he saw Mrs Q he first discussed the appointment of an executor and trustee in each will. Mrs Q instructed him to prepare the wills so that she would act as her husband’s executor, and he as hers. Mr Markert recommended an additional, alternate executor, whereupon Mrs Q asked Mr Markert to assume that role. He said that he could not do so, but that if she required a legal professional member of the firm to act, then it should be Mr Bone.
He then said to Mrs Q:
She should appoint a solicitor as a last resort as executor as they will charge for absolutely everything they do, whether professional or personal, at their current rate and there can be a considerable charge to the estate for the solicitor to administer.
Mrs Q told Mr Markert that she understood and accepted that. He suggested she consider appointing another family member or friend as alternate executor, but her instructions were that no suitable person was available and, under an earlier will, her husband had appointed his then solicitor as his first and only executor. She showed him a copy of that earlier will.
Mr Markert says he then explained, again, to Mrs Q that Mr Bone would charge professional fees but no more – i.e., he would not charge commission for his work if he was appointed executor. She then gave instructions for the body of the will.
In his statement Mr Markert says:
The circumstances in which I took instructions from (Mrs Q) and prepared both wills were the product of extreme urgency. I took instructions from Mrs Q, on Mr Q’s behalf, for Mr Q’s will and I explained everything to Mrs Q for both her will and Mr Q’s will. In my mind, explaining everything in this matter, particularly in relation to solicitor-executors and providing draft wills, containing the clause for solicitor-executors was sufficient explanation. I was not aware at the time that r 10 of the solicitors rules required such explanation by way of separate correspondence. The clause in the will setting out basis for payments to an executor-solicitor were prominent and explicit and reflected what I had told her verbally.[2]
[2]Affidavit of Andrew Patrick Markert filed 13 August 2012, [24].
The wills were in evidence. Mr Markert frankly conceded, from the first, that he did not advise Mrs Q or Mr Q in writing, before the signed their wills, of the matters required by r 10.
The ‘charging’ clause was indeed, however, prominent and not (as commonly occurs) lying somewhere amongst specific executor’s powers in the latter part of the will.[3] It appears within the body of the second clause, by which Mr and Mrs Q firstly appointed each other as executor and trustee or, in the alternative, Mr Bone. It is compelling that, regardless of any advice Mr Markert may have given them, it was so prominently placed as to make it highly improbable that either will-maker did not see it, or overlooked it.
[3]Copies of each will are contained in an agreed bundle of documents filed by the parties, Volume 1, pp 129 – 132.
The wills were prepared by Mr Markert and on the next day, 18 December, Mrs Q attended at the firm, and read her will and duly executed it. She took away a copy of a draft will for her husband, and a letter from Bone Lawyers to him, which she said she would carry to her husband who was still at Nambour Hospital.
Both wills contained the charging clause mentioned earlier, allowing Mr Bone to charge professional fees for his work administering the estate notwithstanding that he had also been appointed as executor in both wills.
Mr Q was released from hospital on 18 December and returned to his home with his wife. He properly executed his will there that day.
Mr Bone’s administration of the estates
Mr Bone acted as executor of the estates and, also, as solicitor for the executor between 24 December 2008 and 15 October 2010.
On 24 December 2008 he entered into two costs agreements with himself (one in respect of each estate) which provided that the calculation of his professional fees when acting as the estate solicitor would be at an hourly rate, with other usual items. Neither agreement provided, however, that he could charge a fee for care and consideration.
In the course of acting for Mrs Q he rendered five bills between January 2009 and April 2010, and in three of them he charged for care and consideration of, in total, $910.70. The total costs he charged for administering Mrs Q’s estate was $12,928.63.
In Mr Q’s estate he rendered 10 bills, charging care and consideration in five of them in the total sum of $2,525.84. The total of all bills was $74,541.22.
Mr Bone admits that he did not, as executor, object to any of the bills which included components for care and consideration or object to some which charged hourly rates for non-legal work.
Upon becoming aware that he had not been authorised to charge for care and consideration he refunded the total amount of those charges in both estates, $3,436.54, to the beneficiary AKF.
The disciplinary proceedings against Mr Bone
AKF complained to the Commissioner in September 2010. On 20 October 2010 the Commissioner wrote to Mr Bone advising of the complaint and stating that the issues raised were mismanagement; inefficient management; a breach of r 10; a conflict of interest; wrongly profiting from a fiduciary relationship; failing to account for trust funds; and, charging excessive fees. Mr Bone replied in a detailed and extensive way (in a 14 page letter, with attachments) in November 2010.
The Commissioner then referred the matter to the Queensland Law Society (QLS) for investigation. The QLS wrote to Mr Bone and he, again, responded promptly and in detail. The QLS wrote to him again in March 2011 and his response was similarly prompt, and comprehensive.
On 24 May 2011 the QLS wrote to the Commissioner recommending that Mr Bone’s breach of r 10 be dismissed on the basis that there was no public interest in taking disciplinary action if Mr Bone agreed to review any other wills prepared by him and to explain to any affected will-maker the effect of any similar charging clauses, and to prepare any necessary codicils at no charge to any clients.
The QLS also recommended that a costs assessment be obtained in relation to the administration of the estates, in contemplation of a disciplinary charge in relation to overcharging for care and consideration.
In June 2011 the Commissioner wrote to Mr Bone enclosing copies of the QLS report and recommendation letter and seeking his response. On 16 August 2011 Mr Bone replied, through his present solicitors, that he had changed his practice in relation to the preparation of wills and was reviewing all wills prepared by him and writing to will-makers to advise of the effect of charging clauses. He was also, he said, advising will-makers that he would without charge prepare a codicil to effect any changes the will-maker may require – i.e., that he was taking the very course suggested by the Law Society.
He denied that the error concerning r 10, or his mistake in charging care and consideration, constituted unethical or unprofessional behaviour.
In late November 2011 the Commissioner sought further submissions from Mr Bone and included, for the first time, submissions in relation to allegations of lack of candour, or misleading conduct, and the alleged conflict of interest. Again, Mr Bone responded through his solicitor in detail in early February 2012.
Despite those submissions the Commissioner, on 23 April 2012, provided draft particulars of charges against him. The present application was then filed on 14 June 2012. No particulars were provided for the eighth charge, which alleged dishonesty, and an order was made for their delivery.
On 13 March 2013 the Commissioner advised Mr Bone’s representatives that he was not proceeding with charges 4 – 8 and that, in continuing with the third charge, the Commissioner acknowledged that it may be something of a ‘test’ case.
The Tribunal made directions for the hearing of the matter on 17 May 2013. At that hearing Mr Bone, through his lawyers, advised that he would seek indemnity costs in relation to charges 3 – 8. The Commissioner was directed to advise Mr Bone and his solicitors by 31 May 2013 which of the remaining charges 1, 2 and 3 would proceed. Notwithstanding that direction, the Commissioner did not inform Mr Bone until 29 August 2013 that he was not proceeding with charge 3.
Expert Evidence
A number of affidavits have been filed on Mr Bone’s behalf from senior lawyers experienced in wills, probate and succession practice, including one from the Public Trustee. The affidavits primarily contain what is in effect expert evidence from the deponents about, for example, the mischief to which r 10 is directed, and Mr Markert’s conduct.
QCAT Practice Direction No 4 of 2009 contains specific provisions about evidence of that kind: it limits parties to one expert; requires that notice be given to the other party; and, also, requires that all experts must attend a conclave convened by a QCAT Member, Adjudicator or the Principal Registrar. None of these things occurred here, or were sought by Mr Bone or his representatives. For these reasons, the Tribunal has disregarded that evidence.
Charge 1
Rule 10.1 of the Solicitors Rule requires that a solicitor who receives instructions from a client to draw a will appointing the solicitor as an executor must inform the client in writing and before the client signs the will of any entitlement of the solicitor to claim commission, of the inclusion in the will of any provision entitling the solicitor to charge professional fees and, if there may be an entitlement to claim commission, that the person could appoint, as executor, a person who might make no claim for commission.
The purpose underlying the rule was explained by Habersberger J in Szmulewicz v Recht[4]:
[I]t seems to me that the point of rule 10.1 is that it is an attempt to ensure that a testator is given full information and advice by his solicitor about a clause in his will which potentially causes a conflict between the solicitor’s fiduciary duty to his client and his personal interest.
[4][2011] VSC 368 at [39]; see, also, In the Will of Shannon (1977) 1 NSWLR 210.
Later, his Honour said at [44]:
In my opinion, a solicitor putting forward a will for a client to sign, which contains a clause such as the one in this case, must explain to the client all of the pros and cons of the inclusion of the clause even if it was the client who suggested the clause, so that it is clear that the client has given his or her informed consent to a clause which otherwise would give rise to an objection on the ground of conflict between fiduciary duty and personal interests. The solicitor cannot assume that the client understands all of the ramifications of including the suggested clause, no matter how sophisticated or astute the client may be with respect to financial matters.
Under s 418 of the LPA unsatisfactory professional conduct includes conduct of an Australian legal practitioner happening in connection with the practice of law which 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. Under s 420 a breach of a ‘relevant law’ (which would include r 10) is capable of constituting unsatisfactory professional conduct.[5]
[5]LPA s 420(1)(a).
A number of aspects of the unusual factual matrix surrounding the making of these wills for Mr and Mrs Q are relevant. Firstly, Mr Bone never met them, and he was not involved in the taking of instructions. Everything was done by Mr Markert, who was attending to the preparation of wills in circumstances of obvious urgency, knowing that Mr Q was terminally ill in hospital.
Secondly, during his conference with Mrs Q for the purpose of taking instructions for the preparation of the wills Mr Markert gave her a detailed explanation which included advice that Mr Bone, by whom Mr Markert was employed, would charge professional fees for all work done in relation to the estate, whether legal or administrative. Mrs Q told Mr Markert that she understood and accepted that matter, but there was no alternative appointee that she and her husband wished to make executor. Mr Markert also told Mrs Q that Mr Bone would not charge a commission if appointed executor. Mr Markert recorded these matters in a detailed diary note.
Before it can find that a disciplinary charge against a legal practitioner is proven this Tribunal must be ‘satisfied’ that the practitioner has engaged in unsatisfactory professional conduct.[6]
[6]LPA s 456(1).
As McMurdo P observed in Legal Services Commissioner v Bradshaw,[7] the definition of unsatisfactory professional conduct in s 418 does not purport to be comprehensive. The President said:
In any case, s 418 refers to what ‘a member of the public is entitled to expect of a reasonably competent Australian legal practitioner’ … This is a standard to be determined by the Tribunal after considering all of the relevant circumstances pertaining in each case. (emphasis added)
[7][2009] QCA 126, [54].
While it is true that, as the Commissioner’s submissions point out, Mr Markert did have time to prepare a letter for Mrs Q to accompany her husband’s will when she collected it, the most pertinent of the prevailing circumstances is urgency. It is inescapable that Mr Markert, who had some experience but was still about a year short of qualifying as a solicitor, was obliged to react very quickly to meet the demands implicit in Mrs Q’s instructions.
The need for expedition was such that, even had Mr Markert known of r 10, it would not have been surprising if he overlooked it in the heat of these events.
The next most important prevailing consideration is the uncontested fact that the disclosure required by r 10 was, in truth, made orally to Mrs Q by Mr Markert, and apparently understood by her.
The definition of unsatisfactory professional conduct in s 418 sets the standard of competence and diligence to be attained by a practitioner by reference to the reasonable expectations of members of the public of a reasonably competent Australian legal practitioner. The section appears in Chapter 4 which, in its ‘main purposes’ in s 416 speaks of a need to promote and enforce the professional standards, competence and honesty of the legal profession.
While, as McMurdo P observed in the passage in Bradshaw mentioned earlier, the Commissioner is not required to prove what a member of the public expects of a reasonably competent Australian legal practitioner, the test is set by reference to a reasonable expectation – i.e., what a member of the public is entitled to expect.
That entitlement, here, should appropriately be considered in light of the mischief to which r 10.1 is directed. Plainly that mischief is the inclusion, without proper and reasonable notice to the will-maker, of a charging clause in a will (or the claiming of commission by a solicitor/executor). Mr Markert did that, at least with Mrs Q. On any view he took every necessary step to address the mischief, save for actually giving a notice in writing.
In light of the unusual, urgent – and, as they may reasonably be described, dramatic – circumstances in which Mr Markert took instructions his failure to comply with r 10 is, at least, understandable. It can fairly be described as an error of inadvertence. In light, however, of Mr Markert’s evidence (supported by his diary notes) it is also compelling that he took steps, notwithstanding those circumstances, to draw the charging clause to Mrs Q’s attention and to ensure that she understood it – i.e., to address the very mischief to which r 10 is directed.
That action on his part was (in terms of bringing the matter to the will-maker’s notice) reinforced, here, by the prominence he gave the charging clause in the wills themselves.
In the Tribunal’s view, to categorise the oversight in these circumstances as unsatisfactory professional conduct sets the standard to which the definition in s 418 is directed too high. The point of the rule is to ensure that will makers have notice of these things. That occurred here, at least in the case of Mrs Q.
In Legal Services Commissioner v McClelland[8] de Jersey CJ considered disciplinary proceedings against a lawyer who failed to get a proper certificate in certain transactions on 16 separate occasions over a period of time, in breach of the Property Agents and Motor Dealers Act 2000 (Qld). The particular provision overlooked by the lawyer was one intended to alert purchasers to any connection their lawyer may have with those involved in the other side of the transaction, such as might affect the lawyer’s capacity to discharge his or her obligation to the purchaser independently.[9]
[8][2006] LPT 13.
[9]Legal Services Commissioner v McClelland [2006] LPT 13, [24].
The Chief Justice said:
A practitioner must have the wit carefully to read and comprehend a provision like this, designed for the protection of clients in an area in which he substantially practices. The ‘failure’ referred to in s 3B(1)(c)[10] would not embrace all cases of error but this is substantial enough to fall within its ambit.[11] (emphasis added)
[10]Of the Queensland Law Society Act 1952 (Qld).
[11]Ibid [27].
There is nothing to suggest Mr Markert consulted Mr Bone during these hurried events. The question, then, is whether Mr Bone’s failure to supervise his articled clerk in a way which ensured full compliance with r 10 is sufficiently ‘substantial’ to warrant the conclusion that it constitutes unsatisfactory professional conduct.
Both ss 418 and 420 of the LPA contain flexible tests, such that not every error which a practitioner may make will constitute unsatisfactory professional conduct. Decided cases suggest, rather, that a finding of that kind will usually involve repeated errors or a significant departure from accepted standards of competence.[12] That is not the case here.
[12]Legal Services Commissioner v McLelland [2006] LPT 13; Legal Services Commissioner v Bradshaw [2008] LPT 9; Legal Services Commissioner v Bradshaw [2009] QCA 126; Legal Services Commissioner v Anderson [2009] LPT 001; Legal Services Commissioner v Krebs [2009] LPT 11; Legal Services Commissioner v Rouyanian [2013] QCAT 57; Scroope v Legal Services Commissioner [2013] NSWCA 178; and NSW Bar Association v Bland [2010] NSWADT 34.
This was an error, by an articled clerk, which can in the prevailing circumstances be fairly described as a technical breach of a rule designed to ensure a particular matter is brought to a client’s attention – and, when all the evidence suggests it was.
The Tribunal is not persuaded that this is conduct at the level, or with the requisite degree of seriousness or substance, to which s 418 is directed. The charge should be dismissed.
Charge 2
Like the first charge, the second charge also contains some unusual elements and circumstances. Mr Bone admits that the costs agreements he signed with himself did not permit him to charge the estates for care and consideration. The evidence establishes that Mr Bone’s usual costs agreement did include a provision for a charge of that kind, but it was left out through an error made by Mr Markert; and, that Mr Bone was never aware of that error until it was brought to his attention some time later. (Whereupon he promptly repaid that part of his fees reflecting those charges.)
There are added difficulties with the costs agreements. First, they purport to be between Mr Bone and himself, as executor on the one hand and estate solicitor on the other, when it is trite law that a person may not enter into a contract with themselves.[13] They were, then, always void and no enforceable obligations could arise under them, and Mr Bone could not have acted in breach.
[13]Browne v Commissioner of State Revenue (2004) 1 Qd R 116; Re Christie [2004] AATA 1396.
That said, the fact Mr Bone took this course is not something for which he could be strongly criticised: the well known text on administration practice in Queensland, de Groot’s Wills, Probate and Administration Practice (Qld) recommends that practitioners make these agreements, even when they are fulfilling both roles.
Secondly, in the absence of a binding costs agreement, as counsel for the Commissioner fairly conceded during submissions before the Tribunal, the basis upon which Mr Bone might have charged the estate for his work would have been calculated by reference to the Uniform Civil Procedure Rules 1999 (Qld) and Schedule 1 – Scale of Costs – which, in item 1, plainly makes an allowance for ‘general care and conduct’ calculated by reference to a variety of factors including the complexity of the proceedings, and leaves the question of an allowance and the amount of it to the Registrar’s discretion.
The amount actually overcharged because of the imposition of the components which were not allowed under the costs agreement is proportionally small – three per cent of the total cost in respect of Mr Q’s estate, and about seven per cent of Mrs Q’s estate.
Under the LPA a costs assessor or a court may only refer a matter to the Commissioner to consider disciplinary action if the reduction, on an assessment of costs, is 15 per cent or more.[14] As Ipp J observed in D’Allesandro v Legal Practitioners Complainants Committee[15] over charging, of itself, will only constitute a breach of professional or ethical standards where it is so excessive as to clearly establish wilful or reckless behaviour or blatant rapaciousness.[16] A fee that a solicitor may seek to charge by way of a bill of costs may, upon taxation, be found to be unreasonable and therefore subject to appropriate reduction but it does not, however, necessarily follow that the fees so charged by the bill are so excessive as to constitute a breach of ethics.
[14]LPA s 343(2).
[15](1995) 15 WAR 198 at 209-12.
[16]Nikolaidis v Legal Services Commissioner [2007] NSWCA 130 per McColl JA at [137].
Mr Bone was not constrained, in the absence of a binding costs agreement, by contract or statute from charging care and consideration. The circumstances in which he did so have been explained and constitute, again, a simple administrative error. As soon as that error was brought to his attention he repaid the sum wrongly claimed.
That sum was, proportionally, both relatively small and quite moderate. Mr Markert made a mistake when he drew the costs agreements, and Mr Bone made an error when he did not detect that they lacked provision for a charge for care and consideration. Both were in error in following a procedure recommended by a leading Queensland text in the area. No party has sustained any loss and, as the Commissioner fairly concedes, Mr Bone has at all times been frank and cooperative.
In the view of the Tribunal this, like the first charge, involves conduct which falls short of being unsatisfactory professional conduct in terms of s 418. Under s 420(1)(b) charging excessive legal costs may constitute an offence referrable to ss 418 or 419 but that is not an element of the charge here.
Mr Bone made a mistake, in his practice, involving a combination of an administrative error and a mistake of law. When he came to charge fees referrable to that error the charges rendered were proportionately very moderate. He had compounded his mistake by not observing the missing clause in the costs agreements but, as the Chief Justice observed in the passage cited earlier[17] while practitioners are expected to read and comprehend legislation (and, of course, documents) touching the work they are doing, a failure or oversight will not necessarily constitute unsatisfactory conduct unless it is substantial enough to fall within the ambit of the misbehaviour or misconduct envisaged in s 418.
[17]Legal Services Commissioner v McLelland [2006] LPT 13 at [27].
Again, something worse than relatively minor administrative and legal errors made by an articled clerk will be required before misconduct reaches a level of seriousness at which an adverse disciplinary finding is warranted. That is not the case here, and charge 2 should be dismissed.
Costs
The Commissioner, in his submissions, signified that if adverse findings were made against Mr Bone in respect of either or both of charges 1 and 2 he only sought, by way of penalty, a public reprimand.
In particular, he signified that he did not seek any order as to costs against Mr Bone because of ‘exceptional circumstances’ – namely, that only two of the eight original charges were proceeding to a hearing.
The phrase appears in s 462 of the LPA, relating to costs. Under that provision, a disciplinary body like QCAT must make an order requiring a person whom it has found to have engaged in prescribed conduct to pay costs, including the costs of the Commissioner and the complainant, unless the disciplinary body is satisfied that exceptional circumstances exist.
Under s 462(4) QCAT may make an order requiring the Commissioner to pay costs but can only do so if it is satisfied that the lawyer has ‘not engaged in prescribed conduct’ and that ‘special circumstances warrant the making of the order’.
Mr Bone seeks his costs associated with charges 3 – 8 and signified, at the hearing, that if charges 1 and 2 are dismissed he also seeks costs in respect of them.
Some novel questions arise. The first is whether or not Mr Bone could ever recover his costs under s 462(4) in respect of charges 3 – 8 when those matters did not proceed to a hearing, or a determination before this disciplinary body.
Section 462 is obviously not designed to confer or preserve the broad discretion over costs commonly found in statutory provisions conferring power to award costs.[18] Rather, it requires that the Tribunal, when considering the Commissioner’s costs, to confine itself to the discretion contained in s 462(1) and, in respect of any application for costs by a respondent practitioner, to exercise the discretion contained in s 462(4).
[18]As McPherson JA observed of a similar clause in the previous version of the LPA, the Legal Profession Act 2004 (Qld), s 286 in Baker v Legal Services Commissioner [2006] QCA 145 at [56].
In Legal Services Commissioner v Sing[19] the Tribunal was confronted with circumstances in which a practitioner had written to his wife’s commercial tenant threatening to report alleged criminal conduct on the part of the tenant to the police unless outstanding rent was paid. The Chief Justice presided, and concluded that the solicitor’s conduct remained on the correct side of a line between legitimate pressure and improper intimidation[20] and was not improper, or unfair.
[19][2007] LPT 004.
[20]Ibid [30].
The practitioner then applied for costs under the preceding but similar provision in the Legal Practitioners Act 2004 (s 286(4)).[21] The Chief Justice observed that the statutory provision assumes that, ordinarily, notwithstanding the success of a respondent in achieving, in effect, an acquittal in disciplinary proceedings the Commissioner will not be ordered to pay costs. He observed: ‘That no doubt recognises the public interest which motivates the Commissioner in approaching the Tribunal’.
[21]Legal Services Commissioner v Sing (No 2) [2007] LPT 005.
The Chief Justice then went on to discuss the phrase ‘special circumstances’ and observed that the phrase means just what it says – i.e., the circumstances must be ‘special’ before costs will be ordered against the Commissioner. The Tribunal was pressed, in the case before him, with the proposition that the charges against Mr Sing being unusual, the judgment would have some broader utility for the purposes of relations between the Commissioner, and legal practitioners. The Chief Justice rejected an argument that this potential broader utility made the case ‘special’.
A second preliminary question concerns s 462(4)(a), which limits the instances in which the Tribunal might consider exercising a discretion to order the Commissioner to pay costs: it must be satisfied that the practitioner ‘… has not engaged in prescribed conduct’. The phrase means, for present purposes, engaging in unsatisfactory professional conduct.[22]
[22]LPA s 462(8).
In Legal Services Commissioner v Scott (No 2)[23] the practitioner originally faced seven disciplinary charges but, by the time the matter came on for hearing, only five remained and one of those was significantly scaled back. Further changes were made in the course of the hearing. Ultimately, the practitioner was found guilty of two charges of unsatisfactory professional conduct, and two of professional misconduct. He sought costs in respect of charges which were withdrawn before and during the hearing but Fryberg J construed the provision to mean that there must be an actual finding of ‘not guilty’.[24]
[23][2009] LPT 9.
[24]Ibid [16].
Byrne SJA reached a different conclusion in Legal Services Commissioner v Atkins[25]. The practitioner had originally faced six charges. He admitted one, and five were contested. At the hearing one was withdrawn and the Tribunal dismissed the remaining four. The practitioner was ordered, in the original hearing, to pay the Commissioner’s costs of the one charge in which he was held to be guilty.
[25][2009] LPT 3.
In the Tribunal’s subsequent costs decision[26] Byrne SJA observed, when discussing the practitioner’s application for costs in respect of the charges against him of which he was acquitted, that the ‘… general rule is that a practitioner found not guilty is not entitled to costs’[27]; but then said that:
[I]f a charge has no substantial prospect of success, and that ought reasonably to have been appreciated by the Commissioner, such ‘special circumstances’ do arise. Similarly, a practitioner ought not be vexed with the trouble and expense of defending an allegation of important fact that the Commissioner, as he ought to have realised if properly advised, had no real prospect of establishing.[28]
[26]Legal Services Commissioner v Atkins [2009] LPT 10.
[27]Ibid [80].
[28]Ibid [81].
Byrne SJA then went on to consider the information available to the Commissioner when the charges were laid and said that the special circumstances which may warrant a costs order:
… involve the notion that, at various times before the hearing, the Commissioner, appropriately advised, should have recognised that there was no reasonable likelihood of success on the failed charged … on this basis, there is a proper foundation for the costs to be assessed on an indemnity basis.[29]
[29]Ibid [89].
There is no compelling basis for concluding, as occurred in Scott, that the phrase ‘… has not engaged in prescribed conduct’ in s 424(4)(a) must be confined to circumstances in which the practitioner has actually been found not guilty of a disciplinary charge, and cannot extend to those in which a charge has been brought, but withdrawn. The Tribunal must, the provision says, be satisfied that the practitioner has not engaged in conduct of that kind. In the absence of a charge, what other conclusion could the Tribunal reach?
The Tribunal is, for these reasons, satisfied that it may consider Mr Bone’s applications for costs in respect of all charges. That exercise involves, for the reasons identified in Atkins, some examination of the question whether or not the Commissioner, appropriately advised, should have brought charges 4 – 8, and persisted with charges 1 – 3.
Charges 1 and 2 have been dismissed in circumstances where (whatever the tension between the decisions in Scott and Atkins) Mr Bone has, in truth, been found not guilty. It cannot be said that either charge was, in the phrase which is sometimes used, plainly without merit or bound to fail. They involved non-compliance with a statutory rule, and a (void) costs agreement. They might, at worst, be described as adventurous; but, as these reasons show, they did require earnest consideration.
Once that is recognised, it cannot be said that the circumstances are ‘special’ in the sense that word is used in s 462(4)(a), and construed by the Chief Justice in Sing. As his Honour observed, the provision must also be applied in the light of the public interest which motivates the Commissioner in approaching the Tribunal. Charges 1 and 2 failed here, but only after a contest with some not insubstantial elements and they ought not attract an adverse costs order. If the ordinary rules about costs applied, this would be an instance where no order as to costs would be the proper order. In light of the events which have happened, and the Commissioner’s indication that he does not pursue a costs order in his favour, that remains an appropriate outcome.
The third charge related to an alleged conflict of interest between Mr Bone’s roles as executor, and solicitor. It relied, in its particulars and for proof, upon adverse findings in respect of the first and second charges. After the charge had been laid the Commissioner recognised that it involves something of a test case. In a letter to Mr Bone’s solicitors of 13 March 2013 the Commissioner said ‘… this may be a situation in which the professional and ethical obligations of practitioners are unclear and should be clarified’.
The parties attended before a compulsory conference in QCAT before Ms Endicott, a Senior Member, on 17 May 2013. She ordered that the Commissioner must inform Mr Bone’s representatives by 4:00pm on 31 May 2013 which of charges 1, 2 or 3 would proceed. It took, however, until 29 August 2013 for the Commissioner to advise Mr Bone that charge 3 was being abandoned. Mr Bone submits that in the intervening period he went to considerable effort and expense through his legal representatives to prepare and meet that charge, including obtaining lay and expert evidence. The delay by the Commissioner has not been explained.
Once it is concluded that charges 1 and 2 were not so lacking in merit or prospects as to mean the Commissioner should not have proceeded with them, the same may be said of charge 3. The process of reasoning by which the Commissioner came to conclude that charge 3 should be withdrawn is not disclosed but, in any event, it cannot be said that it was always so plainly unmeritorious as to mean it should not have been brought or proceeded with.
But the delay after the date set by the Tribunal, 31 May, involves different questions. The matter was set down for hearing, originally, on 11 and 12 September under a Tribunal notice dated 21 May 2013. While charge 3 remained on foot Mr Bone was compelled to prepare to meet it, and to do so until a date within a fortnight before the hearing was to commence, when the Commissioner notified him it was withdrawn. That delay, in breach of a Tribunal order, may fairly be categorised as something falling within the meaning of the phrase ‘special circumstances’ and to warrant an order that the Commissioner should pay Mr Bone’s costs after 31 May 2013 in respect of charge 3, on an indemnity basis.
Charges 4 – 8 were withdrawn on 13 March 2013. They dealt with the ANZ loan Mr Bone raised for the purposes of administering the estate. The fourth and fifth charges alleged misleading conduct or a breach of his duty of candour in his dealings with the bank, the sixth and seventh with his communications on the same topic to the AKF, and the eighth alleged a breach of duty not to mislead.
Correspondence contained in a large bundle of agreed documents filed by the parties shows that these matters were prominent in investigations undertaken by the QLS in 2010, having been raised in the AKF’s original letter of complaint of 20 October 2010. Mr Bone, through his solicitor, sought details of the allegation that both the bank and AKF had been misled on 6 February 2012 and, in particular, detailed particulars of any allegation that Mr Bone knew the representations were untrue. The Commissioner did not respond. Further, when the disciplinary application was first filed, Mr Bone complained about the absence of particulars in charge 8 and the Tribunal directed that they be supplied.
The Commissioner has never disclosed any evidence to support the allegation that Mr Bone knowingly misled either the bank or the AKF, or breached his duty of candour. Allegations of this kind involve, effectively, a charge of fraud, and are very serious. It is a trite proposition that they should not be made lightly.[30]
[30]Dal Pont, Lawyers’ Professional Responsibility (2012, 5th Ed, Thomson Reuters), 17.220.
On 12 December 2012 the Commissioner asked Mr Bone not to ‘progress’ matters relating to these charges and they were discussed again in January 2013. In a letter of 13 March 2013 the Commissioner said that he had ‘… reviewed the evidence in this matter and taken into account the submissions made on behalf of Mr Bone’ and that ‘… following that review, the Commissioner has decided not to proceed with charges 4 – 8 in the discipline application’.
Amongst the Commissioner’s documents is one relating to its internal work in evaluating the case against Mr Bone and also, showing occasions in which advice was sought from both senior and junior counsel. It shows no more than that the matter did not, as it were, go to sleep in the Commissioner’s office – there were, for example, five advices from senior and junior barristers between 12 December 2012 and 30 May 2013, but their purpose is not disclosed.
What is disclosed is that after the disciplinary charge was brought on 14 June 2012 there was no material communication about charges 4 – 8 or their particulars between the parties save for Mr Bone’s Response, filed in QCAT on 20 August 2012. The inescapable conclusion is that the ‘review of the evidence’ and the ‘submissions made by Mr Bone’, referred to in the Commissioner’s letter of 13 March 2013, can only be references to evidence gathered, and submissions made by Mr Bone or on his behalf, before the discipline application was even filed.
In written submissions on costs the Commissioner says that the charges were initiated on the basis of the evidence he had but, then, he reviewed them and took advice and eventually concluded that they should not proceed. Such occurrences are, it is said, ‘regrettable’ but sometimes arise in a regulatory body’s discharge of its statutory obligations in a protective jurisdiction, and a costs order in Mr Bone’s favour is not justified.
That description of the Commissioner’s role, and the burdens attached to it, is readily understood and accepted. It might have more weight here were it not the case that, as is apparent, no new evidence appeared and nothing material occurred between the time the discipline application containing these charges was filed, and the time the Commissioner decided not to proceed with them.
That circumstance puts the matter within those contemplated by Byrne SJA in Atkins[31], in that it fairly brings into consideration the question whether the Commissioner, appropriately advised, should have recognised there was no reasonable likelihood of success before the disciplinary charge was laid.
[31]Legal Services Commissioner v Atkins [2009] LPT 10 at [89].
There is nothing to suggest the Commissioner was under any time constraint, or pressure, to bring these charges in mid-2012. It is not unfair to assume that, in bringing them, he thought they had some substance and merit. It is compelling that, after bringing them, he subsequently changed his mind and decided they had little prospect of resulting in an adverse finding against the practitioner, and that he should withdraw them. That event, involving a complete reversal, casts a retrospective pall over the advisability of bringing the charges in the first place.
While it is important that the Commissioner is not dissuaded from bringing proceedings out of fear of adverse costs orders there is, as Byrne SJA recognised, a point at which fairness to respondents may necessitate costs awards to them. When, as here, serious charges involving allegations of fraud are brought but then withdrawn in circumstances where nothing happens after the charges are laid which alters their complexion, the practitioner may be said to have a justifiable claim to feel aggrieved and a fair argument to an entitlement to be recompensed in costs.
It will be recalled that, in his submissions about charges 1 and 2, the Commissioner signified that even if Mr Bone was found guilty of either or both, the LSC did not seek costs orders because of ‘special’ circumstances in the matter. Those circumstances were not expanded but it is compelling that the submission involves a tacit acceptance by the Commissioner that Mr Bone has, in common parlance, been put through the wringer in this matter and to pursue him for costs on the remaining two relatively minor charges would be harsh, and unfair. It is not unfair to observe that, if the circumstances are ‘special’ in the event of that outcome, they are more compellingly so when Mr Bone has escaped any adverse finding at all.
This combination of circumstances warrants, in the Tribunal’s view, a costs order in Mr Bone’s favour in respect of charges 4 – 8 inclusive, up to the time of their withdrawal to be assessed, again, on an indemnity basis.
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