Legal Services Commissioner v Clapin (No 2)
[2011] QCAT 444
•16 September 2011
| CITATION: | Legal Services Commissioner v Clapin (No 2) [2011] QCAT 444 |
| PARTIES: | Legal Services Commissioner (Applicant/Appellant) |
| v | |
| Peter Ross Clapin (Respondent) |
| APPLICATION NUMBER: | OCR256-10 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Justice Alan Wilson, President Assisted by Mr Geoffrey Sinclair (Practitioner Member) Dr Margaret Steinberg AM (Lay Member) |
| DELIVERED ON: | 16 September 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. A compensation order is made under Part 4.10 of the Legal Profession Act 2007 in the amount of $7,500, to be paid by the respondent to the complainants Gary Ronald Stockdale and Jennifer Marie Fuller. |
| CATCHWORDS: | PROFESSIONS AND TRADES – LAWYERS – COMPLAINTS AND DISCIPLINE –DISCIPLINARY PROCEEDINGS – COMPENSATION ORDER – where an Australian legal practitioner was publicly reprimanded and ordered to pay a pecuniary penalty for four counts of unsatisfactory professional conduct – where the lawyer acted for both parties to a transaction contrary to Queensland Law Society Rules 1987 – where two complainants subsequently sought compensation orders – whether there is sufficient causal connection between the charges of unsatisfactory professional conduct and the losses incurred by the complainants – whether the proper execution of security documents would have prevented the losses subsequently incurred by the complainants Legal Profession Act 2007, pt 4.10, ss 165(1), 465(1)(a), 466(3) Legal Services Commissioner v Clapin [2011] QCAT 339, cited |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of Queensland Civil and Administrative Tribunal Act2009 (QCAT Act).
REASONS FOR DECISION
Mr Clapin is an Australian lawyer. Disciplinary proceedings involving four charges were brought against him by the Legal Services Commissioner, and heard and determined by QCAT in July 2011: Legal Services Commissioner v Clapin [2011] QCAT 339.
The first of the four charges against Mr Clapin concerned a transaction in which he acted for all parties, in clear breach of r 85 of the Queensland Law Society Rules 1987, which applied at the time.
The third charge arose from the same matter, in which he was engaged by a Mr Stockdale and Ms Fuller in the transaction which involved a loan, from them, to Mr Stockdale’s sister for two specified investment projects. The loan monies were withdrawn from Mr Clapin’s trust account and paid out for purposes associated with the two projects, without first obtaining approval from them or the execution of documents intended to secure the loan.
In the disciplinary proceedings Mr Clapin was publicly reprimanded and ordered to pay a pecuniary penalty of $7,500 and the Commissioner’s costs, fixed at $2,500. Because Mr Stockdale and Ms Fuller had indicated an intention to apply for compensation from Mr Clapin it was also ordered that they, and he, exchange written submissions in connection with the claim. Each has done so.
Under pt 4.10 of the Legal Profession Act 2007 this Tribunal can make a compensation order in favour of complainants who have suffered pecuniary loss because of misconduct by a legal practitioner that constitutes unsatisfactory professional conduct, or professional misconduct. The first and third counts, relevant to this claim for compensation, were categorised as unsatisfactory professional conduct – that is, conduct happening in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.
This Tribunal may make a compensation order if it is satisfied that the complainant has suffered pecuniary loss because of the misconduct, and that it is in the interest of justice that an order be made.[1] The order may not exceed $7,500 unless the complainants, and the lawyer, consent.[2] Mr Clapin’s submissions dated 4 June 2011 do not signify that he consents to any higher order. He says that he is ‘… in the hands of the honourable Tribunal in regard to the application’.
[1] Legal Profession Act 2007, s 165(1).
[2] Section 466(3).
In their submissions Mr Stockdale and Ms Fuller say that Mr Clapin ‘failed to protect’ their money when it was in his trust account. They say that the transaction behind the third charge, summarised above, involved re-financing three properties they own. They sent instructions to Mr Clapin via a Mr Byrne, who was apparently involved in the transaction on the other side of the record, with Mr Stockdale’s sister, that the ‘necessary paperwork’ would be executed and signed before loan monies were handed over; and, that the paperwork included guarantees and a Deed of Agreement.
Documents produced to the Tribunal by the Commissioner in the course of the proceedings against Mr Clapin show that on 28 November 2005 Mr Byrne instructed Mr Clapin to prepare documents evidencing a loan from GarJen Investments Pty Ltd for $450,000 to Berygail Investments Pty Ltd, in exchange for certain benefits but, relevantly, secured by a personal guarantee from Mr Byrne, a guarantee from Berygail Investments Pty Ltd, and a fixed and floating charge over the assets of that company. An undated Deed of Agreement between GarJen and Berygail recites an agreement in these terms and specifically provides that before the loan funds are available certain guarantees and securities are to be provided – a Deed of Guarantee from Berygail, another from Mr Byrne, and another from Queensland Resource Trust Pty Ltd; and, a fixed and floating charge over Berygail’s assets.
Mr Stockdale and Ms Fuller assert that $320,000 was paid out from Mr Clapin’s trust account to Berygail and to another party before any of these security documents were provided, or executed. In his submission of 31 July 2011 Mr Stockdale says that he was not advised that this transaction might occur, or that it had occurred, or that it happened without provision of the security documents. He says that, had his instructions been sought in those circumstances he would have directed that payments not be made until the security documents were in place.
[10] Mr Stockdale and Ms Fuller were the shareholders and directors of GarJen Investments Pty Ltd. In his submissions Mr Clapin accepts that he received instructions from Mr Stockdale and Ms Fuller in respect of the refinancing of their properties, and to ‘… prepare the documentation for their loan of the funds to Berygail Investments Pty Ltd’. Mr Clapin also agrees that, while it was the intention of Mr Stockdale and Ms Fuller to lend money to Berygail, he ‘… still had an obligation to the complainants to obtain their authorisation in writing prior to dispersing the funds’.
[11] Mr Clapin also frankly admits:
… because my firm was engaged by various members of the same family, some of whom were directors of the borrower and some of whom became lenders, then I cannot claim immunity from the suggestion that the loss would not have been suffered had the lenders had the benefit of independent legal representation before making the investment.
[12] Later, however, he says
… on one hand I don’t think I did anything in practical terms which contributed towards or which gave rise to, the problems which caused Mr Stockdale and Ms Fuller to suffer loss, however, I cannot escape the fact that without ever intending to, I acted for both parties and therefore it is open to the Tribunal to draw the inference that I did contribute towards their loss.
[13] It is the combination of the offending which led to the first and third charges which points to a finding that, in the circumstances arising here, the complainants have suffered loss because of Mr Clapin’s conduct. The first charge meant that the complainants were denied the opportunity for proper, independent legal representation in respect of the transaction.
[14] The circumstances surrounding the third charge, and whether they give rise to a right to compensation, hinge upon Mr Stockdale’s assertion that he and Ms Fuller would not have permitted the paying out of their loan monies from Mr Clapin’s Trust account unless and until the security documents were properly completed.
[15] Mr Clapin does not deny that assertion. The test under s 465(1)(a) involves, on its face, one that is to be determined on the balance of probabilities.
[16] While it is not clear that the execution of the documents would have prevented the losses subsequently incurred by the complainants, the question is whether or not there is some causal connection between the first and third charges, and those losses; and, whether, on the balance of probabilities, any connection warrants an order under s 465(1)(a).
[17] In circumstances where the complainants assert that they would not have approved the payment of funds without provision of proper security via the proposed documents, and where Mr Clapin was wrongly acting for all parties in the transaction, it is compelling that sufficient connection exists. Once that conclusion is reached, it is also clear that the interests of justice require the making of a compensation order.
[18] On the face of the documents which underlie the transaction the initial loss was that of GarJen Investments Pty Ltd. The evidence shows, however, that Mr Stockdale and Ms Fuller borrowed to provide funds to that company, of which they were the sole directors and shareholders. In the absence of any contradictory evidence it is also reasonable to assume that they have personally suffered loss. An order should be made that compensation of $7,500 be paid to them.
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