Legal Services Commissioner v Mugford (No 3) - [2016] QCAT 417

CITATION:

Legal Services Commissioner v Mugford (No 3) [2016] QCAT 417

PARTIES:	Legal Services Commissioner (Applicant)
v
Rodney Jeffrey Kenneth Mugford (Respondent)

APPLICATION NUMBER:

OCR009-14 & OCR165-14

MATTER TYPE:

Occupational Regulation Matters

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Justice DG Thomas, President
Assisted by:
Ms Megan Mahon, Legal panel member
Ms Julie Cork, Lay panel member

DELIVERED ON:

11 November 2016

DELIVERED AT:

Brisbane

ORDERS MADE:

1. The application for a Compensation Order made by Mrs Greenhalgh is dismissed.

CATCHWORDS:

PROFESSIONS AND TRADES – LAWYERS – COMPLAINTS AND DISCIPLINE – PROFESSIONAL MISCONDUCT AND UNSATISFACTORY PROFESSIONAL CONDUCT – OTHER MATTERS – where the respondent was found to have engaged in unsatisfactory professional conduct – where the respondent’s client filed a Notice of Intention to Seek Compensation Order in relation to loss suffered due to the respondent’s failure to settle the sale of her house on the settlement day – where pecuniary loss suffered must be because of the conduct pursuant to section 464 of the Legal Profession Act 2007 (Qld) – whether the making of a compensation order is in the interests of justice

Legal Profession Act 2007 (Qld) ss 464, 465(1)(a), 466(3)
Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 32

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’).

REASONS FOR DECISION

Under section 464 of the Legal Profession Act 2007 (Qld) (‘LPA) a compensation order relevantly includes an order that a law practice pay to a complainant an amount by way of compensation for pecuniary loss suffered because of conduct that has been found to be… unsatisfactory professional conduct or professional misconduct.”
An order with respect of compensation relating to pecuniary loss must not be made unless the tribunal is satisfied[1]:
a) that the complainant has suffered pecuniary loss because of the conduct concerned; and
b) that it is in the interests of justice that an order of this type be made.
[1]Legal Profession Act 2007 (Qld) s 465(1)(a).
A compensation order requiring payment of pecuniary loss of greater than $7,500.00 must not be made unless the complainant and the law practice both consent to the order.[2]
[2]Ibid, s 466(3).
As is obvious from the provisions of section 465(1)(a) of the LPA, pecuniary loss must be suffered because of the conduct concerned, that is, it was an unavoidable consequence of the conduct and flowed directly from the conduct.
Mrs Pamela Greenhalgh has given Notice of Intention to Seek Compensation Order. That notice was received on 13 July 2016.
In a letter which accompanies the notice, Mrs Greenhalgh says:
“I Pamela Greenhalgh have been affected by Rodney Mugford’s negligence with a major loss in a financial way as I had to drop $30,000 to salvage the sale because he failed to do correct searches in time for settlement. In doing so we had to ask for an extension on settlement, which then the borrower wanted to withdraw from sale, this was not an option for me as I had already put a contract on my present home to settle the same. So to do that I had to drop my price by $30,000 to recover sale to keep the house I now call home. This not only caused me financial loss and ill health but also has me having to put a small mortgage, which was due to the reduction in price on Runcorn.
This may not seem much too working people but when one is living on a pension it is quite a lot”

The Charge

In the charge against Mr Mugford concerning Mrs Greenhalgh, Mr Mugford conceded that he failed to conduct the required searches in good time to allow the mortgage documentation to be prepared in time for settlement. Mr Mugford also failed to ensure that settlement went ahead on the due date, and did not respond to attempts by his client to contact him by telephone, email and at his office.
It was the finding of the Tribunal that Mr Mugford did not conduct the matter on behalf of his client in an efficient and expeditious fashion and that his conduct fell short of the standard of competence and diligence that a member of the public was entitled to expect of a reasonably competent Australian Legal Practitioner. On that basis, the conduct amounted to unsatisfactory professional conduct.

The Background

Mrs Greenhalgh relies upon affidavits filed in the proceedings.
Mrs Greenhalgh and her son Robert entered into a contract on 20 October 2011, for the sale of a house at 19 Bolwell Street, Runcorn. Settlement date was 30 November 2011. Mr Mugford was the solicitor acting in relation to the sale.[3]
[3]Affidavit of Wayne Donald Greenhalgh, sworn 6 March 2015, paragraph 2.
On 11 November 2011, Mrs Greenhalgh and her son signed a contract to purchase a property at 11 Eglentin Street Torbanlea. The contract settled on the same day as the Runcorn sale (this was a special condition of the contract of purchase).[4]
[4]Ibid, paragraph 8.
Again, Mr Mugford was the solicitor nominated to act in the matter. Mr Wayne Greenhalgh assisted his mother and brother as to these contracts.[5]
[5]Ibid, paragraph 3.
On Friday 25 November 2011, or Saturday 26 November 2011, the financier from RESI Home Loans called Mrs Greenhalgh to say there was a problem. He said that “he had been trying to get in touch with Mr Mugford himself but had been unable to do so”. He said that RESI could not prepare the mortgage documents as RESI had not been provided with the results of the council searches and RESI would need them straight away if settlement was to go ahead on 30 November 2011. It was standard procedure for the financier to require 2 days to prepare for settlement once the mortgage documents were signed and the result of the search was necessary before the mortgage documents could even be issued for signing.[6]
[6]Ibid, paragraph 16.
Mr Greenhalgh spoke with Mr Mugford on 28 November, who said he had requested the council searches over ten days previous. It was agreed that it would be necessary for the settlement to be delayed.[7]
[7]Ibid, paragraph 19.
Mr Greenhalgh spoke to the real estate agent about delaying the sale of the Runcorn property. He was told that the purchaser would no doubt terminate the contract if settlement was delayed as the purchaser had located another cheaper property.[8]
[8]Ibid, paragraph 20.
Mr Greenhalgh attempted to call Mr Mugford to get advice, but without success.
Mr Greenhalgh then spoke with the real-estate agent acting in the purchase of the Torbanlea property and it was agreed that the settlement would be delayed by 2 days that is to the 2 December but that Mrs Greenhalgh would be granted vacant possession on 30 November. The real estate agent offered to undertake the necessary searches for herself and obtained the searches that same day.
She provided them to Mr Greenhalgh on 28 November.[9]
[9]Ibid, paragraph 23.
The same day Mr Mugford called to say that he had received the searches and sent them to the financier, which was preparing the mortgage documents immediately. Mr Greenhalgh drove from Runcorn into Brisbane and collected mortgage documents that afternoon.[10]
[10]Ibid.
The next day, 29 November, Mr Greenhalgh drove 4.5 hours to Chinchilla where his brother was working. His brother signed the documents. His mother signed on the same day.[11]
[11]Ibid, paragraph 24.
Late that evening Mr Greenhalgh forwarded an email to Mr Mugford expressing his annoyance. He left several messages as well but received no response.[12]
[12]Ibid, paragraph 25.
The next morning on 30 November, the signed documents were provided to the mortgagor and again Mr Mugford was unavailable.[13]
[13]Ibid, paragraph 26.
Mr Greenhalgh also learnt that the purchaser of the Runcorn property had refused to extend settlement and wanted to terminate. He became very anxious.[14]
[14]Ibid.
Mr Greenhalgh initially discussed the matter with Mr Mugford, but later, Mr Mugford was impossible to contact.[15]
[15]Affidavit of Wayne Donald Greenhalgh, sworn 6 March 2015, paragraph 28 and 29.
Because of Mr Mugford’s inaction and the fact that he could not be contacted, Mr Greenhalgh spoke directly with the purchaser’s agent. He sought an extension of the settlement of the purchase. The purchaser refused. Initially Mr Greenhalgh offered to drop the purchase price from $430,000.00 to $420,000.00, then to $410,000.00 and then finally to $400,000.00 after “Mum told me she just wanted to get it over with”.[16]
[16]Ibid, paragraph 30.
At some stage, the agent in the Runcorn transaction called Mr Greenhalgh to say that the offer of a price reduction to $400,000.00 had been accepted and that settlement would go ahead the following day.[17]
[17]Ibid, paragraph 33.
It seems that the purchasers of the Runcorn property did not wish to proceed and would have simply terminated the agreement. A letter was sent from Tay Lawyers to Mr Mugford on 30 November 2011 at the time the various offers were being communicated. Mr Mugford had apparently offered a $500.00 reduction in exchange for an extension to 2 December 2011.
The facsimile transmission reads:
“We have just received our client’s instructions that our client does not accept your client’s offer and is not agreeable to your clients request for extension of settlement. In this regard, we note that settlement was due to take place today, 30 November 2011, at perpetual, level 16 288 Edward Street Brisbane. We further note that your client’s did not call upon settlement to take place and they shall provide our office with cheque details. Therefore your client was not ready willing and able to settle in accordance with the terms of the contract.
In the circumstances our client has requested the contract be mutually terminated and the deposit be refunded to our client and neither party should have any claim against the other”.
The contract for the purchase of the Torbanlea property was subject to the settlement of the sale of the Runcorn property. Special condition 8 to that contract, which was exhibited to an affidavit by Pamela Greenhalgh sworn on 6 September 2015 was as follows:
“This contract is subject to and conditional upon the satisfactory settlement of the sale of the buyer’s property at 19 Bolwell Street Runcorn Qld 4113 by the date of settlement of this contract.”
Moreover, special condition 9 provided, “in the event that the above special condition (8) is not met by the buyer or waived by the buyer then either party may terminate this contract by notice to the other party and all monies paid hereunder shall be repaid in full”.
As the circumstances unfolded, it seems that Mrs Greenhalgh had a number of options which included:
a) Allow the sale of her Runcorn property to be terminated (which according to the facsimile from Tay Lawyers would have had no financial consequence for Mrs Greenhalgh) which would have meant that the second contract, the purchase at Torbanlea property, would itself have terminated pursuant to special condition 8, again with no financial consequence because of the provisions of special condition 9.
b) Settle on the sale contract with respect to the Runcorn property on the due date of 30 December, (without the need for any extension or a reduction in the sale price) with the mortgage being paid out from the sale price. Mrs Greenhalgh would have vacant possession of the Torbanlea property from 30 December and then would settle on the purchase of the Torbanlea property 2 days after the settlement of the Runcorn property. As at 30 December, Mrs Greenhalgh was aware that the mortgage documents were signed and with the financier, who was making preparations for settlement on the delayed date which was a date consistent with the required time suggested by the financier.
Whilst the actions taken with respect to the sale of the Runcorn property were at a time of great stress for the Greenhalgh family, it seems that there were other options, which did not involve the loss at the level suffered, available to Mrs Greenhalgh.
Allowing both settlements to terminate would have involved no cost. Whether that might have involved an ultimate loss is a matter of conjecture and is not quantifiable at this point in time.
The other option would have been to settle on the Runcorn property having been in contact with the financier and being aware of the timeframes which were involved in settlement of the purchase. This would have allowed the settlement of the purchase of Torbanlea to proceed at the revised date as agreed, with early possession being granted.
In the circumstances, the conduct of Mr Mugford was totally unsatisfactory and has caused great anxiety and stress to the whole Greenhalgh family. He has, of course, been disciplined for his conduct.
However, the Tribunal can only make a compensation order where the pecuniary loss suffered has been suffered because of the conduct – in other words, the person suffering the conduct had no option or choice but to suffer the loss as a result of the conduct. That did not occur in this case.
Section 465(1) of the LPA requires that the complainant suffers pecuniary loss because of the conduct and also that it is in the best interest of justice that an order be made.
Had the section said “or” it is in the best interest of justice that an order of this type be made then the Tribunal would have been minded to make such an order because of the conduct of Mr Mugford.
However, the requirement is that the pecuniary loss must be suffered because of the conduct and also that it be in the best interests of justice.
In those circumstances, the Tribunal is unable to make a compensation order in favour of Mrs Greenhalgh of the type mentioned in section 464(d) of the LPA.
The Tribunal therefore orders that the compensation order is dismissed.