New South Wales Bar Association v Bland - [2010] NSWADT 34

No judgment structure available for this case.

CITATION: NSW Bar Association v Bland [2010] NSWADT 34

DIVISION: Legal Services Division

PARTIES:
APPLICANT
Council of the New South Wales Bar Association
RESPONDENT
Timothy Owen Bland

FILE NUMBER: 082019

HEARING DATES: 20, 21, 22 April, 25 August 2009

SUBMISSIONS CLOSED: 7 December 2009

DATE OF DECISION:
4 February 2010

BEFORE: Robberds L QC- Judicial Member; Robinson W QC -Judicial Member; Bubniuk L - Non-Judicial Member

CATCHWORDS: Disciplinary application - unsatisfactory professional conduct

LEGISLATION CITED: Legal Profession Act 1987
Interpretation Act 1897
Home Building Act 1989
Legal Profession Act 2004

CASES CITED: Attorney-General v Maksimovich (1985) 4 NSWLR 300 Constructions Pty Limited [2008] NSWCA 178
Fairfield Municipal Council v McGrath [1984] 2 NSWLR 247
Fowler Corbett and Jessop trading as Haydon Fowler Corbett Jessop v Toro Heydon v NRMA Limited (2000) 51 NSWLR 1
Jones v Dunkel (1959) 101 CLR 298
Lemoto v Able Technical Services Pty Limited (2005) 63 NSWLR 300
Manly Council v Byrne [2004] NSWCA 123 Studer v Boettcher [2000] NSWCA 263
TCN Channel Nine Pty Ltd v Australian Mutual Provident Society [1982] 62 FLR 366
Whyked Pty Limited v Yahoo! 7 Pty Limited [2008] NSWSC 477

TEXTS CITED: Fleming, The Law of Torts, 9th edition

REPRESENTATION:
APPLICANT
P G Mahony SC, barrister and P J Nolan, barrister
RESPONDENT
G P Craddock SC, barrister

ORDERS: 1.The Tribunal finds that Timothy Owen Bland engaged in unsatisfactory professional conduct with respect to the conduct referred to in paragraphs 200, 205, 210 and 213 of the Reasons for Decision
2.The Tribunal grants liberty to apply in respect of the description of the conduct and thus the form of the above order
3.The Tribunal orders that the application be listed 14 days after publication of the Reasons for Decision, for directions as to the further orders to be made as a result of the above findings and in relation to Ms Elkins’ claim for compensation.

1 On 25 August 2008 the Council of the New South Wales Bar Association (the Council) filed in the Tribunal an application for original decision which sought the following orders against Timothy Owen Bland (the Barrister):

ii.an order in terms of any one or more of the subparagraphs of subsection 562 (2) or the subparagraphs of subsection 562 (4) of the Legal Profession Act 2004;

iii.an order that the decision of the Tribunal be published;

iv.an order that the Barrister pay the costs of the Council in the proceedings;

v.such further or other orders as the Tribunal deems fit.

For the reasons set out below the Tribunal is of the view that the Barrister engaged in unsatisfactory professional conduct.

2 The grounds set out in the Council’s application were:

ii.Failing to act on instructions to liquidate the builder on 30 May 2003;

iii.Placing the client under pressure to settle on unfavourable terms because of poor advice and poor running of the case.

3 The application then set out 62 paragraphs of particulars.

4 Counsel for the Council submitted that there was but one complaint and stated that the Council sought one finding of unsatisfactory professional conduct based on three grounds each of which was discrete. Counsel for the Barrister accepted there was only one complaint. Without deciding that there is only one complaint, the Tribunal will proceed at this stage of the proceedings on the basis that there is only one complaint.

The Barrister’s reply

5 The Barrister filed a reply to the application. In that document he asserted that the Tribunal should not make the orders sought and he denied that he was guilty of:

ii.failing to act upon instructions; or

iii.placing the client under pressure to settle on unfavourable terms.

6 On 14 December 2005 Ms Sharyn Elkins wrote to the Legal Services Commissioner making “a complaint regarding the conduct of my Barrister in proceedings which I had against Vero Insurance in respect of property damage to my home at …”. In that letter Ms Elkins set out her version of events which included her exchanging contracts in April 1998 for the purchase of the property on which her home was to be built by a builder; the builder refusing to rectify damage to her home; her commencing proceedings, without legal representation, in the Consumer, Tenancy and Trader Tribunal (CTTT) against the builder and the insurer under the Home Building Insurance Act 1989; her retaining Ms Marina Voncina as her solicitor in January 2001 to act for her in those proceedings; the engagement of the Barrister to act for her in those proceedings; the settlement of the proceedings against the insurer on terms (which are set out in detail below); the order made by the CTTT that the builder pay to her $95,674.41 (plus costs) ; the steps taken to recover that amount which included commencing proceedings in the District Court of New South Wales against the builder and the insurer; the successful notice of motion filed by the builder (seeking an order that the proceedings be struck out as an abuse of process); the amendment of the statement of claim to make a claim only against the insurer; the dismissal of notices of motion filed by Ms Elkins and the insurer; the dismissal of a notice of motion filed by Ms Elkins seeking an order setting aside a subpoena issued by the insurer; and the settlement of the proceedings against the insurer for $75,000 inclusive of costs.

7 Ms Elkins also stated that she had paid the Barrister’s fees up to November 2004, but did not agree to pay the final account in full. She stated that the Barrister agreed to $5,500 but she was reluctant to pay even this amount and she requested “that a waiver of his fees be granted, considering all of the above issues” (exhibit F, RM1, pages 1 – 4).

8 The Legal Services Commissioner referred the complaint to the Council for investigation and report.

9 On 10 January 2006 the Deputy Director, Professional Conduct of the New South Wales Bar Association (Deputy Director, Professional Conduct) wrote to Ms Elkins setting out what was understood to be her grounds of complaint. They included:

ii.refusal to follow instructions to finalise the builder’s insolvency; and

iii.placing Ms Elkins under pressure to settle because of poor advice (exhibit F, RM1, pages 63 – 65).

10 On 30 January 2006 Ms Elkins replied to the effect that the Association had correctly identified her complaints (exhibit F, RM1, page 66).

11 In that letter, she stated that she was no longer concerned about the final payment of the Barrister’s fee of $5,500. She stated however that she would like to receive some kind of compensation “for the three years of unnecessary stress, wasted time and money, for which I feel Mr Bland is directly responsible.” (exhibit F, RM1, page 66).

The facts

12 In April 1998 Ms Elkins exchanged contracts for the purchase of a property and completion of the sale took place in September 1998. The home builder, Australian Conquest (NSW) Construction Pty Ltd (the Builder) refused to rectify drainage problems and sub-standard building work and later a termite infestation which was discovered early in January 1999. Acting for herself, Ms Elkins commenced proceedings in the Fair Trading Tribunal against the Builder, Mr Les Paton, a director of the Builder, and Royal & Sun Alliance Insurance Limited (the Insurer) which had insured Ms Elkins under the Home Building Act 1989 (the Act) (Ms Elkins’ affidavit sworn 26 August 2008 para 3. This affidavit became exhibit C in the proceedings.).

13 Initially Ms Elkins acted for herself but in January 2001 she retained Ms Marina Voncina to act as her solicitor in the proceedings (exhibit C, paras 4 and 5).

14 In June 2002 the Barrister was briefed by Ms Voncina to appear for Ms Elkins on the hearing of the application in the CTTT (Barrister’s affidavit sworn 9 January 2009 (Barrister’s affidavit), para 4).

15 The Barrister was admitted as a solicitor in February 2001, and upon changing roles, commenced practice as a barrister on 16 February 2002 (Barrister’s affidavit, para 3).

16 When he received the brief, the Barrister had conducted about six hearings, three in building cases and two before the CTTT. He gave evidence that he believed that he had a reasonable grasp of the law applying to building disputes and that he had a solid background in building and construction (Barrister’s affidavit, para 6).

17 The proceedings had been on foot for a considerable time. Evidence had been served by each party. Lay and expert evidence had been served on behalf of Ms Elkins concerning the defects in the building work on the house and as to its cause being the poor workmanship of the Builder. The evidence included the cost to rectify the defects and there was evidence as to the diminution in value to the property by reason of the termite infestation (Barrister’s affidavit, para 7).

18 The Builder and the Insurer filed evidence in support of the proposition that Ms Elkins’ claim was valued at best at approximately $15,000 and that Ms Elkins’ own landscaping work caused 95% of the damage. It was the Builder’s proposition that it should be liable for a maximum of $796 (Barrister’s affidavit, para 9).

19 The Insurer objected to being joined in the proceedings alleging that there was no insurable event. It raised a number of arguments. It maintained that the policy only responded in respect of defects falling within the warranties imposed upon the Builder by the Act. There was a dispute as to whether the alleged defects amounted to breaches of the statutory warranty in section 18B of the Act. The Insurer also argued that the policy only responded if the Builder was insolvent, had died or had disappeared (Barrister’s affidavit, para 10).

20 During the afternoon of the day before the proceedings were fixed for hearing in the CTTT negotiations took place between the Barrister and Ms Voncina on behalf of Ms Elkins and counsel and a solicitor on behalf of the Insurer. The Barrister and Ms Voncina took the view that the Insurer had a fair case to be released from the proceedings. They wished to facilitate that if possible, as a costs protection measure but also wanted to secure some advantage for Ms Elkins if they could. The advantage which they sought was a concession by the Insurer that in exchange for release from the proceedings, the Insurer would meet a claim by Ms Elkins if she received an award from the CTTT but was unable to secure payment from the Builder because the Builder was insolvent (Barrister’s affidavit, para 11). What the Barrister and Ms Voncina were seeking to achieve by agreement with the Insurer was the elimination of what the Barrister described as “the otherwise necessary step of winding up the Builder” (Barrister’s affidavit, para 24).

21 The Barrister and Ms Voncina had been instructed that the Builder had ceased home building and that Ms Elkins would be unable to recover from it as it had no assets (Barrister’s affidavit, para 12).

22 As the Barrister and Ms Voncina saw it, if the Builder was insolvent and could not pay, the normal course would be to wind up the Builder and share in the distribution of its assets. Ms Elkins would then make a claim on the insurance policy with the possibility of the Insurer raising, as possible defences: (a) the scope of statutory defects; (b) the question whether costs were covered by the policy; and (c) certain landscaping works undertaken by Ms Elkins had caused the defects in the first place and were thus not covered under the policy. The Barrister and Ms Voncina sought a concession from the Insurer that it would pay any moneys which were not recovered from the Builder but which had been awarded by the CTTT. When describing the proposal in his affidavit, the Barrister stated: “It all hinged upon the builder committing an act of insolvency.” It seemed to the Barrister and to Ms Voncina reasonably likely that the Insurer would agree to such a concession as it was able to see, by reason of its involvement in the CTTT proceedings, that the claim was genuine (even if it thought it had been overvalued) and that the Builder was most unlikely to be able to meet any award by the CTTT (Barrister’s affidavit, para 13).

23 The Barrister put the proposal to counsel for the Insurer, namely, Ms Elkins would let the Insurer out of the proceedings if she received a concession that if the Builder could not pay out on an award made by the CTTT because the Builder was insolvent, then the Insurer would pay the claim under the policy. During the negotiations the Barrister was certain that counsel for the Insurer indicated to him that the Insurer was amenable to the proposal and would make the concession in exchange for being released from the CTTT proceedings (Barrister’s affidavit, para 14).

24 Counsel for the Insurer took on the role of drafting the terms of settlement and the Barrister received the first draft at about 1.30pm. The Barrister and Ms Voncina agreed that the document did not provide the concessions they were hoping to achieve and there was further discussion between the Barrister and counsel for the Insurer. There were then at least two other drafts sent during the afternoon. At about 6.30pm the Barrister was driving his car and received a telephone call from Ms Voncina. He pulled over and she read to him what was described by the Insurer’s solicitor as an alternative clause 8 of the proposed terms of settlement. That clause seemed to the Barrister to provide for the concession that had been agreed between the parties in the oral discussions. He said words to the effect that he would advise Ms Elkins to let the Insurer out upon the basis of an agreement in those terms. Ms Voncina agreed that the clause achieved the objective of securing the concession that had been agreed between the parties (Barrister’s affidavit, para 15).

25 This clause 8 was then incorporated in handwriting into a nine clause terms of settlement deed. It appears that the other clauses had already been agreed.

26 The document was signed by the solicitors on behalf of Ms Elkins and the Insurer and it was agreed that a notice of discontinuance would be filed in the CTTT against the Insurer.

27 Clause 8 of the deed was in the following terms:

Royal & Sun Alliance acknowledge that to the extent that any award or order of the Tribunal falls within the policy by the terms of the award or order that the same can sound an insolvency claim under the policy to the extent that such amount is unable to be recovered from the respondent builders by reason of their insolvency, death or disappearance. (exhibit F, RMI, page 5).

28 At the time the Barrister negotiated the terms of settlement with counsel for the Insurer, he had had previous dealings with some home owner warranty insurance policies and those policies provided that they would answer a claim that was made in the circumstances where the builder “has either disappeared, has died or become insolvent under the Act” (22.4.09 T49\34 – 38).

29 On the following day counsel for the Builder informed the Tribunal to the effect that the principal of his client was terminally ill with cancer and had no interest in the proceedings and would not be taking any further part. Thereafter the Builder did not appear and took no part in the proceedings (Barrister’s affidavit, para 17).

30 The Barrister then presented the client’s case and the Member of the CTTT stated that he was satisfied that the claim was made out. The CTTT ordered the Builder to pay the sum of $95,674.41 and ordered that the Builder pay Ms Elkins’ costs as agreed or assessed without including 19 August 2002 and on an indemnity basis from 20 August 2002 to the conclusion of the proceedings, the costs of the final hearing on 4 and 5 September 2002 to be limited to 1.5 days (Barrister’s affidavit, para 18).

31 When the proceedings before the CTTT concluded on 4 September 2002, Ms Elkins had a conversation with Ms Voncina and the Barrister outside the CTTT. Ms Elkins gave evidence that either Ms Voncina or the Barrister said:

It could be very expensive to wind up the company. There is no point in doing that. You don’t have to go there, because once we have evidence of non-payment in accordance with the terms of the settlement, that is an act of insolvency.

The terms of settlement are all that we have to rely on and that is as good as winding up. If the builder can’t pay that’s as good as the company being insolvent (exhibit C para 21).

32 In paragraph 30 of his affidavit, the Barrister responded to that evidence. He stated that he could not recall which of Ms Voncina or himself said those words which are first quoted above. He said that he accepted that one of them probably said something to that effect. It was consistent with their thinking. He denied that he said the words “It could be very expensive …” and he said he did not know if Ms Voncina said those words. He did not deny that he said the words attributed to him by Ms Elkins in the second quotation.

33 The Barrister stated that he did not know “at that time that by reason of s.45 of the Fair Trading Tribunal Act, the Tribunal was not obliged to state there and then its reasons for making its determination”. The Barrister did not appreciate then that only upon an application being made would such reasons be provided. The only cause of action argued by the Barrister was to the effect that the Builder provided but would not rectify substandard building work (Barrister’s affidavit, para 19).

34 In paragraph 20 of his affidavit, the Barrister stated: “When, much later, it became clear that the Insurer, despite the evidence before the Tribunal, would not only not accept that the Builder was insolvent, but would not accept that the sum ordered by the CTTT in fact referred to substandard building work for which the policy indemnified Mrs Elkins up to $200,000, it was too late to obtain reasons from the Tribunal.”

35 Ms Voncina received from the CTTT a certified copy of an order for the payment of money – being $95,674.41. That document was dated 29 October 2002. On the following day a notice of order was forwarded by the Registrar of the CTTT to Ms Voncina amending the orders sent on 11 September 2002. This notice of order amended the claim, if amendment were necessary, to include a claim for diminution of value of the property in the sum of $30,000. The notice of order ordered the Builder to pay $95,674.41, removed Mr Paton as a respondent and included the order for costs (exhibit C, SE1, page 14).

36 On 2 December 2002 the Barrister wrote to Ms Voncina confirming that her agent had filed in the District Court a certificate of judgment. The Barrister then gave the following advice in the letter:

“If you/your client fails to pay the judgment amount or enter into a schedule of payments acceptable to our client within 28 days, we will make a statutory demand upon them as initiation of the winding up process. As noted in our previous correspondence we will seek the costs of this action against the directors directly.

Costs will include all costs incurred on an indemnity basis. This whole action is as result (sic) of your client’s failure to comply with the statutory warranties under the Home Building Act 1989 [NSW]. We are instructed, that the recovery of costs of enforcement should be borne by your client as part of that action.”

You would then need to make a claim on the insurance policy under the terms of the agreement. If they failed to pay the claim then Mrs Elkins would then have the basis of an action against the insurer.

Please advise Counsel if there is anything else that you wish me to consider as part of this matter.” (Exhibit F, RMI, pages 186/7.)

37 In paragraph 21 of his affidavit, the Barrister referred to that letter and stated:

The advice that I gave by way of that letter was to the effect that steps should be initiated to wind up the building company. I advised that a claim be made upon the policy. In the event of a failure to pay, the clause in the settlement agreement would be engaged such that the insurer would be obliged to pay out upon Ms Elkins’ claim, failing which the insurer could be sued upon the agreement.

38 If by the first sentence of the passage quoted from paragraph 21 of his affidavit, the Barrister was intending to convey that he advised that an application be made to the Supreme Court to wind up the Builder if it did not pay, the Tribunal does not accept that he gave that advice. Such advice would have been contrary to the evidence given by the Barrister that it was his belief that the terms of settlement which he negotiated meant that it was unnecessary to wind up the Builder. Such advice would also have been contrary to the statement made by the Barrister or Ms Voncina on 2 September 2002 (see paragraphs 31 and 32 above). The Tribunal notes that Ms Voncina did not appear to be of the view that in his letter dated 2 December 2002, the Barrister gave advice that an application should be made to the Supreme Court to wind up the Builder if it did not pay – see Ms Voncina’s letter to Ms Elkins set out in paragraph 40 below.

39 Subsection 99 (1) of the Act relevantly provided:

b)a person on whose behalf the work is being done and the person’s successors in title against the risk of loss arising from a breach of a statutory warranty in respect of the work.

40 Paragraphs 22 – 26 of the Barrister’s affidavit, were as follows:

23. With the benefit of senior counsel’s advice, and a re-evaluation of the clause, I am no longer so sure of the opinion that the insurer, by way of clause 8, acknowledged an obligation to indemnify if it was shown that the builder was, in fact, insolvent. This question was, because of the settlement between Mrs Elkins and the insurer, never tested by a court. I now accept that, as a matter of construction, the drafting of clause 8 might not be such as to give effect to the position I had taken on Mrs Elkins’ behalf with the other parties. That is to say, I had been contending for such an acknowledgment on the part of the insurer, since it was a party to the Tribunal proceedings, and privy to the evidence of loss and its causes, and privy to assertions by the director of the building company as to his company’s lack of assets and cessation of trading.

24. I thought that the clause that was offered after negotiation achieved the desired ends of eliminating the otherwise necessary step of winding up the builder. I thought it a significant benefit to Mrs Elkins because, as I understood what was agreed between myself and the opponent, the time and expense of a winding up would achieve at the cost of that step precisely the position the insurer certainly knew to be the case; that is, that the builder was insolvent. I have to concede that my judgment might have been clouded by the fact that I firmly believed, as I do now, that the insurer had agreed with the concession we had sought, and was committed to properly documenting that concession. I had no reason to think then, and I have no reason to think now, that counsel for the insurer was endeavouring to achieve something other than the documentation of the agreed concession.

25. Upon re-evaluation, I now have doubts that the clause does achieve the ends for which I agitated in the negotiated settlement with the insurer in the Tribunal proceedings. On the view of the clause I now hold, it is well open to the view that it says little or nothing. The conclusion that I must now accept, albeit one of professional embarrassment, is that the clause of an agreement offered to me for consideration, upon the tacit assumption that it achieved that which had been agreed, was probably ineffective to record the agreement. It is an available view that the clause is nothing more than a hollow assertion of that which obtained under the policy without reference to the agreement between the parties.

26. The belief that I held as to the true effect of clause 8 was shared by Ms Voncina. She said, in her letter of 5 December 2002, page 25 in exhibit SE1 to Mrs Elkins’ affidavit:

“If they fail to pay the judgment debt then I need to issue on them a Statutory Demand which is in effect initiating a winding up of the company. When the Statutory Demand expires which is in a further 28 (Sic 21) days I will then make a claim on the insurer under the insurance policy and will rely on the Deed of Release that was signed between yourself and the insured’s solicitor. At that point they should pay. If the insurer for some reason refuses to pay up then you also have a claim against the insurer because they agreed to pay you if the builder has failed to meet any statutory demand.”

41 On 2 December 2002 Ms Elkins sent a facsimile letter to Ms Voncina and referred to a letter from Ms Voncina dated 26 November 2002 regarding outstanding accounts. She stated that as she had explained in her previous letter she was unable to pay any more money until she received payment of the money owed to her by the Insurer. She hoped the matter would be settled before Christmas and asked Ms Voncina to give her case priority and somehow enforce the debt before she went on leave. She said: “I am also in desperate need to be paid. As you know, I have spent every dollar I had fighting this case and have borrowed as much as I possibly can from family and friends (exhibit F, RM1, page 288).

42 In paragraph 29 of his affidavit the Barrister stated:

I spoke to Ms Voncina on 20 January 2003 after she had returned from holidays. The topic of the discussion was the winding up of the builder. I do not have a file note of the conversation, but I do have an actual memory of the gist of the conversation. She told me that Mrs Elkins would not fund the winding up of the builder. But that she wanted to continue to recover her award. It was as a result of this that I suggested that proceedings could be commenced against the insurer, enforcing the deed.

43 On 24 January 2003 Ms Voncina wrote to Ms Elkins informing her that she had prepared an affidavit to ground a writ of execution which would be lodged at the District Court on the following Tuesday. The letter stated that once that writ of execution had been served and no payment had been made, then in effect the Builder “has an act of insolvency. This then allows the terms of Settlement which we agreed with Royal & Sun Alliance to come into effect.” The letter went on to say that once she had confirmed the affidavit of service by the sheriff she would serve the documents on the Insurer and she would then call on the Insurer to make the payment (exhibit C, SE1, page 31).

44 On 25 February 2003 the Barrister forwarded to Ms Voncina a memorandum of professional fees. The memorandum described the matter as “8834 of 2002 ELKINS (district court judgment)”. The certificate of judgment in the District Court was given the number 8834 of 2002. The third entry in the memorandum recorded a telephone conference with Ms Voncina on an unspecified date in January 2003 for which a charge of $180 was made. The fourth entry (which was the last entry) recorded “Advice on service of process” on an unspecified date in January 2003 for which a further charge of $180 was made (exhibit C, SE1, page 34).

45 The Barrister gave evidence that the third entry in his memorandum of fees recorded that he and Ms Voncina had a telephone conference and the outcome of that was that he was told there would be no funding for the winding up of the Builder and he was asked to consider if there was another way of attacking the problem, which was where the advice on service of process came ( 21.4.09 T32\10 – 41).

46 After the unsatisfied execution of the writ of execution, the Barrister on 2 April 2003 drafted a letter for Ms Voncina to forward to McLachlan Chilton, the solicitors for the Insurer. In that draft reference was made to the unsatisfied execution of the writ of execution and the next paragraph stated:

The deed between parties at paragraph 8 entitles our client to an indemnity in the circumstances where the respondent committed an act of insolvency in failing to meet a demand for payment of the judgment (exhibit TOB1, page 15).

47 On 4 April 2003 McLachlan Chilton wrote to Ms Voncina referring to a letter which she had written on 27 March 2003. That letter of 27 March was not tendered in evidence to the Tribunal. On 10 April Ms Voncina wrote to the Barrister forwarding to him a copy of the McLachlan Chilton letter and also a copy of the letter written to that firm by Ms Elkins on 27 March 2003. Also enclosed was a copy of a letter written by Ms Elkins to Mr Geddes. Ms Voncina finished her letter by noting that Mr Curry (the solicitor for the Insurer) was still with McLachlan Chilton and that she assumed that it may come down to what was said on the night of the agreement. She said that they needed to discuss the next step (exhibit TOB1 to Barrister’s affidavit, page 17).

48 Paragraph numbered 2 in the letter from McLachlan Chilton dated 4 April 2003 (exhibit F, RM1, pages 161 – 2) was as follows:

i.The award or order of the Tribunal must fall within the cover provided for under the policy of insurance.

ii.The only claim which your client is entitled to raise pursuant to paragraph 8 of the Terms of Settlement is an “insolvency” claim. In this regard, no evidence has been provided that the builder is insolvent within the definition of that term in the policy.

iii.Your client’s entitlement to claim against our client insurer is restricted to any amount unable to be recovered from the builder by reason of the builder’s insolvency, death or disappearance. Non-levy under a writ of execution does not establish that the builder is either insolvent, dead or has disappeared.

iv.The orders made by the Tribunal in their notice dated 30 October 2002 do not specify or provide any breakdown in relation to the amount awarded by the Tribunal. Given that your client’s claim must fall within the terms and conditions of the cover provided for under the policy, we require you to provide us with an itemised breakdown of the amount awarded in your client’s favour by the Tribunal.

v.Your letter refers to a cost order made by the Tribunal and appears to suggest that your client will look to our client for payment of those costs. Please advise us as to where in the Terms of Settlement entered into between our respective clients, our client has agreed to meet your client’s legal costs of the Tribunal proceedings.

49 The letter also referred, with concern, to the fact that a letter dated 27 March 2003 had been received from Ms Elkins. The writer (Mr Curry) stated that he took great offence to the statements made in the letter and considered the statements made in the second page to be tantamount to a threat.

50 The Barrister drafted for Ms Voncina a letter dated 11 April 2003 to be forwarded to McLachlan Chilton (Barrister’s affidavit, para 36 and exhibit C, SE1, page 45).

51 Part of that letter responded as follows to the paragraph numbered 2 in the McLachlan Chilton letter dated 4 April:

i. the award fell within the cover provided by the policy;

ii.the builder committed an act of insolvency by failing to meet the writ executed by the sheriff. This is an act of insolvency pursuant to the definition in Corporations Act 2001 [Cth], and is sufficient to found our claim under clause 8 of the deed;

iii.our client has recovered nothing in respect of the builder, and in executing the writ the sheriff discovered that your client’s are unable to meet any claim, see the definition of insolvency in the Corporations Law 2001;

iv.the tribunal was not required to break down the amounts in a particular way, if your client was so moved they should have applied for a transcript or written reasons under the Act;

v.Your conclusion with respect to our client looking to your clients for cost is correct. We need not remind a firm as experienced as yours that costs follow the event, and that a cost order is part of the judgment. Our client will not be deprived of the fruits of litigation.”

The letter also included the following paragraph:

“Your client has failed to demonstrate any reason why our client should not commence proceedings for the entire judgment amount, costs, indemnity costs, damages and interest. If your client has any reason as to why we should not begin proceedings please inform this office by 5.00 pm 17 April 2003.”

52 The Barrister described part of the letter he drafted in these terms:

It further asserted, based upon my understanding of the effect of clause 8 of the deed, that the non-levy by the Sheriff was an act of insolvency sufficient to engage the acknowledgment of liability by the insurer (Barrister’s affidavit, para 36).

53 By letter dated 17 April 2003, McLachlan Chilton replied to Ms Voncina’s letter. The McLachlan Chilton letter included the following:

In relation to your allegation that the Builder committed an act of insolvency by failing to meet the Writ executed by the Sheriff and that such constitutes an act of insolvency sufficient to found your claim under Clause 8 of the Deed, we draw your attention to the definition of ‘insolvent’ in the terms and conditions of the Policy of Insurance which you will note refers to the definition in the Home Building Act 1989. Section 90 of the Home Building Act 1989 defines insolvent to mean, in relation to a Corporation ‘that the Corporation is an externally administered Body Corporate (within the meaning of the Corporations Law).

Under Section 9 of the Corporations Law, an ‘externally-administered Body Corporate is a Body Corporate:

a)that is being wound up; or

b)in respect of property which a Receiver, or a Receiver and Manager has been appointed (whether or not by a Court) and is acting; or

c)that is under Administration; or

d)that has executed a Deed of Company Arrangement that has not yet terminated; or

e)that has entered into a compromise or arrangement with another person the administration of which has not been concluded.’

At present, the Builder is not “insolvent” within the meaning of the Policy and as such, no claim can arise pursuant to Clause 8 of the Terms of Settlement.

Please be advised that our client will honour its obligations under the Terms of Settlement executed on behalf of our respective clients and pursuant to the terms and conditions of the Policy of Insurance. However, the mere fact that your client has received an Award in her favour from the Tribunal in ex-parte proceedings against the Builder does not automatically entitle your client to be indemnified for the amount so awarded by the Tribunal. Your client’s claim must fall squarely within the terms and conditions of cover provided for under the Policy prior to any indemnity being granted.

At present, your client has failed to discharge her burden of proof in this regard and as a result, any proceedings brought against our client insurer will be vigorously defended.” (exhibit TOB1, pages 19 and 20).

54 In paragraph 33 of her affidavit Ms Elkins stated that at the time of receiving the McLachlan Chilton letter dated 17 April: “I knew that we would have to wind up the builder’s company before the insurance company would pay me.”

55 On 22 April 2003 Ms Voncina forwarded to the Barrister a letter dated that day and a copy of the McLachlan Chilton letter dated 17 April 2003. In her letter Ms Voncina finished by saying that it looked like “we need to take action to enforce the agreement” and “Do you want me to get a second opinion for us before we do anything further in the matter just to make sure there is nothing we have missed”(exhibit TOB1, page 18).

56 On the same day Ms Voncina wrote to Ms Elkins forwarding a number of letters which included the two letters from McLachlan Chilton dated 4 and 17 April and her letter to McLachlan Chilton dated 11 April 2003. In her letter to Ms Elkins she included the following:

Firstly they are saying the builder is not insolvent and secondly they are saying the claim does not come within the policy. So there are two legs to their argument. Both of these legs are in my opinion without basis. (exhibit C, SE1, pages 39 – 40).

57 It was put to the Barrister in cross examination that having seen the correspondence from the Insurer in April 2003, (he understood that) the Insurer was requiring compliance with the terms of the insurance policy before it would entertain a claim from Ms Elkins. His answer was: “That was what they were saying” (21.4.09 T17/42 – 45).

Letter 30 May 2003

58 On 30 May 2003 Ms Elkins wrote to Ms Voncina noting that it was exactly one month since she last wrote and that she had not received any further correspondence from her. The letter went on to say: “Could you please let me know if you intend to follow through with my case or if you want to withdraw, after reading the following.” In the letter Ms Elkins then related that Karen Ellis from the Department of Fair Trading had contacted her again the previous week and arranged to visit her home on 22 May to discuss the case. She stated that Ms Ellis contacted her again on 29 May and informed her that she had spoken with Mr Stefan Molcik, the southern region contact for the Insurer and that he was agreeable to discuss Ms Elkins’ case with her the same day. The letter stated that Ms Elkins telephoned Mr Molcik who told her that “if the builder has been found liable by the Fair Trading Tribunal, then according to the terms of the Home Owners Warranty certificate the insurance company will cover the order, if the builder is insolvent.” The letter went on to say: Mr Molcik would contact McLachlan Chilton and get back to her; she received the return call on 30 May and was informed that the Builder had not been proved insolvent according to McLachlan Chilton; however the Insurer would honour the terms of settlement once the company was insolvent; Mr Molcik suggested that Ms Elkins contact Ms Voncina to finalise the matter; the Insurer appeared very courteous, helpful and approachable; Mr Molcik would contact her again early next week and “I hope this information will help to move things along.”

I think we should be concentrating on finalizing the builder’s insolvency rather than considering legal action against McLachland (sic) Chilton, to enforce the claim. If you intend to follow through with the case, would you please contact Karen Ellis Department of Fair Trading, Ph. 9895 0474 to find out what you have to do to ensure that Australian Conquest Constructions is declared insolvent….”

The final paragraph of the letter commenced: “If you do not intend to follow up my case, could you please let me know within the week, so that I can deal with it myself.” (exhibit C, SE1, pages 49 -50).

59 It is clear from this letter and from the oral evidence given by the Barrister that some time prior to 30 May 2003 he raised for consideration the taking of legal action against McLachlan Chilton (21.4.09 T33\4 – 20).

60 It appears that Ms Voncina forwarded to the Barrister by facsimile transmission on 3 June 2003, a copy of the letter dated 30 May 2003 and a copy of her letter to Ms Elkins dated 3 June 2003 (exhibit F, RM1, pages 110 – 111).

61 In her letter dated 3 June 2003 Ms Voncina thanked Ms Elkins for her letter of 30 May and went on to say: “We are in the process of preparing our documentation to commence legal proceedings. At the moment, there are a couple of issues we want to make sure we have covered in our claim so that we join the Solicitor and not just the Insurer. We understand the issues raised by you, but unfortunately if Home Owners Warranty Insurance decides not to make the payment, the only process available to us is to commence legal proceedings. We are also concerned about the position that the Solicitors have taken, and that is why Tim wants to make sure that they also become personally liable for our costs, and not just the Insurer.

Tim is working on the matter and spoke to me recently regarding some case law that he is looking to incorporate in the claim, and I anticipate having a draft of the documents to you shortly. We understand how you feel; we are feeling just as frustrated regarding this matter” (exhibit C, SE1, page 51).

62 The message in the facsimile transmission to the Barrister was: “Please find attached for your information copy of letter received from Sharyn Elkins regarding this matter. Please let me know how you are going in the preparation of the draft documentation so that I can submit a draft to her before taking the next step” (exhibit F, RM1, page 110).

63 When the Barrister read the letter dated 30 May 2003, he understood that it was Ms Elkins’ view that she and her legal team, including the Barrister, should be concentrating on finalising the Builder’s insolvency rather than considering legal action against McLachlan Chilton to enforce the claim (21.4.09 T33\9 -13).

64 The Tribunal questioned the Barrister about this letter and he was asked: when he read the letter what did he understand Ms Elkins to mean when she referred to “concentrating on finalizing the builder’s insolvency.”. He said he was not sure if she meant concentrate on an act of insolvency to activate the deed or concentrate on “winding the builder up insolvency” (21.4.2009 T44\30 – 36). After further questioning he was then asked: when he read the letter of 30 May did he understand Ms Elkins to mean by those words that there should be concentration on finalising the winding up of the Builder. He answered: “That’s what could be drawn from that.” He then said that he did not recall what he understood that part of the letter to mean when he read it except that he was still operating on the belief that his instructions were that no one would pay for the winding up (21.4.09 T45\1 – 10).

65 He was then asked, if that was his belief, did not the words in the letter mean that they raised a question in his mind as to what Ms Elkins really wanted. He said it probably should have but he had no recollection as to whether it did or did not and “in fact that’s a shortcoming and a failing in this, I didn’t give this enough attention, I didn’t ask the right question of my instructing solicitor” (21.4.09 T45\6 – 21).

66 After further questioning he was asked in effect that this must have excited an interest in himself to find out exactly what Ms Elkins wanted. He said it did not and his reason why it did not was because Ms Elkins was making demands of all sorts of people and of all sorts of things at the time that were preposterous (and he referred to the fact that she had written to the solicitors for the Insurer and the Builder potentially damaging her case). A little later in answering this question he said “and it just seemed that this was something that came but not something that needed to be focussed on at that stage; that’s the best answer I can give you because I just don’t have the advantage of the brief and the notes” (21.4.09 T45\47 – T46\11).

67 On 15 June 2003 Ms Elkins wrote to Ms Voncina thanking her for her letter dated 3 June and stating:

“Unfortunately you did not address all the issues mentioned in my letter to you, dated 30 May 2003, especially concerning the insolvency of Australian Conquest Constructions.”

68 The letter went on to say:

exactly

proof

69 On more than one occasion (see paragraphs 90 and 91 below) the Barrister stated in his affidavit that he had not received letters written by Ms Elkins to Ms Voncina. In his affidavit he did not state that he did not receive this letter of 15 June 2003 written by Ms Elkins. In fact in paragraph 42 he referred to the letter and said that from that point forward until late in 2005 Ms Elkins was adamant that she did not want to meet the expense of applying to wind up the company. One would expect that if he denied receiving the letter of 15 June he would have said so.

70 On 19 June 2003 the Barrister faxed to Ms Voncina a statement of claim which he had drafted which was to be issued in the District Court. The Builder was the first defendant and the Insurer was the second defendant. The Barrister wrote the following message on the facsimile cover sheet:

Please tell our client that we will withdraw our commission if she fails to act on advice and prejudices her claim by correspondence or other conduct. My account will be payable immediately that occurs (exhibit C, page 56).

71 The statement of claim drafted by the Barrister stated that the plaintiff pleaded “the following cause of action against the First & Second Defendants.”

72 In fact the document did not plead any cause of action against the Builder. The document made reference to the fact that the judgment of the CTTT was entered as a judgment of the District Court on 9 December 2002 and that a writ of execution was issued to enforce the judgment; it alleged that failure to pay a debt as and when it fell due was an act of insolvency; it relied upon the terms of settlement deed and alleged that the Insurer had failed or refused to indemnify Ms Elkins as described in clause 8 of the terms of settlement. No cause of action for breach of the policy of insurance was pleaded against the Insurer (exhibit F, RM1, pages 113 – 116).

73 On 24 June 2003 Ms Voncina faxed to Ms Elkins a copy of the draft statement of claim and the handwritten cover sheet and asked if she could proceed to file the pleadings in the District Court (exhibit C, para 36 and exhibit C, SE1, pages 54 and 55).

74 In her affidavit Ms Elkins stated that after what she described as “this intimidating fax”, she backed off and instructed Ms Voncina to file the statement of claim (exhibit C para 36).

75 On 17 July 2003 a statement of claim in the form of the draft was filed in the District Court.

76 On 1 August 2003 the statement of claim was served on the Builder and the Insurer.

77 The Barrister was cross examined about his handwritten note on the facsimile cover sheet which he faxed on 19 June 2003. In particular he was cross examined as to what was the advice that was referred to in that cover sheet. He agreed that his advice that Ms Elkins was to follow was that it was unnecessary to wind up the Builder and that she should proceed by way of District Court proceedings in which the Builder and the Insurer were to be served. He added the qualification that he gave that advice in light of the instruction that the winding up would not be paid for (21.4.09 T48\34 – T49\33).

78 On 24 November 2003 the Builder filed a notice of motion seeking an order that the proceedings against the first defendant be struck out as an abuse of process and an order for costs. The hearing of that notice of motion was fixed for 5 December 2003 (exhibit C, SE1, pages 70 and 71).

79 In his affidavit the Barrister stated what appears to be his reason (or one of his reasons) why he included the Builder as a defendant in the statement of claim. He said that he hoped (indeed probably expected) to obtain an admission from the Builder that it was insolvent and either an admission or an indication of a lack of contest upon the question whether it had breached its statutory warranty (Barrister’s affidavit para 47).

80 In his letter of advice to Ms Voncina dated 6 December 2003 the Barrister stated that they had maintained proceedings against the Builder in an effort to force the Insurer to consider mediating the matter with Ms Elkins (exhibit C, SE1, page 80). The Barrister was cross examined about that statement and asked how he formed the view that that was an appropriate reason to join the Builder in the proceedings. He said that with hindsight that was a view that was probably not sustainable. He disagreed that there was no reasonable basis for it. He maintained that the advice was incorrect but did not accept that it was incompetent (21.4.09 T52\23 – 50). On the following day during further cross examination the Barrister said: “I yesterday admitted that the filing of the statement of claim against the Builder was probably incompetent in hindsight” (22.4.09 T15\8).

81 The Barrister was questioned by the Tribunal as to why he included the Builder in the statement of claim which he drafted. He agreed that there was no cause of action pleaded against the Builder. He was asked why did he draft a statement of claim against a defendant and not plead a cause of action against it. He answered that it was difficult to recall his exact thinking but he thought he took the view that there was no cause of action against the Builder. He was then asked would it not follow that the proceedings were an abuse of process and would be struck out. He answered, with the benefit of hindsight, that was correct (22.4.09 T40\1 – 20).

82 He said that he could not recall if he advised to defend the notice of motion filed by the Builder. He knew that the Builder was alleging that the proceedings were an abuse of process and it was put to him that he knew that he had to fail in the defence of that notice of motion. His answer was:

“No, because the abuse of process was being put as a res judicata and there was some evidence on the basis of, and it’s the basis of my written submissions which would say in certain circumstances you can actually take a cause of action a second time.”

83 It was again drawn to his attention that he had not pleaded a cause of action against the Builder and he agreed that the statement of claim was a very badly pleaded document. He was then asked, did it not follow that he had to fail on the defence of the notice of motion and he answered: “As a matter of legal logic as I now understand it the answer is yes” (22.4.09 T40\32 – 48).

84 On 2 December 2003 Ms Elkins attended a conference with the Barrister and Ms Voncina in the Barrister’s chambers to discuss the Builder’s notice of motion. It appears that the Barrister provided many arguments and referred to a number of authorities, apparently with the object of showing that Ms Elkins would succeed on the notice of motion (exhibit C para 40 and exhibit C SE1, pages 75 – 77). In her affidavit Ms Elkins stated that she did not feel confident with the Barrister’s arguments; that he quoted many cases but he did not deal with the substance of her case. The Barrister did not give evidence that he advised Ms Elkins that the notice of motion could not be successfully defended.

85 The Barrister was cross examined about this conference and in particular about notes made by Ms Voncina at the conference. The notes recorded some legal authorities which the Barrister mentioned. The Barrister stated that he thought he also gave Ms Voncina a copy of the written outline of submissions which he had prepared for the District Court. He was then taken to a note “Need to defend notice of motion”, followed by another note “Need to amend the pleading”. He was asked whether that refreshed his memory about advising that the notice of motion should be defended. He said it did not but he stated it was clearly the record that was taken by the solicitor and he made reference to the fact that he had drafted an alternative pleading which did not have the issue of res judicata looming large in it and as an alternative it was an opportunity to keep the directors of the Builder in the proceedings. He made mention of recovery for insolvent trading (22.4.09 T10\45 – T11\35). The Tribunal concludes from that evidence that the Barrister did advise Ms Elkins to defend the notice of motion.

86 On 5 December 2003 the Builder succeeded on the notice of motion. The statement of claim was struck out against the Builder and Ms Elkins was ordered to pay the Builder’s costs of the proceedings. The solicitor for the Builder originally claimed $10,000 but agreed to accept $6,600 which Ms Elkins paid in April 2004. Ms Elkins stated that she was devastated by the result (exhibit C para 41).

87 The Barrister’s response to the striking out of the notice of motion was to draft an amended statement of claim and forward it with a letter of advice dated 6 December 2003 to Ms Voncina. Apart from removing references to the first defendant and substituting the Builder’s name, the amended statement of claim was, subject to one matter, basically the same as the original statement of claim. Paragraph 15 again alleged that the failure to pay a debt as and when it fell due was an act of insolvency. However the particulars given of that paragraph were different from the original. The amended particulars referred to the certified copy of the order for the payment of the money issued by the CTTT and also to correspondence between Ms Voncina and Mr Geddes (exhibit C, SE1 pages 80 – 86). Two of the letters referred to, written by Mr Geddes, stated in effect that the Builder had no funds (exhibit C, SE1 pages 129 and 130).

88 The Barrister’s letter of advice dated 6 December 2003 also stated: “To assist and for absolute certainty a statutory demand pursuant to the Corporations Act 2001 should be sent to the solicitor for the first defendant. After 21 days this particular document is … an act of insolvency which should trigger the deed between the plaintiff and the second defendant.” The Barrister also forwarded to Ms Voncina a draft of a creditor’s statutory demand of the kind referred to in section 459E of the Corporations Act and a draft accompanying affidavit (exhibit C, SE1, pages 87 – 91).

89 After receipt of Ms Voncina’s letter dated 8 December 2003, Ms Elkins had a telephone conversation with her and asked her to please issue the statutory demand (exhibit A, agreed facts, para 26). At no time did she receive from Ms Voncina or Mr Bland information as to what the costs of winding up the Builder would be (exhibit C para 43).

90 On 24 December 2003 Ms Voncina instructed her process server to serve a statutory demand upon the Builder. By reason of some administrative error, the demand was not served (exhibit A, agreed facts, para 28).

91 On or about 3 February 2004 Ms Elkins left a telephone message with Ms Voncina asking that “we” concentrate on forcing the Builder into liquidation. Ms Elkins followed up that telephone conversation with a letter dated 3 February referring to the costs account of the solicitor for the Builder and stating that she hoped that Ms Voncina received her message that she was more concerned about getting on with the main agenda, that is, forcing the Builder into liquidation and dealing with the insurance company (exhibit C, SE1 page 94 and exhibit C para 46). The Barrister gave evidence that he was unaware of the telephone call and the letter (Barrister’s affidavit para 54).

92 On 3 March 2004 Ms Elkins wrote to Ms Voncina and in the letter she stated that she felt more attention probably needed to be given to the Builder, to prove his insolvency so that they could encourage the insurance company to pay up. After asking whether the Builder had responded within the 21 days period to the statutory demand she noted that failure to comply within the 21 days period is ground to apply to court to wind up the company. She asked: “Has this been started yet?” Ms Elkins did not receive a response to that question (exhibit C para 49, exhibit C, SE1 page 102). The Barrister gave evidence that he did not receive a copy of that letter (Barrister’s affidavit para 54).

93 On 5 August 2004 the Insurer filed a notice of motion seeking an order that the statement of claim be dismissed pursuant to Part 11A Rule 3. That Rule enables the Court to make an order staying the proceedings where no reasonable cause of action is disclosed (exhibit C, SE1 page 114).

94 On 6 August 2004 the Barrister wrote to Ms Voncina in relation to the notice of motion and stated that he noted that “the terms of the policy refer to the definition of insolvency as ‘defined in the act’ the act would be the Home Building Act which has no definition but the Corporations Law does at s585.” He enclosed a copy of that section. The letter went on to say that the issue which has escaped Mr Curry’s attention were the words “can sound an insolvency claim” and that all that was needed to be established was that there was an act of insolvency which could found a claim. The Barrister proposed that a notice of motion be filed to strike out the defence because in his words “there is no evidence that goes to the question of the solvency or otherwise of the company. Nor is there evidence that we have not established an act of insolvency that could found a claim” (exhibit C, SE1, page 116). In paragraph 57 of his affidavit, the Barrister referred to that letter of advice noting that in it he said that the Home Building Act had no definition of insolvency. He accepted that the advice as it related to that definition was wrong and that insolvency for the purposes of the Home Building Act means, by way of section 90, that a corporation is under external administration.

95 The defence filed by the Insurer to the amended statement of claim was not put into evidence before the Tribunal. However having regard to the letters written by McLachlan Chilton to Ms Voncina on 4 and 17 April 2003 and the defence filed by the Insurer to the further amended statement of claim, the Tribunal is satisfied that the defence relied upon the definition of insolvency in the insurance policy and in the Home Building Act.

96 Two of the affidavits relied upon by the Insurer were by Leslie Paton and Daren Curry. Mr Paton annexed to his affidavit his response filed in the CTTT to the claim made by Ms Elkins, a copy of his response which he had filed in the CTTT proceedings to an expert report relied upon by Ms Elkins (and which was also relied upon by Ms Elkins in the District Court proceedings) and an expert report which the Builder filed in the CTTT proceedings (exhibit TOB1, pages 24 – 78). The affidavit of Mr Curry attached expert reports which he had filed in the CTTT proceedings on behalf of the Insurer (exhibit TOB1 pages 79 – 99).

97 On 9 August 2004 Ms Voncina wrote to Ms Elkins referring to the Insurer’s notice of motion and stated that:

Tim Bland indicated to me that in his opinion there are some difficulties with the Notice of Motion in that they are talking about an act of insolvency in accordance with the policy. The consent agreement reached at the Tribunal was that the insolvency was not defined as a definition under the policy. (exhibit C SE1, page 115).

98 In paragraphs 60 and 61 of his affidavit, the Barrister referred to that letter and said that the distinction that actuated his presentation of the case was captured succinctly in the passage just quoted. He said that the last sentence was not precise but it captured the principal idea. As he understood the agreement, it was agreed that if Ms Elkins could show that the Builder did not pay the award because the Builder was in fact insolvent, Ms Elkins would be spared the need to wind up the company and the Insurer would pay on the claim.

99 On 20 August 2004 the District Court proceedings were listed for directions. Ms Elkins attended and after the directions were given she spoke with the Barrister in a room outside the court. In paragraph 58 of her affidavit she related what occurred as follows:

Mr Bland then stood up from the table and stated loudly;

‘If you are not happy with the way I am running the case then maybe you should find another barrister.’

I said: ‘I don’t want to upset you but I still think we should be winding up the builder’s company?’

Mr Bland replied arrogantly: ‘If that’s what you want to do then we can do it.’

100 The Barrister responded to this paragraph, in paragraph 62 of his affidavit. He stated:

Mrs Elkins did not say the words she deposes to commencing ‘Why are we pursuing the insurance company …’. What she asked in fact was why it was that the insurer simply didn’t pay up. I remember replying to her using the expression that the insurer was trying to ‘starve you off your claim’. I told her my opinion of the insurer’s tactics using words to the effect that the insurer was using the court process to run every possible argument against her, and that we were obliged to deal with every argument they put up.

101 The Barrister was cross examined about this conversation and in particular the words deposed to by Ms Elkins: “If you are not happy with the way I am running the case then maybe you should find another barrister.” He agreed that he did not deny that sentence in his affidavit. He was asked whether he agreed with it and his answer was that he offered Ms Elkins that opportunity (22.4.09 T22\28 – 34).

102 In cross examination he denied that Ms Elkins said to him: “I don’t want to upset you but I still think we should be winding up the builder’s company” and he said that she said: “I don’t want to upset you, I don’t want to stop these proceedings, I want you to stay in them.” He agreed that he had not denied that part of the conversation in his affidavit and it was again put to him that Ms Elkins had said those words. His response was: “Well, with the exception of the word arrogantly the response I would have given would have been well, if that’s what you want we can do that and shortly thereafter a statutory demand and a winding up regime was commenced” (22.4.09 T22/45 – 50). It was suggested to him that his answer was not responsive and when he was asked whether the words in this sentence were spoken he answered: “I have no recollection of the conversation apart from what I deposed to.” He was reminded that he had not denied that part of the conversation and he said: “To deny something you have no recollection of is just without any utility”. It was again put to him that the words of this sentence were spoken by Ms Elkins and that his response was: “If that’s what you want to do then we can do it.” His answer was: “And if that was my response then within a couple of weeks there was a draft, well, there was a statutory demand and a regime for winding-up the builder in place.” (22.4.09, T23\1 – 19).

103 There are inconsistencies in the evidence of the Barrister concerning this conversation. Having regard to the facts that: the majority of the conversation was not denied by the Barrister in his affidavit; in cross examination he initially denied the second last sentence was stated and gave a different version of that sentence; he then inferentially admitted that the sentence was spoken by Ms Elkins; and then said that he had no recollection of the conversation apart from what he deposed to, the Tribunal finds as a fact that the conversation as set out in paragraph 58 of Ms Elkin’s affidavit, took place.

104 In paragraph 63 of his affidavit the Barrister stated that to seek further evidence of the fact of the Builder’s insolvency, Ms Voncina issued a statutory demand on 15 September 2004. He said it was intended that, having regard to the position taken by the Insurer, Ms Elkins may need to take the step, in spite of the expense, of winding up the Builder. The Tribunal notes that as far as it can see, the position taken by the Insurer in April 2003, had not changed.

105 On 6 September 2004 Ms Voncina wrote to Ms Elkins and stated:

As you pointed out in that letter, just because the company is registered does not mean that it is solvent, that is often companies are no longer trading because they have no funds, does not mean that they are not insolvent, it just means that the registration has not taken place. You are also aware that last year that we prepared the relevant statutory demand, and unfortunately I had some difficulties with it being served as our first letter to our process server was lost and the second letter eventually was not served. Part of the problems obviously was the time period but also the costs involved, and as I indicated to you our costs which I would have had to pay was in excess of $2,000.00 at that stage. We then looked at what information we had to date and Tim was satisfied and I believe I was also satisfied that we have enough to show that the company is insolvent in that it has not declared your judgment debt and that from the assets before it, it does not have the capacity to pay based on the information on the file. I do not see why we need to wind up the company, because we have made it very clear in our terms of settlement that the company just has to act in a way that could make it insolvent, not that it actually has to be insolvent at the time of judgement from McLachlan Chilton.

I note that this matter is next at Court on the 8th October 2004. I think it would be appropriate for you to be present as I think you need to understand just how difficult this matter is becoming in that at this stage we are trying to ensure that we can enforce not just the judgment debt but also our costs in this matter which you can probably appreciate are quite exorbitant.(exhibit C, SE1, page 132).

106 On 17 September Ms Voncina wrote to Ms Elkins stating that she and the Barrister had discussed issuing a creditor’s statutory demand for payment of debt and that had now been done. The penultimate paragraph of the letter stated that the Barrister and Ms Voncina were so angry now by the manner in which Daren Curry himself had personally been running the case but they were determined not to walk away from it and to obtain a result not just for Ms Elkins but also for the Barrister and Ms Voncina. (exhibit C , SE1, pages 133 – 134).

107 On 8 October 2004 the two notices of motion were listed for hearing (exhibit C, SE1, page 131). However it is not clear from the evidence presented to the Tribunal exactly what happened on that day. Both notices of motion were dismissed but this may have been by consent. It appears that on 7 October McLachlan Chilton served on Ms Voncina a lengthy letter and a number of documents which they proposed to rely upon at the hearing of the notice of motion. It appears that the Court refused to allow the Insurer to use the documents (exhibit C, SE1, page 143). It also appears that on that day counsel for the Insurer informed the Court that Mr Paton had died (Barrister’s affidavit, para 64). On 8 October 2004 the Court also granted leave to amend the statement of claim.

108 On 17 November 2004 the Barrister wrote to Ms Voncina and forwarded to her a draft of an initiating process for the winding up of the Builder. He also forwarded to her drafts of other documents required for that application. In his letter the Barrister advised Ms Voncina of the steps she should take for the completion of documents and affidavits in support of the application (Barrister’s affidavit para 67, exhibit C, SE1, pages 149 – 160).

109 On 25 November 2004 an application to wind up the Builder was filed in the Supreme Court and listed for hearing on 4 February 2005 (exhibit A para 37).

110 On 15 December 2004 a further amended statement of claim was filed in the District Court. It contained a number of errors because it continued to refer to the first defendant and the second defendant. However leaving those errors aside, the document was basically the same as the amended statement of claim which had been filed but with the following changes:

“The decision of the Member in the Consumer Trader and Tenancy Tribunal was that the claim lay within the statutory warranties arising from section 18 of the Home Building Act and this gave rise to an entitlement to indemnity from the insurer separately from all other claim.

Particulars

a)your insurance cover

If (and only if) you, the insured have complied strictly with all your obligations in this policy, then subject to the terms of the policy, we will at our option make good or pay you your loss or damage resulting from (b)2.A breach by your builder of a statutory warranty (as defined in the Act) in respect of the work or”;

b)paragraph 16 was new and was in the following terms:

“The Plaintiff issued a statutory notice on the 16 September 2004 and on the 8 October Australian Conquest constructions (NSW) Pty Ltd had not paid the debt pursuant to section 95A Corporations Act 2001, Australian Conquest Constructions (NSW) Pty Limited has committed an act of insolvency capable of supporting a claim for winding up”;

c)paragraph 17 repeated paragraph 15 of the amended statement of claim but added a subparagraph (h) in the particulars namely “Failure to pay a statutory demand within the prescribed period”;

d)paragraph 18 was new and was in the following terms:

“The sole director of Australian Conquest Constructions (NSW) Pty Limited died on or about the 5 October 2004, this gives rise to a further claim under the policy which requires and indemnity under the deed.

Particulars

The terms of the policy state inter alia

If (and only if) you, the insured, have complied strictly with all your obligations in this policy, then, subject to the terms of the policy, we will at our option make good or pay you your loss or damage resulting from

i.non completion of the work because of the insolvency, death or disappearance of your builder

ii.The plaintiff reads and relies on the Affidavit of Darren Curry sworn the 7 October 2004 filed in this proceedings” (exhibit C, SE1 pages 166 – 171).

111 The District Court proceedings were listed for directions on 20 January 2005 and the Barrister reported to Ms Voncina what occurred that day in his letter dated 27 January 2005. Leave was granted to amend the statement of claim and the Barrister stated that it was noted before Puckeridge DCJ that the majority of the issues raised by the Insurer were grammatical. The letter went on to say:

These effectively fall into two broad categories:

a)what is an act of insolvency for the purposes of the deed?

b)what effect does the death of the director have upon the company?

c)was the decision of the tribunal pursuant to the statutory warranties, covered by the insurance policy?

d)what is the true construction of the deed?

2)which contract the plaintiff chooses to sue upon, the contract of insurance provided pursuant to the Home Building Act 1989, or the deed in into in respect of the proceedings, in the Consumer Trading Tenancy Tribunal.

The issues are,

1)Does the death of a director of the company also mean the death of the company? The answer to this question is clearly no.

2)Is an act of insolvency sufficient to require an indemnity under the deed? The answer to this question is arguable, on the construction of paragraph 8 of the deed.

3) Has the plaintiff proven that the award in the tribunal is one which is covered by the insurance policy? The plaintiff has deposed to the fact, and so has Mister Hall, but this may not be sufficient, therefore I request my instructing solicitor make inquiries with the tribunal with respect to the notes made by Member, whilst giving judgment. Therefore the view is that this is an arguable point also.

It is therefore unlikely that application summary judgments would succeed, as the case must be so clear that no possible defence is available or no arguable case can be presented on behalf of the Defendant. [See. Part 9 rule 17 of the District Court Rules]

Counsel therefore recommends the filing of a repleaded document and proceeding to hearing in an orderly fashion. It is noted that the evidence has been served but the pleadings are not finalised. This will give us time to establish if notes were taken by the Member. If the notes are available then the plaintiff will need to consider amending her affidavit, and/or issue a subpoena to the Member to give evidence. The time will also allow for the finalisation of the liquidation of Australian Conquest Constructions (exhibit C, SEI pages 173 – 174).

112 The application to wind up the Builder came before a Registrar in the Equity Division on 4 February 2005. The Barrister appeared and the application was adjourned because of the need to file further evidence (exhibit A para 39 and exhibit C, SE1, page 176).

113 On 10 February 2005 Ms Voncina wrote to Ms Elkins enclosing a copy of a letter she had written to Mr Curry that day which explained why she was seeking an extension of time to file the further amended statement of claim in the District Court. She wrote to Ms Elkins: “The matter in relation to the company is back at Court on the 18th February. The amendments to your claim are to be filed and served by the 21st February. Mr Bland wants the company matter dealt with so that he can incorporate that into your claim” (exhibit C, SE1 page 178). In the letter to Mr Curry Ms Voncina said:

In relation to the issue of insolvency of the company, we advise that those proceedings are adjourned until the 18th February 2005 and accordingly to incorporate the entire information regarding insolvency of the company, we advise that we will be filing and serving the amendments to our client’s claim by close of business on Monday the 21st February 2005. (exhibit C, SE1, page 179).

114 On 18 February 2005 the Supreme Court made orders for the winding up of the Builder. Liquidators were appointed and no funds were returned (exhibit A para 40).

115 On 22 February 2005 Ms Voncina wrote to Mr Curry informing him that the Builder had been wound up by the Supreme Court on 18 February 2005 and stating: “We now make a further claim for indemnity under the policy and the deed, as the company is in liquidation and a liquidator has been appointed”. A copy of the further amended statement of claim was enclosed and Ms Voncina invited the Insurer to consider making an offer of settlement (exhibit C, SE1 pages 182 – 183).

116 The further amended statement of claim was filed on 14 March 2005. A number of amendments were made to the document previously filed. Those amendments which are presently relevant were:

b)paragraph 17 (h) of the previous document was deleted;

c)paragraph 16 was new and was in the following terms:

i) The cancellation of the licence of Conquest on or about 20 December 2002 prevented the company from trading so as to enter an arrangement under part 10 Corporations Act 2001 (Cth.) with its creditors.

ii) The failure to meet a demand to the instructed legal representative of Conquest and the positive statements of insolvency pleaded in 15 above.

iii) The failure of Conquest to meet a demand made by the Sheriff on 17 February 2004.

iv) The death of the sole director of Conquest on or about 6 October 2004.

v) The order of the Supreme Court on 18 February 2005 in appointing a Liquidator and further ordering the liquidation of Conquest.

(d) paragraphs 19 – 22 were new and were as follows:

(20) On or about 3 December 2004 the Plaintiff issued in the Supreme Court of NSW an Application to wind Conquest upon the grounds of insolvency.

(21) On 18 February 2005 by an order of the Supreme Court Conquest was placed in Liquidation and Schon Gregory Condon was appointed liquidator.

(22) By a letter dated 22 February 2005 the Defendant was notified of the orders of the Court and a demand was made for indemnity.

Particulars:

a) Letter Voncina to McLachlan Chilton (Solicitors) (exhibit C, SE1, pages 187 – 193).

117 On 24 May 2005 the Insurer filed its defence. It was a 9 page document which put all aspects of the claim in issue and denied that the claim made under the policy by way of Ms Voncina’s letter dated 22 February 2005, was in fact a claim under the policy. The Insurer put in issue Ms Elkins contention that the order made by the CTTT was for compensation for breaches of the Builder’s statutory warranties of good workmanship under the Home Building Act. The Insurer asserted that Ms Elkins was in breach of her obligations to the Insurer under the Insurance Contracts Act and the policy of insurance (exhibit A, para 43).

(iii)At that stage she (Ms Voncina) could not pay any further costs.

(iv)The next issue was to try to recover company assets so a writ was issued. The issue of the writ was trying to get a hand on company assets and recover the debt that way.

(v)She did not believe that the District Court proceedings were contemplated as at 2 December 2002. She believed that the Insurer would accept the terms of settlement and accept the matter. However she also said in the same paragraph:

As at the 2 December 2002 I know we had to get the certificate of judgment but to be honest I cannot really say if the proceedings were really contemplated on that date or after the writ was executed that we decided on the District Court proceedings. I cannot find anything to say when the decision was made to issue the Statement of Claim or if it evolved when looking during early 2003 as the issue being considered was ‘do we rely on the Deed’ or ‘do we make the company insolvent’.

(vii) In Mrs Elkins’ letter of the 30 May 2003… it was clear she was unable to provide any further funds for her case. I certainly had no funds to provide by that stage. (exhibit F, RM1, pages 286 – 287).

163 On 23 November 2006 the Deputy Director, Professional Conduct wrote to Ms Elkins forwarding her a number of documents which included Ms Voncina’s letter dated 24 October 2006.

164 On 26 November 2006 Ms Elkins replied and part of her letter was as follows:

Concerning the insolvency issue, I note that my solicitor, Marina Voncina, has provided some evidence to support the idea that I could not afford to pay for the liquidation of the builder’s company. I agree, but that was only in December 2002 following the Fair Trading Tribunal (now CTTT) hearing. I had forgotten that Marina had paid some of Tim Bland’s fees at that stage, although she did not tell me until after the event. I think we all hoped that payment of the awarded amount would take place early 2003 (exhibit F, RM1, page 300).

165 In paragraph 4 of her affidavit sworn 2 February 2009 Ms Elkins stated that at no time did she inform Ms Voncina or the Barrister that she would not fund the winding up of the Builder.

166 The evidence shows that in December 2002 and January 2003 both the Barrister and Ms Voncina believed that clause 8 of the deed enabled Ms Elkins to make a claim and that the clause did not require the Builder to be wound up. They believed that all that had to be shown was that the Builder was insolvent, within the ordinary meaning of that word. The Barrister believed that clause 8 eliminated the step of winding up the Builder (Barrister’s affidavit, para 24). The Barrister believed he had reached an agreement with counsel for the Insurer which was set out in clause 8.

167 The Tribunal accepts that there were two telephone conversations between the Barrister and Ms Voncina in approximately January 2003. The above background is important in making a decision as to what was said during those conversations.

168 During the telephone conversations between the Barrister and Ms Voncina there may well have been a discussion about Ms Elkins’ finances and the fact that she had no money (Ms Voncina had sent to the Barrister a copy of Ms Elkins’ letter dated 2 December 2002). There may have been discussion that Ms Elkins was not able to afford the cost of winding up the Builder. But it does not follow that Ms Voncina told the Barrister that Ms Elkins would not fund the winding up of the Builder.

169 There is no evidence that the Barrister or Ms Voncina advised Ms Elkins by January 2003 that it was necessary or even preferable to wind up the Builder. In fact the evidence is to the contrary (see paragraphs 31 and 32 above). Also the Barrister believed that it was unnecessary to wind up the Builder. Those facts support a conclusion that in January 2003 Ms Voncina did not tell the Barrister that Ms Elkins would not fund the winding up of the Builder.

170 In the letter written by Ms Voncina on 6 September 2004 to Ms Elkins no mention was made of any conversation between the two of them in January 2003 in which Ms Elkins gave instructions or stated that she would not pay for the cost of winding up the Builder. Ms Voncina was recounting in that letter events in relation to winding up. The fact that there was no mention of any conversation in January 2003 supports the conclusion that she did not have a conversation with Ms Elkins in January 2003 in which Ms Elkins instructed or stated that she would not pay for the cost of winding up the Builder. The letter from Ms Voncina to Ms Elkins dated 24 January 2003 did not record that Ms Elkins had stated that she would not pay for the cost of winding up the Builder. It is implicit in the letter that the winding up the Builder was not a necessary step to be taken before the Insurer was liable to pay (see paragraph 43 above). There is no reason to believe that Ms Elkins would give incorrect information to the Barrister concerning her instructions from or conversations with Ms Elkins.

171 The Tribunal is unable to see how the Barrister could have concluded from his conversations with Ms Voncina that Ms Elkins had in effect given instructions to Ms Voncina that she would not fund the winding up of the Builder.

172 Furthermore apart from the Barrister’s letters to the Deputy Director, Professional Conduct and his evidence of his conversation with Ms Voncina, there is no evidence which supports a finding that the question whether Ms Elkins could or would fund the winding up proceedings was discussed between Ms Elkins and Ms Voncina in January 2003 (Ms Voncina made no mention of that having happened when she wrote to the Deputy Director, Professional Conduct, on 24 October 2006. Ms Elkins denied that she informed Ms Voncina that she would not fund the winding up of the Builder.

173 No note of this conversation was made by the Barrister and there is no record in any correspondence, advice or document that Ms Voncina told the Barrister that Ms Elkins would not fund the winding up of the Builder.

174 In the above circumstances the Tribunal concludes that in January 2003 Ms Voncina did not tell the Barrister that Ms Elkins would not fund the winding up of the Builder.

Jones v Dunkel 101 CLR 298

175 Relying upon Jones v Dunkel, the Barrister submitted that as the Council had not called Ms Voncina to give evidence, the Tribunal may readily draw the inference that her evidence would not have furthered the Council’s case on the issue as to what was said by Ms Voncina to the Barrister in these telephone calls in January 2003. Reference was made to the evidence that Ms Voncina had settled Ms Elkins’ complaint to the Legal Services Commissioner and it was submitted Ms Voncina was in the Council’s camp and that the Council was the party to call her.

176 The Council referred the Tribunal to what was said by the Court of Appeal in Manly Council v Byrne [2004] NSWCA 123 and submitted that this was not a case where any inference could be drawn from Ms Voncina’s absence as a witness in accordance with Jones v Dunkel. The Council also submitted that Ms Voncina was not called by the Barrister to corroborate his evidence that she told him in January 2003 that Ms Elkins would not fund the winding up of the Builder.

177 The particular passages relied upon by the Council from the Manly Council decision were contained in the judgment of Campbell J with whom Beazley JA and Pearlman AJA agreed.

178 At paragraph 54 his Honour stated that the inferences licensed by Jones and Dunkel are ones which are drawn, if at all, once all the evidence in the case is in. He said that had significance in two ways. In paragraph 55 he described the second way as follows: if the evidence which has been admitted is enough to prove the case of the party who has not called the witness, the Tribunal of fact could be justified in not counting the failure of that party to call that witness as something that reduces the strength of that case. His Honour discussed this later in the judgment and at paragraph 74 he said:

“That the strength, or weakness, of the case made out by the evidence actually presented in the case bears on whether inferences should be drawn from other evidence not having been presented, is recognised in JPQS P/L v Cosmarnan Constructions P/L [2003] NSWCA 66. Meagher JA (with whom Beazley JA agreed, and Mason P substantially agreed) said at [24]: ‘When a finding of fact has been made in a party’s favour by a judge, the fact that an absent witness’s evidence, if it were given, would not support that finding, cannot disturb the finding actually made.’”

179 The Tribunal accepts that Ms Voncina was in the “the camp” of the Council. However for the reasons set out above the Tribunal is of the view that in January 2003 Ms Voncina did not tell the Barrister that Ms Elkins would not fund the winding up of the Builder. The Tribunal is of the view that the failure of the Council to call Ms Voncina does not reduce the strength of the evidence nor the comfortable satisfaction that the Tribunal has as to its finding. Even if the Tribunal were to draw an inference that evidence given by Ms Voncina to the Tribunal in 2009 would not have furthered the Council’s case, the Tribunal would still make the finding that it has made in paragraph 174.

The conversation on 4 September 2002

180 Counsel for the Barrister referred to evidence of the conversation of 4 September 2002 and submitted that the important point was that the Barrister having achieved what he believed was a concession by the Insurer, he was even then having an “each way bet”. It was submitted that the Barrister’s correspondence demonstrates that he was intent upon pursuing the path to winding up, if that became necessary and reference was made to the letter from Ms Voncina to Ms Elkins dated 8 December 2003 (exhibit C, SE1, page 78) which reported to Ms Elkins the result of the notice of motion taken out by the Builder and which contained the following:

Accordingly Mr Bland has instructed me to prepare documents as follows:

2 To issue a Creditors Statutory Demand for Payment of Debt against Australian Conquest, this then forces the company into liquidation if the debt is not paid.

181 That latter statement appears to be based upon the Barrister’s letter to Ms Voncina dated 6 December 2003 referred to in paragraph 88 above. It can be seen from that 6 December letter that the Barrister did not give advice that the Builder should be wound up. The letter from Ms Voncina did not state that Mr Bland had advised to prepare court documents for an application to wind up the Builder. Ms Voncina did not state that legal proceedings should be taken to wind up the Builder. The Tribunal does not accept these two submissions.

The letter dated 30 May 2003

182 One of the statements made by Ms Elkins in this letter was: “I think we should be concentrating on finalising the builder’s insolvency rather than considering legal action against McLachland (sic) Chilton, to enforce the claim.” In order to appreciate what Ms Elkins was conveying by that statement it is necessary to look at not only what was in the letter but the letters written by McLachlan Chilton on 4 and 17 April 2003 and the letter written by Ms Voncina on 11 April 2003 which was drafted by the Barrister. Those letters from McLachlan Chilton made it clear that the Insurer was of the view that because there was no evidence that the Builder was insolvent within the definition of that term in the policy, clause 8 of the terms of settlement could not be relied upon by Ms Elkins; non-levy under a writ of execution did not establish that the Builder was insolvent for the purposes of the policy and that for the purposes of the policy the Builder would not be insolvent until it was wound up. The relevant insurer representative Mr Molcik confirmed that the Insurer would pay any claims properly payable under the policy if the Builder was insolvent and that McLachlan Chilton had informed him that it had not been shown that the Builder was insolvent. Mr Molcik stated that the Insurer would honour the terms of settlement once the Builder was insolvent.

183 It can therefore be seen that Ms Elkins was making it plain that in her view the Builder had to be shown to be insolvent (as stated by Mr Molcik). The Barrister knew from the McLachlan Chilton letters of 4 and 17 April 2003, that the Insurer maintained that it had to be shown that the Builder was an externally administered Body Corporate, which in practical terms meant that it had to be shown that the Builder was being wound up.

184 The second sentence of the letter stated: “Could you please let me know if you intend to follow through with my case or if you want to withdraw, after reading the following.” The letter also contained the following sentence on page 2: “If you do not intend to follow up my case, could you please let me know within the week, so that I can deal with it myself.” When one has regard to the letters written in April 2003, the terms of the first page of the letter dated 30 May 2003 and that sentence which has just been quoted, the Tribunal is of the view that in her letter dated 30 May 2003, Ms Elkins gave instructions that the Builder be wound up.

Legislative history of unsatisfactory professional conduct

185 Section 496 of the Legal Profession Act 2004 states:

unsatisfactory professional conduct includes conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.

186 The definition of unsatisfactory professional conduct in section 496 of the Legal Profession Act 2004, is, for present purposes, the same as the definition of unsatisfactory professional conduct in section 123 of the Legal Profession Act 1987.

187 When the Legal Profession (Amendment) Bill (which became the Legal Profession (Amendment) Act No263 of 1987) was before Parliament, the Attorney General Mr Sheahan in his Second Reading Speech stated:

negligence

The Law Society has suggested the definition of professional misconduct might be clarified by restricting the concept of professional misconduct to serious cases of incompetence and cases justifying a person’s removal from the roll of barristers or solicitors, and by introducing a new definition of unsatisfactory conduct for cases where the conduct falls short of a reasonable standard.

This suggestion recognizes the distinction made in the Act between cases of minor professional misconduct provided for in division 5 of part 10 and serious professional misconduct, or unsatisfactory professional conduct provided for in division 7. In the case of minor professional misconduct, or unsatisfactory professional conduct, as it will now be known, proceedings will continue to be taken before the Professional Standards Board, and the board will have the power to make a range of orders where it is satisfied the complaint is made out. The Disciplinary Tribunal will continue to deal with matters of serious professional misconduct (Hansard Legislative Assembly, 18 November 1987, pages 16275 – 6. See also the Second Reading Speech of Mr Sheahan on 29 April 1987 when the Legal Profession Bill was before Parliament. He then stated that the Professional Standards Board would determine complaints about delay, negligence or other matters falling short of serious professional misconduct – Hansard page 10759 - emphasis added by the Tribunal).

188 One of the amendments to the Legal Profession Act No 109 of 1987 made by the Legal Profession (Amendment) Act No 263 of 1987, was the insertion of the definition of “unsatisfactory professional conduct” in section 123.

189 At common law, courts are permitted to have regard to extrinsic material such as the Hansard record of debates preceding the enactment of legislation, to identify the mischief at which the legislation is aimed (Fairfield Municipal Council v McGrath [1984] 2 NSWLR 247 at 250D – E, per Glass JA, with whom Hutley JA agreed – reversed by the High Court 156 CLR 672, but not on this point; Attorney-General v Maksimovich (1985) 4 NSWLR 300 at 304F - G per Kirby P. See also TCN Channel Nine Pty Ltd v Australian Mutual Provident Society [1982] 62 FLR 366).

190 The above second reading speeches make clear that one of the mischiefs at which the legislation was aimed, was that conduct of lawyers falling short of serious professional misconduct, such as delay and negligence, was not subject to disciplinary action. The legislation was aimed to make such conduct subject to disciplinary action.

Interpretation Act 1987

191 Section 33 of the Interpretation Act 1987 provides that in the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act shall be preferred to a construction that would not promote that purpose or object.

192 Section 496 of the Legal Profession Act 2004 is included in Chapter 4 of that Act. Two of the purposes of the Chapter are:

(b)to promote and enforce the professional standards, competence and honesty of the legal profession.

193 After taking account of section 33 of the Interpretation Act 1987 and the above second reading speeches, the Tribunal is of the view that unsatisfactory professional conduct can, in appropriate circumstances, include negligence and that the law of the tort of negligence is particularly relevant where the question is whether the conduct of an Australian legal practitioner, in giving legal advice to a client, is unsatisfactory professional conduct.

The tort of negligence

194 In Heydon v NRMA Limited (2000) 51 NSWLR 1 the New South Wales Court of Appeal considered the duty of care of legal practitioners and the standard of that care in the context of giving professional advice. At paragraphs 146 and 147, Malcolm AJA said:

In this context the content of the duty of care and the liability is the same whether it is founded on contract in the case of a solicitor, or whether it is founded on a duty of care in tort in the case of a barrister. In each case the duty is to apply the relevant degree of skill and exercise reasonable care to carrying out the task. There is no implied undertaking that the advice is correct, but only that the requisite degree of professional skill and care has been exercised in the giving of the advice.

195 At paragraphs 362 and 363, McPherson AJA said:

There is occasion here to bear in mind that the liability in question is limited to negligent acts or omissions, and that is so whether it arises out of contract, as it does for a solicitor, or is based in tort, as it is for a barrister in New South Wales. In a contract for legal services, the implied undertaking is no more nor less than to have and use the requisite degree of skill and care. The same duty is imposed by the law of tort. In giving advice, a lawyer does not warrant or guarantee the soundness of his or her opinion but only that the requisite degree of skill and care has been used in arriving at it:

At paragraph 649 Ormiston AJA said:

The exercise of due care, skill and diligence does not require, even the case of practitioners of the expertise and experience of the appellants, that they should invariably give the right advice as to every question raised for their opinion …

196 In Fleming, The Law of Torts, 9th edition, page 123, the author said this in relation to persons who undertake work calling for special skill:

At the other end of the spectrum of skill are beginners. While it is necessary to encourage them, it is equally evident that they cause more than their proportionate share of accidents. The paramount social need for compensating accident victims, however, clearly outweighs all competing considerations; the beginner is, therefore, held to the standard of those who are reasonably skilled and proficient in that particular calling or activity. This is all the more obvious when, as in the case of driving, the law has evinced its concern for public safety by licensing only those who have passed a test of competency. But it applies as well to skilled professions.

197 The Tribunal is of the view that the standard of competence and diligence which Ms Elkins was entitled to expect from the Barrister when he gave her advice, was that which a member of the public was entitled to expect of a reasonably competent barrister. Ms Elkins was not entitled to expect that the advice was correct, but she was entitled to expect that in giving the advice the requisite degree of competence and diligence had been exercised by him.

The first ground of the Council’s application

198 So far as this ground was concerned, the Council submitted that the Barrister acted incompetently as follows:

(ii)advised that it was not necessary to wind up the Builder;

(iii)in December 2003 advised Ms Elkins that a notice of motion brought by the Builder to strike out the claim should be defended and subsequently defended that notice of motion in Court in a contested hearing;

(iv)in April 2004, advised that there was no need to incur costs pursuing insolvency as amended pleadings were sufficient;

(v)on 6 August 2004 advised that the Home Building Act contained no definition of “insolvency”; and

(vi)in August 2004, advised to pursue a notice of motion to strike out the defence filed by the Insurer which was ultimately dismissed on 18 October 2004.

199 In giving his evidence before the Tribunal, the Barrister said in relation to the statement of claim against the Builder that it did not disclose a cause of action and that it was probably an abuse of process and that in itself was something which the ordinary person could expect would not occur when they engaged legal practitioners (22.4.09 T48/38 – 49/10).

Submissions (i) and (iii)

200 The submissions concerning drafting the statement of claim against the Builder but failing to plead a cause of action against it, advising that the notice of motion filed by the Builder should be defended and defending that notice of motion, can all be dealt with together. It is obvious that the taking of the proceedings against the Builder was an abuse of process. It is abundantly clear that in giving the advice that that course should be followed and in the drafting of the statement of claim the Barrister did not exercise the required degree of professional skill and care. It is clear that the Builder had to succeed on its notice of motion. It is also clear that in advising that it should be defended and then appearing at the hearing of the notice of motion in opposition to it, the Barrister did not exercise the requisite degree of professional skill and care. So far as these 3 allegations are concerned, the Tribunal is of the view that the Barrister’s conduct fell short of the standard of competence and diligence that Ms Elkins was entitled to expect of a reasonably competent Australian legal practitioner. The Tribunal is thus of the view that the Barrister engaged in unsatisfactory professional conduct in these 3 respects.

Submission (ii)

201 At about the time when the Barrister drafted the first statement of claim in June 2003, he gave advice to Ms Elkins that it was unnecessary to wind up the Builder and that she should proceed by way of District Court proceedings in which the Builder and the Insurer should be served. He gave evidence that that advice was given in the light of the instruction that the winding up would not be paid for (see paragraph 77 above).

202 The question whether that advice was of a standard of competence and diligence that a member of the public was entitled to expect of a reasonably competent Australian legal practitioner, cannot be affected by any instruction given by Ms Voncina to the Barrister that Ms Elkins would not fund the winding up of the Builder. If it were necessary to wind up the Builder then Ms Elkins should have been so advised. The question for determination is whether in June 2003 a reasonably competent Australian legal practitioner, acting to the standard of competence and diligence that a member of the public was entitled to expect of such a practitioner, could have given that advice. In determining that question account would be taken of the circumstances in which the deed came into existence.

203 To answer that question it is necessary to consider the meaning of the word “insolvency” in clause 8 of the deed. An indication of its meaning is that the clause finishes with the words “by reason of their insolvency, death or disappearance” which are similar to the words of section 99 (1) (a) of the Home Building Act: “because of the insolvency or death of the contractor or because of the fact that, after due search and inquiry, the contractor cannot be found.”. The above quoted words of clause 8 are a strong indicator that a court would construe the word “insolvency” in clause 8 as having the same meaning as that word has in the Home Building Act.

204 Furthermore clause 8 included the words “the same can sound an insolvency claim under the policy”. It appears that the only claim which could be described as an insolvency claim under the policy would be a claim based upon section 99 (1) (a) of the Home Building Act. The Barrister gave evidence that prior to this case he had dealings with some home owners warranty insurance policies and that the policies answered a claim that was made “in the circumstances where the builder has either disappeared, has died or become insolvent under the Act and we now know that that’s section 90 of the Home Building Act” (22.4.90 T49/33 – 43).

205 The Tribunal is unable to see how a reasonably competent Australian legal practitioner could have given advice to Ms Elkins that it was unnecessary to wind up the Builder. The Tribunal is of the view that the use of the same or similar words in both section 99 (1) (a) and clause 8 of the deed meant that a court would more than likely construe that clause as requiring that the Builder be wound up. The advice which Ms Elkins was entitled to expect of a reasonably competent Australian legal practitioner was advice that that was the way a court would more than likely construe the clause. This is because a court would more than likely construe “insolvency” in clause 8 as having the same meaning as “insolvency” in section 99 (1) (a) of the Home Building Act. The advice of a reasonably competent Australian legal practitioner should at the very least have stated that that was a construction which a court might adopt. The Barrister’s failure to give the above advice means that his conduct was unsatisfactory professional conduct.

206 The Barrister may have initially perceived that the agreement reached with the Insured’s counsel was that if the Builder was unable to pay an award by the Tribunal by reason of insolvency in fact, the Insurer would accept that fact as giving rise to a right to make a claim on the policy. However the fact is that in April 2003, McLachlan Chilton made it plain that the Insurer was insisting that Ms Elkins prove that the Builder was being wound up. The letters from McLachlan Chilton in April 2003 indicate to the Tribunal that when the Barrister gave his advice in June 2003 that it was unnecessary to wind up the Builder, he did not act diligently to the standard that a member of the public was entitled to expect of a reasonably competent Australian legal practitioner. Furthermore for a similar reason, the Tribunal does not accept the submission referred to in the first sentence of paragraph 148(d) above.

Further submission

207 The Council also submitted that in June 2003 the advice which the Barrister, acting competently, should have given was as follows:

(b)failing payment by the Builder, an application be filed in the Supreme Court to wind up the Builder;

(c)upon a winding up order being made by the Supreme

Court, a demand for payment be made on the Insurer;

(d)if the Insurer failed to meet that demand, then and only then, sue the Insurer for breach of contract; and

(e)there was no need or reason to sue the Builder on a debt or contract claim in the District Court.

208 Subject to the Barrister also giving the advice referred to in paragraph 207 above, the Tribunal accepts that submission.

209 In June 2003, the Barrister in effect advised Ms Elkins as to the steps to be taken, and those that did not have to be taken, for her to recover the amount of the CTTT verdict. The steps referred to in paragraph 208(a) – (d) flow from the advice, which Ms Elkins was entitled to expect, referred to in paragraph 206. They were the necessary steps to be advised to be taken to recover the amount of the verdict.

210 In failing to give the advice referred to in paragraph 208 the Barrister’s 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. The Barrister’s failure to give this advice means that his conduct was unsatisfactory professional conduct.

Submission (iv)

211 There is no evidence that in April 2004, the Barrister advised that there was no need to incur costs pursuing insolvency as amended pleadings were sufficient.

Submissions (v) and (vi)

212 Submissions (v) and (vi) set out in paragraph 199 above can be dealt with together.

213 The Barrister advised on 6 August 2004 that the Home Building Act had no definition of “insolvency” but that the Corporations Law did. He also advised that a notice of motion to strike out the Insurer’s defence be filed. That advice was based in part upon his understanding that the Home Building Act had no definition of “insolvency” but that the Corporations Law did have such a definition. The letters of 4 and 17 April 2003 from McLachlan Chilton brought to the Barrister’s attention in no uncertain terms: (a) that non-levy under a writ of execution did not establish that the Builder was insolvent; (b) the definition of “insolvent” in section 90 of the Home Building Act; and (c) the definition of “externally-administered Body Corporate in section 9 of the Corporations Law (sic).” In those circumstances there was, in the Tribunal’s view, no basis for the Barrister holding the view that the Home Building Act had no definition of insolvent. To give that advice indicates to the Tribunal that the Barrister had not given proper attention to the issues. Members of the public are entitled to expect that when their lawyer gives them advice to take an interlocutory step in litigation and the advice is based on a relevant law, the lawyer will have a sound knowledge of the law and a proper understanding of it. They are also entitled to expect that the lawyer will have given proper attention to the issues in the litigation. This is what a member of the public is entitled to expect of a reasonably competent lawyer. The meaning of “insolvency” in clause 8 was a relevant matter to be taken into consideration when the Barrister advised that “there was no evidence that goes to the question of insolvency or otherwise of the company. Nor is there evidence that we have not established an act of insolvency that could found a claim.” The definition of “insolvent” in the Home Building Act was relevant to that meaning. The Barrister did not take that into consideration. The advice given on 6 August 2004 fell short of the standard of competence and diligence that Ms Elkins was entitled to expect of a reasonably competent Australian legal practitioner. The Tribunal is of the view that the Barrister engaged in unsatisfactory professional conduct in giving the advice on 6 August 2004.

The second ground of the Council’s application

214 The Council submitted that: Ms Elkins’ instructions by letter dated 30 May 2003 to Ms Voncina were clear and that they were communicated to the Barrister; rather than act on those instructions, the Barrister instead drafted the statement of claim against the Builder and the Insurer; the Barrister had a duty to provide advice to Ms Elkins that would enable her to make informed decisions as to the instructions she would give; and it was his responsibility to provide advice as to the cost involved in winding up the Builder but he failed to do so.

215 For the reasons set out in paragraph 184 above the Tribunal is of the view that in her letter dated 30 May 2003, Ms Elkins gave instructions to Ms Voncina that the Builder be wound up.

216 Furthermore when the Barrister read the letter he understood that it was Ms Elkins’ view that she and her legal team, including the Barrister, should be concentrating on finalising the Builder’s insolvency rather than considering legal action against McLachlan Chilton (see paragraph 61 above).

217 However the Barrister was briefed by Ms Voncina. He took instructions from her and not directly from Ms Elkins. Notwithstanding that Ms Voncina forwarded to the Barrister a copy of Ms Elkins’ letter, the conclusions to be drawn from Ms Voncina’s letter to Ms Elkins dated 3 June 2003 and from her message to the Barrister sent by facsimile transmission on that day are that:

(b)Ms Voncina did not instruct the Barrister to draft documents for the purpose of having the Builder wound up; and

(c)implicit in Ms Voncina’s letter and facsimile transmission of 3 June 2003 is that Ms Voncina was confirming her instructions to the Barrister to draft a statement of claim and that she was either simply ignoring the instructions from Ms Elkins or alternatively she was of the view that the way to proceed was by way of statement of claim in the District Court and it was not necessary to wind up the Builder in order to commence the legal proceedings.

218 In these circumstances the Tribunal is unable to conclude that the Barrister was given instructions by Ms Voncina at this time to liquidate the Builder. Accordingly the Tribunal is of the view that the Council has not established the second ground of its application.

The third ground of the Council’s application

219 The Council submitted that it was the Barrister’s conduct in conference on 26 October 2005 which led to Ms Elkins accepting a substantial compromise of her claim. It was submitted that it was this conduct which clearly placed Ms Elkins under considerable pressure to compromise her claim.

220 One of the submissions made on behalf of the Barrister was that this third ground of complaint was in reality a consequence of the first and could not amount to a separate ground. It was also submitted that the bringing of considerable pressure to bear upon a client by an advocate to settle a case was not, without more, negligent or improper (Studer v Boettcher [2000] NSWCA 263 per Handley JA at [53] and Sheller JA at [62]).

221 Ms Elkins gave evidence that at the conference the Barrister gave her the impression that he was not prepared for the case. The Tribunal can envisage a situation where the unpreparedness of counsel could result in a client’s thinking that the case would have to be settled because it would not be properly presented in court. Even if it be the fact that the Barrister advised Ms Elkins that her case was not strong and that this was contrary to what he had been saying all along, the Tribunal is not satisfied that what the Barrister said and did at the conference placed Ms Elkins under pressure to compromise her claim.

222 At the conference the Barrister was bound to give advice as to Ms Elkins’ prospects of success. As part of that advice the Barrister was obliged to bring to Ms Elkins’ attention the fact that the Insurer was proposing to claim its costs up to 18 February 2005 which was the date when the Builder was wound up in the Supreme Court of New South Wales.

223 In her evidence Ms Elkins stated that at the conference she could see that her hopes were being dashed because the Barrister did not have a strong argument and that she felt that it was all going to fall apart (20.4.09 T35/14 – 16).

224 The Tribunal is of the view that the decision by Ms Elkins to give instructions to settle was a consequence of the unsatisfactory professional conduct the subject of the first complaint and in particular a consequence of the Barrister’s giving advice in June 2003 that it was not necessary to wind up the Builder and that Ms Elkins should proceed by way of the District Court proceedings against the Builder and the Insurer. The position she found herself in at the time of the conference was brought about by that conduct.

225 Furthermore, even if it might be appropriate to conclude that the Barrister brought pressure to bear upon Ms Elkins to settle, the Tribunal is not satisfied that he acted improperly in doing so.

226 Accordingly the Tribunal is of the view that the Council has not established the third ground of its application.

ORDERS

1. The Tribunal finds that Timothy Owen Bland engaged in unsatisfactory professional conduct with respect to the conduct referred to in paragraphs 200, 205, 210 and 213 of the Reasons for Decision.

2. The Tribunal grants liberty to apply in respect of the description of the conduct and thus the form of the above order.

3. The Tribunal orders that the application be listed 14 days after publication of the Reasons for Decision, for directions as to the further orders to be made as a result of the above findings and in relation to Ms Elkins’ claim for compensation.

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Citations

New South Wales Bar Association v Bland [2010] NSWADT 34

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CITATION:	NSW Bar Association v Bland [2010] NSWADT 34
DIVISION:	Legal Services Division
PARTIES:	APPLICANT Council of the New South Wales Bar Association RESPONDENT Timothy Owen Bland
FILE NUMBER:	082019
HEARING DATES:	20, 21, 22 April, 25 August 2009
SUBMISSIONS CLOSED:	7 December 2009
DATE OF DECISION:	4 February 2010
BEFORE:	Robberds L QC- Judicial Member; Robinson W QC -Judicial Member; Bubniuk L - Non-Judicial Member
CATCHWORDS:	Disciplinary application - unsatisfactory professional conduct
LEGISLATION CITED:	Legal Profession Act 1987 Interpretation Act 1897 Home Building Act 1989 Legal Profession Act 2004
CASES CITED:	Attorney-General v Maksimovich (1985) 4 NSWLR 300 Constructions Pty Limited [2008] NSWCA 178 Fairfield Municipal Council v McGrath [1984] 2 NSWLR 247 Fowler Corbett and Jessop trading as Haydon Fowler Corbett Jessop v Toro Heydon v NRMA Limited (2000) 51 NSWLR 1 Jones v Dunkel (1959) 101 CLR 298 Lemoto v Able Technical Services Pty Limited (2005) 63 NSWLR 300 Manly Council v Byrne [2004] NSWCA 123 Studer v Boettcher [2000] NSWCA 263 TCN Channel Nine Pty Ltd v Australian Mutual Provident Society [1982] 62 FLR 366 Whyked Pty Limited v Yahoo! 7 Pty Limited [2008] NSWSC 477
TEXTS CITED:	Fleming, The Law of Torts, 9th edition
REPRESENTATION:	APPLICANT P G Mahony SC, barrister and P J Nolan, barrister RESPONDENT G P Craddock SC, barrister
ORDERS:	1.The Tribunal finds that Timothy Owen Bland engaged in unsatisfactory professional conduct with respect to the conduct referred to in paragraphs 200, 205, 210 and 213 of the Reasons for Decision 2.The Tribunal grants liberty to apply in respect of the description of the conduct and thus the form of the above order 3.The Tribunal orders that the application be listed 14 days after publication of the Reasons for Decision, for directions as to the further orders to be made as a result of the above findings and in relation to Ms Elkins’ claim for compensation.