R v The Law Society of Tasmania; Ex parte LH and LAH
[2002] TASSC 116
•17 December 2002
[2002] TASSC 116
CITATION:R v The Law Society of Tasmania; Ex parte LH & LAH [2002] TASSC 116
PARTIES: R
v
THE LAW SOCIETY OF TASMANIA
LH, Ex parte
LAH, Ex parte
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: M260/2002
DELIVERED ON: 17 December 2002
DELIVERED AT: Hobart
HEARING DATE: 19 November 2002
JUDGMENT OF: Cox CJ
CATCHWORDS:
Professions and Trades - Lawyers - Misconduct, unfitness and discipline - Disciplinary proceedings - Statutory proceedings - Tasmania - Whether the Law Society's referral to the Supreme Court for determination was unreasonable - Whether the Law Society had sufficient evidence to form the opinion that there was professional misconduct.
Legal Profession Act 1993 (Tas), s64.
Aust Dig Professions and Trades [134]
REPRESENTATION:
Counsel:
Prosecutors: P W Tree
Respondent: S P Estcourt QC
Solicitors:
Prosecutors: In person
Respondent: Crawford & Crawford
Judgment Number: [2002] TASSC 116
Number of paragraphs: 15
Serial No 116/2002
File No M260/2002
THE QUEEN v THE LAW SOCIETY OF TASMANIA;
EX PARTE LH & LAH
REASONS FOR JUDGMENT COX CJ
17 December 2002
This is the return of a general order that the Law Society of Tasmania ("the Society") show cause why its decisions made on or about 7 July 2001 to make an application to the Court, pursuant to the Legal Profession Act 1993 ("the Act"), s64, to hear and determine complaints in relation to the prosecutors should not be quashed pursuant to the Rules of the Supreme Court 2000, r627(2)(a), on the ground that those decisions were unreasonable and further why the Society should not be restrained pursuant to the Rules, r627(2)(c), from further acting upon its said decisions upon the same ground.
Both prosecutors are solicitors who were employed by the firm of W ("the firm") and each had conduct of files in which two clients of that firm sought damages for personal injuries arising out of motor vehicle accidents in which they were passengers. It appears that one R is the sole principal of the firm, that he conducts the practice in a number of different states of Australia and that his principal office is in Brisbane.
The two clients each complained to the Society about what are claimed to be excessive professional fees charged by the firm. The first client, Mr Deacon, engaged the firm in about June 1998 and signed a retainer agreement in which the firm agreed to act for him on a "no win - no bill" basis; that is, he was only to be charged professional costs and outlays at the conclusion of the matter and only if he was successful unless (inter alia) he failed to accept the advice of the firm or its barristers, in which event he acknowledged that the firm would be entitled to render an account for those costs and outlays. By cl 3 the firm agreed, in the event that the client was not successful, to pay the other side's party and party legal costs and expenses, provided the client was not in default under the agreement. By cl 5 it was provided
"5 The Client acknowledges and agrees that the (Lawyers) are at liberty to charge a flat rate of $ 250.00 per hour for all work undertaken by the (Lawyers) on behalf of the client, calculated in 6 minute units. For this purpose the perusal, drawing or engrossing of all documentation is deemed to be calculated at the rate of 1 unit per folio."
Clause 9 provided:
"9 The Client acknowledges that in the event of an account being rendered to the Client, the Lawyers will be entitled to levy the sum of $125.00 on account of establishment costs and the further sum of $375.00 on account of ongoing file administration costs, and shall be entitled to charge travelling and waiting time at the flat rate mentioned above. these charges are only payable at the end of the client's claim, and only if the claim is successful, subject to Clause 1."
Clause 16 provided:
"The Client acknowledges that prior to signing this Agreement the Client received written advice from the Lawyers that before executing this Agreement, it would be prudent for the Client to obtain independent legal advice as to the rights and obligations of both parties arising from this Agreement."
The prosecutor, LAH, was first employed by the firm in July 1999 and took over carriage of Mr Deacon's file. In about March 2000, the claim was settled with the MAIB for $12,000 and costs to be taxed on Table A. Those costs and disbursements were settled with the defendant's solicitors for $2,000 and $1,091 respectively. From the $12,000, an HIC advance payment of $1,200 and a Centrelink refund of $1,885.65 were deducted and from the balance received by the firm, including the party and party costs and out of pockets, professional costs and disbursements amounting to $10,069.70 were deducted and a cheque for the balance of $1,935.65 despatched to the client. LAH, at the client's request, prepared an itemised bill of costs amounting to $11,901.75. It purported to be drawn on the scale set out in the retainer agreement.
The second complainant, Mrs Reid, in May 1998, instructed the firm to claim damages for personal injuries arising out of another motor vehicle accident in which she, too, was a passenger. She signed a retainer agreement in substantially the same form as that signed by Mr Deacon. Her claim was settled for $18,000 and party and party costs, which were settled in the sum of $2,422. After deduction of $705.10 for a Centrelink refund from the balance received of $19,716.90, inclusive of the party and party costs and out of pockets, professional costs and disbursements amounting to $10,211.30 were deducted and she was sent a cheque for the balance of $9,505.60. LH commenced working for the firm on 17 May 1999 and took over carriage of the file and retained carriage of it until settlement on or about 28 October 1999. An itemised bill was subsequently prepared, purportedly drawn on the retainer agreement scale and amounted to $11,684.15.
The Executive Director of the Society wrote to LAH on 28 March 2001, and on 9 April 2001 he replied, advising that he had been admitted to practice on 13 September 1996 and that, upon his commencing employment with the firm on 28 July 1999, he was given responsibility for the Deacon file, which contained the retained agreement. He said that the claim was settled by negotiation and that prior to settlement he wrote to Mr Deacon and "gave advice about the amount of potential settlement and the repayments that would need to be made". He received Mr Deacon's signed instructions to settle the case. He said in his letter that, as an employee of the firm, he was not given any discretion about the contents of the retainer agreement and that at all material times he was conducting the file in the course of his employment with the firm. The letter forwarding the memorandum of fees and cheque for $1,935.65 bears the reference "LAH" but does not appear to be signed by LAH. The letter to the Society of 9 April 2001 contains the following statement:
"The forwarding of a settlement cheque, a memorandum of fees and an itemised bill of costs does not and cannot constitute any form of inappropriate behaviour or conduct on my part and in my opinion it is not something that is properly referable to The Society for its consideration.
I regard the complaint as frivolous and vexatious and it should be withdrawn."
LH also wrote to the Executive Director of the Society on 9 April 2001. She made the following five points:
"1At all relevant times I was an employee of (W) and was acting in the course of my employment.
2The bulk of the work on Mrs Reid's file was carried out by another solicitor.
3At the time of taking over the conduct of Mrs Reid's file when my employment with (W) commenced on or about 17 May 1999 Mrs Reid had already signed the Retainer Agreement dated 21 May 1998 which fixed the rate charged for work which I carried out on her behalf.
4At the conclusion of the matter a memorandum of fees was prepared which reflected the work done and charges made pursuant to that retainer. I did not prepare the memorandum of fees however I did sign an internal copy.
5At all relevant times there has not been to my knowledge a decision of any Court, Tribunal or other professional body which characterised the Retainer in question as unconscionable or illegal or otherwise tainted."
Both prosecutors were given notices pursuant to the Act, s60. In each case they were advised that an investigation pursuant to the Act, s58 in respect of a complaint made on behalf of Mr Deacon in the case of LAH and Mrs Reid in the case of LH pursuant to the Act, s57 had revealed conduct on their part which Council might consider pursuant to the Act, s60. That conduct was particularised as follows:
(In the case of LAH)
"That conduct on your part, namely the raising of, or the authorisation of, (W) Bill No 30512 dated 6 March 2000, resulted in the charging of excessive fees or costs to Mr R B Deacon on or about that date."
(In the case of LH)
"That conduct on your part, namely the raising of, or the authorisation of, (W) Bill No 30198 dated 28 October 1999, resulted in the charging of excessive fees or costs to Mrs D M Reid on or about that date."
Submissions were invited on the following questions:
"1Whether Council should form the opinion that the conduct particularised above amounts to unprofessional conduct (see Legal Profession Act 1993, s60(1));
2Whether the conduct may amount to both unprofessional and professional misconduct (see Legal Profession Act 1993, s60(2)(a));
3Whether the conduct may amount to professional misconduct only (see Legal Profession Act 1993, s64);
4Whether, if the conduct may amount to both unprofessional conduct and professional misconduct, the Council should hold a hearing or should make an application for the Disciplinary Tribunal to hear and determine the matter;
5Whether, if the conduct may amount to professional misconduct only, the Council should make an application to the Disciplinary Tribunal or should make an application to the Supreme Court, to hear and determine the matter."
On their behalf, a firm of solicitors responded:
"The following factors we assert are relevant to the determination as to whether or not LH and LAH may have engaged in conduct that might be categorised as unprofessional conduct or professional misconduct or both unprofessional and professional misconduct.
1)At all relevant times they were relatively junior employed solicitors.
2)At no stage did they have any authority to depart from the billing guidelines and requirements of the firm.
3)In both instances, neither practitioner had any involvement in the entry into of the agreement and were relatively 'late on the scene' in relation to the conduct and carriage of the matters; in both instances, another practitioner had been involved in carrying out the bulk of the professional work in relation to the respective cases.
4)In neither case did either practitioner have any discretion in relation to the fees charged. The determination of the appropriate fee to be charged was made by the principal of the firm, or other persons physically removed from the Hobart office and situated in Brisbane. Neither practitioner had any authority, actual or implied, to write down or write off fees charged.
5)In neither case did either practitioner sign the bills complained of.
6)It is submitted that in the circumstances, neither could be said to have engaged in professional misconduct, or unprofessional conduct or both professional misconduct and unprofessional conduct.
CONCLUSION
It follows that in all instances, my clients answer questions 1, 2, and 3, in the negative.
So far as questions 4 and 5 are concerned, my clients instruct that no hearing at all should be held given the answers to questions 1, 2, and 3.
In the event Council determines that the conduct may amount to unprofessional conduct and professional misconduct, it is the submission of my clients that the matter should be dealt with by the disciplinary tribunal and that no application should be made to the Supreme Court in any circumstances."
The Society retained the services of senior counsel, who concluded:
"I am of the view that those of the practitioners complained against who were complicit in the charging of the fees concerned, should be considered for prosecution before the Disciplinary Tribunal for statutory professional misconduct in the charging of excessive fees or costs."
That advice was dated 9 May 2001, but on 22 June, counsel further advised the President of the Society that he had re-considered the question whether the prosecution should be before the Disciplinary Tribunal or the Court and had come to the conclusion that it should be before the Court. He advanced a number of reasons for this course. On 7 July, the Council of the Society resolved to commence proceedings against both prosecutors in the Supreme Court alleging that they had been guilty of professional misconduct. The Council considered the two advices of senior counsel and the material that I have already outlined.
The prosecutors claim that the Society's decision to prosecute them in the Supreme Court for professional misconduct is unreasonable. The Act, Pt 8, deals with disciplinary proceedings, and professional misconduct is defined in s56 as including "conduct on the part of a practitioner which results in … (d) the charging of excessive fees or costs". Section 57 permits any person, or the Society, to make a complaint against a practitioner and s58(1) requires the Council of the Society to investigate a complaint made under s57. If, in the course of an investigation, the Council considers a complaint to be frivolous, vexatious or lacking in substance, it must dismiss the complaint (s58(3)). Section 64 provides:
"64 If, during an investigation or hearing under this Division, the Council is of the opinion that any matter which is the subject of the investigation or hearing amounts to professional misconduct, it must make an application –
(a) under section 72 for the Tribunal to hear and determine the matter; or
(b) to the Supreme Court to hear and determine the matter."
The Tribunal's disciplinary powers are extensive and range from striking off a practitioner to imposing a reprimand. The Supreme Court's powers are co-extensive with those of the Tribunal (s81) and include a power to make a default order under s111, a course which is not an issue in this case. By s80(2), it is provided that an application to the Supreme Court, unless the Supreme Court otherwise orders, is to be heard in open court, but s80(4) provides that if the Court considers that an application relating to a complaint should be heard and determined by the Council or the Tribunal, it may refer that complaint to be heard and determined by the Council or Tribunal.
Mr Estcourt QC for the Society does not dispute that the remedy sought by the prosecutors is available if the Court is of the view that the Society's decision was unreasonable, but he contends that it was not unreasonable. Overcharging is capable of amounting to professional misconduct, as the definition section clearly states. For a practitioner to charge professional costs at a rate which seems to be three to four times higher than the agreed party and party costs and to deplete the damages recovered by clients against whom there does not appear to have been any basis for a contention of contributory negligence to the extent alleged here is, I have no doubt, prima facie evidence of significant overcharging, notwithstanding that the Act, s129, permits agreement between a practitioner and his client for remuneration otherwise than in accordance with any rules made by the Council under s128 and notwithstanding that the agreement may have been made in the context of the consideration provided by the practitioner in the form of a "no win - no bill" undertaking. Whether in the circumstances of this case the amounts charged were in fact excessive is not the issue before me. They may well not be. But the question here is whether there was sufficient evidence of excessive charging to enable the Council to form the opinion that it amounted to professional misconduct by those complicit in it. I have no doubt that there was.
The conduct particularised as the subject of the complaint and the Council's investigation of it was, in each case, the raising of, or the authorisation of, particular bills which were alleged to have resulted in the charging of excessive fees or costs to the two clients. The Council was obliged by s64 to refer the matter to either the Tribunal or the Supreme Court "If, during an investigation … the Council is of the opinion that any matter which is the subject of the investigation … amounts to professional misconduct". Proceedings of this kind are not punitive, but are designed to protect the public and the integrity of the legal profession. Dickens v The Law Society 42/1981; Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279; Klein v New South Wales Bar Association (1960 - 1961) 104 CLR 186; New South Wales Bar Association v Evatt (1968) 117 CLR 177; Ex parte Attorney-General for the Commonwealth Re a Barrister & Solicitor (1972) 20 FLR 234. The fact that there is no evidence that either prosecutor raised or authorised the bill in the sense of drawing it or signing it, or signing the letter accompanying it and the cheque in settlement, should not preclude the Council from fulfilling its obligations under s64 if in the course of the investigation the actual conduct revealed, while not answering that degree of particularity, is in the Council's opinion, professional misconduct. Any subsequent application to the Tribunal or Court would be expected to contain full particulars of the conduct considered professional misconduct. Before forming the opinion, the Council needed to have before it prima facie evidence of professional misconduct on the part of those under investigation. Mr Estcourt QC submitted that no more than the establishment of a prima facie case was required before the Council could exercise its powers under s64. He relied upon Cornall v AB (a Solicitor) [1995] 1 VR 372. However, the power of referral after investigation by the Secretary of the Law Institute which was in issue in that case was required to be exercised if the Secretary was "of opinion that there appears to have been misconduct". The court consisting of Ormiston, Coldrey and O'Bryan JJ noted at 392 that the previous legislation up until 1989 had required the formation of the opinion that the solicitor was "guilty of misconduct" and said:
"The change of language in 1989 would on its face require now an arguably lesser degree of satisfaction in the mind of the secretary. The formation of an opinion of guilt of misconduct seemingly required more than the establishment of a prima facie case. On the other hand the formation of opinion that there 'appears to have been misconduct etc' requires, in our opinion, no more than the establishment of a prima facie case."
Under the Act, the Council is required to be of the opinion that any matter which is the subject of the investigation amounts to professional misconduct. In my view there was evidence that each of the prosecutors had acted for their clients in the settlement of their actions, had advised them of the amounts which were to be deducted from their damages, and had put in train the final accounting to the client and disposition of the funds in hand in the knowledge of what amount of profit costs would be retained by the firm. There was, accordingly, prima facie evidence of activity on their part as legal practitioners which resulted in the charging of fees which could reasonably be regarded as excessive. True, they are both relatively junior practitioners, but as Hope JA said in Law Society of New South Wales v Moulton (1981) 2 NSWLR 736 at 740:
"It is no answer to a charge of professional misconduct in relation to transactions with his clients' money that the solicitor did not appreciate that what he was doing constituted misconduct."
Likewise, in New South Wales Bar Association v Evatt (supra), the High Court, at 184, said in relation to a claim by a barrister that he did not know it was wrong to be party to the organising of the charging of extortionate fees when the solicitor had the agreement of his client:
"The respondent's failure to understand the error of his ways of itself demonstrates his unfitness to belong to a profession where, in practice, the client must depend upon the standards as well as the skill of his professional adviser."
It is also not disputed by the Society that both prosecutors were employed solicitors. Although there was no evidence of the basis of their remuneration or general terms of employment, they contended in correspondence with the Society that they had no discretion in the amount of the charges to be made once settlement was reached. Nevertheless, the Council was not obliged to accept this explanation and was entitled to form the opinion that actively participating, even as an employee, in the settlement of the client's actions on such apparently disadvantageous terms having regard to the amount which was going to be deducted, amounted to professional misconduct. The Council did not expose its reasoning in forming its opinion, nor detail its level of satisfaction. In my view, there was prima facie evidence to support that opinion and no compelling reason why, in the circumstances, the opinion can be said to be an unreasonable one. It was likewise a reasonable decision on the part of Council to elect to make application to the Supreme Court rather than to the Tribunal as the matter raises issues of the reasonableness of retainer agreements which authorise the practitioner to charge clients who recover verdicts fees which compensate for the work done for others who do not and which provide a fund from which costs ordered to be paid by unsuccessful clients can be paid by the practitioner in accordance with cl 3. Whether the matter ultimately proceeds in the Supreme Court or is referred back to the Council or Tribunal would depend upon the evidence before the Court after the application is made. In my opinion, the general order should be discharged.
5
1