The Legal Practitioners v Council of the Law Society of the Act
[2016] ACTSC 248
•31 August 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | The Legal Practitioners v Council of the Law Society of the ACT |
Citation: | [2016] ACTSC 248 |
Hearing Dates: | 6 May, 13 May 2016 |
DecisionDate: | 31 August 2016 |
Before: | Burns J |
Decision: | The Law Society pay the plaintiffs’ costs of these proceedings on a party/party basis. |
Catchwords: | PROFESSIONS AND TRADES – Lawyers – complaints and discipline – disciplinary proceedings – commenced in the ACT Civil and Administrative Tribunal (ACAT) – Statement of Reasons not provided by Law Society – legal practitioners commenced proceedings under Administrative Decisions (Judicial Review) Act 1989 (ACT) – ACAT proceedings on foot – Law Society rescinded decision to commence disciplinary proceedings – proceedings discontinued by consent in Supreme Court – assessment of costs – application for indemnity costs – processes of Law Society flawed – costs awarded on party/party basis. |
Legislation Cited: | Administrative Decisions (Judicial Review) Act 1989 (ACT), ss 5, 6, 8, 16 Court Procedure Rules 2006 (ACT), r 1163 Legislation Act 2001 (ACT), s 179 |
Cases Cited: | Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 Dibeek Holdings Pty Ltd v Notaras (1997) 141 FLR 364 Legal Services Commissioner v Bone [2014] QCA 179 |
Parties: | Legal Practitioner (First Plaintiff) Legal Practitioner (Second Plaintiff) Legal Practitioner (Third Plaintiff) Council of the Law Society of the Australian Capital Territory (Defendant) |
Representation: | Counsel Mr P Walker SC (Plaintiffs) Mr Travers (Defendant) |
| Solicitors [Redacted for legal reasons] (Plaintiffs) DibbsBarker (Defendant) | |
File Number: | SC 309 of 2014 |
BURNS J:
On 2 December 2014, I ordered by consent that the proceedings be discontinued. They were discontinued as the Law Society had rescinded their decision of 16 December 2013 to commence disciplinary proceedings in the ACT Civil and Administrative Tribunal (the ACAT) against the plaintiffs. As a consequence of that decision, there was no reason for the present proceedings to continue, being contingent on the Law Society’s decision of 16 December 2013. On 2 December 2014, I also reserved the question of costs.
On 6 May 2016 and 13 May 2016, the present proceedings proceeded before me as an assessment of costs. In order to address the question of costs, it is first necessary for me to recount the background of the proceedings.
The proceedings were originally commenced by originating application filed on 4 July 2014. That application sought the following orders:
1.An order pursuant to section 16(1)(b) of the Administrative Decisions (Judicial Review) Act 1989 (ACT) that proceedings numbered OR 14/217 commenced in the ACT Civil and Administrative Tribunal on 25 June 2014, be stayed pending further Order.
2.An order pursuant to section 415 of the Legal Profession Act 2006 (ACT) that the Defendant provide the Plaintiffs with a statement of reasons, as defined by section 179 of the Legislation Act 2001 (ACT), with respect to its decision to commence proceedings numbered OR 14/27 in the ACT Civil and Administrative Tribunal, made on 16 December, 2013, within 28 days.
3.An order of review pursuant to section 6 of the Administrative Decisions (Judicial Review) Act quashing the Respondent’s decision made on 16 December, 2013 on the following grounds:
3.1A breach of the rules of natural justice happened in relation to the making of the decision;
3.2Procedures which were required by law to be observed in relation to the making of the decision were not observed; and
3.3The decision involved an error of law.
4.An order that the Defendant pay the Plaintiffs’ costs of, and incidental to this Application.
In support of that application, an affidavit of the second plaintiff, QD sworn on 4 July 2014 was filed.
On 11 July 2014, the matter was docketed to me by the Deputy Registrar and was adjourned by the Deputy Registrar to the callover before me on 1 August 2014. On that date I gave the following directions:
(a)the defendant provide a Statement of Reasons to the plaintiffs in respect to the decision made by the defendant on 16 December 2013 and affirmed by the defendant on 16 June 2014 to apply to the ACAT pursuant to s 419(1) of the Legal Profession Act 2006 (ACT) (the Legal Profession Act);
(b)the Statement of Reasons to be provided as soon as practicable after 18 August 2014;
(c)the matter be adjourned for four weeks; and
(d)costs be reserved.
On 28 August 2014, the Statement of Reasons was provided to the plaintiffs.
On 29 August 2014, the matter came back before me for Directions. On that date, I adjourned the matter to 25 September 2014 and ordered that the costs of that day be reserved.
On 25 September 2014, I gave the following directions:
(a)that the applicant file and serve an amended originating application and supporting affidavit by 9 October 2014;
(b)the applicant provide to the respondent better particulars of each of the grounds relied on in support of the relief sought by 9 October 2014;
(c)the respondent file any material by way of response on 23 October 2014; and
(d)the matter be relisted for further directions on Thursday 30 October 2014.
An amended originating application was then filed on 7 October 2014 to amend order three. A further amended originating application (FAOA) was then lodged two days later, on 9 October 2014. There was not a significant difference between the two. There was then an issue between the parties whether there was consent to the filling of the FAOA, however, this was subsequently resolved. I will return to the contents of the FAOA later in these reasons.
On 30 October 2014, the matter came back before me again for directions. On that date I gave the following directions:
(a)subject to order 2, the plaintiffs have leave to file a further amended application, dated 9 October 2014;
(b)the plaintiffs pay the defendant’s costs thrown away by reason of the amendments to the said application;
(c)the plaintiffs have leave to file the affidavit of the third plaintiff, sworn on 9 October 2014 and the affidavit of the second plaintiff, sworn on 29 October 2014;
(d)the court notes that the defendant will meet in Council on 17 November 2014 to consider the recommendation (made without admission) to rescind the defendant’s decision to commence proceedings OR 14/217 commenced in the ACAT on 25 June 2014 against the plaintiffs; and
(e)the proceedings be stood over for further directions on 2 December 2014.
As I have already said, on 2 December 2014, by consent, I ordered that the proceedings be discontinued and reserved my decision in relation to costs. I noted at that time that the matter may be relisted for an argument as to costs on short notice if required.
On or about 31 March 2016, the plaintiffs attempted to file an application to reinstate proceedings to allow for argument as to costs to ensue. This was unnecessary because of my orders on 2 December 2014, and that application was ultimately not pursued.
The plaintiffs’ position was that the proceedings were discontinued without admission. As a result of this, the plaintiffs submitted that I needed to assess the merit in the plaintiffs’ claim. The defendant’s position was that there needed to be brief consideration of the proceedings in this Court. I will now turn to the background of the proceedings (the ADJR proceedings).
Background
In the proceedings before me, the plaintiffs relied on the affidavit of the second plaintiff, QD sworn on 29 March 2016. This affidavit also refers to the following affidavits:
(a)affidavit of QD sworn on 4 July 2014;
(b)affidavit of QD sworn on 27 August 2014;
(c)affidavit of ET sworn on 9 October 2014; and
(d)affidavit of ET sworn on 26 October 2014.
The plaintiffs also sought to rely on an affidavit of QD sworn on 29 October 2014. Contained within an annexure to that affidavit is a summary of the complaint that was made to the Law Society in relation to the plaintiffs. The complaint was made by HT. HT had been involved in a motor vehicle accident in 2008 and had a common law claim and compensation claims with “the firm C” in 2009. That firm then moved to Sydney and the matter was transferred to the plaintiffs’ law firm. The matter was ultimately settled, however, there was a dispute about the amount of costs HT had to pay, which included both the firm C’s legal costs and those of the plaintiffs’ law firm. The total amount of legal costs was just over $51,000. HT enquired as to how much of that was made up of the firm C’s legal costs, which was approximately $21,000. HT expressed dissatisfaction with that amount, although was apparently content with the legal costs for the plaintiffs. In order to facilitate a settlement agreement HT was offered an on the spot reduction of total legal costs to an amount of approximately $47,000 by ED, who had day to day carriage of the matter. HT indicated he was content to pay this amount.
On 5 July 2011, HT had come into the office of the plaintiffs to sign the settlement instructions. During that meeting, it was reiterated he would accept a total reduction of $5,000 in legal costs. While ED was on leave, HT spoke with QD. QD, apparently unaware of the reduction in costs that had already been offered, agreed to $42,000 in legal costs being the total amount. When ED returned from leave, he considered that HT should have to pay the costs that were originally agreed to at the time of settlement, being $47,000. HT asserted he should only have to pay $42,000 in costs and alleged that a further $8,318.64 was deducted without his approval. It appears that the amount was $5,000.
The complaint was first dealt with as a complaint solely against QD and was particularised as a breach of undertaking and excessive charging of legal costs. This was contained within a letter addressed to QD from the Law Society on 11 October 2011. On 25 October 2011, the first plaintiff, ED sent an email to Linda Mackay of the Law Society to advise that he had the day to day carriage of HT’s matter and the issue had now been resolved. ED attached a copy of a signed deed dated 21 October 2011 between the plaintiffs’ law firm and HT, with HT agreeing that he had been offered and accepted $3,000 in full and final settlement of his outstanding costs issue and all other outstanding issues with the plaintiffs’ law firm. ED also attached a letter to HT dated 24 December 2010, outlining the work that his firm had undertaken since taking the file over from the firm C, in response to HT’s complaint that no work to progress his matter had been taken by the plaintiffs’ law firm.
On 2 November 2011, a letter addressed to ED by the Law Society confirmed that a formal response to the complaint of HT was still required. QD sent a letter to the Law Society dated 10 November 2011 outlining that he had limited involvement with HT and attaching a number of documents. One of those documents was a letter to the Law Society by ED, which was unsigned and incorrectly dated, as he was on leave at the time. In that letter, ED goes in to detail about what is effectively the genesis of the dispute, which I have already recounted in some detail above at [15].
On 11 November 2011, the response by the plaintiffs was forwarded to HT by the Law Society. On 12 December 2011, HT responded to the Law Society and complained that the plaintiffs’ law firm failed to address that the firm C took his case on a “no win no fee” basis. He considered that since the firm C did not “win his case” the plaintiffs’ law firm should not have included the firm C’s costs in his final account.
On 11 January 2012, HT was advised by the Law Society that the Complaints Committee was now considering his complaint. The plaintiffs were given an opportunity to put forward further comments or material prior to the matter being considered by the Committee. The Committee Members also requested that the plaintiffs provided the following documentation:
(a)their authority to deduct;
(b)their costs agreement;
(c)accounts for costs and disbursements; and
(d)trust account statements.
On 8 February 2012, the first plaintiff sent an email to the Law Society and attached the following documents:
(a)settlement instructions which included authority to deduct;
(b)explanatory statement with all relevant disbursement accounts;
(c)the plaintiffs’ firm’s tax invoice dated 2 September 2011;
(d)letter from the firm C dated 15 November 2010 enclosing an invoice dated 13 September 2010;
(e)tax invoice from the firm C dated 14 October 2010;
(f)signed trust account authority dated 15 November 2010;
(g)letter to HT dated 9 November 2010;
(h)conditional costs agreement the firm C signed on 9 February 2009; and
(i)the plaintiffs’ law firm’s trust account ledger and combined ledger.
Also in that email, the first plaintiff confirmed that when the firm C merged into the plaintiffs’ law firm’s office, they adopted the firm C’s costs agreement. As a result, no separate costs agreement was signed. In this email, ED noted that HT’s letter dated 12 December 2011, effectively raised a new complaint. ED wrote in response that the firm C had done a substantial amount of work for HT before the plaintiffs’ law firm took over, and that as his matter was ultimately successful, he had to pay for the prior legal services provided by the firm C.
On 5 March 2012, the plaintiffs received, by way of a letter addressed solely to QD, notice that following the complaint being considered by the Complaints Committee on 1 March 2012, the Committee members agreed that the matter be referred to the Executive of the Law Society for further consideration.
On 17 September 2012, a letter by John Buxton, DibbsBarker on behalf of the Law Society was sent to QD in relation to HT’s complaint. This letter is approximately three pages in length and set out the facts that Mr Buxton assumed in addition to thirteen queries, which a response was sought. On 17 September 2012, QD sent an email to Mr Buxton stating that he did not have carriage of the matter, and that it was ED that had carriage. Additionally, he stated he had no knowledge of any of the assumptions made by Mr Buxton, nor was he able to answer any of his questions. He also asked Mr Buxton to confirm that the complaint was only against the first plaintiff.
On 18 September 2012, Mr Buxton wrote a letter to the first and second plaintiffs. In that letter he stated that he was “not overly concerned as to who provides the answers” and then highlighted that the obligation falls on both of the plaintiffs as principals of the practice to respond in terms of r 39 of the Legal Profession (Solicitors) Rules 2007 (ACT) (the Rules). In this letter Mr Buxton also wrote that he was not querying the quantum of costs per se and that most of the questions were directed to technical issues relating to the terms of the Conditional Costs Agreement and particular provisions of Part 3.2 of the Legal Profession Act 2006 (ACT) (Legal Profession Act) and s 62 of the Legal Profession Regulation 2007 (ACT).
On 9 October 2012, the third plaintiff, a senior partner of the firm, sent out a letter totalling seven pages in response to Mr Buxton’s letter dated 17 September 2012. I note that the third plaintiff, ET, noted that the Law Society had not yet clarified who the complaint was against and requested that this advice be provided. In relation to the contingency fee issue, ET stated that all charges to HT were based on an hourly rate.
On 21 December 2012, Mr Buxton sent a letter to the first and second plaintiffs. In that letter he stated that the initial complaint was against the first plaintiff by the complainant. However, he wrote that apart from any contingency fee provision, it may be said that the complaint “is directed against [ET], who had principal conduct of the matter, and possibly [QD] to the extent that he approved the tax invoice and trust to office transfer”. Mr Buxton then asked for confirmation as to which partner authorised the transfer of the sum of approximately $47,000 to the office account of the plaintiffs’ law firm. He advised that the complaint was still under investigation and invited the plaintiffs to put further information forward in relation to the contingency fee provision of the conditional costs agreement.
On 1 February 2013, ET replied to the letter of the Law Society dated 21 December 2012. In that letter he confirmed that the first plaintiff authorised the trust account transfers and that the firm C sent a separate costs disclosure statement to HT on 21 January 2009. This letter also set out reasons why the plaintiffs’ law firm asserted there was not a contingency fee agreement, which I will not detail here.
On 4 February 2013, the first plaintiff responded to Mr Buxton’s letter dated 21 December 2012. I note that he stated that the focus of the Law Society’s investigation now appeared to be on the retainer arrangement and the authority, or lack of it, for the trust transfer. He sets out the introductory conversation he had with HT on 13 October 2010, when he was not yet a partner, and wrote that because of this, HT should have no doubt about the basis upon which the plaintiffs’ law firm assumed carriage of the matter. He then referred to the plaintiffs’ firm’s tax invoice. Particularly, he admitted that the invoice did not contain the actual time taken in respect of each item and the author of the charges. However, he asserted that HT was given a copy of the firms’ WIP balance printout at the time of the settlement conference. The letter also contained a heading “[HT] a highly variable person” and went on to refer to a number of examples of HT’s behaviour. Mr Walker SC on behalf of the plaintiffs submitted that this was later the subject of one of the allegations against the first plaintiff; that he had been disrespectful of HT during correspondence with the Law Society. The first plaintiff also went into detail about his trust authority, and in particular, asserted that after he returned from leave, he spoke with HT on 12 August 2011 at great length. He wrote that he told HT that he did not consider the agreement to limit costs to $42,000 as enforceable due to the undue pressure HT had applied on QD, and HT apparently said in response: “that’s fine you can pay your fees, but talk to [the firm C] to reduce their fees by $5,000 and see how you go”. He considered that once the firm C had agreed to reduce their fees by $5,000, HT’s request had been met, and he released the sum of $16,400 to the firm C.
On 22 March 2013, Mr Buxton requested further information from QD. QD responded on 7 May 2013, as he was on leave from late March to April.
On 4 April 2013, ED responded to a letter of Mr Buxton essentially stating that the reason the 12 August 2011 agreement was not raised earlier was because the original complaint of HT was directed towards QD, and particularised as a breach of undertaking and excessive charging of legal costs.
On 23 December 2013, Mr Buxton sent a letter to the plaintiffs advising that they had been instructed by the Law Society to file an application for disciplinary action in the ACAT in relation to “among other things, the contingency fee provision and withdrawal of trust funds”.
The charges against the plaintiffs were particularised in an application for disciplinary action in the ACAT, which were served by hand on the plaintiffs on 26 June 2014. The charges were, in summary, that:
(a)there had not been proper cost disclosure by the first plaintiff;
(b)there had not been proper tax invoices or a request to provide particulars from the firm C about their costs by the first plaintiff;
(c)in adopting the costs agreement between HT and the firm C, the first plaintiff entered into a costs agreement with HT containing a contingency fee provision;
(d)the first plaintiff transferred settlement monies from the plaintiffs’ law firm’s trust account to their office account in an amount exceeding what they were authorised to transfer;
(e)the first plaintiff was disrespectful in the way he treated his client in correspondence with the Law Society, that he did not treat his client fairly and in good faith, and the actions of the first plaintiff in attempting to reinstate quantum of costs constituted a breach of r 8.1(b) of the Rules;
(f)the first plaintiff provided a false and misleading statement on 4 February 2013 to the Law Society;
(g)the statement of the first plaintiff on 4 February 2013 was in breach of r 39.1 of the Rules (that a practitioner should be open and frank in his dealings with the Law Society);
(h)the conduct of the first plaintiff in failing to provide adequate disclosure as set out in (a), failing to take the action detailed in (b) which would have allowed HT to fairly determine the quantum and reasonableness of the costs, taking the action in (d) and behaving in the manner in (e) constituted unsatisfactory professional conduct;
(i)entering into or facilitating the entering into a costs agreement by the first plaintiff containing a contingency fee provision constituted professional misconduct or, alternatively, unsatisfactory professional conduct;
(j)the first plaintiff’s conduct in providing a misleading statement to the Law Society constituted professional misconduct or, alternatively, unsatisfactory professional conduct;
(k)the conduct of the third plaintiff in providing a careless, if not misleading, statement to the Law Society was in breach of r 39.1 of the Rules and constituted unsatisfactory professional conduct; and
(l)having regard to s 285(4) of the Legal Profession Act, each of the first, second and third plaintiffs were guilty of the offence under s 285(1).
The Law Society also sought an order pursuant to s 287(5) that all costs received by the plaintiffs’ law firm in respect to its costs and that of the firm C be repaid to HT in full or in such portion as is deemed appropriate by the Tribunal. A determination was sought from the Tribunal that each of the first, second and third plaintiffs have committed an offence under s 285(4) of the Legal Professional Act and in consequence that the Tribunal determine the number of penalty units to be applied under s 285(4).
As I have already noted, following directions from this Court on 1 August 2014, the Law Society provided a Statement of Reasons on 28 August 2014. I note that the matter was listed before the Court on 29 August 2014, and on 27 August 2014 the plaintiffs sent a facsimile to DibbsBarker requesting a copy of those reasons and outlining proposed directions to be made on that date.
The Statement of Reasons of the Council referred to a long list of material upon which the Law Society relied in reaching its decision. The plaintiffs submitted that quite a deal of this was never given to the practitioners to allow them to make submissions. The plaintiffs submitted that of particular importance was a letter from DibbsBarker to HT dated 26 March 2013, a letter with annexures from DibbsBarker to the Council of the Law Society dated 11 April 2013 and a letter with annexures from HT to DibbsBarker dated 15 April 2013. In that letter dated 15 April 2013, HT stated that he had no recollection of the agreement of 12 August 2011. The Council noted in their reasons that there was no follow-up letter by the first plaintiff to HT that referred to the conversation of 12 August 2011, and preferred the version of HT to that of the first plaintiff. The Council also noted in those reasons that previous responses by the first and second plaintiffs dated 25 October 2011, 10 November 2011, 8 February 2012 and 9 October 2012 did not refer to the agreement of 12 August 2011. The Council considered that the first plaintiff’s response of 4 February 2013 was neither frank nor accurate.
The Council also noted in their Statement of Reasons that they did not accept the third plaintiff’s submission in relation to the conditional costs agreement, and considered that in adopting the conditional costs agreement first entered into between the firm C and HT, the plaintiffs’ firm had entered into a costs agreement with HT containing a contingency fee provision. The Council considered that there was a reasonable likelihood that the plaintiffs would be found guilty by the ACAT of professional misconduct or unsatisfactory professional conduct.
The plaintiffs’ submissions
The plaintiffs submitted that I should make findings in relation to the merits of the plaintiffs’ application in this Court, as the proceedings in the ACAT were discontinued by the Law Society without any admissions being made.
The plaintiffs took me through the underlying legislation surrounding the handling of complaints to the Law Society. The plaintiffs first submitted that the disciplinary process revolves around the handling of a complaint, which has to be made either by a person or the Council. Pursuant to s 397 of the Legal Profession Act the person must then be told about the complaint. The Council then needs to consider submissions under s 398 from the person whom a complaint has been made about. The plaintiffs submitted that the Council must keep a record of its reasons under s 414 and provide its reasons under s 415. The plaintiffs also submitted that pursuant to s 417 the rules of procedural fairness apply.
The plaintiffs referred to the definition of “professional misconduct” as set out in s 387 of the Legal Profession Act:
387What is professional misconduct?
(1)In this Act:
professional misconduct includes–
(a) unsatisfactory professional conduct of an Australian legal practitioner, if the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and
(b) conduct of an Australian legal practitioner whether happening in connection with the practice of law or happening otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice.
...
Section 387, as evidenced from above, is an “inclusive” definition. The plaintiffs submitted that, despite this, the evidence in relation to the second and third plaintiffs demonstrated that they were only vicariously liable as they had no specific knowledge of HT’s case, and as such was a powerful submission against a finding of professional misconduct.
The plaintiffs then submitted why their application in this Court was appropriate. To summarise:
(a)the plaintiffs had requested the Statement of Reasons by the Law Society as early as 6 January 2014;
(b)there were numerous refusals by the Law Society to provide a copy of that Statement of Reasons and assertions that the application, when provided, would be sufficient; and
(c)it was only after proceedings had commenced in this Court that the Law Society provided its Statement of Reasons.
As I have already noted, the Statement of Reasons was provided on 28 August 2014. The plaintiffs submitted that the reasons were of importance, as it explained why ET was being referred to the ACAT, it showed some of the credit findings that were made and there were documents the plaintiffs had not been provided with. The plaintiffs also submitted that without these documents, it was difficult to formulate the originating application, and noted that the originating application was amended when the Statement of Reasons was provided. The FAOA amended the third order sought in the originating application as follows:
3.1A breach of the rules of natural justice happened in relation to the making of the decision to make an application to the ACT Civil and Administrative Tribunal (ACAT) in respect of the Third Plaintiff (AD(JR) Act s. 5(1)(a)).
Particulars
3.1.1There was no “complaint” under Part 4 of the Legal Profession Act 2006 (ACT) against the Third Plaintiff.
3.1.2The Defendant did not inform the Third Plaintiff of the matters set out in subsection 397(3)(d) of the Legal Profession Act 2006 (ACT) and the Defendant took no decision in accordance with subsections 397(5) or (6) with respect to the Third Plaintiff.
3.1.3The Defendant did not conduct an investigation into a complaint against the Third Plaintiff.
3.1.4The Defendant did not put the allegation(s) at paragraphs 49 and 53 of the Respondent’s application to ACAT to the Third Plaintiff for comment or submission by him before the Defendant made the application to ACAT.
3.2That the Defendant did not have jurisdiction to make an application to ACAT for an order in relation to a complaint against the Third Plaintiff (AD(JR) Act s. 5(1)(b)).
Particulars
3.2.1The Third Plaintiff repeats the particulars at 3.1.1 – 3.1.3 above.
3.3Procedures which were required by law to be observed in relation to the making of the decision to make an application to ACAT in respect of the Third Plaintiff were not observed (AD(JR) Act s. 5(1)(b)).
Particulars
3.3.1 The Defendant did not determine or could not validly have determined that it was not appropriate to deal with this matter under subsection 413(2) of the LPA in that:
(i)In paragraphs 49 and 53 of the Defendant’s application to ACAT, the Council only seeks a finding of unsatisfactory professional conduct;
(iii)Paragraphs 49 and 53 of the Defendant’s application to ACAT could not lead to a finding of professional misconduct;
(iii)There was no material before the Defendant and no material to put to the Third Plaintiff that he was not generally competent and diligent and there was no other material complaint which had been made against the practitioner.
3.4 In respect of the First Plaintiff, the decision to make an application to ACAT in respect of ground/charge 47 was:
3.4.1 So unreasonable that no Council could make it (AD(JR) Act s. 5(2)(g)).
3.4.2 With respect to the second sentence, involved an error of law (AD(JR) Act s. 5(1)(f).
Particulars
(i)That the Defendant misconceived rules 8.1(a) and 8.1(b) in that on the facts as found by the Defendant, the matters set out in paragraph 47 are not capable or not reasonably capable of constituting a breach of rules 8.1(a) and 8.1(b) properly understood; and
(ii)The Defendant could not have been reasonably satisfied that there was a “reasonable likelihood” that the First Plaintiff would be found guilty of unsatisfactory professional conduct or professional misconduct because he breached these rules.
3.4.3 With respect to the whole of the paragraph, was made with the Defendant having failed to take into account the relevant considerations set out in paragraphs 412(1)(a) and (b) of the LPA (AD(JR) Act s. 5(2)(b)).
3.5In respect of all plaintiffs, there was no evidence upon which the Defendant could reject, or no evidence upon which the Defendant could reasonably reject, the First Plaintiff’s evidence that he had informed [HT] on 13 October 2010 and 20 October 2010 that [the plaintiffs’ law firm] would charge [HT] the fees calculated by reference to an hourly rate (AD(JR) Act s. 5(1)(h) and 5(2)(g)).
3.6In respect of all Plaintiffs, as a result of the ground set out in paragraph 3.5, the Defendant’s decision to conclude that the fee agreement between [the plaintiffs’ law firm] and [HT] was in contravention of section 285 of the LPA, involved an error of law (AD(JR) Act s.5(1)(f)).
3.7In respect of all Plaintiffs, that the decision to make an application to ACAT to seek orders set out in paragraphs 54 and 56 involved an error of law in that ACAT has no power to make either order (AD(JR) Act s. 5(1)(f).
Particulars
(a)ACAT has no power to order the Plaintiffs to repay [the firm C]’s fees.
(b)ACAT has no power to determine that the Plaintiffs have committed an offence under section 285(4) or to determine the number of penalty units to be applied under section 285(4).
3.8 In respect of all Plaintiffs, that the Defendant breached the rules of procedural fairness by:
3.8.1Failing to make available to the Plaintiffs the letter from [HT] to DibbsBarker dated 15 April 2013 (T29 in the Statement of Reasons); or
3.8.2Failing to put the substance of that letter to the Plaintiffs for submission and comment prior to making its decision.
3.9In the alternative to the grounds set out above, should it be necessary, the Plaintiffs seek prerogative relief.
The plaintiffs also submitted that no complaint had been laid against ET until the ACAT application occurred, which is the reference to a breach of natural justice in the plaintiffs’ FAOA. The plaintiffs submitted that in the absence of a complaint either by an individual or an own motion complaint, the Law Society had no jurisdiction to refer anything to the ACAT, which is a reference to ground 3.2 and 3.3 in the plaintiffs’ FAOA. The plaintiffs then went through some of the grounds in the FAOA, although it is not necessary for me to recount them here, as they have been set out above.
The plaintiffs ultimately submitted that their application was well-founded and likely to succeed, and in those circumstances it is appropriate that there be an order for costs in their favour.
Indemnity costs
The plaintiffs also sought indemnity costs up until the provision of the Statement of Reasons. In support of that assertion, the plaintiffs relied upon the passage of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (Colgate-Palmolive):
In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course.
...
Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance ... the fact that proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp...
The plaintiffs submitted that the Law Society’s conduct was extremely imprudent and analogous to “wilful disregard of known facts or clearly established law”. The plaintiffs then referred me to correspondence between the parties concerning the Statement of Reasons. For convenience, I will set this out in some detail here. The plaintiffs highlighted that their request for a Statement of Reasons as per s 415 of the Legal Profession Act was made on 6 January 2014, in circumstances where they were told on 23 December 2013 that an application for disciplinary action would be filed in the ACAT. Mr Buxton responded on 19 February 2014 to the plaintiffs and advised that the phrase “is entitled to” in s 415 does not strictly require the Law Society to provide reasons unless requested to do so. Mr Buxton then wrote that the s 415 is effectively satisfied when a legal practitioner receives a copy of the ACAT application, which sufficiently sets out in detail the reasons. Mr Buxton then stated “in any event, and as you have made a request, we provide the following reasons supporting the Law Society’s decision to make an application to ACAT”. What was then provided was a one page summary referred to by the Law Society as “the particular charges which the Law Society has decided to proceed with under s 419”. This summary does not refer to some of the allegations which were then made to the ACAT, such as the allegation that ET had written a misleading letter to the Law Society.
On 20 February 2014, the plaintiffs again wrote to Mr Buxton, submitting the purported reasons for the Council’s decision were inadequate and again cited s 415 of the Legal Profession Act. ET, the author of that letter, also stated:
Please note that we reserve our right to rely upon this correspondence in support of an application for costs of the foreshadowed ACAT proceedings pursuant to section 433(3) of the Legal Profession Act 2006 (ACT) if appropriate and in relation to any application to the ACT Supreme Court that may be made with respect to this matter.
The plaintiffs then again requested a copy of the Statement of Reasons.
On 25 February 2014, Mr Buxton responded to the plaintiffs’ letter stating that the plaintiffs were provided with the Statement of Reasons by his letter dated 19 February 2014. Mr Buxton stated that the plaintiffs’ request for further reasons at this time “appears premature and unnecessary”, as they were currently in the process of finalising the ACAT application and it would be forwarded to the plaintiffs in due course. I note at this point that the application for disciplinary action in the ACAT was served on the plaintiffs on 26 June 2014. Mr Buxton in that letter of 25 February 2014 also invited the plaintiffs to withdraw their request before considerable costs were incurred in preparing a “further statement of reasons”. Mr Buxton also wrote that:
We note that you have foreshadowed an application to the ACT Supreme Court. In our respectful view, such an application is premature and misconceived in light of the fact that you have a right to put submissions at the hearing of the matter through the ACAT. You are further entitled to be represented at the hearing. Any application to the Supreme Court will be strenuously opposed and we shall rely upon this letter in respect to an application for costs.
The plaintiffs submitted the failure to provide the Statement of Reasons was “so blatantly wrong” that it justified a higher order of costs. They submitted that from the provision of the Statement of Reasons onwards they seek nothing more than party and party costs.
The plaintiffs also referred me to the Queensland Court of Appeal decision in Legal Services Commissioner v Bone [2014] QCA 179. This case referred to the question of indemnity costs while considering the question of special circumstances and exceptional circumstances for costs before legal disciplinary boards. The judgment of that court was delivered by Morrison JA with Fraser and Gotterson JJA agreeing, and cited the judgment of Di Carlo v Dubois [2002] QCA 225, also a judgment of the Queensland Court of Appeal. The court noted at [69]-[70] that:
Notwithstanding that the principles in Colgate Palmolive do not define all the circumstances in which the discretion is to be exercised, and do not limit the width of that discretion, nonetheless they provide useful guidance to the type of special or unusual circumstance that will enliven the discretion. As was said in Di Carlo:
It is important that applications for the award of costs on the indemnity basis not be seen as too readily available when a particular party against whom the order is sought is seen to carry responsibility for the state of affairs calling for a costs order without some further facts analogous to those mentioned in Colgate and other considered decisions.
Further, in Di Carlo this Court also adopted as correct the proposition that in order to enliven the discretion one is not confined to the situation of an “ethically or morally delinquent party”, but “... the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation”. Other cases have adopted as the test: “whether there was something irresponsible about the conduct of the losing party which exposed its opponent to costs which should, in fairness, be ordered on the indemnity basis.
(Footnotes omitted)
The plaintiffs submitted that there does not need to be conduct that equates to virtual wrongdoing in a moral sense before the court can order indemnity costs.
The plaintiffs also submitted that the Law Society should have made an application under s 8 of the Administrative Decisions (Judicial Review) Act 1989 (ACT) (ADJR Act) for the matter to be stayed so that it could proceed in another other forum, which they submitted has happened in many cases including that of Fekete v Construction Occupations Registrar [2013] ACTSC 45 (Fekete). In that case, the plaintiff commenced proceedings in relation to the defendant’s decision to order the plaintiff to undertake specified works. The plaintiff was the certifier of the work in question, and sought in this Court that the defendant’s decision to issue a rectification order be reviewed. The defendant filed an application seeking that the proceedings be dismissed. This was on the basis that the matters complained of could be dealt with adequately by the ACAT. In that case, Sidis AJ decided that the matter should proceed in the Supreme Court because there were matters of significance with potentially far-reaching consequences raised.
The defendant’s submissions
The Law Society conceded that costs would ordinarily follow the event, however, that in this particular case a question arises as to whether there are any special circumstances relevant to the court exercising its discretion as to costs. The Law Society submitted that each party should bear their own costs for the ADJR proceedings. In support of that proposition, the Law Society argued that it was premature, inappropriate and unwarranted for the plaintiffs to commence ADJR proceedings in circumstances were proceedings were already on foot in the ACAT, and where those proceedings had only been commenced nine days earlier. It also submitted that adequate and appropriate relief was available to the plaintiffs within those ACAT proceedings.
The Law Society submitted that the ACAT has broad powers to grant relief, and within that ambit the ACAT could have ordered that the Law Society provide the Statement of Reasons. The Law Society also submitted that it was not given any specific indication that the ADJR proceedings would be commenced and that it was open to the plaintiffs upon being served with the ACAT proceedings to specifically advise the Council that unless they provided the Statement of Reasons and agreed to a stay of proceedings within the ACAT, they would commence ADJR proceedings. It submitted that this was the appropriate course or alternatively, on the first return date before the ACAT they could have sought a stay until the Statement of Reasons had been provided. If this was not granted, the Law Society submitted that then the plaintiffs would have been entitled to bring an application under the ADJR Act to review that decision. The Law Society also submitted that on the first return date before the ACAT on 19 July 2014, the Law Society’s legal representatives indicated to the plaintiffs’ legal representatives and the presiding member of the ACAT that a Statement of Reasons would be provided and consent given to a stay of proceedings in the ACAT.
The Law Society also raised a number of other courses that the plaintiffs could have taken in the ACAT, such as filing a statement of issues and contentions within the ACAT or indicating that they would make a strike out application. It submitted that the plaintiffs did not have to come to this Court for relief and by doing so it has unnecessarily increased costs to a very large degree. The Law Society submitted that the proceedings should have been dealt with by the ACAT, as legislated for in the overarching statutory scheme of the Legal Profession Act.
The Law Society submitted that any application seeking judicial review of the decision to refer to the ACAT should have been made at the earliest after the provision of the Statement of Reasons, particularly considering the lack of particularly of order three in the originating application. On 16 October 2014, Mr Buxton, by letter to ET, wrote that he was hopeful that some accommodation could be reached on some, if not all issues, raised in the ADJR proceedings. The Law Society asked me to infer from this that if the same complaint had been made to the ACAT as opposed to this Court that there is no reason to doubt that the Law Society would have adopted a similar approach, and tried to accommodate the concerns raised by the plaintiffs. Additionally, the Law Society submitted that if the plaintiffs had indicated to the Council that they intended to make an application for review under the ADJR Act, it would have achieved the same result, at little cost to the parties, without having to come to this Court. It submitted that this was on the basis that shortly after the proceedings were commenced in this Court, the advice of Senior Council was sought. He was apparently on leave at that time, however, when he returned he advised that the decision should be simply withdrawn and should be considered again by the Law Society.
The Law Society then referred me to a number of cases in relation to where the Supreme Court and the ACAT have jurisdiction to hear the same matters. The first one was prior to the commencement of the ACAT: Dibeek Holdings Pty Ltd v Notaras (1997) 141 FLR 364. The case concerned the Tenancy Tribunal of the ACT where the plaintiff commenced proceedings in this Court against the defendants at a time when the defendants had already filed notices of dispute with the Tenancy Tribunal. Higgins J, as his Honour then was, said at 373:
If the legislature establishes a specialist tribunal to deal with matters within that specialised area, then, prima facie, it would be expected that this Court would not, ordinarily, seek to assert its concurrent jurisdiction in relation to a matter then pending before such a tribunal.
The proceedings in this Court were subsequently stayed until further order. The defendant also referred me to a decision of Master Mossop, as his Honour then was, in Koundouris v Construction Occupations Registrar [2014] ACTSC 68. In that case, the plaintiff brought proceedings seeking judicial review of the decision of the Construction Occupations Registrar under the ADJR Act. However, at the time there were proceedings for review of the defendant’s decision on foot in the ACAT. His Honour considered that “as a general rule, matters for which there is adequate provision should be heard in ACAT...” His Honour, in making his decision to dismiss the proceedings, considered that it was of fundamental importance that there is an entitlement to full merits review in the ACAT and that entitlement had been exercised by the plaintiff. He went on to say that “the ACAT has the power to determine all issues relating to proceedings in a manner which will allow it to find the relevant facts, decide questions of law and cure any of the procedural defects outlined ...” Similarly in Fekete, Sidis AJ said “as a general rule matters for which there is adequate provision should be heard in ACAT”.
The Law Society asked me to take into account that it is not a profit making organisation rather, it is a body that has a statutory function and any costs that it is required to pay would have to come out of a statutory fund. It then referred me to s 384 of the Legal Profession Act, which outlines the purpose of the chapter entitled “complaints and discipline”:
384Purposes–ch 4
The purposes of this chapter are as follows:
(a) to provide a nationally consistent scheme for the discipline of the legal profession in the ACT, in the interests of the administration of justice and for the protection of consumers of the services of the legal profession and the public generally;
(b) to promote and enforce the professional standards, competence and honesty of the legal profession;
(c) to provide a means of redress for complaints about lawyers;
(d) to enable people who are not lawyers to participate in complaints and disciplinary processes involving lawyers.
The Law Society then referred to the standard of proof in referring a decision to the ACAT and submitted that the Council only had to be “comfortably satisfied”. It also submitted that pursuant to s 422 of the Legal Profession Act the Council is not restricted to bringing an application to the ACAT about matters that were raised by a consumer of legal services. It submitted that if in the course of investigating a matter it decides that there are other matters that ought to be referred to the ACAT it can also include those other matters in the complaint or in the referral that it makes to the ACAT.
The Law Society referred me to a letter dated 12 September 2014 from Mr Buxton. In that letter, Mr Buxton proposed that each party bear their own costs and wrote that this constituted a compromise on the part of the Law Society. On 16 October 2014, Mr Buxton noted that he was hopeful that some accommodation could be reached on some of the issues raised in relation to the judicial review proceedings. On 24 October 2014, the Law Society then proposed that it would pay the plaintiffs’ reasonable costs of the proceedings on a party and party basis up to and including 1 August 2014. On 1 December 2014, the Law Society proposed to the plaintiffs that costs be reserved and each party file brief submissions on costs to allow the matter to be heard before me on 12 December 2014. The plaintiffs did not agree to this course of action.
The Law Society then submitted that a without prejudice letter was then received from the plaintiffs estimating the costs that they were seeking and on 18 March 2015, a Calderbank offer was made on behalf of the Council for costs. The Law Society submitted that as these offers were not ultimately accepted, each party ought to bear their own costs of the present proceedings in their entirety. In the case that I do not accept that submission, the Law Society submitted that the costs of the plaintiffs ought to be limited on a party and party basis only up until 14 July, which was the first return date in the ACAT. Or otherwise, costs should be limited to 30 July, which is when the Law Society agreed to provide a Statement of Reasons.
Indemnity costs
The Law Society submitted that the failure of the Council to provide a Statement of Reasons prior to commencing the proceedings in the ACAT does not fall within the “wilful disregard of known facts” or dishonest conduct of that detailed by Sheppard J in Colgate-Palmolive. It submitted that the Council accepted that it failed completely in providing a Statement of Reasons. It submitted that at the time, the Law Society had the view that s 415 of the Legal Profession Act imposed no condition precedent upon the commencement of the ACAT proceedings. At that time, the Law Society took the view that the compilation of a Statement of Reasons would essentially involve a duplication of the preparation of the application to the ACAT, such that that application to the ACAT would set out all the facts of the matters upon which the Law Society based its decision to refer the matter to the ACAT. Mr Travis, on behalf of the Law Society, submitted that it has now adopted a different view of its obligations with respect to the Statement of Reasons.
The Law Society also submitted in relation to the indemnity costs, that there is presently no evidence before me as to what the plaintiffs’ costs are with respect to their indemnity costs application. It then submitted that there are a number of cases, including in this Court, that say the court ought to be advised as to the basis on which those indemnity costs are to be calculated, eg pursuant to a fees agreement.
Consideration
A party who discontinues civil proceedings is usually liable to pay the costs of the other party: r 1163 of the Court Procedure Rules 2006 (ACT). In the present case the agreement reached by the parties is that the proceedings would be discontinued, but the Court would determine any issue relating to costs, and as such the general rule found in r 1163 is not to be applied.
I accept that the process adopted by the Law Society which culminated in the commencement of the ACAT proceedings was flawed. The question is whether it was reasonable for the plaintiffs to have commenced these proceedings in the circumstances that existed at the time. In my opinion it was reasonable. The plaintiffs had engaged in correspondence with the Law Society concerning the process adopted by the Law Society and urging that ACAT proceedings not be commenced due to the flaws in that process. The Law Society nevertheless determined to commence the ACAT proceedings. I accept that in commencing the ACAT proceedings the Law Society was taking a pragmatic approach to the relevant issues, and was intent on ensuring that the plaintiffs were not disadvantaged by the flaws in the process, but this acknowledgement cannot derogate from the proposition that the process was fundamentally flawed. While the plaintiffs could have taken other action with a view to halting the ACAT proceedings, that does not mean that the present proceedings were inappropriate or unreasonably commenced.
In my opinion the Law Society should pay the plaintiffs costs of these proceedings on a party/party basis. The fact that the Law Society is exercising powers directed toward the public good is not a sufficient reason to deprive the plaintiffs of a costs order with respect to proceedings where, prima facie, they had a good cause of action. The actions of the Law Society, however, do not warrant the making of any special costs order.
Order
I order the Law Society to pay the plaintiffs’ costs of these proceedings on a party/party basis.
| I certify that the preceding sixty-nine [69] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: D Scuteri Date: 31 August 2016 |
1
5
6