Xu v Council of the Law Society of NSW
[2009] NSWCA 430
•23 December 2009
NEW SOUTH WALES COURT OF APPEAL
CITATION:
Xu v Council of the Law Society of NSW [2009] NSWCA 430
FILE NUMBER(S):
40142/09
HEARING DATE(S):
10/11/2009
JUDGMENT DATE:
23 December 2009
PARTIES:
Chang Yuan XU - Appellant
Council of the Law Society of NSW - Respondent
JUDGMENT OF:
Tobias JA Basten JA Handley AJA
LOWER COURT JURISDICTION:
Administrative Decisions Tribunal of NSW
LOWER COURT FILE NUMBER(S):
ADT 072028
LOWER COURT JUDICIAL OFFICER:
Greenwood & Others
LOWER COURT DATE OF DECISION:
30 March 2009
LOWER COURT MEDIUM NEUTRAL CITATION:
[2009] NSWADT 67
COUNSEL:
D R Pritchard SC/R Graycar - Appellant
C A Webster/H Bennett - Respondent
SOLICITORS:
Lawside Lawyers - Appellant
Law Society of NSW - Respondent
CATCHWORDS:
LEGAL PRACTITIONERS – discipline - sloppy conveyancing - contracts exchanged with s.66W certificate - solicitor did not interview wife co-purchaser - unsatisfactory professional conduct.
LEGAL PRACTITIONERS – lien for unpaid costs – client’s passport held in connection with bail application - solicitor entitled to lien - limits of lien.
PASSPORT - general property of Commonwealth – grantee has special property - grantee may create lien in favour of solicitor.
LEGISLATION CITED:
Administrative Decisions Tribunal Act 1997 (NSW)
Australian Human Rights Commission Act 1986 (Cth)
Bail Act 1978 (NSW)
Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth)
Fauna Conservation Act 1974 (Qld)
Legal Profession Act 2004 (NSW), s 496
Medical Practice Act 1992 (NSW)
New Zealand Bill of Rights Act 1990
Passports Act 1938 (Cth)
Passports Act 1992 (NZ)
Supreme Court Act , ss 75A(6) and (10)
CATEGORY:
Principal judgment
CASES CITED:
Blades v Higgs (1865) 11 HLC 621
City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477
Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628
Gatward v Alley (1940) 40 SR (NSW) 174
In re Davis [1947] HCA 53; 75 CLR 409
Kennedy v The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563
Mabo v Queensland (No 2) [1992] HCA 23; 175 CLR 1
R v Brailsford [1905] 2 KB 730
Vallant Hooker & Partners v Proceedings Commissioner [2001] 2 NZLR 357
Walden v Hensler [1987] HCA 54; 163 CLR 561
Yanner v Eaton [1999] HCA 53, 69; 201 CLR 351
TEXTS CITED:
DECISION:
1. Appeal allowed with costs.
2. The Tribunal’s finding that the third charge had been established is set aside.
3. The Tribunal’s finding that the first two charges had been established is confirmed but the finding that they constituted professional misconduct is set aside and a finding that they constituted unsatisfactory professional conduct is substituted.
4. The fines of $3000 imposed by the Tribunal on all three charges are quashed and in lieu thereof the solicitor is fined $1500 for unsatisfactory professional conduct evidenced by the findings in respect of the first two charges.
5. Order that the overpayment of $1500 by the solicitor in respect of the fines imposed by the Tribunal be refunded to him.
6. The public reprimand ordered by the Tribunal for professional misconduct is set aside and in lieu thereof the solicitor is publicly reprimanded for unsatisfactory professional conduct.
7. The order by the Tribunal that the solicitor pay the Law Society’s costs of the proceedings is set aside and in lieu thereof there is substituted an order that there be no order as to costs.
8. The respondent is to have a certificate under the Suitors Fund Act.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40142/09
ADT 027028TOBIAS JA
BASTEN JA
HANDLEY AJA23 December 2009
CHANG YUAN XU v COUNCIL OF THE LAW SOCIETY OF NEW SOUTH WALES & ANOR
CATCHWORDS
LEGAL PRACTITIONERS – discipline - sloppy conveyancing - contracts exchanged with s.66W certificate - solicitor did not interview wife co-purchaser - unsatisfactory professional conduct.
LEGAL PRACTITIONERS – lien for unpaid costs – client’s passport held in connection with bail application - solicitor entitled to lien - limits of lien.
PASSPORT - general property of Commonwealth – grantee has special property - grantee may create lien in favour of solicitor.
HEADNOTE
The appellant solicitor was charged in the Administrative Decisions Tribunal with 3 counts of professional misconduct, 2 relating to sloppy work in a conveyancing transaction, the third alleged that the solicitor had improperly exercised a lien for unpaid costs over the passport of a client on remand who was seeking bail. The charges in relation to the conveyancing transaction alleged that the solicitor witnessed a client's signature on the contract. The client said to the solicitor’s clerk when returning the contract that his wife had also signed it as she wanted to be a co-purchaser. The solicitor heard the conversation. He later signed an incomplete s.66W certificate for both purchasers and allowed the certificate and the contract apparently bearing both signatures to leave his office as part of an exchange by post. The wife later claimed that her signature on the contract was a forgery. The Tribunal found that the charges were proved and characterised them as professional misconduct.
The Tribunal found the third charge proved, and characterised it as professional misconduct. It imposed a fine on all charges and a reprimand. On appeal by the solicitor HELD: (1) the findings of guilt on the conveyancing charges were confirmed as findings of unsatisfactory professional conduct; (2) although by statute the Commonwealth retained the general property in an Australian passport this did not prevent the recognition of a special property in the grantee as a bailee at will, or the creation of a sub-bailment in favour of a solicitor which entitled him to exercise a lien over the passport; (3) The conviction on the third charge was therefore set aside and the charge dismissed; (4) the reprimand as one for unsatisfactory professional conduct was confirmed and the fine imposed by the Tribunal was reduced.
ORDERS
1. Appeal allowed with costs.
2. The Tribunal’s finding that the third charge had been established is set aside.
3. The Tribunal’s finding that the first two charges had been established is confirmed but the finding that they constituted professional misconduct is set aside and a finding that they constituted unsatisfactory professional conduct is substituted.
4. The fines of $3000 imposed by the Tribunal on all three charges are quashed and in lieu thereof the solicitor is fined $1500 for unsatisfactory professional conduct evidenced by the findings in respect of the first two charges.
5. Order that the overpayment of $1500 by the solicitor in respect of the fines imposed by the Tribunal be refunded to him.
6. The public reprimand ordered by the Tribunal for professional misconduct is set aside and in lieu thereof the solicitor is publicly reprimanded for unsatisfactory professional conduct.
7. The order by the Tribunal that the solicitor pay the Law Society’s costs of the proceedings is set aside and in lieu thereof there is substituted an order that there be no order as to costs.
8. The respondent is to have a certificate under the Suitors Fund Act.
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40142/09
ADT 027028TOBIAS JA
BASTEN JA
HANDLEY AJA23 December 2009
CHANG YUAN XU v COUNCIL OF THE LAW SOCIETY OF NEW SOUTH WALES & ANOR
Judgment
TOBIAS JA: I agree with Handley AJA.
BASTEN JA: On 20 August 2007 the Council of the Law Society commenced proceedings in the Administrative Decisions Tribunal seeking orders against a solicitor, Mr Chang Yuan Xu (the appellant) on the basis that he had been guilty of professional misconduct. The details of the charges and the findings of the Tribunal have been set out by Handley AJA and need not be repeated. I agree with the conclusions his Honour has reached and with the orders he proposes. I also adopt his Honour’s reasons with respect to the first two charges. My reasons with respect to the third charge are set out below. I also make some general comments in relation to the proceedings in the Tribunal.
Jurisdiction and constitution of Tribunal
Developments in the regulation of the legal profession over many years have had the effect of diminishing in practical significance the jurisdiction of this Court with respect to professional misconduct. That jurisdiction has long been accepted as flowing from the power of the Court to admit legal practitioners as officers of the Court, pursuant to the Charter of Justice of 1823: Kennedy v The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563 (the principles being discussed in more detail by Rich J in the unpublished version of the judgment); In re Davis [1947] HCA 53; 75 CLR 409 at 414 (Latham CJ), 423 (Dixon J).
The structural changes of most significance have been twofold. First, there has been an expansion of the bases of disciplinary action from the general law principles which were restricted to cases of disgraceful or dishonourable conduct in a professional respect, so as to cover “unsatisfactory professional conduct” which is defined by statute to include conduct “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”: Legal Profession Act 2004 (NSW), s 496. In addition, the concept of “professional misconduct” is now also the subject of statutory definition and includes unsatisfactory professional conduct “where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence”: s 497(1)(a). The variation in terminology between these two definitions is not presently significant; rather the issue relevant to the present case turns on the distinction between that which is merely a failure to reach or maintain a reasonable standard of competence and diligence and conduct which involves a “substantial” or “consistent” failure of that kind. For the reasons explained by Handley AJA, I agree that the conduct of the practitioner in the present case, in relation to the conveyancing matter, did not satisfy either of the epithets of aggravation.
The second substantial change achieved by the statutory system of regulation has been the conferral of jurisdiction and powers on bodies other than this Court in respect of professional discipline. In particular, as this case illustrates, the investigation of a complaint may lead to proceedings in the Administrative Decisions Tribunal, commenced pursuant to Part 4.8 of the Legal Profession Act, following a decision under Part 4.5. The Tribunal is established under the Administrative Decisions Tribunal Act 1997 (NSW) (“the ADT Act”). Schedule 2 of the ADT Act provides for the composition of the Legal Services Division of the Tribunal and for the allocation of functions to that Division. Where a complaint is made against a solicitor under the Legal Profession Act, the Tribunal may be constituted to include a senior judicial member of the Tribunal, but it need not be so constituted. The Division may be constituted by two solicitor members and one or two lay members. Once the President has determined which form of constitution is appropriate, the membership of the Division to conduct the hearing in a particular matter is to be determined by the Divisional Head. It thus appears that a legal practitioner can face loss of his or her professional status by the determination of a tribunal including only two practitioners (together with one or two lay members) and without a judicial member. A greater level of protection is accorded medical practitioners whose names can be removed from the roll only by a tribunal presided over by a District Court judge: Medical Practice Act 1992 (NSW), ss 146-148.
The questions which can arise before the Tribunal are frequently matters having some degree of complexity. That is illustrated by the third charge in the present case, concerning the claim for a lien over a passport of a client to secure the payment of fees.
Lien over passport
The circumstances in relation to the third complaint are set out by Handley AJA. As his Honour has noted, the retention of the passport after the solicitor’s instructions were withdrawn did not in fact cause his former client to remain in detention for longer than she did. That factual conclusion does not, however, determine the question of principle, which is whether the solicitor could retain a passport, properly received by him in the course of his professional duties, to secure payment of his fees: Re Wright; Ex parte Clout (1984) 1 FCR 51 at 53 (Beaumont J). In the present case, the solicitor obtained the passport in order to be able to surrender it to the court if that were (as he not unreasonably anticipated) a condition of bail. That immediate and legitimate purpose for which the solicitor held the passport came to an end when his instructions were terminated without bail having been granted on the anticipated condition of surrender of the passport, or at all. His continued right to retain the passport depended upon his right to assert a lien to secure his costs in the matter in the course of which he received the passport, and subject to any order of the Court: Legal Profession Act, s 728.
Before the Tribunal, the matter appears to have been debated and determined on the basis of the proper construction of s 9A(2) of the Passports Act 1938 (Cth) (since repealed). The Tribunal stated at [71]:
“We are satisfied that the passport was not a document that was created for or otherwise came into existence for the purposes of Ms Ning’s criminal matter, and that by operation of Commonwealth Legislation it could not properly be the subject of a solicitor’s lien. We are satisfied to the required standard that the Respondent’s assertion of a lien over the passport was improper in the circumstances.”
The Tribunal further found that the conduct was “a consistent failure” to maintain a reasonable standard of competence and diligence, apparently because the passport was held for some 13 days after the client withdrew her instructions and because for most of that period he had been “expressly informed of the provisions of Commonwealth Legislation”, that being a reference to the statement in a letter from the client’s new solicitors.
The relevant provisions of the Passports Act were in the following terms:
“6A Australian Passports to remain property of Commonwealth
An Australian passport remains always the property of the Commonwealth.
…9AOffences relating to improper use or possession of passports etc
(1) A person who:
…
(b)in connection with travel or identification, uses an Australian passport that was issued to another person;
(c)being a person to whom an Australian passport has been issued, permits another person to use that passport in connection with travel or identification;
(d)has in his or her possession or under his or her control an Australian passport that was not issued to him or her;
…
is guilty of an offence ….(2)Paragraphs (1)(a) to (f) (inclusive) do not apply if the person has a reasonable excuse.”
In its reasons, the Tribunal asserted that the solicitor had “conceded that a passport document cannot be the subject of a lien, as opposed to the Commonwealth’s interest or title in the document”: at [60]. This was presumably a finding that the solicitor could not assert a lien against a claim by the Commonwealth. Having accepted that the solicitor was asserting a lien over the passport, the Tribunal concluded that he was doing so “improperly”: at [62].
Reference to the passport being the property of the Commonwealth tends to distract attention from the real issues in the case. As explained in Yanner v Eaton [1999] HCA 53, 69; 201 CLR 351, in relation to a description of fauna as the property of the Crown, in s 7(1) of the Fauna Conservation Act 1974 (Qld), at [17], Gleeson CJ, Gaudron, Kirby and Hayne JJ stated:
“The word ‘property’ is often used to refer to something that belongs to another. But in the Fauna Act, as elsewhere in the law, ‘property’ does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of ‘property’ may be elusive. Usually it is treated as a ‘bundle of rights’.”
A similar analysis is to be found in the judgment of Gummow J at [85] ff. Further, the common law principle that the owner of land may have property in wild animals killed on his or her land was explained by Lord Westbury LC in Blades v Higgs (1865) 11 HLC 621; 11 ER 1474 at 1478, in the following terms: “I apprehend that the word ‘property’ can mean no more than the exclusive right to catch, kill and appropriate such animals which is sometimes called by the law a reduction of them into possession”. See also the discussion in Walden v Hensler [1987] HCA 54; 163 CLR 561 at 566 (Brennan J). In other circumstances, the conferral of property in the Crown may say nothing about possession or other rights, but may constitute a basis upon which the owner of the property can claim royalties for its exploitation.
In relation to the Passports Act, the attribution of “property” in the passport to the Commonwealth should properly be seen as the provision of a basis upon which the Commonwealth can exercise its statutory powers to control the use and misuse of documents issued by it to holders. For example, as between the Commonwealth and the person to whom the passport is issued, the rights of the Commonwealth to recover the passport may depend upon relevant statutory provisions and the exercise of powers conferred by statute in accordance with administrative law principles. In this sense, the Commonwealth has property in a passport. However, unless and until it exercises its powers the holder to whom the passport is issued also has “property” in the passport. The client of the solicitor, as the holder, has an immediate right to possession of the passport which would bring it within the category of her property which might be attached by a lien.
A consideration of s 6A does not advance the matter further in the present case. The same may be said in relation to the offences created by s 9A. It was not disputed that the solicitor committed no offence by being in possession of his client’s passport with her consent. It was also assumed, without consideration of the legal basis for the assumption, that a State court would have authority to require the surrender of a passport as a condition of bail: Bail Act 1978 (NSW), s 36(2)(i) and s 37A(1). In effect, these matters were accepted as examples of a “reasonable excuse” for the purposes of s 9A(2). The assumption reveals the circularity of the inquiry: whether a person has a reasonable excuse will depend upon whether the circumstances and principles of law warrant the retention of the passport. The true question must therefore be whether, under the general law or the law governing solicitors’ liens specifically, a solicitor is warranted in holding a client’s passport as security for payment of his or her fees.
It does not appear to have been in dispute before the Tribunal that a solicitor’s lien could extend to any property of a client received by the solicitor in the course of his or her professional employment, so long as it was the property of the client. Despite submissions to the contrary, the Tribunal accepted the proposition that this principle was not satisfied because the passport was not the “property” of the client, but of the Commonwealth.
In its submissions, the Law Society referred the Tribunal to a decision of the New Zealand High Court dealing with a claim of discrimination against a firm of solicitors who had retained the Indian passport of a client pursuant to a lien for payment of fees due to them: Vallant Hooker & Partners v Proceedings Commissioner [2001] 2 NZLR 357 (Laurenson J). Although the remarks appear to have been obiter and not the subject of reasoned submissions, the Court indicated a view that a solicitor could not assert a lien over the passport which, in accordance with a provision equivalent to s 6A of the Commonwealth Act, stated that the passport was “the property” of the government: at [29]-[31] and at [82]. Reference was also made in that case to aspects of the Passports Act 1992 (NZ), s 33, which went somewhat further than s 6A of the Commonwealth Act in prohibiting use of the passport as a security, pledge or deposit. It is not clear how those provisions might have affected the issue in the present case, nor is it necessary to pursue the matter. For the reasons set out above, the dicta of the New Zealand High Court are not persuasive.
On the basis on which the case was argued before the Tribunal, the charge should have been dismissed and the appeal should therefore be upheld. However, some caution should be noted in respect of the underlying principle. A passport is not necessarily to be treated as equivalent to any other document or property of the client for the purposes of a solicitor’s lien. Rather, it is a document issued by a central government to a citizen to facilitate travel outside the country of issue: Rubenstein K, Australian Citizenship Laws in Context (Lawbook Co, 2002) p 242-243; R v Brailsford [1905] 2 KB 730 at 745 (Lord Alverstone CJ). It operates to facilitate the exercise of the fundamental right enjoyed by a person under the International Covenant on Civil and Political Rights (1966) to be “free to leave any country including his own”: Article 12, par 2 and see Human Rights Committee, General Comment 27, UN Doc CCPR/C/21/Rev.1/Add.9 (1999). That right may be subject to restrictions identified in Article 12, par 3, which will form the basis of legitimate legal controls under domestic law, in circumstances where the Covenant applies. Although the Covenant has not been enacted as part of the domestic law of Australia, it is a Schedule to the AustralianHuman Rights Commission Act 1986 (Cth) and contraventions of the Covenant may engage the investigative powers conferred on the Australian Human Rights Commission under that Act and the procedures under the Optional Protocol to the Convention. It may be expected, absent any indication to the contrary, that the general law of Australia will conform to such principles especially in an area of direct relevance to transnational activity: cf Mabo v Queensland (No 2) [1992] HCA 23; 175 CLR 1 at 41-42 (Brennan J).
The circumstances of the present case did not directly raise any question as to restraints on freedom of travel: see generally, Robert S Lancy, “The Evolution of Australian Passport Law” (1982) 13 Melb UL Rev 428 at 443. In Vallant Hooker & Partners reference was made to the right to freedom of movement provided by s 18 of the New Zealand Bill of Rights Act 1990, but it had only peripheral relevance to the central issue which was a claim of racial discrimination. Consideration of the relevant principles may need to include the statutory circumstances in which the Commonwealth would not issue a passport. They included the existence of a reason to believe that the applicant owes money to the Commonwealth in respect of certain expenses or loans: Passports Act 1938, s 7C. Further, there is express provision in the Bankruptcy Act 1966 (Cth) requiring a bankrupt to deliver his or her passport to a trustee in bankruptcy: s 77(1)(a)(ii). Powers are conferred on the Family Court of Australia to make orders for delivery up of a passport where there is a fear that a child may be removed from the country: Family Law Act 1975 (Cth), s 67ZD.
These provisions indicate that there are circumstances where controls may be exercised over a passport in order to prevent a person leaving the country. Whether a private individual such as a solicitor, absent statutory authority, has a similar power of control of the passport of another is a large question. The place of a supposed general law lien of a solicitor to retain a client’s passport would need to be considered in the context of such provisions of Commonwealth laws, valid State laws and relevant statutory provisions governing the conduct of legal practitioners: cf Dal Pont, Lawyers’ Professional Responsibility (3rd ed, Lawbook Co, 2006) at [16.80]. These questions need not be pursued for present purposes, but nor should it be assumed that the solicitor’s lien necessarily extends to permit retention of a passport, obtained from a client for a specific purpose.
HANDLEY AJA: On 17 August 2007 the Law Society commenced proceedings in the Administrative Decisions Tribunal (the Tribunal) against the appellant Mr Chang Yuan Xu (the solicitor) charging him with three counts of professional misconduct. The Society sought orders that the solicitor pay a fine, be publicly reprimanded, and pay the costs of the proceedings. The three counts were:
"1. The solicitor held out that he had witnessed the signature of Jian Juan Liu on the contract for the purchase of Unit 21, 109-123 O'Riordan Street Mascot when he had not.
2. The solicitor knowingly provided a false s.66W certificate dated 6 November 2003.
3. The solicitor improperly imposed a lien.
Extensive particulars were attached. The Tribunal found the three charges proved and held that the solicitor had been guilty of professional misconduct within section 497(1)(a) of the Legal Profession Act 2004 (the Act). This provides:
"Professional misconduct includes:
(a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence".
There was no evidence of dishonesty, and the Tribunal imposed a fine of $2500 on the two conveyancing charges, a fine of $500 on the lien charge, publicly reprimanded the solicitor, and ordered him to pay the Law Society’s costs of the proceedings. The solicitor appealed as of right to this Court, but has paid the fines in the meantime.
Conveyancing charges
On 15 October 2003 the solicitor received instructions from Mr Rong Zhang (the client) to act for him on the purchase, off the plan, of Unit 21, 109-123 O’Riordan Street Mascot. The client brought the draft contract to the solicitor who explained it to him. The client then signed the contract and the solicitor witnessed his signature (Blue 251). The purchase price was $525,000 with provision for a 10% deposit. The client said that he wanted to think it over and took the contract away, but the solicitor made and retained a photocopy of the front page which showed the client’s signature witnessed by the solicitor (Blue 255).
The client returned with the contract a few days later and had a conversation with the solicitor’s conveyancing clerk. The solicitor, who was dealing with another client nearby, overheard the conversation and the first charge depended on this. The solicitor gave various accounts of the conversation. In his letter to the Society of 28 September 2004 he said (Blue 124):
"After his signing the contract, he took it home as he wanted to think it over. A few days later, he brought the contract to this office with his wife's name and her signature on it and hence represented to us that she had properly signed (before him)."
On 22 November 2004 he said in his statement to the Society (Blue 147):
"The above said contract was returned to this office a few days later and Mr Rong Zhang said words to the effect of ‘my wife is also purchasing this property with me. She has signed a contract. We are both applying for the deposit bond. Please do not exchange the contract till the deposit bond is granted’.
I asked whether his wife agreed to exchange without cooling off period. Mr Rong Zhang replied words to the effect of ‘we agree so’.”
The solicitor said in his first affidavit of 6 December 2007 (Blue 251):
"I did not see the front page of the contract when Mr Zhang delivered it to the office. The subject contract has always been in [the conveying clerk’s] possession.
I recalled that the husband told me words to the effect of: ‘my wife also wants to be a purchaser and so she has signed the contract.’
However I did not give much attention to the husband's comments at the time. I did not check the wife's signature on the contract at that time."
His oral evidence was confused but was clarified when he said (Black 127-8) that he heard Mr Zhang speak to his conveyancing clerk:
"He say ‘my wife want to purchase property. The name put on it’ and he signed the contract.
Q. When you say ‘he’ in that context do you mean she signed the contract?
A. Yeah, she signed the contract.Q. So you heard those words?
A. Yeah”.The contract the client gave to the conveyancing clerk named the wife as a co-purchaser with what purported to be her signature in Chinese characters next to the husband's English signature and both appeared to have been witnessed by the solicitor (Blue 256). The contract in that form was exchanged with the vendor's solicitors a few days later.
The wife subsequently repudiated the contract and claimed that her signature was a forgery. Her Chinese passport showed that she was not in Australia when the contract was signed and exchanged. The vendor subsequently agreed to rescind the contract and it refunded the deposit.
The Tribunal found that the conduct of the solicitor in "failing to witness" the wife's signature on the contract and signing a s.66W certificate conveyed representations to the vendor and its solicitors which were false.
The solicitor’s conveyancing clerk wrote to the solicitors for the vendor on 6 November 2003 (Blue 224). The heading referred to both purchasers by name, and the text referred to the contract which was enclosed by way of exchange. The letter continued:
"We also enclose the s.66W Certificate and the copy of Deposit Bond. We are advised that the original Bond has been forwarded to your office by the real estate agent already."
The Deposit Bond was in the name of both purchasers (Blue 160).
The s.66W certificate (Blue 223) referred to the contract for the sale of Unit 21 to Mr Zhang and his wife, identified by name, and included the following:
"(d) I have explained to
(i) the effect of the contract for the purchase of that property;
(ii) the nature of the certificate;
(iii) the effect of giving the certificate to the vendor."
The space provided in para (d) for the names of the purchasers was left blank. The document was typed dated 6 November and was signed by the solicitor in that form. It was incomplete, and the solicitor should not have signed it, but it was sent with the contract to the vendor's solicitor and accepted without demur. The conveyancing clerk had told the solicitor that the vendor's solicitor wanted such a certificate and that Mr Zhang said that contracts could be exchanged with a s.66W certificate without a cooling off period (Blue 252).
The solicitor instructed her to prepare the certificate which he signed without having read it (Blue 252). The conveyancing clerk signed the covering letter for the contract and the certificate which were received by the vendor's solicitor on 11 November (Blue 1).
Although the s.66W “certificate” had a blank in para (d) where the names of the purchasers should have been inserted it was signed by the solicitor with the intention and in the expectation that it would be sent to the vendor's solicitor and it was.
Despite the obvious gap the document should, if possible, be construed as a valid, rather than an invalid certificate ("ut res magis valeat quam pereat"). This can be done by reading it as a whole and supplying the names of the purchasers by implication from the earlier part of the certificate. If the vendor's solicitor read and understood it that way the solicitor would have been bound by that construction. His signature would have conveyed a representation that the document was valid which the vendor's solicitor relied on when accepting it.
The solicitor admitted that he had signed the certificate but said "I careless. I did not read it. I did not check. It's my mistake" (Black 139). He also admitted that he did not see Mrs Liu at that time (Black 159).
In this state of the evidence the Tribunal was entitled to find, as it did in substance (Red 18), that the solicitor's failure to check the contract after he had learned that the client's wife had signed it and her name had been added as a purchaser, reinforced by his signature of the incomplete s.66W certificate, was a representation (holding out) to the vendor and its solicitors. This representation, on which they were entitled to rely, was that the wife was also a purchaser and, after being properly advised, had knowingly waived her right to a cooling off period. The solicitor would have been liable for negligent misrepresentation and misleading and deceptive conduct if the vendor had suffered significant loss and brought proceedings. To that extent he has been let off lightly.
The findings of the Tribunal, so understood, do not establish "a substantial", let alone "a consistent" failure to reach or maintain a reasonable standard of competence and diligence. However that conduct was within the definition of unsatisfactory professional conduct in s.496 ("conduct … that falls short of the standard of competence and diligence that a member of the public is entitled to expect").
As a result of the solicitor’s acts and omissions an exchange of contracts between solicitors with a s.66W certificate failed to create a clearly enforceable contract for this simple transaction. However regardless of their consequences, these were momentary and isolated lapses.
A finding of unsatisfactory professional conduct, though not charged, was available to the Tribunal under s 562(6), and this Court has power to substitute that finding under ss.75A(6) and (10) of the Supreme Court Act and this should be done.
The fine of $2500 on these two charges, and the reprimand, must be reconsidered in the light of the lesser finding.
Lien on Australian passport
On 8 May 2004 the solicitor attended at Mulawa Correctional Centre and was there instructed by Jing Ning (Ms Ning) to appear for her on charges of demanding property with menaces and detaining a person in company with intent to obtain an advantage (Blue 2). He appeared for her at Burwood Local Court on 11 May, and again on 24 May when counsel made an unsuccessful application for bail. On 7 June Ms Ning terminated the solicitor’s retainer, thanked him for his assistance (Blue 248), and asked him to release her file to her new solicitors.
The solicitor had obtained possession of Ms Ning’s Australian passport because he expected that she would be required to surrender it as a condition of any bail. On 8 June the solicitor received a request from Ms Ning’s new solicitors for the client’s file. He replied the same day sending them “the police paperwork”, asking for payment of his fees, and asserting a right to a lien on his file pending payment (Blue 243).
The new solicitors replied the following day disputing the solicitor’s right to exercise a lien over the passport and drawing his attention to the offence created by s.9A(1)(d) of the Passports Act 1938 (C’th). The solicitor maintained his claim to a lien over his whole file (Blue 246) which was only released on 21 June (Red 34) following payment of his fees on 18 June (Blue 247).
Bail was granted on 9 June, but Ms Ning’s father did not deposit the cash bail until 24 June (Red 23), when she was released. Her time in custody was not extended by her inability to produce her passport while it was retained by the solicitor.
The Tribunal found, over the solicitor’s denials, that he had asserted a lien over the passport (Red 32), and that he had no reasonable excuse for withholding it from the new solicitors (Red 32). The Tribunal was satisfied that “by operation of Commonwealth legislation it could not properly be the subject of a solicitor’s lien” (Red 35).
The relevant provisions of the Passports Act 1938 which was in force at the relevant time are ss.6A, 9A(1)(d), and 9A(2) as follows:
“s6A
An Australian passport remains always the property of the Commonwealth.
s9A(1) A person who:
(a) …
(d) has in his or her possession or under his or her control an Australian passport that was not issued to him or her;
is guilty of an offence … .
s9A(2) Paragraphs (1)(a) to (f) (inclusive) do not apply if the person has a reasonable excuse.”
Unlike s.33(3) of the Passports Act 1992 (NZ) considered in Vallant Hooker & Partners v Proceedings Commissioner [2001] 2 NZLR 357 the Commonwealth Act did not in terms prohibit the grant or acceptance of any security or pledge over an Australian passport.
The fact that the general property in an Australian passport always remained with the Commonwealth did not prevent the grantee of the passport having a special property in it. Possession of a chattel is a good title against anyone who does not have a better title: Gatward v Alley (1940) 40 SR (NSW) 174, 179. The grantee of an Australian passport in possession of it is a bailee at will of the Commonwealth with a good title against everyone except the Commonwealth.
The grantee of an Australian passport, as a bailee at will can create a sub-bailment in favour of others such as his or her travel agent, hotel, airline, solicitor, trustee in bankruptcy, or a Court. The sub-bailment would not be binding on the Commonwealth, but if it was created for reward the sub-bailee, subject to the terms of the bailment, could retain possession of the passport against the sub-bailor.
The solicitor having obtained possession of the passport for a legitimate forensic purpose, was entitled to retain possession against his client, and exercise a lien over it until his proper costs and disbursements were paid or payment thereof was secured. In my judgment he had a reasonable excuse for having and retaining possession of the passport for the purposes of s.9A(2) of the Passports Act 1938.
A bailee with a right to retain possession against his bailor is entitled for the protection of the criminal law: Paton Bailment in the Common Law 1952 pp 444-6. He is also entitled to vindicate his right to possession against the bailor in an action for trespass, conversion or detinue: City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477 at 483-4, 490-1.
The solicitor could not have asserted his lien against the Commonwealth which had not authorised the client to create it: Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628, 632; but he was entitled to assert it against the client.
Since writing the above I have had the benefit of reading the reasons for judgment of Basten JA in draft. I only wish to add that although a solicitor may have a lien on his client’s passport the Court may decline to enforce it if its exercise would deprive an impecunious client of his liberty. In such a case the Court might, for example, order the solicitor to deliver the passport to the Court that would be considering the clients’ bail application subject to his lien.
Conclusion
For these reasons the Tribunal’s finding on the third charge relating to the lien must be set aside and that charge dismissed. The Tribunal’s decision that the first two charges were established should be confirmed but the finding that they constituted professional misconduct should be set aside and there should be substituted a finding that they constituted unsatisfactory professional conduct by the solicitor.
The solicitor’s conveyancing work in the Zhang matter was incredibly sloppy and his signing of the incomplete s.66W certificate was irresponsible. Although, by themselves, they were not acts of professional misconduct, repeated acts of this character would properly be characterised in that way. Although the acts were isolated and there is no evidence that they had been repeated in other transactions the solicitor should nevertheless be publicly reprimanded for them as acts of unsatisfactory professional conduct.
The fine imposed by the Tribunal for the third charge must be quashed, but the solicitor’s conduct reflected in the other charges still merits a fine which should be fixed at $1500.
Section 566 requires the Tribunal to order a practitioner who has been found guilty of professional misconduct or unsatisfactory professional conduct to pay the costs of the moving party “unless [it] is satisfied that exceptional circumstances exist”. The Tribunal was bound, in the light of its findings, to order the solicitor to pay the Law Society’s costs. This Court must now re-exercise the power in the light of the revised findings that have been proposed.
The Society succeeded on two charges, but failed on one. The Tribunal conducted two back-to-back hearings, one for the conveyancing charges, and one for the lien charge, and each occupied about the same length of time. The dismissal of the lien charge carried a prima facie entitlement to an order for the costs of that charge in favour of the solicitor and the Law Society has a prima facie entitlement to an order for costs in its favour in respect of the charges on which it succeeded.
There is little point in having two separate costs assessments when the balance in favour of one party or the other is likely to be minimal, and out of all proportion to the costs of the assessment process. In my judgment these matters constituted exceptional circumstances and there should be no order as to the costs of the proceedings in the Tribunal.
The solicitor has had a substantial measure of success in this Court and is entitled to the costs of the appeal. The following orders should be made:
1. Appeal allowed with costs.
2. The Tribunal’s finding that the third charge had been established is set aside.
3. The Tribunal’s finding that the first two charges had been established is confirmed but the finding that they constituted professional misconduct is set aside and a finding that they constituted unsatisfactory professional conduct is substituted.
4. The fines of $3000 imposed by the Tribunal on all three charges are quashed and in lieu thereof the solicitor is fined $1500 for unsatisfactory professional conduct evidenced by the findings in respect of the first two charges.
5. Order that the overpayment of $1500 by the solicitor in respect of the fines imposed by the Tribunal be refunded to him.
6. The public reprimand ordered by the Tribunal for professional misconduct is set aside and in lieu thereof the solicitor is publicly reprimanded for unsatisfactory professional conduct.
7. The order by the Tribunal that the solicitor pay the Law Society’s costs of the proceedings is set aside and in lieu thereof there is substituted an order that there be no order as to costs.
8. The respondent is to have a certificate under the Suitors Fund Act.
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LAST UPDATED:
23 December 2009
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