Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of NSW v Brooks [2012] NSWADT 131
• Hearing dates: 17 October 2011
• Decision date: 04 July 2012
• Jurisdiction: Legal Services Division
• Before: M Barnes, Judicial Member; J Currie, Judicial Member; E Hayes, Non-Judicial Member

Decision

The Tribunal accordingly orders:

(a) The name of David George Brooks be removed from the Roll of Local Lawyers.

(b) David George Brooks pays the costs of the Society of and incidental to these proceedings.

• Legislation Cited: Legal Profession Act 2004
• Cases Cited: Prothonotory of the Supreme Court of NSW v Nikolaides [2010] NSW CA 73; Law Society of NSW v McKenzie [2003] NSW ADT 92; Law Society of NSW v Hooper [2005] NSW ADT 174; Prothonotory of the Supreme Court of NSW v Alcom [2000] NSW CA 288; Hill vJames [2004] NSW SC 55
• Category: Principal judgment
• Parties: Council of the Law Society of New South Wales (Applicant); David George Brooks (Respondent)
• Representation: Counsel; M J Beaumont and T. Maltz (Applicant); Law Society of NSW (Applicant); No appearance (Respondent)
• File Number(s): 102035

REASONS FOR DECISION

1 The Council of the Law Society of New South Wales (the Society) as Applicant sought orders on the basis the Respondent David George Brooks (the solicitor), was guilty of professional misconduct.

2 These proceedings involve an application for disciplinary action pursuant to Section 551 of the 2004 Act. As whilst the proceedings were commenced after 1 October 2005, the complaint predated the commencement of the 2004 Act.

3 The Society sought orders that

(a) The name of David George Brooks be removed from the Roll of Local Lawyers;

(b) David George Brooks pay the costs of the Society of and incidental to these proceedings;

(c) Such further orders as the Tribunal deems fit.

4 There was no appearance by the solicitor at the final hearing on 17 October 2011. Nor was any Reply filed on behalf of the solicitor or affidavit materials filed and served.

5 The Tribunal when listing the matter for hearing was made aware of issues regarding service and gave specific orders regarding effecting of service and is satisfied those orders had been complied with by the Society.

6 The Tribunal is satisfied that appropriate efforts have been made to serve the Respondent including submitting materials to him by post to his last known residential and business addresses.

7 The Tribunal accepts that the solicitor was aware of the proceedings and is satisfied whist he was not personally served with a copy of the Application that it remained entirely appropriate for the matter to proceed to hearing and be concluded.

8 The Tribunal accepts the comprehensive affidavits tendered in the proceedings dealing with service upon the solicitor and complying with the Tribunal's directions referrable to service. Accordingly the matter proceeded to hearing on 17 October 2011.

9 In summary the Society contended the solicitor was guilty of professional misconduct in the context of working for a client in relation to a sale contract under which his client was a vendor and the solicitor engaged in conduct which was aimed at deceiving the proposed buyer about the true price that was to be paid by the vendor for certain assets under other contracts.

10 More specifically the Particulars of the Grounds were:

(a) Mr. Brooks, in the context of a continuing series of communications with Mr. Terry Hill's legal representative, and acting as a solicitor, knowingly concealed from Mr. Terry Hill and his legal representative (a fellow legal practitioner) the true payment price in a contract between Mr. David James (and companies associated with Mr. James) and the liquidators of the Hill Wine Group of Companies.

(b) Mr. Brooks, acting as a solicitor, intentionally misled and deceived Mr. Terry Hill and his legal representative (a fellow legal practitioner) by altering the payment price and other elements of various draft contracts and other documents (the documents identified in Schedule 1) and forwarding them to Mr. Hill's legal representatives, fraudulently representing them to be the genuine draft contracts or other documents sent to Mr. Brooks by the solicitors for the liquidators of the Hill Wine Group of Companies, or sent by Mr. Brooks to those solicitors. Those alterations are set out at paragraphs 39-60 in the submissions dated 21 August 2006 filed for the Society in proceedings 13048 of 2005.

(c) Mr. Brooks, acting as a solicitor, knowingly and fraudulently made false representations to Mr. Terry Hill and his legal representative (a fellow legal practitioner) with the intention that Mr. Terry Hill would rely upon those representations as to the payment price in, and other elements of, the contracts, between Mr. David James and companies associated with Mr. James) and the liquidators of the Hill Wine Group of Companies. These representations were made in the documents identified in Schedules 1 and 2 below, and are set out at paragraphs 61084 in the submissions dated 21 August 2006 filed for the Society in proceedings 13048 of 2005.

11 There were schedules to the Particulars which related to the alteration of documents and separately to the misleading representations.

BACKGROUND

12 In 2002 Mr. Hill and Mr. James entered into a transaction under which Mr. James would buy a winemaking and wine distribution business from a company managed by the liquidators Ferrier Hodgson and Mr. James was to then on sell the winemaking component of this business to Mr. Hill.

13 There were a series of complex negotiations and well before the matter came to the attention of the Law Society, controversy arose between a range of entities and in the course of that controversy it was found that the solicitor in acting for Mr. James had altered a variety of documents provided by the liquidators and he sent those altered documents to Mr. Hill's legal adviser.

14 A common feature of these alterations was the alteration of the prices relating to the costs of purchasing the wine making and wine distribution businesses. In summary the vendors were represented by Mr. David Landy of Clayton Utz, the solicitor was representing the interests of Mr. David James. Mr. Michael O'Neill and to a lesser extent Mr. David Evans of NOT Lawyers were representing the interests of Mr. Terry Hill.

15 The solicitor was acting for Mr. James and it was found in that he had altered a variety of documents provided by the liquidators and he sent these altered documents to Mr. Hill's legal advisers. As noted, a common feature of the forgeries was the alteration of prices. These altered documents were identified in the course of Supreme Court litigation. Ultimately this led to separate Supreme Court litigation initiated by Mr. Hill against Mr. James and a range of other parties including the solicitor which was heard before Bergin J and such forgeries were found to be proven and Her Honour made a finding that the solicitor, Mr. Brooks was guilty of deceit. The solicitor was a party to these proceedings however he did not give evidence. Her Honour awarded exemplary damages of $125,000.00 against the solicitor as a Judgment owing to Mr. Hill. This was not paid and as a consequence the solicitor was declared bankrupt on 13 April 2005. The reference to Her Honour's Decision is Hill -v- James [2004] NSW SC 55.

16 The Society, after investigation and consideration including information from the solicitor, determined to cancel his Practising Certificate and refused to renew the Certificate. The solicitor was informed of this decision on 16 June 2005. The solicitor commenced proceedings in the Supreme Court appealing the decision however that appeal did not proceed and the appeal was abandoned, noting that the solicitor paid the Society's costs on an indemnity basis.

17 Subsequently the solicitor commenced proceedings to remove his name from the Local Roll of Lawyers pending the outcome of the Society's investigation of his conduct however those proceedings were stayed and the solicitor was ordered to pay the Society's costs.

18 The focus of the Society's case against the solicitor is upon the alleged falsehoods, forgeries and concealments by Mr. James and the solicitor that affected the knowledge of Mr. Hill and his solicitor Mr. O'Neill of NOT Lawyers, the solicitor for Mr. Hill with NOT Lawyers, in what has been referred to as the James-Hill negotiations.

19 Those negotiations the Tribunal finds arose in circumstances where there had been reluctance by the liquidators to deal with Mr. Hill and he accordingly entered into an agreement with Mr. James.

20 That agreement is referred to as the Back to Back Agreement.

21 Relevant clauses of this Agreement provide:

"Recital 5 - You have each determined that the means to achieve your respective aims is for you alone to proceed to negotiate and conclude a deal for the acquisition of the wine business and the distribution of business, on the understanding the wine business is to be bought by you (a reference to David James) on behalf of Terry Hill".

Further Clause f provides:

"f. You shall provide Terry Hill with copies of all draft Asset Sale Contracts relating to the acquisition by Newco No 2 of the Wine Business, for approval by Terry Hill."

22 In the conduct of the proceedings before the Tribunal the tendered evidence included a comprehensive affidavit of Michael Francis O'Neill and the deponent was not the subject of cross examination and affidavit evidence was also tendered from John David Hamilton Evans and that evidence was not the subject of cross examination. Both of these gentlemen were solicitors who had a role in relation to the transactions acting in the interests of Mr. Hill.

23 From the tendered materials it can be seen that the solicitor in the Supreme Court proceedings had intended to give evidence that Mr. O'Neill was aware and agreeable to the amendments made to the documentation which would be referred to in greater detail below.

24 Mr. O'Neill was the subject of cross examination on these issues in the Supreme Court and on these matters he was found to be a witness of truth. Similarly the Tribunal is satisfied and accepting of his evidence.

25 Affidavits were tendered on behalf of the Law Society by a variety of other witnesses who were involved at various stages of the transaction in question.

26 The Tribunal accepts all of those witnesses as witnesses of truth and more specifically accepts the evidence of Mr. Evans, an employed solicitor of NOT Lawyers. Whilst he had only limited indirect involvement in the matter it is accepted that he had no knowledge that any of the prices in the draft contracts had been altered by the solicitor or Mr. James prior to him receiving them and forwarding such drafts to Mr. O'Neill.

27 Similarly that Mr. Terry Hill had no knowledge and no discussions with either the solicitor or Mr. James advising him of any changes to the documents. He had always understood that the documents were unaltered.

28 Mr. Ian Brierley had a limited role in the transactions in that he was entering into assist Mr. Hill to arrange finance and his evidence is accepted that he denied asking anyone at any stage to alter the prices in the documentation. He always understood that the purchase price Mr. Hill would pay Mr. James was the same as Mr. James would pay the liquidators.

29 Further the Tribunal is satisfied that the Back to Back agreement was entered into on 9 May 2002 and that any alterations to that document by fax of 22 May 2002 did not affect the substance of the agreement between Mr. James and Mr. Hill.

30 The Tribunal specifically accepts the evidence of Mr. O'Neill who denied that he had taken instructions from his client and that he was happy and agreeable to a change in the prices in any agreement or sale deed.

31 The Tribunal accepts the Society's submissions that the solicitor acted dishonestly and that such acts of dishonesty can be placed into two categories namely forgeries and misrepresentations. The solicitor admitted altering the documents but otherwise denied any wrongdoing.

32 Referrable to the forgeries there are 6 forgeries of key parts of the Contractual documents and referrable to the misrepresentations there are 7 misrepresentations.

33 The Tribunal accepts that the Solicitor and Mr. James were motivated by seeing an opportunity to obtain the relevant assets from the liquidator at a price lower than referred to in the Back to Back Agreements of 9 May 2002 being a total of $12.3 million comprised of $10.3 million for the wine business and $2 million for the distribution business. The Tribunal accepts that the Solicitor was further actively advancing suggestions of Mr. James as to how the deception could be achieved and this includes by way of email from the Solicitor to Mr. James of 15 May 2002.

34 The solicitor was further aware by reference to the Back to Back Agreement there were obligations by Clause 5f, to forward draft Sales Contracts to Mr. Hill, which specifically provided:

"f. You shall provide Terry Hill with copies of all draft Asset Sale Contracts relating to the acquisition by Newco No 2 of the Wine Business, for approval by Terry Hill."

35 The Solicitor was aware that Mr. James was attempting to negotiate and was successful in negotiating a lower price with the liquidator but then sought to conceal those two prices from Mr. Hill.

36 Mr. Hill was left with the belief the total price that he was to pay for the wine business was $10.3 million.

37 The Tribunal finds the first forgery occurred on 22 May 2002 at 12.10 p.m. when the Solicitor submitted an email to David Evans which purported to but did not truly enclose a copy of the Clayton Utz Contract.

38 Alterations were made to the true Contract by the Solicitor before sending it to Mr. Evans when such alterations were:

(a) The definition of "Completion Payment" was changed from $8.18m to $10.28m.

(b) The definition of "deposit" was altered from $0.885m to $1.22m.

(c) The definition of "Distribution Price" was altered from $3,00,004.00 to $2,000,004.00.

(d) Clause 3.1 was altered from a total purchase price for the Distribution Assets of $3,000,004.00 to $2,000,004.00 (numbers in the associated table also were changed).

(e) Clause 3.2 was altered from a total purchase price for the Winery Assets of $5,849,996.00 to $9,499,996.00 (numbers in the associated table were also changed),

(f) The definitions of "First Land" and "Second Land" were removed, although the definition of "Land" still refers to those definitions (and Schedule E continues to explain what these two terms mean). The removal of the definitions of "First Land" and "Second Land" therefore appears to have been ineffectual.

39 The Tribunal finds the purpose in making the alterations was fraudulent and it was to ensure Mr. Hill was not alerted to the facts that the true sale price as then negotiated for the winery business was $8 million and it left Mr. Hill with the belief that the price was $10.3 million and he would be paying $10.3 million.

40 The second forgery the Tribunal finds was made on 22 May 2002 at 1.40 p.m when the Solicitor submitted to David Evans a further amended Deed.

41 The Tribunal finds that the intent was always fraudulent. The Tribunal finds that whilst this email referred to a further amended Deed that there were fraudulent alterations to the Deed including to the way by which the land was treated under the Sale Contract, as well as making the same alterations to the sales deed that had been made in respect of the First Forgery. The Tribunal finds the Solicitor made the following fraudulent alterations:

(a) First Mr. Brooks included a proposed amendment which indicated that the lands known as the "Marienberg" lands would be purchased in a separate land side deed for $700,000.00 (see clause 2.1(c)). It was true that the Liquidators had agreed to put the land sales in separate side deeds and it was also true that Mr. Brooks had made a proposal to Landy to amend clause 2.1 of the Sale Agreement. However, the agreement attached to Mr. Brooks' email was a forgery for two reasons:

(i) The Prices were false: Mr. Brooks amended the Winery price to $9,499,996.00 (approximately $9.5m). Mr. Brooks evidently chose $9.5m because that amount would appear to Mr. Hill to be consistent with the reduction of a previous number shown to Mr. Hill (of approx $10.2m, see at 61.a above) by $0.7m (this reduction being consistent with the suggestion that the Marienberg land would be bought for $700,000.00). However, the $9.5m amount bore no connection whatsoever to the true price that would be paid by Mr. James once the $0.7m amount (in respect of the Marienberg lands, which were now in a separate deed) was excluded. The true Winery price (excluding the land) at that time was $5,849,996.00 as per the document attached to the email from Mr. Landy at 11.41 am on 22 May 2002.

(ii) The amendments were not the true proposed amendments. The additions to clause 2.1 (ie new clauses 2.1(c) and 2.1(d) as by email by Mr. Brooks to Mr. Evans used the expression

"Land" whereas the true proposed amendments sent by Mr. Brooks to Mr. Landy used the expression "First Land". These two emails were sent by Mr. Brooks 7 minutes apart.

(b) Second, Mr. Brooks omitted to include in the Sale Deed an amendment to reflect the fact that at that time, it was already known to Mr. Brooks that a side-deed would also be entered into between the "First Buyer" (being entities purchasing for Mr. James' benefit) and the Liquidators to buy residential properties.

42 The Tribunal finds the third forgery to be an email of 24 May 2002 at 5.08 pm submitted by the Solicitor to Mr. Evans purporting to enclose a proposed letter to Clayton Utz, as well as a copy of the side agreement relating to the land and a copy of the Contract conditions for the sale of the land. The Tribunal finds that side agreement relating to the sale of land is a forgery and is different from the true version sent by Mr. Landy to Mr. Brooks (23 May 2002; 11.26 at CB661 onwards) because:

(a) All references to the "Second Land" (which is in effect composed of the three residential properties) have been removed (including in Annexure A); and

(b) The purchase price for the "First Land" is changed from $650,000.00 to $700,000.00.

43 The Fourth Forgery occurred on 24 May 2002 at 6.03am when the Solicitor submitted an email to Mr. Evans enclosing a draft letter re the Land Contract.

44 However the true letter regarding the Land Contract was sent later by the Solicitor to Mr. Landy at 9.01am on 24 May and the email of 6.03 am was a version that excluded any indirect references to "the Second Land".

45 The Fifth Forgery occurred on 24 May 2002 at 4.10 pm again by email from the solicitor to Mr. Evans with a cover email stating

"Here is the Contract that I received from Clayton Utz as the final Contract".

46 The Tribunal accepts this statement is false and the following alterations had been made by the Solicitor:

(a) The definition of "Completion Payment" as altered from $7,380,000.00 to $10,350,000.00;

(b) The definition of "Deposit" was altered from $820,000.00 to $1,150,000.00;

(c) The definition of "Distribution Price" was altered from $2,500.004.00 to $2,000,004.00;

(d) The definition of "Winery Price" was altered from $5,699,996.00 to $9,499,996.00;

(e) Clause 3.1 was altered from a total purchase price of the Distribution Assets of $2,500,004.00 to $2,000.004.00 (and consequential changes were made to the items in the table); and

(f) Clause 3.2 was altered from a total purchase price for the Winery Assets of $5,699,996.00 to $9,499,996.00 (and consequential changes were made to the items in the table).

47 The Tribunal accepts the Society's submission that Mr. Brooks forged the figures to continue to maintain the deception that the total price being paid by Mr. James of approximately $11.5 million.

48 The Sixth Forgery related to an email of 4.40 pm on 24 May 2002 to Mr. David Evans which referred to:

"Here is a further agreement sent to us by David..".

49 The Tribunal finds this Contract contains the same forgeries as the Contract sent at 4.10 pm on 24 May to David Evans.

50 The Tribunal finds that separately from the aforesaid forgeries there were 8 dishonest and misleading misrepresentations, these being:

(a) On 22 May 2002 the amended Back to Back agreement was misleading because it continued to assert that "the deposit" was $1.23 million at a time when to Mr. Brooks knew that the deposit was not $1.23 million (for example, Mr. Brooks had received a draft copy of the sale contract from Mr. Landy at 4.07pm on 21 May 2002 which contained a deposit amount of $885,000.00: CB338-395 at CB 345. Further:

(i) Clause 5(d) contained the false statement: "The Liquidators require a 10% deposit ($1.23 million)..";

(ii) Clause 5(e) contains the statement :"Terry Hill shall pay the deposit of $1.23 million...".

(b) On 24 May 2002, the Solicitor sent a facsimile to Mr. Hill's legal advisers in which he stated:

"We confirm Mr. O'Neill's advice that your client is content for us to enter into the various contracts with the Liquidators of the Hill Wine Group as forwarded to you." (emphasis added)

(c) On 8 June 2002 the solicitor sent an email to Mr. O'Neill which contained two statements being

(i) "Please find enclosed a further amended agreement with David James. We apologise and that the agreement we forwarded to you did not cap the liability of Mr. Hill to $10.875 million"; and

(ii) "We note that there has been ongoing discussion with the Liquidators regarding the apportionment of the purchase price..."

However very relevantly by 9.54 a.m. that day the solicitor was already aware the true price for the Winery Business was substantially lower than $10.875m and less than the $10.3m figure in the Back to Back Agreement. The true price for the Winery business was $5,699,996.00. The Tribunal accepts that the appropriate inference is that the real and dishonest reason for this attempt to amend the Back to Back Agreement was to try to ensure that even if Mr. Hill discovered what really occurred he would nevertheless be forced to pay Mr. James $10.3m. Further it is found that the reference to ongoing discussion with the Liquidators regarding the apportionment of the purchase price was misleading. Whilst there is evidence of adjustments with respect to employee entitlements there is no documentary evidence of any discussion of apportionment of the purchase price after the contract was entered into on 24 May 2002.

(d) The solicitor on 14 June 2002 sent a fax similarly to Mr. O'Neill and the solicitor indicated that: "we note that your client is yet to pay the balance of the deposit namely the sum of $200,000.00..."(emphasis added). The expression "the balance of the deposit" was dishonest because Mr. Hill had already paid a deposit of $992,869.00 on 22 May 2002 and the total deposit payable in respect of the Distribution Business and the Wine Business and the Land (including the residential properties which Mr Hill did not know were being acquired) was $1.02 million. There was no so called "balance" payable of $200,000.00.

(e) On 17 June 2002 the solicitor sent an email to Mr. O'Neill which noted: "our client has asked whether he is to be paid the sum of $200,000.00 from the proceeds of settlement as per the agreement". The Tribunal accepts that this email was dishonest for the same reasons that the email of 14 June 2002 was dishonest.

(f) On 19 June 2000 the solicitor sent a facsimile to Mr. O'Neill which stated "we note that pursuant to the agreement between our respective clients your client is to provide a letter indicating that Mr. Hill is not able to comply with his obligations to provide funds for the purchase of the wine business".

However the solicitor was aware that the funding necessary to purchase the wine business referred to as the "Winery Price" was only $5,699,996.00 in total whereas the solicitor had dishonestly represented to Mr. Hill and his advisers that the funds required were $10.2 million in total.

Therefore the solicitor knew that Mr. Hill was attempting to raise an amount that was well in excess of the amount that was really required in order to purchase the Wine Business. The solicitor knew that he had deceived Mr. Hill in making this misrepresentation.

(g) On or around 24 June 2002 Mr. O'Neill and Mr. Hill realised that the final Sale Contract signed on 24 May 2002 was different from the forged contracts that they had seen and in particular, that the prices purportedly paid under the forged contracts that they had previously received were approximately $4 million higher than the true price recorded in the apparently true contracts.

This led Mr. O'Neill to send to the solicitor an email on 24 June asking in part "why we were not told this information...". The solicitor on 3 July at 7.08 a.m. sent an explanation to Mr. O'Neill which referred to a variety of issues and to topics such as: "stock", "properties in SA", "other properties", and "allocation of prices".

The Tribunal accepts that all of these explanations were false and misleading and the dominant reason for the difference was that every single sale contract that Mr. Hill and Mr. O'Neill had previously been shown by the solicitor had been deceptively altered.

(h) On 12 July 2002 Mr. O'Neill wrote to the solicitor and noted that in a conversation on 11 July with Mr. James: "David James assured me that the price paid for the wine assets under the various contracts, as varied was as described in the "back-to-back agreement" as signed by him and faxed to me on 22 May 2002". This alleged statement if made by Mr. James was false as the price ultimately paid by Mr. James was not the price as set out in the 22 May 2002 Back-to-Back agreement, including the price paid for the Wine Business was not $10.2 million.

51 By 16 July 2002, the solicitor had had a number of weeks to consider his position and the Tribunal accepts that the solicitor wrote to Mr. O'Neill that day and purported to deal with the issues set out in Mr. O'Neill's email. Yet the solicitor made no effort to correct the statement allegedly made by Mr. James and in substance endorsed this misrepresentation.

52 The Tribunal is comfortably satisfied on the evidence that the solicitor is guilty of professional misconduct.

53 The Tribunal finds that the solicitor was guilty of each forgery and misrepresentation and such conduct was part of a calculated and premeditated plan to advantage his client and dishonestly disadvantage Mr. Hill. The conduct is inexcusable and warrants strong rebuke in the public interest.

54 There have been no acts of contrition or remorse by the solicitor and the Tribunal considers that the appropriate orders are that the solicitor's name be removed from the Roll of Local Lawyers.

55 The solicitor's conduct as particularised was calculated and deliberate and whilst it may well have had devastating financial consequences for him at a personal level, the Tribunal cannot let those consequences be determinative as to whether any penalty other than being struck off should be made.

56 Authorities that are supportive of the approach the Tribunal is adopting in this matter include: Prothonotary of the Supreme Court of New South Wales v Nikolaides [2010] NSW CA73; Law Society of New South Wales v McKenzie [2003] NSW ADT 92;Law Society of New South Wales v Hooper [2005] NSW ADT 174; Prothonotary of the Supreme Court of New South Wales v Alcorn [200] NSW CA 288.

57 This is a protective jurisdiction and the solicitor engaged in acts of dishonesty and deception without remorse or contrition.

58 As to costs there are no exceptional circumstances and costs should follow.

59 The Tribunal accordingly orders:

(a) The name of David George Brooks be removed from the Roll of Local Lawyers.

(b) David George Brooks pays the costs of the Society of and incidental to these proceedings.

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Decision last updated: 04 July 2012