Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Council of the Law Society of New South Wales v Webb (No 2) [2012] NSWADT 233
• Hearing dates: 7 August 2012
• Decision date: 08 November 2012
• Jurisdiction: Legal Services Division
• Before: M Chesterman, Deputy President; J Currie, Judicial Member; R Fitzgerald, Non-judicial Member

Decision

1. The Respondent is reprimanded.

2. The Respondent is fined the sum of $1,500.

3. The Respondent is to pay 50% of the costs of the Applicant as agreed or assessed.

• Catchwords: Solicitor - unsatisfactory professional conduct - consequential orders - costs
• Legislation Cited: Conveyancing Act 1919; Legal Profession Act 1987; Legal Profession Act 2004
• Cases Cited: Council of the Law Society of New South Wales v Hinde [2011] NSWADT 20; Council of the Law Society of NSW v McGuire (No 3) [2012] NSWADT 118; Council of the Law Society of New South Wales v Webb [2012] NSWADT 114; Council of the Law Society of New South Wales v Xu [2009] NSWADT 67; Law Society of New South Wales v Lee [2005] NSWADT 242; Law Society of NSW v Markovski [2009] NSWADT 92; Legal Practice Conduct Board v Boylen [2003] SASC 242; Xu v Council of the Law Society of NSW [2009] NSWCA 430
• Category: Consequential orders
• Parties: Council of the Law Society of New South Wales (Applicant); Peter James Webb (Respondent)
• Representation: Counsel; S Barnes (Applicant); Anne-Marie Foord (Applicant); Eakin McCaffery Cox (Respondent)
• File Number(s): 112026

decision

Introduction

1 In a Disciplinary Application ('the Application'), filed on 15 September 2011, the Council of the Law Society of New South Wales ('the Law Society') claimed that the Respondent, Peter James Webb (hereafter 'the Solicitor'), while practising as a solicitor, was guilty of unsatisfactory professional conduct and/or professional misconduct on seven Grounds.

2 In the Application, the Law Society sought orders as follows against the Solicitor: (a) removal of his name from the Roll of Local Lawyers; (b) payment of the Law Society's costs as agreed or assessed; and (c) such further and (sic) other order as the Tribunal deemed appropriate.

3 The substantive hearing of the Application ('the first hearing') took place before us on 22 and 23 March 2012. Mr Barnes of counsel appeared for the Law Society and Mr Lloyd of counsel for the Solicitor.

4 In a decision delivered on 14 June 2012 (Council of the Law Society of New South Wales v Webb [2012] NSWADT 114 - 'our first decision'), we made a finding of unsatisfactory professional conduct against the Solicitor.

5 At a subsequent directions hearing, the legal representatives for the parties advised that the questions that remained for decision - i.e. what order or orders, if any, we should make against the Solicitor by way of 'penalty', and whether, and if so to what extent, we should accede to the Law Society's claim of entitlement to costs - could in their opinion be resolved 'on the papers', following the receipt of written submissions. But the Tribunal was later requested to schedule a hearing.

6 This hearing ('the second hearing') took place on 7 August 2008. Mr Barnes again appeared for the Law Society and Ms MacDougal, of Eakin McCaffery Cox, for the Solicitor. We had the benefit of written submissions from both parties.

7 The ensuing discussion of the two remaining questions should be read in conjunction with our reasons for our first decision, in which the allegations made in the Application, the evidence admitted at the first hearing and the matters on which our finding of unsatisfactory professional conduct was based are set out at some length.

The relevant conduct of the Solicitor

8 The Application by the Law Society set out seven Grounds. Two of these (1 and 4) were withdrawn at the first hearing. The Grounds were as follows:-

Peter James Webb, while practising as a Solicitor, was guilty of unsatisfactory professional conduct and/or professional misconduct in that the Solicitor acted for various purchasers of real property in circumstances where in each matter he:

1. Did not in fact have any purchaser's instructions to so act (see Particulars save for C. - John Christie and E. - Helena Czyzewska).

2. Failed to confirm his retainer (see Particulars save for C. - John Christie).

3. Failed to provide each purchaser with any written or oral advice as to the terms of the relevant Contract for Sale or as to their respective rights and obligations under it.

4. Following exchange of contracts but prior to or at settlement of each matter, became aware there had been a reduction in the purchase price but failed to inform the relevant mortgagee and thereby misled it.

5. Having become so aware of the said reduction in the purchase price continued to act for both vendor and purchaser when he was thereby in a conflict of interest.

6. Transferred to and for the benefit of Graham Lee ('Lee') the excess of funds received on settlement without obtaining instructions from the relevant purchaser in circumstances where:

(i) there was no document evidencing either the terms of any agreement between them and tee or the terms of any purported loan; and

(ii) No security was provided by Lee.

7. Failed to maintain clear records of instructions received from Lee as purported agent for each purchaser.

9 The accompanying Particulars indicated that these allegations were made in respect of ten separate 'matters', each of which involved one or more 'purchaser clients' of the Solicitor.

10 These transactions occurred during the period between November 2004 and January 2006. The following extracts from a Statement of Agreed Facts handed up at the first hearing (it is reproduced in our first decision at [12]) provide enough information about them for present purposes:-

Background

1. Mr Webb is a legal practitioner currently practising as a barrister in Western Australia. He was admitted onto the roll of solicitors on 25 August 2000. He obtained his unrestricted Iicence to practice in late 2002, and started his own firm in May 2003.

2. Mr Webb's intention was to build his practice from a base where he started with no major clients, and had had little prior experience in conveyancing. His background was mainly in performing supervised work in commercial, IP and IT related work.

3. In August 2003 Mr Webb was first approached by a Graham Lee ("Lee"). Lee described himself as a mortgage broker working with Mortgage One. Lee said to Mr Webb that he could refer conveyancing clients to Mr Webb.

4. Lee unsuccessfully attempted to convince Mr Webb to invest in buying properties. Mr Webb maintained that he was interested in building up his legal firm and that he did not want to be an investor himself.

5. Lee told Mr Webb that he had an idea for a property syndicate with members who would buy about ten properties to make a profit. Lee told Mr Webb that he had a number of interested clients, and that the arrangement was that the buyers would buy investment units at the same time as they refinanced their homes, and that Mr Webb would act for the purchasers in the conveyancing transactions...

The transactions the subject of the complaint

13. There are ten (10) transactions the subject of the complaint. Each transaction followed a similar path, and it is unnecessary to repeat the facts of each and every transaction. The following facts relate to all ten matters.

14. Mr Webb acted for the purchaser of an investment unit.

15. Except in the matter of David Miller, he also acted for the vendor in the transaction.

16. Each purchaser client was referred to Mr Webb by Lee. Lee stated that he was the authorised representative of the clients and Mr Webb accepted those statements.

17. Mr Webb did not meet the purchaser clients in person or speak to them over the telephone during the course of the matter. He took his instructions directly from Lee.

18. In support of Lee's statements that he was the authorised representative of each purchaser client, Mr Webb was given a number of documents by Lee for each purchaser, as follows:

a. A costs agreement purportedly/evidently signed by the clients.

b. Copies of identification documents including drivers licences, birth certificates, and citizenship certificates.

c. An authority purportedly/evidently signed by the clients appointing Lee as their agent and authorising Lee to act on their behalf "in relation to the above purchase for the purpose of authorising and distributing funds in relation to the subject purchase".

d. An authority purportedly/evidently signed by the clients authorising Mr Webb to place the surplus funds in trust.

e. A further authority to Mr Webb to release the balance of any trust funds to Lee.

19. Mr Webb received instructions to act only after contracts had been exchanged. He had nothing to do with preparing the contracts.

20. The price stated on the contract was reduced by a deed of variation purportedly/evidently signed by the purchaser and vendor after Mr Webb was instructed. Mr Webb had nothing to do with preparing the deeds of variation.

21. In each of the 10 matters there was a surplus of funds at settlement. In each matter the surplus of funds was paid into Mr Webb's trust account and then transferred to Lee pursuant to the signed authority in paragraphs 18(d) and (e) above. The surpluses ranged from approximately $35,000 to $70,000...

23. It appears that in each transaction that Lee was perpetrating a fraud on the purchasers by applying part or all of the surpluses for his own benefit, and not as the purchasers had intended. Mr Webb was not involved in or aware of the fraud by Lee. He received no financial benefit from Lee's fraud. He did receive professional fees for performing the conveyances.

24. Mr Webb believed that the reason for the reduced purchase prices was because of problems with valuations and that there were excess funds because the purchasers were putting up their homes as security for the loan, for the purposes of obtaining funds for the Lee building syndicate.

25. Lee has been convicted of a criminal offence in relation to the fraud. Mr Webb gave evidence for the DPP in the prosecution.

11 Taking into account this Statement of Agreed Facts and a quantity of documentary and oral evidence received at the first hearing, we were satisfied that the facts alleged in Grounds 2, 3, 6 and 7 were established. In relation to Ground 5, our conclusions, stated in our first decision at [103 - 109], were that in seven of the ten matters the Solicitor did continue to act, as alleged, for both vendor and purchaser after becoming aware of a reduction in the purchase price, but that in the particular circumstances of these matters, no relevant conflict of duties arose.

12 Our finding of unsatisfactory professional conduct was based primarily on the conduct described in Ground 6, but it took account also of facts alleged in support of other Grounds. For the purposes of the ensuing discussion, the passages in our first decision (paragraphs [87 - 91] and [102]) in which this finding is explained should be reproduced here:-

87... After careful consideration, we have reached the conclusion that the conduct of the Solicitor that is described in Ground 6 was negligent in such a manner and to such an extent that it must be characterised as unsatisfactory professional conduct.

88 In our judgment, the events within the Solicitor's knowledge that led up to the transfers of substantial amounts of clients' money in the circumstances identified in Ground 6 were such as to give rise to 'warning signs' (to employ Mr Lloyd's phrase). They imposed on the Solicitor a duty to take reasonable steps to ensure that these transfers genuinely were in accordance with the wishes of the purchaser clients.

88 Adapting the terminology used by Allsop P in the passage quoted above from David v David ([2009] NSWCA 8 at [76]) the Solicitor became aware of facts that put him on notice that his clients' interests were endangered or at risk unless further steps beyond the limits of his retainer were carried. He was therefore obliged to speak in order to bring to the attention of the clients these aspects of concern and to advise of the need for further advice either from himself or from a third party.

89 The circumstances that, in our opinion, warrant this conclusion include a number of the matters that formed the basis for the allegations made in Grounds 2, 3, 5 and 7 of the Application. We do not think that the Law Society has established unsatisfactory professional conduct, let alone professional misconduct, under any of these Grounds, considered separately (our reasons for rejecting Ground 5 appear below). But it does not follow that the conduct to which these Grounds referred must be treated as irrelevant when consideration is given to the Society's case under Ground 6.

90 The principal aspects of the evidence that we have taken into account in reaching this conclusion with regard to Ground 6 are these:-

1. In all the matters, the Solicitor had many opportunities to take the simple step - e.g. by means of a meeting or a phone call made by him or by Ms Abood - of contacting the purchaser clients and confirm that his understanding of both their transactions (including their arrangements with Mr Lee to participate in his 'building syndicate') and the tasks that they entrusted to the Solicitor conformed with their understanding of these matters. But he never took this step.

2. He surrendered to Mr Lee total control over the transmission of documents between his office and the purchaser clients.

3. Through wishing to avoid the possibility of having to provide lengthy explanations of these transactions, he left it to Mr Lee to provide such advice about them to the clients as he (Mr Lee) thought fit.

4. His decision, in all but one of the matters, to act on behalf of the vendor as well as the purchaser had the consequence that protection of the purchaser clients' interests became the responsibility of a junior solicitor (Ms Abood), whose work he supervised to a limited extent only.

5. None of the following aspects of the transactions (all of which became known to him at some stage before their completion) was sufficient to prompt him to take the simple step of making direct contact with the purchaser clients, or instructing Ms Abood to do so, before he transferred the excess funds to Mr Lee:

(a) The discrepancy between the statements on the contracts of sale that a deposit had been paid and the advice given to him that it had not been paid.

(b) (In seven out of the ten matters) the substantial reductions in the purchase price, amounting in some instances to figures in the vicinity of $200,000.

(c) The fact that although (in these seven matters) the reason given to him by Mr Lee and/or Mr Sakr [a vendor in many of the matters] for the reductions in price was that the valuations were too low to support the initial prices, the lenders remained willing to advance the higher amounts originally offered.

(d) The fact that on settlement of each of the purchases the mortgagees made these higher amounts available without providing in any of the accompanying documentation for security such as Mr Lee described to the Solicitor (i.e. mortgages over the residences of the purchaser clients) to be furnished to them.

6. Although the Solicitor's retainer by the purchaser clients was confined to acting on their purchases, an integral part of this transaction was the receipt and distribution, on their behalf, of all of the funds advanced by the lenders - not merely the lesser amount required to complete the purchase - and his deposit of the excess amounts into his trust account. He became the custodian of these amounts as part of the process of fulfilling his retainer.

7. As events transpired, the amounts of these excesses were (a) significantly more than would be normal in a purchase of property subject to mortgage; (b) significantly more than would have been expected initially in the seven cases in which there was (to the Solicitor's knowledge) a reduction in the purchase price; and (c) substantial in their own right...

102 In our opinion, the negligence displayed by the Solicitor in failing to take steps such as are outlined in Ground 6 was not 'mere negligence' (to adopt the terminology in In the matter of Spero Pitsikas (1995) 1 LPDR (No 1) 5), but was sufficiently serious to warrant a 'black mark'. It fell 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'. It therefore amounted to unsatisfactory professional conduct under section 496 of the LP Act.

13 During the first hearing, Mr Barnes argued that if we were to conclude that the Solicitor had engaged in unsatisfactory professional conduct, we should take the further step of holding that this unsatisfactory conduct was of a 'substantial or consistent nature' so as to constitute professional misconduct under section 497(1)(a) of the LP Act.

14 We did not accept this argument. We stated in our first decision at [111] that in interpreting the phrase 'substantial or consistent', we had obtained useful guidance from a passage in the Tribunal's decision in Council of the New South Wales Bar Association v Asuzu [2011] NSWADT 209 at [37 - 43]. We then gave the following reasons for our conclusion (at [112 - 114]):-

112 We would not characterise the failures of the Solicitor to recognise, in the distinctly unusual circumstances of this case, that the authenticity of Mr Lee's agency needed to be questioned as failures to 'meet the requisite standard in a way that is meaningful or relevant to the legal practitioner's ability to practise law'. Neither this reason for holding them to have been 'substantial' failures - in line with the definition of the term 'substantial' suggested in Asuzu - nor any reason stemming from other common meanings attributed to this term would seem applicable to this case.

113 Mr Barnes argued that the Solicitor, by failing in no less than ten matters spread over some twelve months to take the precautions needed to protect his clients' interests, fell short of the requisite standards in a manner that inevitably attracted the label 'consistent'. In opposing this argument, Mr Lloyd pointed out that because none of the clients involved in the earlier purchases raised any complaint about them, the Solicitor was entitled to assume that his conduct was appropriate in the circumstances.

114 We accept the force of Mr Barnes's submission. But on balance, we consider that what was effectively the repetition of the same error by the Solicitor should not be treated as a 'consistent' course of unsatisfactory professional conduct when nothing was done to draw his attention to the nature and scale of the consequences of his error. This view of the question is in line with the Tribunal's suggestion in Asuzu that there should have to be a 'repeated or persistent failure resulting from the legal practitioner making the same mistakes of principle or acting in the same inappropriate way in a variety of situations (our emphasis)'. There was here no real 'variety of situations'.

The question of 'penalty'

15 As we stated in our first decision at [53], much of the relevant conduct of the Solicitor occurred before 1 October 2005, the date of commencement of the Legal Profession Act 2004 ('the LP Act'). But the complaints from which these proceedings originate were made after this date. By virtue of clause 17 of Schedule 9 to this Act, the proceedings are therefore governed by Chapter 4 and other relevant provisions of the LP Act. But we may not make any determination or order of a disciplinary nature against the Solicitor that is 'more onerous' than could have been made under the statute that preceded and was repealed by this Act, namely, the Legal Profession Act 1987.

16 In his submissions at the second hearing, Mr Barnes argued that although we had made a finding of unsatisfactory professional conduct rather than professional misconduct, we were still obliged, when making one or more orders by way of penalty, to take account of the important role of disciplinary proceedings in protecting both the public and the legal profession.

17 He drew attention to the 'extremely serious' consequences that flowed from the Solicitor's failure to protect his clients' interests. Having observed that the Solicitor was an 'inexperienced conveyancer' when he acted in the ten matters with which this case is concerned, Mr Barnes argued that this inexperience was irrelevant to the breaches of duty that the Solicitor committed. This duty, he maintained, 'arose from the fundamental obligation upon all solicitors to ensure they act in accordance with their clients' instructions, especially in circumstances such as those that confronted the Respondent and which were referred to by the Tribunal as "warning signs"'.

18 A further submission of Mr Barnes is relevant here, though in fact he advanced it as part of his argument relating to costs. It was based on a passage in the decision of the Court of Appeal, given in an appeal from this Tribunal, in Xu v Council of the Law Society of NSW [2009] NSWCA 430.

19 In these proceedings, the Tribunal held (see Council of the Law Society of New South Wales v Xu [2009] NSWADT 67) that the respondent solicitor, in the course of acting in the purchase of land, had claimed to have witnessed the signature - which turned out later to be a forgery - of the wife of his client on the contract and had knowingly provided a false certificate under section 66W of the Conveyancing Act 1919. This certificate contained a statement that he had explained to her the effect of the contract of purchase, the nature of the certificate and the effect of sending the certificate to the vendor. The Tribunal ruled that this conduct amounted to professional misconduct.

20 Constituted in the same manner, the Tribunal held also, following a separate hearing involving the same parties, that the respondent had improperly exercised a lien for his costs over the passport of his client. The ground on which it held the lien to be improper was that the passport was the property of the Commonwealth, not the client. The Tribunal characterised this conduct also as professional misconduct.

21 On appeal by the respondent solicitor, the Court of Appeal ruled that the passport was in fact held by the client as a bailee, that the solicitor could accordingly exercise a lien over it and that the finding of professional misconduct should therefore be set aside. It also ruled that the proper characterisation of the respondent's behaviour in relation to the wife's signature and the certificate under section 66W was unsatisfactory professional conduct, not professional misconduct.

22 At [41], Handley JA, with whom Tobias and Basten JJA agreed, said in relation to this behaviour:-

41 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").

23 The passage in his Honour's judgment on which Mr Barnes relied was at [59]:-

59... 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....

24 Mr Barnes relied on this passage to support a submission regarding our ruling in our first decision that the Solicitor's behaviour in this case did not involve unsatisfactory professional conduct of a 'substantial or consistent nature', so as to constitute professional misconduct. The submission of Mr Barnes was that 'reasonable minds might disagree with that characterisation'.

25 The orders that he sought against the Solicitor were to the following effect:-

1. A fine of $5,000.

2. A public reprimand.

3. An order that, in the event that the Solicitor should apply at any time in the future for a practising certificate to practise in this State as a solicitor, the following conditions should apply to any certificate issued to him:-

(a) for a period of two years from the date of issue of the certificate, a restriction on acting as a solicitor otherwise than in the course of employment by a solicitor holding an unrestricted practising certificate; and

(b) a requirement to complete successfully, within six months of the date of issue of the certificate, courses in Trust Accounting and Legal Ethics as agreed between the parties or, failing agreement, as determined by the Manager of the Law Society's Professional Standards Department.

26 These orders, as Mr Barnes observed, are within the range of orders that were available to the Tribunal under the relevant provision (section 171C) of the Legal Profession Act 1987. But the statute giving us authority to make any order or orders is actually the Legal Profession Act 2004. The relevant provision is section 562.

27 Ms MacDougal did not contest the Law Society's claim that the Solicitor should be reprimanded. But she argued that this, along with the publication of our first decision, would constitute a sufficient deterrent and 'a sufficient expression of the Tribunal's finding that he failed to see the "warning signs"... and that his conduct was sufficiently serious to warrant a "black mark"'.

28 In opposing Mr Barnes' contention that in addition the Solicitor should be fined and any practising certificate issued to him should be subject to restrictions, Ms MacDougal relied on the following matters:-

(a) The conduct of the Solicitor with which these proceedings are concerned occurred a long time ago.

(b) This conduct was culpable on account of negligence on his part, not dishonesty. It has never been suggested that he has been dishonest, either in the course of that conduct or at any other time. The likelihood, therefore, of his engaging again in similar conduct during practice is very low.

(c) As soon as the nature of the fraud practised on his clients became known to him during July 2006, he took it on himself to report the whole affair to the Law Society.

(d) He co-operated fully in the two investigations of his practice that then took place at the instigation of the Society.

(e) Without any objection by the Society, he continued to practise without complaint. He did so in New South Wales, remaining as a sole practitioner until 31 March 2010, until he surrendered his practising certificate on 15 April 2011. After taking a qualifying course in Western Australia, he was admitted as a barrister on 4 July 2011, where he practises solely as a barrister.

(f) In each of four affidavits filed as testimonials on his behalf, the deponent, being fully aware of the allegations contained in the Application, attested as to his good character.

(g) In his affidavit, he stated: 'I truly regret my conduct and apologise for it.' He stated also that he had been 'tormented' by the fact that unwittingly he allowed his clients to be deceived, and that he wrote to all of them conveying his apologies and sending them 'another complete settlement pack'.

(h) On 9 October 2008, pursuant to section 271 of the LP Act, the Society made a demand on him for payment of the costs, amounting to $91,620.32, of the second investigation of his practice. On 17 April 2009, because he was not in a position to pay this amount in full, he and the Society executed a deed providing for an initial payment of $5,000 and monthly instalments of $400. He made these payments until April 2011, during which month he surrendered his practising certificate. Between then and March 2012, the Society did not press him for further payment. But by a letter dated 19 March 2012, the Society demanded an immediate payment of $4,800, followed by monthly instalments of $400 until the outstanding sum of $76,620.32 had been paid.

(i) In his affidavit, sworn on 6 December 2011, he stated that he had no assets and that his net income for the preceding financial year had been between $32,000 and $34,000.

29 We are satisfied that, for the reasons given by Ms MacDougal, restrictions such as Mr Barnes suggested on any future practising certificate issued by the Law Society to the Solicitor are not warranted.

30 On the question whether a fine should be imposed, Ms MacDougal's submissions carry significant weight. Important factors in the Solicitor's favour are the absence of any dishonesty attaching to the Solicitor's conduct and the readiness and sincerity with which he acknowledged his wrongdoing.

31 On the other hand, it is significant that, while we did not accede to Mr Barnes's submission that the unsatisfactory professional conduct in which the Solicitor engaged was of a 'substantial or consistent nature' so as to constitute professional misconduct under section 497(1)(a) of the LP Act, we did state, at [114], that 'we accept the force of' this submission, and we commenced our ruling with the phrase 'on balance'. We take note also of the observation of Handley JA in Xu v Council of the Law Society of NSW [2009] NSWCA 430 at [59], quoted above at [23].

32 This same case, Xu v Council of the Law Society of NSW, provides further guidance on the issue confronting us. As indicated earlier, Handley JA, in the same paragraph of his judgment ([59]) said: 'The solicitor's conveyancing work in the Zhang matter was incredibly sloppy and his signing of the incomplete s.66W certificate was irresponsible.' He went on to consider what order or orders by way of penalty were appropriate. His conclusion, stated at [59 - 60] and agreed to by the other members of the Court, was that the respondent should be publicly reprimanded and should pay a fine of $1,500.

33 This decision accords with a concern that we feel about treating a reprimand, without more, as a sufficient penalty in this case. The 'sloppy conveyancing' and 'irresponsible' behaviour of the respondent in Xu, occurring as they did in only one transaction, were not substantially more serious instances of unsatisfactory professional conduct, than the conduct, continuing through ten transactions, in which the Solicitor in this case engaged. It appears to us, having regard also to what we know of the Tribunal's practice with regard to penalties in other cases where a striking-off order is not warranted, that a reprimand alone would not sufficiently reflect the very serious consequences of his actions or serve the important purposes of protecting both the public and the legal profession.

34 We believe for these reasons that a fine should be imposed. In determining the amount of the fine, we should, in line with Ms MacDougal's submissions, take account of the financial implications of the Solicitor's very substantial liability for the costs of the investigation and, potentially, for costs relating to these proceedings. Authority for doing so can be found in the judgment of the Full Court of the Supreme Court of South Australia in Legal Practice Conduct Board v Boylen [2003] SASC 242 at [74] (Debelle J), and in the following passage in a decision of the Tribunal (Law Society of New South Wales v Lee [2005] NSWADT 242 at [12]) in which a fine of $1,000 was imposed:-

12 The Tribunal is satisfied that the Solicitor was guilty of professional misconduct as alleged and admitted. Both Mr Williams for the Solicitor and Mr Barton for the Law Society submitted that a modest fine would be appropriate. The Tribunal was of the view that the Solicitor had already suffered a substantial financial penalty in respect of costs and Receiver's fee and that a substantial fine would be inappropriate in these circumstances.

35 Our decision, having regard to all the considerations, is that the Solicitor should be fined the same amount as the respondent in Xu, i.e. $1,500.

Costs

36 The section of the LP Act governing costs in disciplinary proceedings is section 566. So far as relevant here, it states:-

566 Costs

(1) The Tribunal must make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner, a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist...

(3) The Tribunal may make orders requiring payment of an Australian legal practitioner's costs from the Public Purpose Fund, but may do so only if satisfied that the practitioner did not engage in unsatisfactory professional conduct or professional misconduct and the Tribunal considers that special circumstances warrant the making of the orders. The Tribunal is to have regard to the length and complexity of the proceedings when making a determination under this subsection...

(6) The Tribunal may fix the amount of costs itself or order that the amount of costs be assessed by a costs assessor under Part 3.2.

37 Mr Barnes's primary submission was that the Tribunal was bound to order that the Solicitor pay the Law Society's costs of the proceedings, by virtue of the clear terms of section 566(1).

38 In arguing that we should not do so, but should make a finding of 'exceptional circumstances', Ms MacDougal relied on two features of the case in particular.

39 The first was that, as the Law Society (in her submission) should have foreseen, our conclusions regarding the Solicitor's conduct fell well short of those sought by the Society. We made a finding of unsatisfactory professional conduct, not professional misconduct; we based this finding on only one of the seven grounds contained in the Application; two of these grounds (Grounds 1 and 4) were abandoned at the commencement of the first hearing; substantial sections of the report of the second investigator were held inadmissible (as to this, see our first decision at [8]); and for all these reasons the Law Society's claim in the Application that the Solicitor should be struck off proved to be without foundation.

40 On the basis of these matters, Ms MacDougal submitted that we should in fact make an order under section 566(3) entitling the Solicitor to recover from the Public Purposes Fund the costs associated with the failure of six out of the seven grounds of the Application. In this connection she cited the Tribunal's decision in Council of the Law Society of NSW v McGuire (No 3) [2012] NSWADT 118.

41 Secondly, in her arguments as to 'exceptional circumstances' under section 566(1), Ms MacDougal relied on (a) the evidence, already outlined, as to the Solicitor's poor financial situation and the substantial impact of his liability to pay the costs of the second investigation and (b) evidence of continuing health problems contained in his affidavit. In asserting that these constituted 'exceptional circumstances', she relied on the Tribunal's decision in Law Society of NSW v Markovski [2009] NSWADT 92.

42 In reply, Mr Barnes maintained that the matters on which Ms MacDougal relied did not constitute 'exceptional circumstances'. The serious consequences of the Solicitor's conduct had made it entirely proper, he said, for the Law Society to have pressed for findings of professional conduct and, indeed, for an order removing his name from the Roll. Furthermore, it was essential that the Society brought forward the allegations contained in Grounds 2, 3, 5 and 7 of the Application and tendered evidence relating to these Grounds (contained chiefly in the investigators' reports), because our finding of unsatisfactory professional conduct under Ground 6 expressly took account of this evidence. In this important sense, we did not 'dismiss' these four Grounds.

43 Finally in relation to section 566(1), Mr Barnes submitted that the fact that a respondent practitioner was of limited means was not to be regarded as 'exceptional circumstances' under section 566(1) or indeed as 'special circumstances' under section 566(3). He cited a case under section 566(3), NSW Bar Association v Howen (No. 2) [2008] NSWADT 27 at [38 - 39], [67],

44 Mr Barnes further maintained that the Solicitor could not make a case under section 566(3) for payment of any of his costs out of the Public Purposes Fund because an essential pre-requisite stated in the subsection had not been fulfilled. The Tribunal had not been 'satisfied' that the Solicitor 'did not engage in unsatisfactory professional conduct or professional misconduct'.

45 In discussing these competing arguments, we will turn first to the Solicitor's claim for an award of costs from the Public Purposes Fund under section 566(3). We agree with Mr Barnes's contention on this point. The authority cited by Ms MacDougal, Council of the Law Society of NSW v McGuire (No 3) [2012] NSWADT 118, does not assist the Solicitor because in that case, unlike the present one, there was no finding of professional misconduct or unsatisfactory professional conduct against the respondent.

46 We are aware of decisions in which the weakness of some part or parts of a case brought successfully by an applicant in proceedings such as these has been held to constitute 'exceptional circumstances' under section 566(1). Indeed, this occurred in a case that we have already mentioned, Xu v Council of the Law Society of NSW [2009] NSWCA 430. Because, as outlined above, the Law Society's 'charge' of an improper lien being exercised by the respondent solicitor was held by the Court of Appeal to be misconceived, Handley JA, at [61 - 63], ruled that the respondent had a 'prima facie entitlement to an order for the costs of that charge'. He held also that on the two 'charges' that succeeded, the respondent was bound to pay the Law Society's costs. Characterising these matters as 'exceptional circumstances', he decided that there should be no order as to the costs in the Tribunal.

47 In Xu, however, there were two separate distinct hearings in the Tribunal. From a practical point of view, the evidence relating to the ground on which the Law Society ultimately failed was entirely distinct from the evidence relating to the grounds on which it succeeded. That is not the situation here. In accordance with Mr Barnes's submission, we regard as significant the fact that in making a finding of unsatisfactory professional conduct under Ground 6, we drew significantly on the evidence adduced by the Law Society in relation to the four Grounds (2, 3, 5 and 7), on which it sought, but failed to obtain, a disciplinary finding.

48 Despite this ground for distinguishing the facts in Xu, we are bound to follow the approach adopted by the Court of Appeal in that case. It is undoubtedly true that the costs of preparing for and conducting the trial in these proceedings would have been significantly less if the Law Society had not pressed, until the commencement of the trial, the two Grounds (1 and 4) that it abandoned and its claim that the Solicitor should be struck off.

49 As to the relevance of the Solicitor's financial situation and his liability to pay the costs of the investigation, we must point out first that in the authority on which Ms MacDougal relied, Law Society of NSW v Markovski [2009] NSWADT 92, the Tribunal did not mention, and did not appear to be aware of, the mandatory terms of section 566(1). The only reasons that it gave for not ordering the respondent solicitor to pay the Law Society's costs were stated as follows at [28]:-

28 The Tribunal is not minded to make an Order that the Respondent pay the costs of the Law Society as agreed or assessed, not because the Law Society is not so entitled but rather because, if this Respondent, at her age, is to re-enter the ranks of practising solicitors and make a fist of her employment she needs to have the opportunity to somehow dig herself out of the personal and financial hole in which she now finds herself and a costs order would only serve to dig a deeper financial hole from which she would be unlikely to ever emerge.

50 In Council of the Law Society of New South Wales v Hinde [2011] NSWADT 20, the Tribunal did make a finding of 'exceptional circumstances' based chiefly on the poor financial circumstances of the respondent solicitor. It took account also of the fact that he was 82 years of age. It stated its reasons for its finding at [32 - 33]:-

32The features of this case that support a finding of 'exceptional circumstances' are, as Mr Chegwidden argued, the advanced age of the Respondent and his straitened financial situation. The relevant aspects of his financial situation are these: (a) he has a very small regular income, taking the form of a state pension; (b) he has no assets of significant value; (c) due in particular to his age, he has no significant prospect of obtaining gainful employment; and (d) any costs order against him could only be satisfied by small instalment payments commencing on a future date and lasting over a significant period of time.

33In the context of disciplinary proceedings such as these, we are satisfied that these constitute 'exceptional circumstances'. They fall within the phrase 'out of the ordinary course, or unusual, or special, or uncommon', used in R v Kelly (Edward) [2000] QB 198 at 208 and adopted by the Queensland Legal Practice Tribunal in Legal Services Commissioner v Scott (No 2) [2009] QLPT 9 at [19]. The hearing of disciplinary proceedings against a legal practitioner who is both as far past the normal age of retirement and as impoverished as the Respondent is indeed a most unusual phenomenon.

51 These are distinctly more straitened financial circumstances than those affecting the Solicitor, even allowing for his liability for the balance of the costs of the investigation.

52 We have found this a difficult question to resolve, but on balance we are satisfied that the requirement of 'exceptional circumstances' has been established, and a partial costs order is warranted, by virtue of the three considerations on which Ms MacDougal relied. The trial was longer than it need have been; the Solicitor remains liable to pay a very substantial sum towards the costs of the investigation of his practice; his financial circumstances are relatively poor.

53 We therefore order that the Solicitor is to pay 50% of the costs of the Law Society, as agreed or assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.

Registrar

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Decision last updated: 08 November 2012