Pg v The Law Society of the Australian Capital Territory [2004] ACTSC 99 (1 October 2004)

Last Updated: 29 October 2004

PG v THE LAW SOCIETY OF THE AUSTRALIAN CAPITAL TERRITORY [2004] ACTSC 99 (30 September 2004)

LEGAL PRACTITIONERS - unsatisfactory professional conduct - allegations of false statement in a certificate by a solicitor and causing or permitting client to make false statement - finding of fraudulent intent - issues relating to construction of documents - opinion evidence by other senior practitioners.

Real Property Act 1900 (NSW), s 80A

Legal Practitioners Act 1970 (ACT), s 37

Law Society of the Australian Capital Territory v Lardner and Andrews [1998] ACTSC 24

Howes v Law Society of the Australian Capital Territory [1998] ACTSC 71

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49

APPEAL FROM THE PROFESSIONAL CONDUCT BOARD OF THE LAW SOCIETY OF THE AUSTRALIAN CAPITAL TERRITORY

No. SCA 21 of 2004

Judge: Crispin, Whitlam and Bennett JJ

Supreme Court of the ACT

Date: 30 September 2004

IN THE SUPREME COURT OF THE )

) No. SCA 21 of 2004

AUSTRALIAN CAPITAL TERRITORY )

APPEAL FROM THE PROFESSIONAL CONDUCT BOARD OF THE LAW SOCIETY OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: PG

Appellant

AND: THE LAW SOCIETY OF THE AUSTRALIAN CAPITAL TERRITORY

Respondent

REASONS FOR JUDGMENT

Judge: Crispin, Whitlam and Bennett JJ

Date: 30 September 2004

Place: Canberra

IN THE SUPREME COURT OF THE )

) No. SCA 21 of 2004

AUSTRALIAN CAPITAL TERRITORY )

APPEAL FROM THE PROFESSIONAL CONDUCT BOARD OF THE LAW SOCIETY OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: PG

Appellant

AND: THE LAW SOCIETY OF THE AUSTRALIAN CAPITAL TERRITORY

Respondent

REASONS FOR JUDGMENT

THE COURT:

1. This was an appeal against a decision of the Professional Conduct Board of the Law Society of the Australian Capital Territory ("the Board") finding the appellant guilty of unsatisfactory professional conduct.

2. The appellant acted for Mr and Mrs Galbory ("the clients") in a conveyancing transaction involving the purchase of land in New South Wales and the provision of a mortgage to the Bendigo Bank ("the bank"). The contract for sale required completion by 1 November 2001 and authorised the vendor to charge penalty interest at the rate of $98.63 per day in the event of any delay in completion beyond that date.

3. On 25 October 2001, the appellant received from the bank's solicitors a letter purporting to enclose a mortgage and other documents including "Memorandum of Provisions RN2539912" ("the memorandum"). The letter indicated that the documents would need to be returned by noon at least three days prior to settlement. This meant that, if settlement was not to be delayed beyond 1 November 2001, the executed mortgage documents would need to be returned by noon on 29 October 2001.

4. The appellant met with the clients to discuss the transaction at 5.00 pm on Friday, 26 October 2001 but then realised that the memorandum had not been enclosed with the letter from the bank's solicitors. He attempted to contact them by telephone to obtain a copy but was unable to do so. He then advised the clients that he did not have the memorandum and was unable to obtain a copy before Monday. However, the memorandum was a pro forma document and he had previously received copies of it from the bank in connection with other transactions. He told the clients that he was familiar with its contents and offered them a choice: he could see them again during the following week when he had obtained a copy of the memorandum or they could accept his advice as to its contents and proceed to execute the mortgage documents. They chose to adopt the latter course. The appellant gave them the foreshadowed advice, the adequacy of which was not challenged, and the clients proceeded to execute the mortgage documents.

5. The appellant then executed a "solicitors certificate" ("the certificate"), the relevant portion of which stated that the appellant had been provided with a number of documents, including the memorandum, and that he had explained to the clients the general nature and effect of the documents required to be signed by them and the risk of losing the secured property and other assets they owned. The clients executed a section on the foot of the certificate headed "client's certificate" in which they certified that "the above information" was true. The clients also executed a further form entitled, "Acknowledgment Authority and Undertaking" ("the acknowledgment") which included a statement that they had received a copy of the mortgage including the memorandum.

6. On 29 October 2001 the appellant had his secretary advise the bank's solicitors that the memorandum had not been received and seek a copy. This request was followed by a facsimile message from the appellant to the bank's solicitors on 30 October 2001, again seeking a copy of the memorandum.

7. The complaint to the Board alleged that the appellant had been guilty of professional misconduct or unsatisfactory professional conduct in that:

(a) he knowingly and wilfully certified to the bank that he had received the memorandum when that was not the case and he knew that to be so;

(b) he exhorted or knowingly allowed the clients to sign both the certificate and the acknowledgment which were similarly untrue;

(c) as such, he engaged in conduct which was capable of bringing the legal profession into disrepute;

(d) such conduct could reasonably be regarded by solicitors of good repute and competency as amounting to professional misconduct or to unsatisfactory professional conduct.

8. The Board received written evidence from four senior solicitors with extensive experience in conveyancing, each of whom expressed the opinion that the appellant's conduct did not constitute either professional misconduct or unsatisfactory professional conduct. However, each agreed in cross-examination that he would not sign or permit a client to sign an inaccurate certificate or false acknowledgment and the Board took the view that their viva voce evidence had been "at odds with their written statements".

9. The Board delivered three separate statements of reasons for decision. The majority, consisting of Messrs Crowley, Loftus and Burnett, found that the appellant had signed the certificate knowing that it was false and that he had asked the clients to sign a false acknowledgment when he had known or ought to have known that the bank and its solicitor would have relied upon the representations in these documents. They said that pragmatism could not be advanced as an excuse for unsatisfactory professional conduct and added that it made no difference, save as to penalty, that the appellant had been motivated by the best interests of the clients, that he had not gained personally, that he had not caused the initial problem, or that the clients had not been prejudiced and could not have changed the memorandum even if they had seen it earlier. Mr Watch, who concurred with the majority decision, said that he had found the matter particularly difficult but that, given earlier decisions referred to in the NSW Solicitors Manual and evidence from the four solicitors "that in all probability they would not do what [the appellant] did", it was difficult not to conclude that he was guilty of unsatisfactory professional conduct. The lay member on the Board, Mr Van Arkel, dissented, stating that he accepted the opinion of the four senior practitioners who had given evidence on the appellant's behalf.

10. In a separate statement of reasons delivered on 23 March 2004 the Board dealt with the issues of penalty and costs, observing that the appellant had "failed to appreciate that his conduct amounted to fraud" and that this lack of appreciation of itself justified a reprimand. It ordered that the appellant be reprimanded and that he pay the respondent's costs of and incidental to the notice of complaint.

11. Mr Tobin QC, who appeared for the appellant, challenged the crucial findings of the majority of the Board and of Mr Watch, submitting that they had been based upon a misinterpretation of the representations contained in the relevant documents.

12. It quickly became apparent that the acknowledgment did not contain any false statement. The clause in which the clients stated that they had received a copy of the memorandum was qualified by the following statement:

I/We acknowledge that if any of the above clauses are inapplicable I/we have sought independent advice from a qualified person as to the nature and effect of the documents.

13. During the hearing of the appeal this portion of the form was drawn to the attention of Dr Griffiths SC, who appeared for the respondent, and, after due consideration, he indicated that the respondent now conceded that the execution of the acknowledgment could not be shown to have involved any misrepresentation. In view of this concession it was clear that those findings, that were dependent upon the contention that the acknowledgment contained a false statement, could not be sustained.

14. Mr Tobin also submitted that the certificate did not contain any misrepresentation. It was true that the appellant had not received the copy of the memorandum purportedly enclosed with the letter from the bank's solicitors but the memorandum was a pro forma document in an approved form which had been numbered by the Registrar-General pursuant to s 80A of the Real Property Act 1900 (NSW), and he had been provided with other copies of it in the past. Hence, when the appellant certified that he had "been provided" with the memorandum, that statement was true.

15. Dr Griffiths maintained that the relevant portion of the certificate, construed in context, clearly conveyed a representation that a particular copy of the memorandum had been provided to the appellant for the purposes of the transaction in question. We were unable to accept this submission. The certificate was also in a standard form and the requirement that the lawyer certify that he or she had been provided with the relevant documents was presumably intended to provide evidence that he or she had had the necessary basis for the advice given to the client. The fact that a lawyer may have derived his or her knowledge of the contents of a numbered pro forma document from one copy rather than another appeared to have been of no more significance than if he or she had learnt of relevant statutory provisions from one copy of an Act rather than another. Indeed, it would not have been surprising if the bank had abandoned the practice of sending out copies of the memorandum and simply put one copy on its website. The certificate did not expressly require the appellant to assert that he had been provided with a particular copy or that he had received a copy at a particular time and we were not satisfied that such assertions could fairly be attributed to a simple statement that the appellant had been provided with the memorandum.

16. Dr Griffiths argued that the earlier provision of copies in connection with other transactions would not have enabled the appellant to have given a copy to the clients. Whilst that may have been true, the certificate did not contain any assertion to the effect that the appellant still had a copy or that he had been in a position to supply one to the clients.

17. Mr Tobin also submitted that, whilst the certificate was dated 26 October 2001, the document should be taken to have been provided to the bank's solicitors in escrow and that the representations which it contained should be taken as reflecting the position that would have existed at the time of settlement rather than that which had existed at the time the document was executed. He argued that it was standard conveyancing practice for intending purchasers, dependent upon the provision of mortgage finance, to be asked to sign mortgage documents by which they represented that they already had a legal interest in the relevant land and purported to mortgage it to the relevant financial institution, notwithstanding the fact that they would not acquire such an interest until the purchase was settled. The provision of such documents in these circumstances did not involve any misrepresentation because it was understood that the factual statements they contained were intended to reflect the position at the time of settlement when the relevant interest in the land would be acquired. In the present case it was common ground that the terms of the memorandum were to be incorporated into the mortgage. Mr Tobin argued that, in these circumstances, all of the documents relating to the mortgage should be similarly construed. Hence, the certificate should be taken to have conveyed representations to the effect that by settlement, the appellant would have been provided with the relevant documents and given his clients the necessary advice, just as the mortgage should be taken to have conveyed representations to the effect that at settlement the clients would have acquired the legal estate and would have been entitled to mortgage it to the bank. In fact, by the time of settlement the clients had actually obtained a copy of the memorandum as well as the other documents.

18. Dr Griffiths submitted that such an approach was clearly untenable because, by executing the certificate and dating it 26 October 2001, the appellant had represented that the memorandum had already been provided to him. Mr Tobin countered by pointing out that the same observation could be made about the representations contained in the mortgage and arguing that it was necessary to construe the relevant representation, not merely by reference to the words in the document, but by reference to how those words would be understood by the bank or its solicitors in the context of the mortgage transaction to which it related.

19. Whilst this was an interesting and potentially important argument, the manner in which such a certificate was likely to be understood by solicitors acting for banks or other lending institutions was not directly addressed in the evidence before the Board and we found it unnecessary to resolve the issue.

20. Even if we had accepted the respondent's contentions as to the manner in which the certificate should have been construed, that would not, of itself, have demonstrated that the appellant had been guilty of unsatisfactory professional conduct. In the context of disciplinary proceedings in which a legal practitioner is exposed not only to the opprobrium of his or her peers but also to other significant sanctions, it is plainly insufficient to demonstrate only that he or she misinterpreted a clause in a document.

21. Section 37 of the Legal Practitioners Act 1970 (ACT) provides that:

. . . unsatisfactory professional conduct includes conduct (whether consisting of an act or omission) occurring in connection with the practice of law that falls short of the standard of competence and diligence that a client is entitled to expect of a reasonably competent legal practitioner.

22. In Law Society of the Australian Capital Territory v Lardner and Andrews [1998] ACTSC 24 Miles CJ, Higgins and Madgwick JJ said at [11] that this provision and a similar provision relating to the concept of professional misconduct were not true definitions but rather descriptions or examples of what was intended to be included within the meaning of the terms. In the subsequent case of Howes v Law Society of the Australian Capital Territory [1998] ACTSC 71, Gallop ACJ, Higgins and Crispin JJ said at [10] that the term is "apt to describe conduct which whilst falling short of professional misconduct nonetheless involves a significant departure from the standards expected of legal practitioners of good repute".

23. In the present case, the four senior solicitors who gave evidence on his behalf were unanimous in their opinion that the appellant had not been guilty of either professional misconduct or unsatisfactory professional conduct. None of them resiled from that opinion in cross-examination. The concessions relied upon by the Board as being at odds with these opinions were made in response to questions predicated upon assumptions as to the known falsity of statements in each document, not as to an honest mistake as to the construction of a potentially ambiguous clause. In other circumstances, we may have been inclined to place considerable weight on the opinions expressed by the Board itself. However, the Board seems to have acted upon its perception of the evidence given by the four senior practitioners rather than its own knowledge of conveyancing practice.

24. Furthermore, the case against the appellant was clearly dependent upon contentions that he had executed the certificate and exhorted or permitted the clients to certify that the information contained in it was correct when he knew that it contained a false statement. Such an allegation could not be sustained merely by pointing out that the appellant adopted a construction of a clause in the document that differed from that favoured by the respondent, or even that subsequently preferred by the Board. What was alleged was not that he had been mistaken, but that he had lied and that he had caused or permitted his clients to lie.

25. Dr Griffiths sought to answer this difficulty by pointing out that the appellants had not given any evidence of his understanding of the relevant clause. However, the proceedings before the Board had been conducted substantially by reference to a statement of agreed facts and the issue does not appear to have been identified with any clarity prior to the appeal. Indeed, none of the four solicitors who gave evidence on the appellant's behalf were asked any questions about their understanding of the relevant clause. In these circumstances we were not prepared to draw any adverse inference against the appellant by reason of a perceived failure to address this specific issue in the general explanations he had provided in his letters to the respondent and his co-operation in the provision of agreed facts. The burden of proof rested upon the respondent and, in our opinion, there was no evidence capable of discharging it.

26. The suggestion that the appellant's conduct had been fraudulent was clearly unfounded. The certificate had been addressed to the bank and the appellant had been required to return it to the bank's solicitor. Even if the document had otherwise been capable of conveying a representation that the appellant had been provided with a particular copy of the memorandum for use in this transaction and if there had been some relevance to such a representation, the Bank's solicitors could not have been deceived because the appellant had twice taken steps to have them contacted and told that the memorandum had not been received. We were unable to see any basis for an inference that, having told them the truth, the appellant must have intended to deceive them, let alone that he had acted with some fraudulent purpose.

27. Mr Tobin also advanced the tantalising suggestion that it may be appropriate to jettison the long standing practice of applying the civil standard of proof as explained in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 in proceedings of this kind. He argued that in the light of the decision of the High Court of Australia in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49 it may now be appropriate to apply the criminal standard since the Act requires proof that the solicitor in question is "guilty" of professional misconduct or unsatisfactory professional conduct and exposes him or her to substantial sanctions. The present case, was, however, determined substantially by reference to agreed facts and we found it unnecessary to consider this argument.

28. For the reasons now provided we concluded that the evidence before the Board had not established that the appellant had been guilty of unsatisfactory professional conduct. We ordered that the decision of the Board and consequential orders against the appellant be set aside and that, in lieu thereof, the complaint should be dismissed and that the respondent should pay the appellant's costs of the proceedings before the Board and of the appeal.

I certify that the preceding twenty eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Date: 30 September 2004

Counsel for the appellant: Mr T Tobin QC

Solicitor for the appellant: CCLAW

Counsel for the respondent: Mr J Griffiths SC

Solicitor for the respondent: Phelps Reid

Date of hearing: 10 September 2004

Date of judgment: 30 September 2004