Doherty v The Law Society of New South Wales [2008] NSWCA 269 (20 October 2008)

Last Updated: 27 October 2008

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Doherty v The Law Society of New South Wales [2008] NSWCA 269


FILE NUMBER(S):
40325 of 2008

HEARING DATE(S):
20 October 2008


EX TEMPORE DATE:
20 October 2008

PARTIES:
Peter John Doherty - Applicant
The Law Society of New South Wales - First Respondent
Andrew Stuart Brown - Second Respondent

JUDGMENT OF:
McColl JA

LOWER COURT JURISDICTION:
Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S):
SC 13562 of 2008

LOWER COURT JUDICIAL OFFICER:
James J

LOWER COURT DATE OF DECISION:
29 August 2008 and 11 September 2008


COUNSEL:
Mr A Campbell - Applicant
Mr S Barnes - First Respondent
Second Respondent - not applicable

SOLICITORS:
Jason Li Lawyers - Applicant
Raymond John Collins - First Respondent
Second Respondent - not applicable


CATCHWORDS:
LEGAL PRACTITIONERS - suspension of practising certificate - whether suspension should be stayed pending appeal

LEGISLATION CITED:
Legal Profession Act 2004

CATEGORY:
Procedural and other rulings

CASES CITED:
Dupal v The Law Society of New South Wales (Court of Appeal of New South Wales, 26 April 1990, unreported)
New South Wales Bar Association v Stevens [2003] NSWCA 95
Robb v Law Society of the Australian Capital Territory (Federal Court of Australia, Finn J, 21 June 1996, unreported)

TEXTS CITED:


DECISION:
1. Expedite the hearing of the appeal. 2 Set the appeal down for hearing on 11 December 2008. 3. Pending the hearing of the appeal permit the applicant to practice as a lay associate in the law practice of Mr Mario Piperides, being Lloyd Lancaster Lawyers. 4. Costs to be costs in the appeal.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40325/08

McCOLL JA

Monday 20 October 2008

PETER JOHN DOHERTY v THE LAW SOCIETY OF NEW SOUTH WALES

Judgment ex tempore

1 McCOLL JA: This is an application by Notice of Motion filed on 3 October 2008 seeking an expedited hearing of the appeal and an order that, pending hearing of the appeal, the suspension of the applicant’s practising certificate by the Law Society of New South Wales be stayed and that he be permitted to practice as an employed solicitor. The Law Society does not object to the application for expedition and I propose to list the appeal for hearing on 11 December 2008.

2 The application for a stay arises in the following circumstances. The applicant is a solicitor by profession who until early in September 2008 carried on practice as the principal of a firm, Lloyd Lancaster Lawyers, in Kogarah. On 19 June 2008 the Law Society suspended his practising certificate in exercise of its power so to do conferred by s 548, which appears in Pt 4.7 of the Legal Profession Act 2004. That section relevantly provides:

“548 Immediate suspension of local practising certificate

(1) This section applies if the Commissioner or the relevant Council considers it necessary in the public interest to immediately suspend a local practising certificate on the ground of the seriousness of the conduct in respect of which a complaint has been made in relation to the holder of the certificate.

...

(3) The suspension operates until the earliest of the following:

...

(d) the suspension is successfully appealed.

...

(5) The suspension takes effect on the day that notice of the suspension is given to the holder ...”

3 Section 549 confers a right of appeal to the Supreme Court against the decision of the Council under Pt 4.7 to suspend or direct the suspension of a local practising certificate. On that appeal the Supreme Court may make any order it considers appropriate.

4 The applicant appealed from the Law Society’s order. On 27 June 2008 Kirby J, having particular regard to the fact that expedition had been granted of the appeal and that it would be heard within a month, granted a stay of the Law Society’s order pending hearing of the appeal. On 11 September 2008 James J dismissed the appeal.

5 The factual background which led to the Law Society suspending the applicant’s practising certificate appears in the judgment of James J delivered on 29 August 2008 (the “principal judgment”).

6 In short, in 2006 the applicant became involved both as a solicitor and through a corporate vehicle as an investor in property dealings. The parties to the property transactions were the same but their respective interests differed. A Mr Geoffrey Rafter was a participant in each of the transactions.

7 Two joint venture agreements were entered to give effect to the transactions, one relating to property in the Byron Bay region, the other to property near Hill End. Under the terms of the Hill End joint venture agreement Mr Rafter was to pay the deposit on exchange of the contract for sale.

8 In October 2006 Mr Rafter gave the applicant a bank cheque in the amount of $35,000, being the deposit on the Hill End transaction. That transaction ultimately did not proceed. It appears to be common ground that instead of applying those monies to the Hill End purchase in the same month the applicant applied those sums in two tranches. The first tranche was in the amount of $16,000 to discharge an obligation which prima facie fell on the applicant, or more accurately, the corporate vehicle through which he was participating in the property transactions, to pay the deposit on exchange of contracts for one of the Byron Bay properties. The second tranche, $19,000 of the $35,000, formed part of a sum of $40,000 in a cheque the applicant drew on his general account and paid in respect of an option to purchase the lease of the Byron Bay Tourist Park.

9 These matters came to the Law Society’s attention in March 2008 when another participant in the joint ventures complained to the Legal Services Commissioner about the applicant.

10 On 11 March 2008 the Legal Services Commissioner referred the complaint to the Law Society’s Professional Standards Department for investigation. Because the complaint included allegations about the conduct of the applicant’s firms’ trust account, the Professional Standards Department instructed Mr Gore, a trust account inspector, to carry out an investigation of the trust account. He did so and produced a report on 6 May 2008: principal judgment (at [34]).

11 In that report he detailed the transactions which James summarised in his judgment and of which I have given a short account. The report contained a recommendation that on the basis that Mr Doherty was in breach of s 255 of the Legal Profession Act in relation to Mr Rafter’s $35,000 then a deficiency in trust funds was in existence in relation to that amount. Mr Gore recommended that a copy of his report be forwarded to the Manager of the Professional Standards Department for consideration and appropriate action: principal judgment (at [35]).

12 On 19 June 2008 the Professional Conduct Committee of the Law Society resolved to recommend to the Council of the Law Society that the applicant’s practising certificate be suspended and that a manager be appointed to his practise. Later the same day the Council passed those resolutions in accordance with the Committee’s recommendation. In its statement of reasons the Council said in part:

“The material provided in Mr Gore’s report dated 6 May 2008 made pursuant to s 270 of the Legal Profession Act 2004 is such that notwithstanding the submissions from the legal representative of the solicitor the Council is of the opinion that the solicitor has breached s 255 of the Legal Profession Act 2004 and appropriated trust funds to his own use in that he:

1. Obtained funds on behalf of a client, (G Rafter) for a stated purpose, such funds being trust money; and

2. subsequently used such funds to discharge financial obligations which lay on the solicitor’s own company, Lloyd Lancaster Pty Limited.”

See principal judgment (at [38]).

13 Before James J the Law Society’s case was that the applicant had contravened s 255 of the Legal Profession Act. That provision requires a law practice to hold trust money deposited in the trust account of the practice exclusively for the person on whose behalf it is received and to disburse the money only in accordance with the direction given by that person. The Law Society submitted before James J that the applicant’s contravention of s 255 was of such a degree of seriousness as to render it necessary in the public interest to suspend his practising certificate immediately: principal judgment (at [41]-[42]).

14 The appeal before James J proceeded as a hearing de novo. The applicant gave evidence, as did Mr Rafter. The applicant advanced a number of submissions in support of his appeal all of which, as I understand James J’s judgment, relied on the premise that he had been entitled to treat the $35,000 as he did.

15 James J summarised those submissions as the single total agreement submission, the subsequent events submissions, and the submission that Mr Rafter had directed or authorised the applicant to apply the $35,000 for the purpose of the Byron Bay project. James J rejected all three submissions. Having done so he adjourned the proceedings to hear submissions on what order may be appropriate under s 549.

16 It was clearly common ground before his Honour, and was so before me, that the court could vary the suspension order pursuant to s 549 even if satisfied that the underlying reasons on which it was based were established.

17 The proceedings came back before James J in due course. On 11 September 2008 his Honour delivered a further judgment (the “final judgment”). His Honour’s reasons for wishing to give the matter further consideration, he explained, had regard to whether having made the findings he did he should simply dismiss the appeal, having regard to what appeared to him to be the emergency nature of the power under s 548 and the apparent width of the power under s 549(2) of a court on appeal to make any order it considered appropriate: final judgment (at [3]). His Honour’s reasons also included (final judgment (at [4])):

“4. ... [A]spects of the facts, including that there was only a single payment involved, that that payment, although not of an insubstantial amount, was not an extremely large amount, that the payment was made in the course of a somewhat unusual transaction of a kind which might not be repeated, that Mr Rafter’s funds were diverted to a venture in which Mr Rafter did have some interests, and that in the court proceedings brought by Mr Rafter for an accounting the two ventures were treated as being a single venture or at least as being closely connected”.

18 His Honour accepted the harsh consequences of the exercise by the Law Society of its s 548 power. He entertained the possibility that one order he might make would be to allow the applicant to continue to practice as a principal. One of the factors his Honour took into account in entertaining that possibility was the likelihood that the disciplinary proceedings which the Law Society in due course would commence against the applicant would not be dealt with in the Administrative Appeal Tribunal until what his Honour described as “an advanced time” in 2009 and may not indeed be heard for nearly twelve months. His Honour was conscious of the fact that if the appeal was dismissed the applicant would not be able to earn income by the only means by which he had been earning income in recent years. Nevertheless, his Honour rejected the proposition that he might allow the applicant to continue to practice as a principal. In so doing he adverted to the fact that the findings made in his principal judgment necessarily involved a finding of dishonesty on the applicant’s part: principal judgment (at [6] - [8]).

19 His Honour also entertained a fallback submission, suggested by counsel for the Law Society, that an order his Honour might make would permit the applicant to practice only as an employee under the direct supervision of a principal. At that stage it appears that that form of order was not acceptable to the applicant, not least because as, appears from James J’s reasons, it would be difficult for him to obtain such employment: final judgment (at [10]).

20 In deciding what order he should make James J took into account the Law Society’s submission that he had found the applicant as a solicitor had received a sum of money to be held by him on trust and to be applied for a particular purpose but had applied that sum for another purpose which discharged obligations of his own company. He also took into consideration the Law Society’s submission that the applicant had not acknowledged that he had acted wrongly but had continued in the proceedings before James J to seek to justify the conduct he found to be wrongful: final judgment (at [11] – [12]).

21 His Honour referred to statements of principle of general application in Dupal v The Law Society of New South Wales (Court of Appeal of New South Wales, 26 April 1990, unreported).

22 In that judgment Kirby P, then President of the Court of Appeal, said that the normal consequence of the misuse of entrusted funds by a solicitor (defined at that stage as wilful breaches of a statutory provision) was removal of the name of the solicitor from the roll. Handley JA referred to the need for this Court to insist on solicitors maintaining the highest standards of personal honesty and integrity in their dealings with clients and the public and in the handling of monies entrusted to their charge.

23 James J expressed concern that if the appeal was dismissed the applicant might “indefinitely remain in a state of limbo and that none of the events in s 548(3) on the happening of which a suspension ceases to operate would occur”: final judgment (at [14]).

24 His Honour was given an assurance by counsel for the Law Society that disciplinary proceedings against the applicant would be prosecuted with reasonable expedition. His Honour nevertheless appreciated that there would necessarily be a delay of a number of months before the proceedings were likely to be heard. However, having regard to those considerations James J concluded that he ought dismiss the appeal without making further order other than that the applicant pay the Law Society’s costs of the appeal.

25 On 3 October 2008 the applicant filed a Notice of Appeal appealing against James J’s judgments. Mr A Campbell who appears today for the applicant, says that the Notice of Appeal was drafted before James J’s reasons became available. As I understand he accepts those grounds will have to be amended. However, in short, the applicant wishes to argue on appeal that James J erred in his application of the burden of proof having regard to the gravity of the allegations made against him and in analysing the applicant’s evidence as compared to that of Mr Rafter.

26 The Notice of Appeal seeks orders either that the suspension of the applicant’s practising certificate be revoked or that the applicant be allowed to practice with appropriate restrictions.

27 In his affidavit in support of the Notice of Motion sworn 9 October 2008 the applicant says that he sold his practice to a Mr Mario Piperides on 1 September 2008. He states that Mr Piperides is also acting as agent for the Law Society in respect of the practice. All of the trust accounts and records of the practice are currently in the possession of the Law Society and according to the applicant “are under review”.

28 Since James J delivered his final judgment on 11 September 2008, it appears that Mr Piperides has made a request to the Law Society to permit the applicant to be employed as a lay associate in the law practice of which he was previously principal. A lay associate is an associate of a law practice who is not an Australian legal practitioner: s 7(2)(b) Legal Profession Act. Section 17 of the Legal Profession Act provides that a law practice must not have a lay associate whom any principal knows to be a disqualified person unless the associate is approved by the relevant authority under subs(3). The Law Society Council is the relevant authority for the purposes of a disqualified person who is an associate of a solicitor.

29 On 17 October 2008 the applicant’s solicitors were advised that the Law Society Council had considered Mr Piperides’ request and had resolved to refuse it. The reasons given were that having regard to the Council’s role in the protection of the public and the legal profession, it was not satisfied that the applicant understood the seriousness of his conduct which led to the suspension of his practising certificate on 19 June 2008. In all the circumstances the Council was not satisfied that allowing the applicant “to again be associated with the practice of law, even in a limited capacity, would not pose a continuing danger to both the public and the profession.”

30 In his affidavit in support of the Notice of Motion seeking a stay the applicant proffered an undertaking that if permitted to practice on a limited basis he would have no dealings with client’s trust monies and would act under the supervision of a solicitor with an unrestricted practising certificate.

31 Mr S Barnes, who appeared for the Law Society and opposed the grant of the relief sought in the Notice of Motion, emphasised the finding of dishonesty which James J made. I accept that this was an extremely grave finding to be made against a legal practitioner. He also relied on New South Wales Bar Association v Stevens [2003] NSWCA 95. In that case Spigelman CJ (at [91]) (with whom Meagher and Sheller JJA agreed) emphasised authorities which indicated that the protection of the public was a matter entitled to significant weight on an application for a stay once it appeared a professional person had acted improperly to a substantial degree. His Honour referred with approval to Finn J’s statement in Robb v Law Society of the Australian Capital Territory (Federal Court of Australia, Finn J, 21 June 1996, unreported):

“... it must remembered that this is not the usual instance of civil litigation in which the question is whether a reason is there to hold a successful party out of the benefit of a judgment obtained until the appeal is heard. Here Mr Robb’s ‘reason’ must be considered, not in the context of a judgment giving a benefit to a litigant, but rather as one designedly made to protect both the public and the reputation of the profession.

The Supreme Court clearly regarded Mr Robb’s professional misconduct as serious. Equally it found him to be ignorant of, or indifferent to, his fiduciary responsibilities. It is not for me to gainsay these conclusions.

Notwithstanding the appeal lodged, to allow Mr Robb a stay in the face of such findings would require the demonstration of a reason of some cogency. I do not consider that the prejudice asserted, given as I will indicate the prospect of its mitigation in some degree, outweighs the very distinct prejudice to the public interest which could be sustained if the stay were granted. ...

It is the case whenever an order for suspension is made and an appeal is lodged on arguable grounds, that the practitioner affected can assert that prejudice will be suffered if, the suspension having begun to run, the appeal is successful. This circumstance could not in my view justify, in effect, a stay as of right in all the circumstances. The decision to stay a suspension order subject to appeal on arguable grounds must in my view involve an instance specific question.

There is a variety of factors of which account can or should properly be taken when considering a stay in such cases. Among these are (i) the seriousness of the misconduct found; (ii) the likely prejudice to public confidence both in the integrity of the disciplinary processes themselves and in the reputation of the profession if the practitioner is granted a stay; (iii) the means available to mitigate the prejudice alleged; and (iv) the expedition with which the appeal can be heard.”

32 It is pertinent to note that in declining the stay sought in Robb Finn J was conscious of the prospect of the mitigation of the order suspending the practising certificate in that case. The mitigation to which Finn J apparently referred was the possibility for the practitioner in that case to practice as an employed solicitor pending the hearing of the appeal.

33 Spigelman CJ concluded (at [104]) from his consideration of the authorities that each case must turn on its specific facts as he observed the range of relevant considerations is broad. Nevertheless the fact that the issues involved in professional rights to practice concern the protection of the public means that the public interest is always entitled to significant weight.

34 Spigelman CJ explained that statement:

“108. Like the exercise of the inherent jurisdiction of the Court and the statutory power to remove a practitioner from the Roll, the statutory power to cancel a practising certificate is exercised not to punish the legal practitioner but to protect the public. (See Clyne v New South Wales Bar Association [1960] HCA 40; (1960) 104 CLR 186 at 201-202; New South Wales Bar Association v Evatt [1968] HCA 20; (1968) 117 CLR 177 at 183-184.) In such a context the exercise of the Court’s power to stay must give significant weight to the protection of the public and the public interest involved in ensuring that persons who practice the profession of law comply with the highest standard of integrity.

109. I said in New South Wales Bar Association v Cummins [2001] NSWCA 284; (2001) 52 NSWLR 279 at [20]:

‘There are four interrelated interests involved. Clients must feel secure in confiding their secrets and entrusting their most personal affairs to lawyers. Fellow practitioners must be able to depend implicitly on the word and behaviour of their colleagues. The judiciary must have confidence in those who appear before the courts. The public must have confidence in the legal profession by reason of the central role the profession plays in the administration of justice. Many aspects of the administration of justice depend on the trust by the judiciary and/or the public in the performance of professional obligations by professional people.’”

35 I am acutely conscious of the public interest in members of the legal profession faithfully discharging their obligations in relation to trust accounts. However I am also conscious of the fact that in this case, unlike for example in Robb, no finding has yet been made that the applicant has been guilty of professional misconduct. The proceedings are at a very early stage. The power conferred by s 548 is one available to be exercised in such circumstances. However the factors which troubled James J in his second judgment concerning the isolated nature of the transaction also trouble me. I am also conscious of the fact that before James J, the Law Society was prepared to entertain the proposition that the applicant be allowed to practice as an employed solicitor, a proposition from which it has since resiled.

36 The Law Society did not submit the appeal was hopeless, it made no submissions about its prospects of success. I make no criticism of it in that respect. It properly drew attention to the statements in Stevens and emphasised the public interest relevant to the stay application. I am cognisant that notwithstanding his conclusion of dishonesty James J was at least prepared to entertain the proposition that the applicant be permitted to practice as a legal practitioner although he ultimately rejected that proposal for what, in my view, were cogent reasons.

37 The circumstances have now changed markedly. The proposal, as I now understand it, is not that the applicant be permitted to work as a legal practitioner, whether as a principal or an employee, but rather that he be permitted to work as a lay associate in the firm he formerly owned. That would involve duties of a clerical nature, he would not have access to a trust account or, as I understand the proposal, to any clients’ monies. The Law Society accepted that this order could be made in theory. It did not identify any particular danger which might arise from permitting the applicant to engage in work as a lay associate.

38 In my view it is appropriate to make an order permitting the applicant to such work, at least pending the hearing of the appeal. Unlike in Stevens, making such an order will not involve the applicant exercising his rights to practice as a legal practitioner. It ought not, in my view, offend the public interest issues to which the Chief Justice referred. It will however give the applicant some source of income pending the hearing of the appeal. I am conscious too in this respect, as was Kirby J when he granted a stay in June, that I propose to grant expedition of the appeal and that it will be heard in early December. The Court of Appeal will be in a better position than I on the necessarily preliminary view of the facts which I can obtain on a hearing such as this, to determine first, whether the appeal proper ought be allowed and in the event that it is not, what order, if any, might be made pending the proceedings being brought before the Administrative Decisions Tribunal by the Law Society of New South Wales.

39 Andrew Stuart Brown, who was appointed by the Law Society of New South Wales as manager of the applicant’s practice, was named as the second respondent to the Notice of Motion. He had filed a submitting appearance before James J. He did not appear on the return of the Motion before me, a matter about which neither party complained.

40 I make the following orders:

1. Expedite the hearing of the appeal.

2. Set the appeal down for hearing on 11 December 2008.

3. Pending the hearing of the appeal permit the applicant to practice as a lay associate in the law practice of Mr Mario Piperides, being Lloyd Lancaster Lawyers.

4. Costs to be costs in the appeal.

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LAST UPDATED:
24 October 2008