ACT CIVIL & ADMINISTRATIVE TRIBUNAL

LEGAL PRACTITIONER ‘S’ (Steven Gavagna) v COUNCIL OF THE LAW SOCIETY OF THE ACT (Appeal) [2017] ACAT 58

AA 59/2016

Catchwords: APPEAL – OCCUPATIONAL DISCIPLINE – legal practitioner – excessive costs – failure to inform client of increasing costs – costs agreement unenforceable – client not treated fairly and in good faith – whether letter from client enclosing cheque constitutes a ‘final offer’ – whether banking cheque was acceptance – whether doing so was in breach of duty-whether duty of fidelity owed to former client – whether practitioner guilty of professional misconduct or unsatisfactory professional conduct

Legislation cited: ACT Civil and Administrative Tribunal ACT 2008 s 82Legal Profession Act 2006 ss 276, 386, 389, 433

Cases cited: Allinson v General Council of Medical Education and Registration [1894] 1 QB 750Certain Lloyds Underwriters v Giannopoulos [2009] NSWCA 56Commonwealth of Australia v Bank of New South Wales (1950) AC 235Council of the Law Society v Legal Practitioner P4 [2014] ACAT 64Council of the Law Society of the ACT v Legal Practitioner S [2016] ACAT 72Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45Fox v Percy [2003] 214 CLR 118J P Morgan Australia Limited -v- Consolidated Minerals Limited [2010] NSWSC 100 JP Morgan v Consolidated Minerals Ltd [2011] NSWCA 3Legal Practitioner v Council of the Law Society of the ACT [2011] ACTSC 207McMahon’s (Transport) Pty Ltd v Ebbage [1995] 1 Qd R 185The Legal Practitioner v Council of the Law Society of the ACT [2010] ACAT 19The Legal Practitioner v Council of the Law Society of the ACT [2015] ACTCA 20

The Legal Practitioner v Council of The Law Society of The ACT (No 2) [2014] ACTSC 9Rohatgi v Health Care Complaints Commission NSWCA (unreported) 26 July 1996Theodorelos v Nexus Projects Pty Ltd [2009] ACTSC 149Warren v Coombes (1979) 142 CLR 531

List of Texts/Papers cited: Butterworths, Riley Solicitors Manual

Appeal Tribunal: Presidential Member M-T DanielSenior Member B Meagher SC

Date of Orders: 7 August 2017Date of Reasons for Decision: 7 August 2017

2

AUSTRALIAN CAPITAL TERRITORY )CIVIL & ADMINISTRATIVE TRIBUNAL ) AA 59/2016

BETWEEN:

LEGAL PRACTITIONER ‘S’Appellant

AND:

COUNCIL OF THE LAW SOCIETY OF THE ACTRespondent

TRIBUNAL: Presidential Member M-T DanielSenior Member B Meagher SC

DATE: 7 August 2017

ORDER

The Tribunal orders that:

1 The finding made by the Tribunal on 4 July 2016 that the respondent’s

conduct has involved a substantial or consistent failure to reach or to

maintain a reasonable standard of competence and diligence such that his

conduct constitutes professional misconduct be set aside.

2 The respondent’s conduct described in grounds 1, 3 and 5.1 of the

application for disciplinary conduct constitutes unsatisfactory professional

conduct.

3 The appeal against the orders 1 – 4 made by the Tribunal on 9 November

2016 is dismissed but this order does not take effect for 14 days and is

subject to any application made in the interim.

4 The parties may make written submissions concerning order 5 of the

orders dated 9 November 2016 and costs of the appeal in accordance with

the direction in the following order but in the absence of submissions order

5 will be confirmed and there will be no further order as to costs.

5 Any written submission concerning costs including the Appeal Tribunal’s

power to so order be filed and served:

(a) by the appellant within 14 days;

(b) by the respondent within 28 days;

(c) by the appellant in reply within 35 days.

………………………………..Presidential Member M-T Daniel

Delivered for and on behalf of the Tribunal

2

REASONS FOR DECISION

1. This is an appeal1 from a decision and orders made by the Tribunal2 on 4 July

20163 and 9 November 2016.4

2. On 4 July 2016 the Tribunal found that the practitioner’s conduct the subject of

complaint amounted to professional misconduct. On 9 November 2016, having

heard submissions on penalty and costs from the parties, the Tribunal ordered:

1. The respondent is publically reprimanded pursuant to section 425(3) (e) of the Legal Profession Act 2006.

2. The respondent is fined $5000.00 pursuant to section 425(5) of the Act with liberty to apply if agreement cannot be reached on time to pay.

3. That an unrestricted practicing certificate not be granted to the practitioner prior to 1 July 2017 pursuant to section 425(1)(b) of the Act.

4. That the practitioner undertake, complete, and pass the costs module and ethics module component of the Practice Management Course conducted by the Law Society of the ACT prior to 30 June 2017.

5. The practitioner is to pay the Council's costs of this application dated 20 October 2015 on a party/party basis at the scale applicable to matters in the Supreme Court in an amount to be agreed, or failing agreement to be determined by the Tribunal.

3. The condensed facts were set out in the decision of the Tribunal at [3]- [7] as

follows:1 This decision was previously anonymised and cited as Legal

Practitioner ‘S’ v Council of the Law Society [2017] ACAT 58 pursuant to section 423A of the Legal Profession Act 2006. As the appeal period has ended, the practitioner has now been identified in the citation of this decision. The reasons for decision otherwise remain unchanged from the date of publication

2 The Tribunal appealed from is referred to as the Tribunal and this appeal tribunal is referred to as the Appeal Tribunal

3 Council of the Law Society of the ACT v Legal Practitioner S [2016] ACAT 72

4 The hearing of the issue relating to culpability took place on 22 March 2016. A decision with written reasons was given on 4 July 2016. A hearing on the question of penalty took place on 9 November 2016 and orders were then made. No written reasons were given on the question of penalty but oral reasons appear in the transcript at Appeal Book [AB] 536-538

3

3. The respondent was the principal and sole director of an incorporated Canberra law firm, (the firm) which employed a practitioner with an unrestricted practising certificate, (Mr RY) who acted for a client (the complainant) on the conveyance of a residential unit in Canberra.

4. Fees for acting on the conveyance were to be assessed on the basis of an agreed lump sum fee [$940 plus GST]. Contractual documents sent to the complainant at the time of the retainer foreshadowed the possibility of additional work for which further charges would be made. Additional work was done during preparation for the transfer and because a settlement cheque went astray after the settlement, some further work was done after settlement. A final account was rendered which was significantly in excess of the amount of the agreed fee [$6,943.95].

5. The complainant objected to the amount of the final account. By 8 April 2010 some settlement negotiations had taken place between the complainant and the firm and the complainant wrote to the firm offering the sum of $3,000.00 as his ‘final offer’ and enclosing a cheque for that amount. The firm presented the cheque. Nearly a month later it advised the complainant that his offer was rejected and lodged a bill of costs in the Supreme Court for $8,007.40.

6. On 22 May 2010, the complainant lodged a written complaint with the applicant relating to the total amount charged by the firm and also for presenting the cheque without accepting the complainant’s final offer. The applicant commenced an investigation.

7. In February 2013 the respondent and the complainant entered into a written agreement to settle the dispute. A term of the agreement was that the complainant would withdraw his complaint to the applicant. [Figures in brackets added]

4. The Tribunal found that three of the charges brought by the Council were made

out, these were:

Ground 1: The Respondent has deliberately charged, or alternatively, deliberately or recklessly permitted his employed solicitor, [Mr RY], to charge, excessive legal costs within section 389(b) of the Act, namely, the invoice referred to in paragraph 145 in the sum of $6,943.95.

Ground 3: In breach of s 276 of the Act, the Firm failed to disclose to the complainant the significant increase in costs which [the Firm] proposed to charge [the Complainant], and the Respondent as the sole principal of the Firm and the supervisor of [Mr RY] on the matter was “involved in the failure” within the meaning of section 277(7) of the Act.

Ground 5.1: In breach of rule 1.1 of the Rules, or alternatively in breach, of the general ethical duty pleaded in paragraph 24 above, the Practitioner improperly:

5 of the application for disciplinary action

4

(a) accepted and banked, or permitted to be banked, a sum of money, namely $3,000.00, from his client, and

(b) then proceeded to seek to recover a yet greater sum of $8,007.40 (less the $3,000.00)

5. The Tribunal characterised the practitioner’s conduct as amounting to professional

misconduct. The orders of 4 July 2016 stated that the practitioner’s conduct had

involved a “substantial or consistent failure to reach or to maintain a reasonable

standard of competence and diligence” such that his conduct constituted

professional misconduct. Those words are taken from the definition of

professional misconduct contained in section 386 of the Legal Profession Act

2006. Notwithstanding the words which appear in the order, it is evident from

paragraph 127 of the Tribunal’s reasons that the real basis of the conclusion that

the practitioner was guilty of professional misconduct was the Tribunal’s view

that peers of the respondent would regard the conduct, as a whole, to be

disgraceful and dishonourable. This is the language of the common-law test for

professional misconduct6 and is not confined to competence or diligence.

6. Following the orders of 4 July 2016, the parties filed further evidence7 and written

submissions as to the orders that should be made as a consequence of the

finding of professional misconduct, including whether there should be an order

for costs. On 9 November 2016, after hearing oral submissions, the Tribunal

made the final orders set out at paragraph [2] above. The Tribunal gave short

oral reasons for the decision to make those orders. The Tribunal adopted the

statements of principle set out in the Council’s submissions, and noted that the

circumstances of the conduct were as set out in the reasons for decision of

4 July 2016. The Tribunal expressed concern as to the degree of insight or

understanding which the practitioner had into his conduct, but noted that the

practitioner had at least in relation to the complainant issued an apology and

acknowledged the impact of the matter upon the complainant. The Tribunal

noted also the significant impact of the proceedings upon the practitioner,

reducing the amount of the fine to $5,000 on this account.

6 Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, 763.5-7

7 This consisted of a tender bundle of correspondence with the Council and an affidavit of the practitioner dated 21 September 2016

5

The questions on appeal

7. The practitioner filed amended grounds of appeal on 13 February 2017 seeking

“replacement orders that he engaged in unsatisfactory professional conduct,

reprimand or penalty, and subject to the outcome of the appeal, costs.”

8. In the amended grounds, the practitioner did not challenge the findings in respect

of grounds 1 and 3, but challenged the finding in respect of ground 5.1 and the

consequent finding that his conduct amounted to professional misconduct. It

was conceded by the practitioner that in the overall circumstances he had been

guilty of unsatisfactory professional conduct.

9. The practitioner’s submissions raised three8 areas in which it was asserted that the

finding that ground 5.1 was established was incorrect. These were described as:

(a) Accord and satisfaction errors. That is, the Tribunal erred in not finding

that there was no accord and satisfaction when the practitioner deposited

the complainant’s $3000 cheque, or in the alternative in failing to find that

the practitioner was reasonable in having the understanding that there was

no accord and satisfaction.

(b) Identification of duty errors. That is, the Tribunal erred in finding that

the practitioner owed the complainant either a duty of fidelity (in so far as

such a duty required the practitioner to be loyal to the complainant and act

in his best interests to the exclusion of the practitioner’s interests) or a

duty with similar content under rule 1.1, as no such duties are owed to a

former client.

(c) Characterisation of conduct errors. That is, the Tribunal erred in failing

to find that the good faith duty (that it was conceded the practitioner owed

the complainant) required the practitioner to act reasonably, honestly and

for a proper purpose having regard to both parties’ legitimate interests,

and in failing to find that the practitioner did not breach that duty by

acting in accordance with his legal rights or alternatively his reasonable

understanding of those rights.

8 A fourth area called “Not professional misconduct” involved grounds 1 and 3 as well as ground 5

6

10. In relation to ground 5.1, the Council filed a notice of contention asserting that,

even if ground 5.1 was not made out in relation to rule 1.1 or the duty of

fidelity, the practitioner’s conduct still amounted to a breach of the duty of good

faith which separately established ground 5.1.

11. The practitioner further submitted that the Tribunal erred in characterising his

conduct as professional misconduct, because either:

(a) Grounds one and three together (once ground 5.1 was excluded) amounted

only to unsatisfactory professional conduct; or

(b) Grounds one and three, together with ground 5.1 being made out only in

terms of breach of the duty of good faith, amounted only to unsatisfactory

professional conduct.

12. Although the amended grounds of appeal sought ‘replacement orders’ the

practitioner did not challenge the penalty orders made on 9 November 2016 in

his oral or written submissions, other than to ask to be heard as to costs should

the appeal be successful.

Nature of appeal

13. The ACAT Act by section 79 provides for an appeal from a ‘decision’ of the

tribunal. The term ‘decision’ is defined by that Act to include “a decision on a

matter in an application.”9 This means that the appeal may be against a finding

such as a finding of professional misconduct.10

14. Section 82 of the ACT Civil and Administrative Tribunal Act 2008 requires an

appeal tribunal to decide to deal with an application for appeal as a new

application, or as a review of all or part of an original decision.

9 The application at AB 80 asks for a finding that the respondent is guilty of professional misconduct

10 An appeal lies from orders, rather than from reasons: Commonwealth of Australia v Bank of New South Wales (1950) AC 235 at 294; Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45; Mahendra Rohatgi v Health Care Complaints Commission NSWCA (unreported) 26 July 1996. Clearly the finding of culpability is a decision that, in effect, declares the conclusion rather than the reasons. There is some discussion of this in The Legal Practitioner & Council of the Law Society of the ACT [2010] ACAT 19. No submission to the contrary was made. 

7

15. Refshauge J explained the operation of section 82 in The Legal Practitioner v

Council of The Law Society of The ACT (No 2) [2014] ACTSC 9 at [49] and

[50].11

16. Here the Appeal Tribunal has decided to proceed by way of a review. The

applicable principles were set out in Theodorelos v Nexus Projects Pty Ltd

[2009] ACTSC 149 at [78] as follows:

Appeal by way of rehearing is also one where the appeal court must determine whether the decision of the body from which the appeal is taken is wrong, by that body falling into error of law, making a finding of fact that is clearly wrong or exercising a discretion on a wrong principle or in a way that is clearly wrong. Ordinarily, however, facts found based on the assessment of witnesses will not lightly be overturned. The appeal court usually has power to receive further evidence, though this is ordinarily subject to some restrictions. The appeal court may also draw inferences itself from primary facts found by the body from which the appeal is taken. The decision, however, is not restricted to making the decision that should have been made by the body from which the appeal is taken but in determining it the appeal court must have regard to the circumstances which exist at the time of the appeal and by making its own decision on these circumstances

17. The Council in its written submissions said that the decision to characterise the

practitioner’s conduct as professional misconduct was an exercise of discretion.

In oral submissions the point was altered to saying it was like one involving a

discretion. The practitioner’s oral submissions were that the finding involved an

exercise of judgment about established facts.

18. In our view, the decision as to whether the practitioner has been guilty of

professional misconduct is a decision as to whether the facts as found satisfy a

legal criterion. This point was made by Campbell JA in different circumstances

in Certain Lloyds Underwriters v Giannopoulos [2009] NSWCA 56 at [91]. He

said:

...it was a question that involved application to the facts of a legal criterion. In a similar way, a conclusion whether established facts show that a defendant has acted negligently is not reviewed on the same test as

11 This approach was also followed in Legal Practitioner v Council of the Law Society of the ACT [2011] ACTSC 207 affirmed on appeal: The Legal Practitioner v Council of the Law Society of the ACT [2015] ACTCA 20

8

is used for a discretionary decision: Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531, esp at 553.

19. In Warren v Coombes there was no issue about the existence of a duty of care (the

case involved a collision between a boy on a bicycle and a motorist), and the

majority judgment of Gibbs ACJ, Jacobs and Murphy JJ said, at 536: “The

question for decision ... is whether the learned trial judge was correct in finding

that the respondent was not negligent.” It was in relation to whether the trial

judge was wrong in deciding there had been no breach of duty of care that their

Honours said, at 551:

... in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it.

20. The role of an appeal tribunal in respect of credit findings is more limited and has

been the subject of several cases since Warren v Coombes.12

21. We have approached review of the Tribunal’s conclusions (i) that the facts as

found amounted to breach of the practitioner’s duty or obligations and (ii)

should be characterised as professional misconduct as the application of facts

found to legal criteria, in the manner outlined in these authorities.

The facts and findings of the Tribunal

22. To understand the grounds of appeal and the argument made it is necessary to

review the facts in some detail. In the Tribunal most facts were not in dispute.

To the extent that they were, there is no ground of appeal from the findings

about the disputed facts.

23. The Tribunal’s longer version of the facts commenced at [15]:

History

15. The respondent’s conveyancing file indicates that the firm received initial advice of the sale of the unit to the complainant by letter from the vendor’s agent dated 26 June 2009. The complainant dealt with

12 see Fox v Percy (2003) 214 CLR 118 at [26] – [31]

9

Mr RY at the outset of his contact with the firm and it was he who did the conveyancing work. The contract for sale was sent to the complainant with a covering letter of 30 June 2009. On 2 July 2009, the respondent’s firm’s contractual documents were sent to the complainant.

16. Those contractual documents consisted of a covering letter dated 2 July 2009; a document headed ‘Cost Disclosure Purchase/Sale of Residential Property’; and another headed ‘Fee & Expenses Schedule Purchase/Sale of Residential Property’.

17. The documents sent to the complainant referred to his purchase of a unit in the suburb of Gordon in the ACT, and that he had instructed them to act in the purchase on his behalf. The letter covering the documents listed a number of activities which the letter said were included in the work they would undertake. The letter referred to an ‘Agreed Fee’ of $940.00 plus GST for doing that work. It warned that some additional work might be necessary in circumstances referred to which would be charged for on an additional basis. The following sentence was included in the letter:

If there are any changes to the billing arrangements for any reason, you will be immediately notified.

18. Disbursements were to be additional to the professional fees previously referred to.

19. There was reference to a ‘credit limit’ as follows.

Credit Advice

Please note that your Credit Limit is $1,500.00. If at any time your total fees and disbursements (including work in progress) exceed your credit limit, work on your file will be put on hold until such time as your fees are paid in full, and a further amount is deposited into our Trust Account in anticipation of further fees and disbursements. We will notify you once you have reached your limit.

20. The complainant swore an affidavit on 17 February 2016, which was tendered in the proceedings. At paragraph 9 he said that the purchase of the property was settled on 6 October 2009. He said that he was not provided with an invoice or any information about additional fees at that time.

21. At paragraph 11 he said that the first time that he had been advised that any additional work had been conducted on his file was when he received an email from Mr RY of 5 November 2009. He also said that he had not been provided with an estimate of extra fees, nor advised that the fees by that time had already exceeded the $1,500.00 credit limit after which work was to cease. He was

10

advised in that letter that a cheque which had been posted as part of the settlement payments had gone astray. He was told in the letter:

If I [Mr RY] clear this matter up I am going to have to charge you, so you may wish to attend to it yourself.

22. Mr RY on 23 November 2009 wrote to the complainant advising him that the firm had done additional work, estimating the professional fees involved would be in the range $5,000.00 - $6,000.00. He also said that when a final account was rendered there would be a fully itemised account.

23. The complainant then received a tax invoice dated 30 November 2009 for professional services of $5,950.00 plus GST. In addition to that disbursements and administrative services brought the total without GST to $6,318.68. GST was $625.27. After deduction of an initial payment in the form of a deposit of $450.00, the total was $6,493.95 inclusive of GST. Adding the $450.00 ‘deposit’ back in the total costs were $6,943.95. It seems likely that the invoice was sent on 3 December 2009 although dated 30 November 2009.

24. The original estimate had been $940.00 plus GST or $1,034.00.

25. The tax invoice was not itemised as promised. It gave a list of activities justifying the charge which read as follows:

To our professional costs herein of and incidental to the purchase of [the property]

To our professional costs herein of and incidental to liaising with St George Bank re your proposed advance up to time of your retaining the services of ABC Mortgages to broker loan with RAMS

To our professional costs herein of an incidental to assisting with your First Home Owners Grant and First Home Buyers Stamp Duty Concession, including liaising with your mortgage broker and accountant and answering various requisitions by ACT Revenue Office

To our professional costs herein of and Incidental to liaising with the Vendor’s solicitor and your rental agent re Letter of Attornment

To our professional costs herein of and incidental to Liaising with Ray White Strata re non-received cheque for Owners Corporation of Units Plan 724, arranging Mortgage Settlements Australia for replacement cheque to be issued and forwarding same to Ray White Strata

11

26. No dates were given to identify when these services were provided, however, a time costing document in the firm’s file which was exhibited to the respondent’s affidavit indicates that all work other than the lost cheque item was done up to or at about the time of settlement.

27. Mr RY gave evidence and was cross examined on his affidavit dated 17 March 2016. He said that he was involved in the preparation of the tax invoice after receiving a draft from the practice manager prepared from time costing records.

28. He said that there was a charge of $940.00 plus GST for the standard conveyancing work done however other additional work ‘outside the standard conveyance’ was charged at a higher rate.13 In his affidavit of 17 March 2016 at [21] he explained the method of charging adopted in the invoice as follows:

21. It was the practice of the firm that all attendances relating to the standard conveyancing aspects of the conveyance were recorded at the ‘D’ rate of $150.00 per hour plus GST. All other attendances were recorded at the ‘A’ rate of $325.00 per hour plus GST. If the work was charged and not written off, it was either:

(a) grouped and charged at the “agreed fee”; or

(b) grouped and charged at the relevant rate; or

(c) charged at the relevant rate by way of an itemised tax invoice showing the work undertaken.

29. He said that he was not permitted to reduce the amount on a draft invoice by more than 10% without the approval of the practice manager.

30. In his affidavit, Mr RY said that after receiving the draft invoice he discussed it with both the practice manager and the respondent. He said that in his conversation with the respondent he said the following:

We can’t charge the amount on this bill for this matter which is $6,227.57. It needs to be reduced by significantly more than 10%

31. In the application that was filed, paragraph 13 alleges that the invoice dated 30 November was sent to the complainant with the knowledge and authority of, and at the direction of the respondent.

13 Transcript of proceedings 21 March 2016 page 55

12

32. The response did not admit the allegation that the invoice was sent at the direction of the respondent, but otherwise admitted the allegations of paragraph 13.

33. At the hearing, paragraph 13 was amended by the respondent so that it read:

The respondent admits that he had knowledge that [Mr RY] had authority to send out tax invoices but the respondent denies that he knew that the invoice for $5,950.00 +GST to [the complainant] was to be sent out or that he directed it to be sent out.

34. The respondent gave evidence about the conversation alleged by Mr RY, and in examination in chief, the following exchange is recorded:

…..If [the respondent] could just see [Mr RY’s] affidavit and you, [respondent], would turn to paragraphs 23 through to 25?

...I've read those now.

What do you say about [Mr RY’s] evidence in paragraph 23 that he had a conversation with you about the invoice on or about 15 November and that he may have said to you words to the effect, "We can't charge the amount on this bill for this matter, which is $6,227.57," and importantly, "It needs to be reduced by significantly more than 10 per cent." What do you say about that?

...I say that did not happen.

Did you have a practice of reviewing [Mr RY’s] invoices before they were sent out?

...I did not.14

35. In cross examination the following answers were given:

Isn't this right, [respondent], that [Mr RY ] did indeed raise his concerns about the quantum of the bill with you as he has said on several occasions now before the bill was sent out on about 30 November 2009? That's right, isn't it?

...I do not recall him doing that.

You cannot exclude the possibility that he did though, can you?

14 Transcript of Proceedings 22 March 2016 page 88

13

...I do not recall him doing that.

Please answer my question. You cannot exclude the possibility that he did so, can you?

...I could not absolutely exclude the possibility, no. 15

36. After receiving the invoice around 3 December 2009, the complainant indicated to the firm that he was not happy with the amount charged. A meeting between the practice manager, Mr RY and the complainant was held on 22 January 2010. This failed to resolve the dispute. However by that time, an itemised summary of time costing had been prepared which was discussed with the complainant.

37. On 11 February 2010 the complainant emailed the practice manager reiterating his view that the charge was unreasonable, but offering $2,000.00 in settlement of the account.

38. The respondent then wrote to the complainant on 17 February 2010. He commenced the letter as follows:

Despite having had oral and written advice as to costs (in accordance with the Legal Profession Act) and itemised invoices you have not identified what it is that should be reduced as part of your invoice. For example, was there a phone call not undertaken or an action invoiced not having been completed.

39. He pointed out the part of the initial letter sent to the complainant previously referred to permitting additional work, and even quoting that part referring to immediate notification in the case of changes in billing arrangements.

40. The complainant emailed again on 26 February 2010 advising that he did not consider that any more than $3,000 was reasonable for the work undertaken. The respondent emailed the complainant on 1 April 2010 threatening legal proceedings without further notice “unless payment for our outstanding invoices is made by next Tuesday 6 April 2010.”

41. The complainant wrote to the respondent on 8 April 2010 enclosing a cheque for $3,000.00 as a ‘final offer’ of settlement of the dispute. The firm banked the cheque and lodged a bill of costs in the Supreme Court registry. A copy of that letter is Annexure ‘A’ to this decision.

42. The complainant lodged a complaint with the applicant on 22 May 2010.

15 Transcript of proceedings 22 March 2016 page 107

14

43. The respondent pursued that application for assessment of the firm’s costs, and a hearing took place before a Deputy Registrar. A letter from the respondent to the applicant of 11 January 2011 indicates that the assessment was stayed as a result of the operation of section 304 of the LPA which provides that such a costs assessment may not proceed where a client complains to the applicant about the costs charged. The same section permits the applicant to apply for an assessment under section 409 as part of the complaints investigation process.

44. In the 11 January 2011 letter, the respondent requested the applicant apply to the Court under section 409 in order for the costs to be assessed. Such an application was made on 19 November 2012.

45. The process of assessment commenced and experts were retained to provide reports. However, on 20 February 2013, the complainant and the respondent entered into an agreement to settle the costs issue for payment by the respondent to the complainant of $2,000.00 and the provision of $1,500.00 credit for future legal services to be provided in any way the complainant wished. The assessment process in which the applicant was the Law Society of the ACT with the incorporated firm as the respondent, continued.

46. During the course of those proceedings, the Deputy Registrar of the Court referred a legal issue to the Court for determination. The issue was as follows:

Is there an enforceable cost agreement in place between the respondent and its client [the complainant] such that I must assess the disputed legal costs by reference to that agreement?

47. The matter was heard on 23 September 2013 by Master Mossop who gave judgment on 27 September 2013, answering the question ‘no’.

48. In his judgment he dealt with three submissions put by the applicant Law Society.

49. The first of these was that the documents sent by the firm to the complainant covered by the letter of 2 July 2009 do not comprise a costs agreement. The basis of this submission was that the documents did not constitute an offer to enter into a costs agreement as required by section 282(4) of the Act. Although they may have been an offer to enter into a contract, an ‘engagement’ or retainer is not the same thing as a costs agreement.

50. The Master essentially agreed with the submission of the applicant. He regarded the documentation sent to the complainant as “a

15

confusing mass of documentation” which did not amount to a clear statement that it constituted an offer to enter into a costs agreement.

51. Having answered the question in the negative, it was unnecessary for him to deal with the two remaining submissions, however he proceeded to deal with the second submission.

52. The second submission was based on alleged non-compliance with section 300(1)(a) of the LPA which requires that “the costs agreement specifies the amount, or a rate or other means of working out the amount, of the costs.”

53. In finding that the second submission resulted in a ‘no’ answer to the question presented, the Master made the following comments:

38 The July documents are a confusing amalgam. The Costs Disclosure document appears to be a combination of a form for a statutory costs disclosure and a form for a costs agreement. The applicant is correct in saying that there is no specific text which says that the hourly rates identified in the Fee & Expenses Schedule will apply in relation to “additional work” referred to in the Covering Letter. Rather, the only text which makes specific reference to the application of those hourly rates is that at passages [17] and [19].

39 The respondent’s submission that when one looks at the collection of documents as a whole, notwithstanding the difficulties of their drafting, it can be discerned in accordance with ordinary principles of contractual interpretation that the hourly rates would apply to the additional work is one that might have been accepted if it was not for the terms of the Covering Letter. In relation to that letter the following features are of significance.

(a) At passage [2] the letter does refer to the “Fee Rate and Expenses Schedule” (intending to mean the Fee & Expenses Schedule) but does not state which part of the schedule is applicable or make any reference to the application of hourly rates.

(b) The first sentence of passage [3] identifies that “Professional Fees” will be on the “Agreed Fee” basis. That is consistent with the heading in the Fee & Expenses Schedule and the bolded figure of $1,034 in that schedule since $940 + GST is $1,034. The next sentence contemplates that additional fees may be charged but does not specify the rates at which they are to be charged. The third sentence, as I have interpreted it, means that there will be immediate notification if there is any change from the Agreed Fee method of

16

charging. Once again it does not specify the basis upon which those additional fees will be charged and makes no reference to the Costs Disclosure or the Fee & Expenses Schedule.

(c) The text in passage [4], refers to the “Costs Disclosure and Expenses Schedule” is clearly limited to “disbursements” (although query whether that is what was intended having regard to the capacity to time charge for administrative costs referred to in the Expenses Schedule part of the Fee & Expenses Schedule).

(d) The text under the “Credit Advice” heading (passage [5]) is consistent with the limitation on “Professional Fees” to $1,034 and the statements at passage [3] that there will be immediate notification if there are to be any additional fees charged. I note however that there is substantial room for confusion as to whether or not the $1,500 credit limit is in addition to or inclusive of the amount of $450 described as for “legal costs and disbursements” or alternatively for “initial fees and disbursements” which is identified in the immediately preceding paragraphs.

54. Master Mossop decided that the question would be answered ‘no’ as a result of the second submission also.

55. It was not essential for the Master to determine the third submission in order to answer the question posed by the Deputy Registrar, and he did not attempt to do so.

56. The assessment proceedings were then settled by consent on 26 November 2013. The consent order was as follows:

The fair and reasonable costs of the [Respondent] in acting for [the complainant] are $2,000.00.

57. The respondent was ordered to pay the applicant’s costs.

58. The applicant’s investigations continued, and solicitors acting for it wrote to the solicitor then acting for the respondent on 2 June 2015. Attached to that letter were two signed draft statements by Mr RY with the request that the respondent provide any comments on the contents of the statements within 14 days. One of the statements contained material which was reproduced in Mr RY’s affidavit filed in these proceedings and in particular the reference to the conversation with the respondent after he received the draft invoice on about 15 November 2009.

17

59. No reply was received. There was a follow up letter of 17 June 2015 which had not been included in the filed material. This became exhibit A6.

60. The applicant’s lawyers wrote again on 22 June 2015 to advise that the Society required a response to the earlier letters and drawing the attention of the respondent’s solicitor to rule 39.2 of the Legal Profession (Solicitors) Rules 2007 reproduced below.

39.2 A practitioner should respond within a reasonable time and in any event within 14 days (or such extended time as the Society may allow) to any requirement of the Society for comments or information in relation to the practitioner’s conduct or professional behaviour and in doing so the practitioner should furnish in writing a full and accurate account of his or her conduct in relation to the matter.

61. The respondent’s former lawyer wrote to the applicant on 1 October 2015 proposing a resolution of the complaints.

62. This application was filed on 20 October 2015.

24. More facts were set out and other findings made in dealing with each ground.

25. In respect of ground 1, having found the charge was excessive16, the Tribunal

examined the practitioner’s knowledge starting at [77] and found that he had

been told by RY that the bill should be reduced but still sent it out.17 The

Tribunal concluded at [81]:

after the respondent’s conversation with Mr RY [shortly after 30 November 2009], he knew of the amount proposed to issue on the invoice, and that Mr RY considered that there should be a discount for the complainant of greater than 10%. The statement by Mr RY should have alerted him to the likelihood that the invoice was unduly high carrying with it the possibility that it constituted an excessive charge. At that stage the respondent should have investigated the contents of the draft invoice and made his own decision about its quantum. In those circumstances, the Tribunal is of the view that his permitting the invoice to issue was reckless, since he did not take the step of ensuring for himself that the

16 For a number of reasons set out at paragraphs [63] – [76] of the decision, which we set out at our paragraph [93] ff

17 This finding is attacked in paragraph 56 of the practitioners written submissions. It is not a ground of appeal. It relates to a finding that depends in part on the Tribunal’s assessment of conflicting oral evidence. The contemporaneous records, whilst consistent with the practitioner not being told, are not inconsistent with him being told. Assuming it was open for us to disagree with the Tribunal about this finding, we are not persuaded that it was in error in so concluding

18

charge was justified. He took the risk that the charge was excessive thus exposing himself to possible disciplinary action.

26. In respect of ground 3, the Tribunal was satisfied that the law practice had

breached section 276 of the LP Act, by Mr RY failing to advise the client in

writing as soon as practicable after becoming aware that additional work was

being done which was accruing charges. The Tribunal concluded that the firm

had failed to have a system in place for ensuring that this legal requirement was

complied with18 and it was the responsibility of the practitioner as the sole

director to undertake or initiate such preventative action. Consequently the

Tribunal was satisfied that the practitioner was ‘involved in’ the failure as

contemplated by section 277(7) of the LP Act19 and ground 3 was established.

27. Ground 5.1 alleged that in breach of rule 1.1 of the Rules, or alternatively in

breach, of the general ethical duty pleaded in paragraph 24 above, the

Practitioner improperly:

(a) accepted and banked, or permitted to be banked, a sum of money, namely

$3,000.00, from his client; and

(b) then proceeded to seek to recover a yet greater sum of $8,007.40 (less the

$3,000.00).

28. The Council relied on Rule 1.1 of the then applicable Solicitors Professional

Conduct Rules. It provided:

A practitioner should treat his or her client fairly and in good faith, giving due regard to the client’s position of dependence upon the practitioner, his or her special training and experience and the high degree of trust which a client is entitled to place in a practitioner.

29. The Council also relied on a general duty in paragraph 24 of the application as

follows:

If and to the extent (which is denied).. Rule 1.1… did not apply to the (practitioner) at or around April 2013….(the practitioner ) was ..under a general law ethical duty of professional conduct to continue at all times during which (the relevant events) took place to treat the complainant fairly and in good faith, and not to treat the complainant in any

18 At [88] and [89]19 At [89]

19

negotiation or resolution of their costs dispute, otherwise than in an honourable and reputable manner

30. The Tribunal agreed with the Council’s submissions at [96] and [97] AB 57/58

that:

.... [the complainant] writing a letter as an immediate past client of a firm should be treated in the same way as a client of the firm and should be treated in a manner that we had pleaded and set out in paragraph I think 99 of our written submission. He should be treated fairly and in good faith and not treated in any negotiation or resolution of the cost dispute in other than an honourable and reputable manner

31. The Tribunal then referred to a duty of fidelity on a number of occasions. At [93]

it said:

the issue is whether the respondent breached his duty of fidelity to his client as expressed in rule 1.1 by accepting his cheque which was tendered as a ‘final offer’ when there had been some earlier negotiation.”

32. At [99] it said:

In the Tribunal’s view the duty of fidelity expressed in rule 1.1 of the Solicitors’ Rules was breached when the cheque was presented and the proceeds retained. Ground 5 is made out.

33. And at [125]:

the respondent was precluded from taking any contractual advantage which would lead to breach of his duty of fidelity to his client.

34. The Tribunal held that the letter from the complainant enclosing the cheque was

unambiguous saying at [99]:

The Tribunal does not find the terms of the letter in any way ambiguous when considering the complainant’s intent in writing the letter. He, a layman was making a final offer and fortifying his sincerity by tender of the offered amount. He was not aware of any possible term of art in drafting the letter that might hold some particular significance for the respondent.

20

35. Although it was not expressly pleaded in the application for disciplinary action,

the principles relating to accord and satisfaction20, were important in

considering ground 5.1.

36. In these proceedings the practitioner had submitted that the letter and banking of

the cheque did not legally amount to accord and satisfaction, and that therefore

he could not be in breach of his ethical duties. The Tribunal did not make a

finding as to whether there was accord and satisfaction or not, and was not

persuaded by the practitioner’s argument.21 It said that whether there was accord

and satisfaction or not was not the question. Rather, it proceeded on the basis

that the ethical duty of the practitioner was not limited to or defined by his strict

legal rights. The Tribunal referred to the unchallenged evidence that the

practitioner had asked his senior employed solicitor to research the point and

had believed he was entitled to bank the cheque. The practitioner had been

cross-examined about this point at AB 446-449. The Tribunal noted that the

practitioner said he thought the letter was ambiguous.

37. The Tribunal concluded on this ground at [99]:

In the Tribunal’s view the duty of fidelity expressed in rule 1.1 of the Solicitors’ Rules was breached when the cheque was presented and the proceeds retained. Ground 5 is made out.

Categorisation of conduct

38. The Tribunal at paragraphs [111] – [127] considered the concepts of

unsatisfactory professional conduct and professional misconduct.

Notwithstanding the terms of the order issued 4 July 2016, it is clear from

paragraph 127 that the common law definition of professional misconduct was

applied to the entirety of the conduct:

While acknowledging that all conduct involved is not of equal gravity, the Tribunal takes the view that peers of the respondent would regard the conduct found established as a whole to be disgraceful and dishonourable. The Tribunal finds it to constitute professional misconduct.

20 It is an expression used in cases where there has been a compromise of a larger claim by a payment of a lesser sum (satisfaction) which is deemed to have been accepted (accord)

21 Paragraphs [92] – [95]

21

The arguments made on appeal

39. The amended appeal and the written submissions of the appellant addressed four

points: accord and satisfaction; no duty of fidelity; no breach of admitted duty;

no professional misconduct. Counsel for the practitioner also spent some time at

the hearing of the appeal drawing to the Tribunal’s attention the evidence

relevant to the practitioner’s state of mind at various times during the period

over which the conduct occurred.

40. It is most convenient to deal with these topics starting with the issue of whether

there was a duty of fidelity.

Did the Tribunal err in referring to a duty of fidelity?

41. As noted, at a number of times in consideration of ground 5.1, the Tribunal

referred to the practitioner’s ‘duty of fidelity’. At the conclusion of the reasons

for decision, in characterising the conduct, the Tribunal stated [125] “the

respondent was precluded from taking any contractual advantage which would

lead to breach of his duty of fidelity to his client.”

42. There is a fiduciary relationship whilst the retainer continues but it ceases when it

is finished. A duty of fidelity as described here refers to a duty of loyalty that is

an incident of the fiduciary relationship.

43. The Council conceded that the complainant was at the relevant time a former

client and correctly conceded that a duty of fidelity does not continue after the

retainer is ended.22

44. The Council argued on appeal that in using the phrase ‘duty of fidelity’ the

Tribunal really meant no more than the duty of good faith as they found in [96]

or as an incident of rule 1.1.

45. Rule 1.1 seems to be limited in time to present clients and includes duties of a

fiduciary nature.

46. Bearing in mind the references without qualification in [93], [99] and [125] the

Council’s submission is not persuasive. The Tribunal clearly relied on a duty of

fidelity and used language associated with that by referring to the trust the client 22 Riley’s Solicitors Manual at [6040.50]

22

placed in the practitioner at [124], although the Tribunal had found that by then

the complainant was a former client [125].

47. We are satisfied that the Tribunal was in error in finding that the duty the

practitioner owed his immediate past client was a duty of fidelity.

Accord and satisfaction

48. Under this topic, the amended grounds of appeal state that the Tribunal erred in

finding that:

(a) the authorities relating to accord and satisfaction were “far from

determinative”;

(b) the appellant’s view of the application of the contractual law could not be

regarded as correct; and

(c) the letter from the complainant of 8 April 2010 contained only one

meaning, that is making an offer of settlement expressed to be final of

$3000 .

and in not finding that:

(d) the April letter did not articulate a condition that if the practitioner kept

the $3000 cheque then the practitioner was giving up any further claim;

(e) the April letter informs the practitioner how much the complainant

thought he should pay and that he was paying that amount in discharge of

what he considered to be his obligation;

(f) the practitioner was entitled to deposit the cheque without giving up any

further claim; and

(g) in the alternative to (d) to (f), the practitioner was reasonable in having

that understanding.

49. Counsel for the practitioner referred the Appeal Tribunal to the case of JP

Morgan v Consolidated Minerals Ltd [2011] NSWCA 3 as well as the decision

of Justice Hammerschlag at first instance at [2010] NSWSC 100 [JP Morgan].

There, the dispute was whether the tender of a cheque of $20,000,000 in respect

of a claim for approximately $51, 000,000 with a letter that did not contain the

words ‘offer’ and the subsequent banking of the cheque amounted to an

23

agreement. The conclusion reached in interpreting the letter in those

circumstances was that it was not an offer but an assertion of what was owed

and the provision of the cheque was not accompanied by a condition that

banking it was an acceptance of the sum in full satisfaction of the claim.

50. The reason why courts do not readily conclude there is an agreement in such

circumstances is because it is an attempt by the offeror to restrict the offeree in

how it may respond. This is well explained in McMahon’s (Transport) Pty Ltd v

Ebbage [1995] 1 Qd R 185 at 195 by Pincus JA as follows:

The basis on which it is said that one party may effectively force an agreement on another, by telling that other that a certain sort of action (other than assent to the proposal) will be taken to be assent to the terms of the proposed agreement, is unclear. One can understand why, in this area, a distinction is drawn between the case in which the contract when made imposes no obligations on the offeree, as in Carlill v. Carbolic Smoke Ball Co.[1892] EWCA Civ 1; [1893] 1 Q.B. 256, and that in which it is sought to impose an obligation on the offeree, the obligation coming into existence because the offeree has performed an act stipulated by the offeror — such as, to take Corbin’s example (Vol. 1 p. 310), hanging out a flag on Washington’s birthday.The question is obviously not merely one of fact, but involves matters of legal principle, such as those just alluded to. The cases on conditional tender of payment, although numerous, give no clear guidance. I, like the primary judge, prefer to follow those in which the Court has rejected the offeror’s assertion that there has been an accord; I do so on the basis that the question is whether there is a contract and that the answer to that question is that there is none, because in general the law does not allow the imposition of an obligation in contract to be achieved by a stipulation that it shall be deemed to be imposed if the prospective obligor performs a stipulated act 23(other than one by way of express assent to the terms proposed), or does nothing as in Felthouse v. Bindley [1862] EngR 931; (1862) 11 C.B.(N.S.) 869;142 E.R. 1037. Since writing the above, I have noticed the decision of this Court in Citibank Ltd v. Amos (App. 243/1994; 10 May 1996, unreported); the views there expressed are consistent with my conclusion: see pp. 5, 7 of the principal judgment.

51. His Honour concludes “Undoubtedly, each case must be considered on its own

facts.”

52. In McMahon’s (Transport) Pty Ltd v Ebbage [1995] 1 Qd R 185 the recipient

immediately wrote back saying the cheque was not accepted as acceptance of

23 Our highlighting

24

the offer but it would bank the cheque as part payment in seven days. That made

clear there was no acceptance and gave the offeree the chance to stop the

cheque. Similarly in JP Morgan the recipient wrote immediately saying it did

not accept it as full payment.

53. The question of whether there was accord or not is an objective question of fact.

54. Here subjectively it is plain that the client thought his offer had been made and

accepted and the practitioner did not. Here the words “final offer” were used

and the intent seems fairly clear. The letter does not say that the cheque can be

banked without being an acceptance. On the other hand, it does not expressly

say that banking the cheque constitutes acceptance of the final offer.

55. It is arguable that there was accord and satisfaction because the word ‘offer’ was

used and there was no contemporaneous communication by the practitioner

signalling that there was no acceptance of the offer even though the cheque was

banked to office (not trust) and a receipt sent. If the practitioner had given the

client immediate notice of his state of mind, banking the cheque was unlikely to

be an accord and arguably, to the extent his client was at a disadvantage he had

brought it on himself by trying to impose this on the practitioner.

56. The Tribunal took into account that it was a letter written by a young

unsophisticated client who was not a lawyer. Against that it was clear, by now,

that the parties were in dispute. The client had got legal and expert advice from

others in responding earlier. Some correspondence had been sent from his

father’s email and his father was a friend of the CEO of the Law Society and a

mediator. It is on one view a sophisticated letter and is an attempt to gain an

advantage – not allowed generally – by ending the dispute and, at least

impliedly, by trying to impose on the offeree a method of acceptance.

57. The Tribunal did not hold that there was accord and satisfaction but did say it

thought there was no ambiguity in the client’s letter. It’s conclusions are at [98]-

[99]. Relevantly, the Tribunal said:

it contains only one meaning, and that is that he was making an offer of settlement expressed to be final of $3,000.00. In the circumstances of the

25

case the possibility that he was offering to make a down payment of $3,000.00 against some greater settlement amount is not available

and

The Tribunal does not find the terms of the letter in any way ambiguous when considering the complainant’s intent in writing the letter.

and later at [124]

the letter shows that the complainant was indicating as clearly as he could in layman’s language that he wished to finally settle the dispute that existed. He indicated that the amount which he was willing to settle for, and which was the final amount that he would be willing to go to was $3,000.00. Further, as an indication of his sincerity, his capacity to pay, and the finality of his position he was tendering the amount in the accessible form of a cheque. It is clear that he did not consider that he was in any jeopardy of the respondent taking the money offered without agreeing to settle his claim for that amount and to that extent was reposing his trust in the respondent in enclosing the cheque with the letter.

58. In a normal commercial setting the letter is ambiguous because it does not spell

out how acceptance may be achieved nor expressly impose a condition on the

provision of the cheque. To that extent we differ to a degree from the findings

of the Tribunal. However the Tribunal was not addressing it in a commercial

context.

59. We read the letter as meaning that there is an open offer to settle the dispute and

there is a cheque that shows the former client’s good faith and ability to pay. It

leaves open what the practitioner may do next. Objectively if (as was done) he

banked the cheque and said nothing for a month, it is difficult not to see these

circumstances as acceptance of the offer. He could have sent the cheque back.

He could have banked it into trust or into an office account and immediately

informed the complainant he was not accepting it as settling the dispute but as

part payment or a combination of such actions.

60. Turning to the relevant grounds of appeal24, in respect of ground (a) it is not

necessary to determine whether the relevant authorities are determinative. In

any event as each case turns on its own facts the statement is not controversial.

24 at [48] and [49]

26

61. In respect of ground (b) at [99] the Tribunal said “The respondent’s view of the

application of the contractual law could not be regarded as beyond doubt or for

that matter even correct.” Strictly we do not agree with that statement as far as it

goes. The offer was clear but may in law be ambiguous. The conduct in banking

the cheque and not contemporaneously rejecting the offer makes the

practitioners view extremely problematic. Relevantly, the Tribunal did not say

he did not have that view only that it was incorrect and in their view

unreasonably so.

62. In respect of ground (c), whilst in a commercial setting the effect of the letter

could be taken as being ambiguous, it is not incorrect to say that its one

meaning was to make an offer of settlement expressed to be final of $3000. In

fact that is what it expressly says.

63. In respect of ground (d), the Tribunal did not expressly deal with that. Clearly the

letter did not expressly say that by keeping the cheque the practitioner was

giving up any further claim. However, the Tribunal was not incorrect in saying

that the subjective intention of the offeror was clear and he gave no hint in the

letter that the practitioner could have the cheque without accepting the offer.

64. In respect of ground (e), the letter cannot be read in that way. It was an offer

(unlike in Morgan).

65. In respect of ground (f), we agree that it may have been possible for the

practitioner to bank the cheque without giving up any further claim but he

would have needed to communicate his intention contemporaneously.

66. In respect of ground (g), it was not unreasonable for the practitioner to regard the

letter as ambiguous or as giving an opportunity to deal with the cheque in a way

that was not an acceptance of the offer. In our view it was not reasonable to

form such an uncommunicated view, bank the cheque and say nothing at the

time to the former client.

67. The Tribunal made no finding that the practitioner’s understanding was

unreasonable. The Tribunal did not find that the practitioner’s belief as to the

applicable law was not genuinely held. We deal later with practitioner’s state of

27

mind about these matters but we could not conclude with any comfortable

degree of satisfaction that the practitioner did not have a genuine, if mistaken,

and in part unreasonable, view that he was entitled to act as he did.

68. We do not think the Tribunal erred in failing to find that the practitioner’s view of

contract law in the circumstances was correct, or in failing to find that the

practitioner was entitled to bank the cheque and pursue the remainder of the

unpaid invoice.

69. In relation to the Tribunal’s failure to find that the practitioner’s understanding

was reasonable, there is also the need to consider whether he was in fact owed a

debt. By the time the cheque was banked the practitioner had reviewed the file

and in doing so would have seen that there was no written advice to the client as

to additional work being done, with the consequence that even if there had been

a binding costs agreement the additional sums said to be owing under it were

not payable.25 A practitioner should have an understanding of the law in relation

to legal costs. He may have also been expected to question whether his costs

agreement was enforceable. In these circumstances, we are not persuaded that it

was reasonable for the practitioner to have believed he was entitled to bank the

cheque without more.

70. We are not satisfied that the Tribunal made any material errors in relation to

‘accord and satisfaction’.

71. As will be seen, as the Tribunal correctly held at [93] and as the Council

submitted, whether there was accord and satisfaction was not the right question.

The real question is whether the practitioner’s conduct was culpable, whatever

the answer to the accord and satisfaction question.

No breach of admitted duty

72. The Tribunal found that it was wrong of the practitioner to have acted on his

understanding of his legal rights in these circumstances where the client’s

intention was clear.26 That finding was made by reference to the duty of fidelity

– the Tribunal did not consider the admitted duty to act fairly and in good faith.

25 Section 276 of the Legal Profession Act 200626 Paragraph 99

28

It is therefore important to consider whether the client’s letter was so clear that

it was inconsistent with the admitted duty for the practitioner to overlook what

the client thought he was doing and gain an advantage by banking the cheque

and pursuing the remainder of the invoice by costs assessment.

73. It is common ground that the practitioner owed his former client a duty which is in

the nature of a duty of good faith. It is the duty referred to in paragraph 24 of the

application for disciplinary action as follows:

the practitioner was under a general law ethical duty of professional conduct to continue at all times during which (the relevant events) took place to treat the complainant fairly and in good faith, and not to treat the complainant in any negotiation or resolution of their costs dispute, otherwise than in an honourable and reputable manner

74. This formulation was conceded by the practitioner in his written submissions at

[34].

75. In Council of the Law Society v Legal Practitioner P4 [2014] ACAT 64 at [34] it

was described as a duty to act fairly and honestly.

76. The Council by its notice of contention argued that even if the Tribunal had been

in error in referring to the duty of fidelity in relation to ground 5.1, the conduct

of the practitioner nonetheless was in breach of the duty to act fairly and in good

faith and the finding that ground 5.1 was established should stand.

77. The practitioner argues that he should be judged as if he was dealing at arm’s

length in a normal commercial dispute. The practitioner’s argument is that the

content of his legal rights vis-a-vis the former client and his obligations under

the duty to act fairly and in good faith were co-extensive, that is if he was acting

in accordance with his legal rights, or his reasonable understanding of his legal

rights, he could not be in breach of his duty of good faith.

78. The Council submits that approach is incorrect because a legal practitioner bound

by the duty of good faith owes a more onerous duty than one owed by one

contracting party to the other.27 The Council also argued that the content of the

27 This is seen as an ethical duty derived from the practitioner’s special role as a legal practitioner admitted to practice and is owed to the general public. It is not the emerging duty of good faith owed by

29

duty is that contained in rule 1.1 absent the fiduciary obligations and that rule

1.1 continues to apply to former clients. We have noted above that rule 1.1

appears to be limited to present clients and may not be the correct source of the

duty to act fairly and in good faith. However it is derived28, it is common ground

that there is a duty to act fairly and in good faith with third parties in matters

connected to legal practice, that the duty was enlivened in these circumstances,

and that its content is as described above.

79. In this case, we are not satisfied that the practitioner acted in accordance with his

legal rights, nor are we satisfied that his understanding of his rights – though

genuine – was reasonably held. In any event, we do not agree with the

submission put on behalf of the practitioner that as a matter of principle

provided a lawyer is acting in accordance with their strict legal rights he or she

cannot be in breach of the duty to act fairly and in good faith.

80. The Tribunal below did not expressly consider the practitioner’s duty of good

faith. It falls to the Appeal Tribunal to consider whether the facts as found

amount to a breach of that duty. In the circumstances of this case we do not see

that receiving correspondence making a final offer in relation to the payment of

legal fees, recognising a lack of legal clarity in the letter, getting legal research

hastily performed and banking the cheque without telling the former client the

offer was not accepted for a month (thereby gaining an advantage) is acting

fairly or in good faith. In our view it falls below the standard that reputable and

competent lawyers would regard as acceptable. We had said that there was some

uncertainty in the offer in terms of the doctrine of accord and satisfaction but it

must have been obvious to the practitioner that it was a distinct possibility if not

a probability that the tender of the cheque was seen as conditional by the

complainant on acceptance of the offer. He admitted in cross examination that it

needed research by him to know how he might treat it. That must have meant he

saw the intention of the complainant as seeking to bring about that outcome.

That is not acting fairly. No matter who he was dealing with, the practitioner

contracting parties to each other, in relation to the contract 28 It may be as simple as the need for public confidence in the legal

system, which is enhanced by solicitors being taken at their word and trusted to act fairly with third parties in matters that have a connection with legal practice

30

should have at the very least, communicated his intention immediately and

ideally allowed the complainant the opportunity to stop the cheque or get access

to it after the dispute was resolved by putting it in trust.

81. Ground 5 is made out on the alternative basis in paragraph 24 of the Application

and as set out in the Notice of Contention

No professional misconduct

82. The Tribunal thought the conduct in ground 1 was serious. It thought the conduct

in ground 5.1 was the most serious. The conduct in ground 3, it thought, was

less serious. It found that taken together the three grounds constituted

professional misconduct.

83. It was conceded by the Council at the appeal that there was no reliance on the

definition contained in section 386 of the LP Act in terms of a failure of

competence or diligence, but rather that the common law definition of

professional misconduct was relied upon. As is common ground, section 386 is

an inclusive definition and the common law test relied on here is as set out in

[115] of the Tribunal’s reasons as follows:

The common law definition of professional misconduct is drawn from a test formulated in the English medical profession case of Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 at 763.5-7. In summary, the test provides that a professional engages in professional misconduct if his or her behaviour would reasonably be regarded as disgraceful or dishonourable by professional colleagues who are of good repute and competency. The test has been recognised as applying to Australian legal practitioners in a long line of authorities, such as Chamberlain v ACT Law Society [1993] FCA 527 at 58-9.

84. In fact the test has been expressed in some Australian cases in slightly different

terms. In Chamberlain v ACT Law Society (1993) 118 ALR 54 at 58-59 Black

CJ adopted a test referring to “conduct which may reasonably be held to violate

or fall short of, to a substantial degree, the standard of professional conduct

observed or approved of by members of the profession of good repute and

competency.”

85. Although this is not an exercise of a discretion, in dealing with a value judgment

as to what would be reasonably thought by professional colleagues of good

31

repute the opinion of the Tribunal is not lightly to be interfered with. It was

constituted by two very senior and respected lawyers as well as a non-lawyer

with wide community experience. It would need a material error in the

conclusions reached about any of the three grounds to reconsider it.

86. As discussed above the Tribunal did mistake the duty that applied in ground 5.

Contrary to the Council’s submissions, we are satisfied the Tribunal was heavily

influenced by the elements that are relevant to a duty of fidelity such as the trust

the client puts in the lawyer and the vulnerability of a client in that relationship.

87. Because the Tribunal viewed the conduct through that lens it did not direct its

attention to factual findings about the practitioner’s knowledge or belief at the

time of the conduct in ground 5. There was little dispute about the facts and the

relevant documentation is in evidence. It is open to us to make findings based

on such uncontroversial evidence as explained in paragraph 18 above.

88. One fact submitted to be important by the practitioner was that the practitioner

believed he was giving the client access to an independent opinion by sending

the bill for assessment. The internal documents29 of the practitioner indicate that

he had given instructions to file the bill of costs for assessment and in cross

examination agreed he knew the cheque was paid into office.30 It does not show

that he intended that there be a one month gap (although as an experienced

practitioner he should have known that this time frame to provide a bill of costs

in taxable form is not unusual). Counsel for the Council argued the practitioner

had to refer the bill for assessment anyway. To the extent that this refers to the

initial contractual documents this is correct, but it was not known by the

practitioner until after the decision by Master Mossop.

89. However the Council also argues that there was a need to provide continuous

written disclosure under section 276 of the Legal Profession Act 2006; that there

was no written disclosure before 2 December 2009 when the bill was sent; the

references to oral disclosure in the file occur after the bill was sent and that by

the time the cheque was banked in April 2010 this was all apparent to the

29 Appeal Book (AB) 12230 AB 447

32

practitioner as the practitioner had read the file.31 The practitioner in reply

argued that it was true that there was no compliance with section 276 and the

practitioner should have seen that but clearly, as is evident from his letter to the

client of 17 February 2010,32 he believed – wrongly – that the Act had been

complied with and there had been disclosure and the debt was owed. He did not

advert to the absence of writing and appears not to have turned his mind to

section 276. There is no argument that this is other than unsatisfactory but it is

argued to be not so heinous as to amount to professional misconduct.

90. It was also conceded by the Council that dishonesty was not alleged.33 We are

satisfied there was no element of dishonesty in the practitioner’s conduct.

91. Each of the grounds establishes conduct by the practitioner that is below the

standard that his peers would expect. It is necessary to consider the full facts in

relation to each ground to be able to determine how peers of the practitioner

would view the conduct.

92. Dealing with ground 1, this alleged that the respondent has deliberately charged,

or alternatively, deliberately or recklessly permitted his employed solicitor, [Mr

RY], to charge, excessive legal costs within section 389(b) of the Act, namely,

the invoice referred to in paragraph 14 in the sum of $6,943.95. The ground

relied on paragraphs 1-16 of the application which are part of the summarised

history above. The Tribunal concluded the charges were excessive. It said that

the additional work was charged at higher rate than the basic conveyancing

rate.34 The high rate was $325 per hour + GST (A rate) and the low rate (D rate)

was $150 + GST per hour.35

93. The decision of Master Mossop found there was no rate provided by the costs

documents as even though there was a list of fees which included various hourly

rates they were not clearly stated to apply and from that the Tribunal found the

higher rate was not allowed. The Council also points out that there was no

31 Transcript of proceedings page 8832 AB 11233 Transcript of proceedings page 9534 The second sentence of [68] has it the wrong way around35 See AB 199 in the affidavit of RY

33

written disclosure about additional costs as required under section 276 of the

Legal Profession Act 2006.

94. No challenge36 had been made to the reasons in paragraph 25 although it seems to

assume a number of matters not articulated. It is not of great importance as on

any view, however one got there, the charges were excessive. As was correctly

submitted by the practitioner, at this time the invalidity of the costs agreement

and what flowed from it was not known. So to the extent the bill was too much

because the scale rate was less than the rate charged the practitioner was not

aware of that problem at the time.

95. The second reason for the finding of overcharging was the consent order that the

fair amount was $2000. The Tribunal thought the age and limited commercial

experience and financial experience of the complainant were relevant. It is not

obvious why this is relevant to the proper amount to be charged nor on what

evidence the conclusion about his experience was made. He was cross examined

and his appearance may have given that impression.

96. The overwhelming reasons are as found in [73] and [74] of the Tribunal’s

decision, namely that the practitioner during cross examination said that with

hindsight he believed that there had been some overcharge; he agreed that the

amount of the original quote given to the client was relevant to consideration of

whether there had been an overcharge; he agreed RY “may have taken some

time longer than he should have and:

Comparison of the differential between the initial costing of the work and the amount of the final invoice is significant in the view of the Tribunal. The invoiced amount is also in the opinion of the Tribunal well in excess of what might be usually expected for the conveyance of a then $315,000.00 home unit for a first home buyer.

97. Whilst the practitioner may be forgiven for not knowing that RY had taken too

long or that the correct rate was a scale rate, he should have adverted to the

disparity between the original amount of $940 plus GST and the figure arrived

36 We should say that the tribunal is not a Court of pleading and any procedural lapses are not invalidating. This obviously is subject to the need to ensure both substantive and procedural fairness

34

at by using the A rate on a time costing basis. He should have realised that the

amount was significantly more than what the market ought to bear.

98. Having said that, there was additional work done over and above the standard

conveyance and it is detailed in cross examination of RY at AB 385ff. The first

home owners grant involved a fair bit of communication with accountants as

well as the Stamp Duty Office and the client. There was a change of mortgagee

and the first one was in Queensland. The other work in chasing the cheque and

arranging a tenancy attornment would not have been as significant.

99. The A rate that was charged was what the firm including the practitioner believed

was an agreed rate based on their belief that the costs agreement applied. On

any view including that of the client the cost could well have been as high as

$3000. In all cases, however, whatever the costs agreement and the agreed

billing rates might add up to be there has to be an overview as to what is a fair

cost for this work. The Tribunal was entitled to conclude that the amount that

was actually sent was excessive and the practitioner had the opportunity to

reduce it. It did not find that he allowed the bill to be sent knowing it was too

much but that he was reckless.

100. Additionally, in classifying this conduct regard should be had to what he did

next and that was to ask RY and the office manager to meet with the client,

explain the bill and try and sort out his concerns.

101. The client did not argue that there was no additional work or that no more than

the original sum of $940 should be paid. Clearly he was not expecting it to be

that much and had not been told when it arose as he was promised.

102. There is no evidence on the conveyancing file that client had not been told of

the additional fees until an email of 23 November 2009.37 The client gave

evidence to that effect and was accepted. RY gave evidence. His cross

examination refers to documents we do not have but there is a suggestion that

he says he had a conversation with the client earlier that gave him information

about the additional fees.38 The practitioner suggested that RY and the office

37 AB 21838 AB 394ff and 397 line 41

35

manager get the client in after he complained and try and sort it out.39 They did

and there is an office memo prepared by the office manager at AB 107 which

includes an assertion that he was told of estimates from time to time and

offering a discount of more than 10% namely $940.

103. The significance of this is that whilst it was not correct, the practitioner when

he reviewed the file or discussed it with RY, would assume reasonably that the

client had been told of the additional fees. That does not excuse the sending out

of the excessive bill but it does make the subjective mindset of the practitioner

less unreasonable. We were taken in detail to the documents on the file. It is

evident that the practitioner believed that the client had been given estimates by

RY during the time. The memo from the office manager of 22 January 2010 at

AB 107 and the letter dated 17 February 2010 written by the practitioner at

AB 112 to the client must support the conclusion that the practitioner had until

then believed the client well knew about the estimates. The client asserted he

had not been told otherwise by a letter of 26 February 2010. The solicitor might

be excused if he preferred to believe RY and the office manager.

104. In respect of ground 3 this alleged that in breach of section 276 of the Act, [the

firm] failed to disclose to the complainant the significant increase in costs which

[the firm] proposed to charge the respondent, and the respondent as the sole

principal of [the firm] and the supervisor of [Mr RY] on the matter was

“involved in the failure” within the meaning of section 277(7) of the Act.

105. The Tribunal found this had been made out and that finding has not been

challenged. Nonetheless at paragraph 57 of the practitioner’s submissions there

is a direct attack on the foundation for the finding. In the absence of there being

any ground of appeal it is unfair and wrong for us to consider such a

submission. In any event the Tribunal had the advantage of seeing and listening

to RY and the practitioner give evidence and this must have contributed to their

conclusions. We do not have that advantage. In addition to the established facts,

it is possible however to note that, whilst the system whatever it was did not

work, the practitioner had taken some steps to try and resolve the matter by

getting the client in to talk to RY and the office manager and review the file. He

39 AB 397

36

also relied on RY and as discussed above had reason to believe that the client

had been told of the estimates during the course of the matter.

106. We have set out above the facts in relation to Ground 5.1, in finding that ground

to be established. The conduct which established Ground 5.1 would have been

a breach of the duty of fidelity, if it had applied. It did not. Thus the Tribunal’s

conclusion that it was most serious needs to be reconsidered.. Looking at all

three grounds together, if one were to consider only the size of the original bill

by comparison with what was agreed later or what the Court found by consent

later together with the uncommunicated intention to bank the cheque and not

accept the offer, the conduct may be regarded as professional misconduct.

However, when we take into account the other facts including findings as to the

state of mind of the practitioner we do not think that his peers ought to

reasonably think he had breached the requisite standard to a substantial degree.

Also important, in this conclusion, is the small nature of the amounts involved

and the isolated nature of the course of conduct. As we have discussed above we

cannot be comfortably satisfied that the state of mind of the practitioner was

other than what follows.

107. The practitioner appears to have believed that the complainant had been told

about the estimates of costs by RY and confidently asserted as much to the

complainant in his letter of 17 February 2010 (although he should have known

from his examination of the file there was no contemporaneous file note of a

discussion about estimates, and there was no written advice of additional legal

work being done). He did not then know that his costs agreement documents did

not amount to a costs agreement (although he should have known this was a

problem, if he had applied his mind to it). He knew that the firm’s normal work

in progress records added up to the amounts in the bill. When the dispute had

arisen he had asked RY and the office manager to meet the client and go

through it with him and try and reach an amicable outcome. The office manager

offered to reduce the bill by more than 10% anyway. The complainant did not

get back to them and then with the aid of legal and other expert advice

challenged the bill. The practitioner had believed he was not accepting the offer

with the cheque and instructed that a bill be assessed. He was not to know that

37

this would take over a month (although he should have anticipated it would not

be immediate). He should have communicated his intentions and actions with

the complainant anyway. The taxation was voluntary on his part, so he thought,

although as a result of Master Mossop’s later decision and the absence of further

written disclosures under section 276 it was legally necessary.

108. Without the knowledge of the context in which these events happened it might

be thought that there was some avarice and deliberate deception involved. The

Council did not allege dishonesty. In context, the conduct was ill considered and

at times intemperate but was not knowingly deceptive. The sums involved were

not substantial and avarice is not an obvious motive. As the Tribunal said, the

standard, in considering what are the facts – including here the practitioner’s

state of mind – requires a comfortable satisfaction. We are of the view,

considering the conduct as a whole and given that the breach of the duty to act

fairly and in good faith was not a substantial breach, that peers of the

practitioner aware of the fuller circumstances would not regard the conduct as

dishonourable or disgraceful but rather ill-considered and uninformed.

Conclusion

109. We set aside order 1 in the orders of 4 July 2016 and order that the conduct

found established in the three grounds is unsatisfactory conduct.

110. The amended grounds of appeal refer to the penalty orders but no submissions

were made about them. It would be open to us to review the penalty given we

have acceded to argument that the practitioner’s conduct was not professional

misconduct. In the absence of any argument that we do so we have not. We do

not see the penalty orders as being out of step with our findings. However, we

will defer that order for 14 days to allow the parties to consider whether that is

inappropriate.

111. The practitioner in his submissions asked to be heard about costs. The

practitioner has achieved some success in the appeal. There is no general power

to order costs to follow the event. There may be a need to consider section 433

of the Legal Profession Act 2006. We will allow time for submissions in writing

about this issue.

38

112. Finally we thank counsel for their diligence and assistance in providing high

quality submissions both written and oral.

………………………………..Presidential Member M-T Daniel

Delivered for and on behalf of the Tribunal

39

ANNEXURE A

Dear [Legal Practitioner ‘S’]

8th April 2010

Following our recent telephone conversation, I have enclosed a cheque for $3,000. This is my final offer for what I consider to be reasonable costs for services provided by [Mr RY].

My reasoning for arriving at this figure is the same as my email to you on 26 February 2010.

I was disappointed that you did not respond to that email. I believe I put reasonable arguments for not agreeing to pay the full fee of $6,493.95. I also requested we meet to try and resolve the matter. Again, your lack of a response suggests you were not interested in discussing the matter further.

I would like to put on record that I always intended to pay for the services provide by [Mr RY]. I was also aware there would be additional costs above the basic cost of $940 (your letter dated 2 July 2009 made this clear).

However, my point is that it was not until 23 November 2009 that I was advised these additional costs would be in the range of $5,000 - $6,000.

Being over 6 times greater than the original agreed fee, I believe this is unreasonable. Had I been advised earlier that the extra costs would be of this magnitude, I would not have continued to retain [Mr RY’s] services.

Yours sincerely,

40

HEARING DETAILS

FILE NUMBER: AA 59/2016

PARTIES, APPLICANT: Legal Practitioner ‘S’

PARTIES, RESPONDENT: Council of the Law Society of the ACT

COUNSEL APPEARING, APPLICANT Mr Katekar

COUNSEL APPEARING, RESPONDENT Mr Beaumont SC, Ms Power

SOLICITORS FOR APPLICANT N/A

SOLICITORS FOR RESPONDENT Phelps Reid Lawyers

TRIBUNAL MEMBERS: Presidential Member M-T Daniel, Senior Member B Meagher

DATES OF HEARING: 22 May 2017

41