I only learnt in the last few years that Melbourne is one of the world’s great Jewish cities, with a globally significant series of communities of orthodox adherents.  One of those orthodox communities has delivered up an interesting case.  In Victorian Legal Services Commissioner v AL [2016] VCAT 439, VCAT’s Acting President recently found a well known Melbourne solicitor guilty of two counts of professional misconduct, constituted by breaches of each limb of r. 30.1.2 of the solicitors’ professional conduct rules.

The rule prohibited conduct calculated to, or likely to a material degree to be, prejudicial to the administration of justice, or to diminish public confidence in the administration of justice, or adversely to prejudice a practitioner’s ability to practise according to these rules.

The practitioner’s disciplinary offence was first to state privately to his client’s father his disappointment after an orthodox Jew sitting watching someone else’s case in court had gone out of his way from the well of the court to assist police in the middle of a bail hearing in a criminal prosecution of the practitioner’s client. His second offence was committed when the man, whom I will refer to as the complainant since he lodged the disciplinary complaint which led to the practitioner’s disciplinary prosecution, rang the practitioner and asked him about comments to similar effect which the man had heard the practitioner had made, taping the call. The practitioner expressed directly to the man similar sentiments, expressly invoking the Jewish principle of ‘mesirah’ by which Jews who cooperated with secular authorities against fellow Jews in times and places where Jews enjoyed imperfect protection were ostracized. Jewish authorities have repeatedly said that the principle has no operation in modern day Australia in relation to criminal matters.

The Age has reported, in an article prominently featuring the practitioner, that victims of Jewish abusers have been pressured not to cooperate with police. It reported the Legal Services Commissioner as saying that ‘there was a general principle that made it impermissible for a lawyer to tell a witness they could not inform police about a matter because of a religious or community rule.’ I do not mean to criticise the Commissioner in this regard, because The Age sought his comments prior to the Commissioner’s receipt of the complaint, and the Commissioner was presumably simply responding to a general question about lawyers’ obligations towards witnesses in their cases. But what VCAT’s decision demonstrates is that the practitioner’s comments occurred after the conduct in question which the practitioner believed to have involved false statements based on misinformation, and were directed to a person who was not a witness and who, as far as the practitioner was aware, was simply someone who stood up in the well of the court and interfered in his client’s case. Given that, as far as the practitioner is said to have known, the man who stood up in court had no further role to play in the case or in his client’s drama more generally, it is hard to see how the practitioner could be said to have intended to pressure the man as a victim of a Jewish abuser not to cooperate further with the police in the future in bringing the abusers to justice, as seems to have been the implication.

The Tribunal’s reasons set out the charges and the particulars pleaded in support of them in full. The hearing proceeded as a contest only as to whether the conduct amounted to unsatisfactory professional conduct or professional misconduct. The Commissioner and the practitioner asked the Tribunal to proceed to determine that question on the basis of a plea based on a set of agreed facts, all of which are also set out in the reasons. This makes the decision interesting because it allows the reader to see exactly what allegations were before the Tribunal, exactly what evidence was before it, what facts the Tribunal was prepared to find, and what inferences it was prepared to draw from those facts.  As we will see, the Tribunal was not shy in drawing inferences.

The rich factual context of the practitioner’s comments, from the complainant’s point of view, are spelt out in detail in David Marr’s long piece in The Guardian on the response of the particular orthodox Jewish community to sexual abuse at Yeshiva College. The Commissioner did not allege that the practitioner was aware of any of it. It was not said that the practitioner was an orthodox Jew, associated with the community, or aware of any of the matters recounted by Mr Marr. In fact, it was an agreed fact that the practitioner said he was not aware that the person whom he regarded as interfering in his client’s case was himself a victim of his client. And the Tribunal repeated statements by the complainant that the practitioner was likely not an orthodox or even particularly observant Jew.  That seems to be consistent with the practitioner’s erroneous description of a person who infringes the prohibition of mesirah as a ‘maser’.

In what follows, I have stated the facts as they seem to have been found, from the perspective of the practitioner.

In September 2011, the practitioner, who is Jewish, was appearing in the Magistrates’ Court in the bail hearing as the advocate for his client, an orthodox Jewish defendant to child sex charges.

The police did not oppose bail. The issue was as to the conditions of bail. A question arose as to whether the practitioner’s client was a flight risk. The prosecution suggested that the practitioner’s client was still connected with people who might spirit him out of the country. (It is certainly the case that the headmistress who was the subject of this blog post left rather suddenly for Israel in 2008, as did David Kramer in the 1990s according to David Marr’s article, in each case after plausible allegations of abuse surfaced against them.)

The police referred vaguely to the possibility of the practitioner’s client obtaining an Israeli passport on the basis that his parents might have been born in Israel, even if the practitioner’s client’s Australian passport were located and surrendered as a condition of bail. The police, it seems, were horribly under-prepared on this issue. Then, to quote from the Tribunal’s reasons:

‘The Magistrate stated that she was concerned that the evidence in respect of Mr Cyprys’s ability or entitlement to obtain a non-Australian passport, specifically an Israeli passport, was “vague”. Her Honour asked the prosecutor whether she had any means of determining whether Mr Cyprys had the ability to apply for a passport from another nation.

At this stage, [the complainant] sought to speak to the [policewoman]. The Magistrate directed the [policewoman] to talk to [the complainant] in the body of the Court. … Following this conversation the prosecutor then submitted the following:

“Your Honour, the information that’s been provided to me… is that there is a right to apply for an Israeli passport for any Jewish person.”’

Elsewhere, the Tribunal found that the conversation between the complainant and the policewoman was ‘prompted by a direction from the Magistrate’, but it seems clear enough that the direction from the Magistrate was prompted by the complainant’s articulation of his wish to speak to the policewoman. So it does not seem that the complainant’s involvement was born of any duty to assist the police or the Court. However VCAT found that lawyers would regard it as uncontroversial that people who are in a position to assist police should generally do so, and any dissuasion of members of the public voluntarily assisting police is likely in a material respect to prejudice the administration of justice.  Observers of court cases should bear this duty in mind in future.

It was an agreed fact that the practitioner believed the policewoman’s submission to the Court following the conversation with the complainant to be false and based on misinformation.  Why that might be so is unclear, but there you are.  It is certainly true that the practitioner, in the tape recorded conversation with the complainant said:

‘if someone tells the informant that in fact there’s a – for a person of particular state of background they could go to embassy and travel without passport therefore the surrender of passport would be inconclusive …’

suggesting a degree of misunderstanding or mis-recollection on the practitioner’s part as to what had occurred.

The practitioner then (presumably privately) asked his client’s father who the man was, and was told that he was an orthodox Jew and, it seems, what his name was. The practitioner then said (again, presumably privately) to the father:

‘It is most disappointing when a person who has nothing to do with the case and being a fellow Jew does willfully seek to hinder another Jew in his defence of criminal charges.’

It was exclusively the speaking of these words which was said to amount to the first count of misconduct.

Though it was not contained in the statement of agreed facts, and though for reasons which are unclear it was not said in the disciplinary charge to amount to professional misconduct, VCAT found as a fact that the practitioner had had ‘at least one’ conversation within a few days of the bail hearing with the complainant’s foster father (also from the same community) in which he expressed his disappointment that the complainant ‘who had no involvement in the proceedings, should be actively aggressive and involved in opposing a bail application of his (the Respondent’s) then client.’  Why the Tribunal referred to ‘at least one’ is also unclear from the reasons.

This expression of disappointment makes more sense than what the practitioner said to his client’s father, because whatever the practitioner understood the complainant to have done, it could hardly have hindered his client in the defence of the charges.

The Commissioner tendered a witness statement of the complainant who was not cross-examined. He stated that he had been subjected to ostracism as a ‘moser’ within his community and criticized for assisting police, including by his foster father and employer. It is not apparent from the Tribunal’s reasons that the Commissioner actually alleged that the practitioner was aware of any of this or that he foresaw it as a possible consequence of speaking the words the subject of either charge.

It appears that within at least parts of the orthodox community to which the complainant belonged, there was still a strong disapproval of assisting secular authorities against fellow members of the community. This is the historical principle of ‘mesirah’, and those who offend it have traditionally been subjected to ostracism as ‘mosers’ (not ‘masers’ as the Tribunal (and the practitioner) repeatedly described them). The principle seems to have had a more enduring real life operation in ultra-orthodox pockets of Melbourne than religious rulings justified. As a Jewish friend pointed out to me, Sydney’s Ecclesiastical Court has again reiterated publicly in response to this very case that it has long been said authoritatively that mesirah has no application in relation to criminal matters in Western democracies such as Australia, and there is in fact a religious imperative to inform and cooperate with authorities in relation to matters such as child sexual abuse.

On 6 October 2011, the complainant rang the practitioner and recorded the conversation on his mobile phone ‘in a manner approved by police’. The practitioner resisted speaking to the complainant, saying it was inappropriate, but the complainant persisted, saying that someone had told him that the practitioner had suggested that the complainant was behind the practitioner’s client losing his passport, a proposition which, he said on the phone, he had nothing to do with.  It seems clear from his evidence that he did in fact have something to do with it; in his witness statement in the practitioner’s prosecution he admitted explaining the ‘law of return’ to the police woman in court while the practitioner’s client’s bail conditions in relation to passports were being argued. The practitioner said, of his conversation with the complainant’s father:

‘that’s the only conversation I had with the person I said to her [sic], “I’m disappointed that you would participate”, and that was my disappointment and that’s why I’m not exactly delighted that another Yid would assist police against an accused no matter whatever he’s accused of.  That’s the reason why I was very disappointed because there is a tradition, if not a religious implement [sic.] that you do not assist against Abraham, assisted by Yid and I was concerned about that.

… [It is] [a] religious principle too.  I mean Maser – principle of Maser is well known.  I’m not suggesting you are but the fact that you were prepared to speak to the Informant upset me enormously.’ (You can listen to the recording here.)

It was exclusively the speaking of these words which was said to amount to the second instance of misconduct calculated to prejudice the administration of justice.

VCAT found that the remark to his client’s father represented the practitioner’s expression of his disapproval in a general sense of one Jew apparently providing any kind of assistance to the prosecuting authorities against another Jew.

VCAT found that the telephone conversation amounted to a ‘direct verbal assault upon’ the complainant ‘which in light of [the complainant’s] evidence before the Royal Commission, can only have been intended to condemn [him] in the harshest and most hurtful way’. It is not clear to me what the Acting President was referring when she referred, in this context to ‘the complainant’s evidence before the Royal Commission’.  It is very unlikely given that the hearing proceeded on agreed facts that the Tribunal reasoned that because other Jews were mean to the complainant, the Tribunal could be comfortably satisfied that the practitioner who was a Jew was also being equally mean.

VCAT found that the practitioner was effectively conveying in the telephone call that he condones Jewish people behaving in a way which undermines the Australian justice system.  Necessarily, the Tribunal must have found that the practitioner was expressing a generalised view on that question rather than merely expressing his disappointment that a Jew came along to watch the prosecution of another Jew and then volunteered to involve himself.  The practitioner’s words were certainly broadly couched, but there is a difference in my mind at least between being disappointed about volunteerism against a fellow community member and advocating the breaching of duties under the law so as favour fellow Jews.

Though the Commissioner did not allege it, the Tribunal went on to find on the basis that it was ‘comfortably satisfied’ in accordance with Dixon J’s comments in Briginshaw v Briginshaw that ‘in the context of his admission of at least one conversation he had with [the complainant’s] foster parent’, the ‘only reasonable inference to be drawn from … the telephone conversation’ was that the practitioner was ‘well aware of the devastating impact upon [the complainant’s] personal and professional life, within his orthodox community, and that his words were effectively endorsing community condemnation.’ What context the conversation with the foster parent provided is not made express by the Tribunal’s reasons.

In fact, the Tribunal went even further, and found itself comfortably satisfied by exact proofs as per Dixon J’s exhortation in Briginshaw that the practitioner continues to practice law in accordance with his misguided concept of religious or cultural solidarity, allowing such views to take precedence over his professional obligation to uphold the principle of equality before the law.

As noted above, VCAT found that competent and reputable practitioners believe as a straightforward and conventional principle that if able to, citizens ought to assist the prosecuting authorities, though the Commissioner does not appear to have brought any relevant authorities to the attention of the Tribunal in support of this proposition which does not seem to be limited to where there is a legal obligation to do so, or a sufficiently close connection with the matter being prosecuted as to give rise to a social expectation that that would occur.  This would appear to be an important clarification of the role of citizens, the full implications of which will no doubt work themselves out over time.

The most complex of VCAT’s findings was that it was comfortably satisfied by exact proofs that by virtue of speaking the words to his client’s father and in the telephone conversation, the practitioner breached r. 30.1.2(c) which prohibits conduct calculated or likely to a material degree to adversely prejudice a practitioner’s ability to practise according to these rules. The Tribunal found that he would in the future be unable, by virtue of having spoken the two sets of words, to comply with those parts of conduct rule 13 which require practitioners to exercise the forensic judgments in a case independently rather than as the mere mouthpiece for a client, and without making submissions in terms which convey or appear to convey the practitioner’s personal opinion on the merits of evidence or an issue.  It was unnecessary to make any such findings, since the three limbs of r. 30.1.2 are disjunctive.  No doubt that is why the reasoning behind this finding is quite shortly stated, making analysis of this conclusion tricky.

VCAT said ‘it is impossible to reconcile the clear views expressed with his continued ability to comply with r. 30.1.2(c)’ which is itself a rule prohibiting conduct which adversely prejudices a practitioner’s ability to practice in accordance with the conduct rules. I must confess that unpicking the detail of that reasoning does my head in.

In Council of the Law Society of NSW v MAG [2016] NSWCATOD 40, a Sydney solicitor was disciplined for writing a private letter of complaint to a Federal Court judge the day after a decision was handed down, adversely to his client in favour of the Tax Man.  The next day he wrote to the trial judge a letter not copied to the other side which commenced:

‘As solicitor for the Applicant in this matter, I have serious concerns about your conduct and decision in this matter. These are:

1. The somewhat immature and inappropriate comments you made to me …’

The solicitor had had a career in theatre before he took up law, and worked for the theatrically named The People’s Solicitors, of Penrith in Sydney’s west where Jeff Shaw QC worked for four years after his career on the bench of the Supreme Court ended prematurely.  The letter continued, after further criticisms:

‘On that basis, notwithstanding that I consider that our client has grounds to appeal your decision -and that I consider that your conduct in this matter is questionable and further that the Australian public and democratic values require and deserve a higher standard of decision making in regard to reviewing decisions of political officers and their agents than that evinced by your reasons, I consider that many of the points raised above indicate that your decision was likely made without good faith and with bias. On that basis, in reliance upon r 39.041 consider that I should extend you the courtesy of varying your judgement before it is entered and before I submit it to appeal.’

At his disciplinary trial, which followed an investigation prompted by the referral of the letter to the Council of the Law Society, the solicitor explained that he had written the letter  “out of concern for the integrity of and respect for the Court and the administration of justice which is a lawyers [sic.] highest duty”.   During the investigation, the solicitor lodged a retaliatory disciplinary complaint against the judge’s associate.  The letter was rude, he acknowledged, but it was not grossly discourteous, so the charge should fail.  He sought to bring in the Attorneys-General of the Commonwealth, NSW and Victoria under s. 78B of the Constitution.

The disciplinary tribunal was unimpressed, and sent him off to an ethics re-education camp:

’28. In our opinion the terms of the Solicitor’s letter go far beyond a mere breach of etiquette. We would characterise them as grossly offensive. Whether they amounted to professional misconduct is a matter of judgment which we approach taking into account that solicitors as officers of the Court are required to uphold the law and its institutions. This includes in our view a duty to exhibit appropriate respect for judicial officers and their decisions not for any personal benefit but out of regard for the institutions they represent. If it were not so public confidence in those institutions may be undermined.’

Legal Services Commissioner v AL [2016] QCAT 237 is a decision of a disciplinary tribunal presided over by Justice David Thomas, President of QCAT and a Supreme Court judge. It is therefore of high persuasive value, and treats Queensland provisions which are the same as the equivalent Victorian provisions. And it provides what I suggest with respect are the correct answers to the following questions:

• How negligent do you have to be before you can be found guilty of unsatisfactory professional conduct as defined in provisions which say that the concept includes ‘conduct that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent’ lawyer holding a practising certificate? (Answer at [44] and [27]: substantial and very obvious fallings short of the standard, established by direct inferences from exact proofs.)
• What must be pleaded specifically in a disciplinary charge? (Answer at [82] – [92]: all states of mind, not only dishonest intents, and all facts to be relied on (‘the charges to be levelled must be fully and adequately set out in the Discipline Application. As a matter of procedural fairness, the Practitioner should not be left in any doubt as to the extent of the allegations that is to be met.’)
• To what extent is a disciplinary tribunal constrained in its decision making by the allegations specifically made in the charge? (Answer at [96] – [108]: absolutely: if no state of mind is alleged, the prosecution should not be allowed to call evidence as to state of mind; ‘it would be wrong to admit evidence the principal purpose of which is to establish conduct that lies beyond the ambit of the charge’.)
• Does the mere fact that charges are not allowed on taxation mean that there has been overcharging such as to warrant discipline? (Answer at [76] – [77]: no)

The Tribunal dismissed charges against a solicitor who lodged a caveat pursuant to an equitable mortgage without checking that it satisfied the Statute of Frauds’ writing requirements and against a partner of her firm who took over her files when she was on holidays and billed the client for the work in attempting unsuccessfully to register the caveat.

I move from the specific facts of this QCAT case to general comment (what follows is certainly not veiled reference to the conduct of the Commissioner’s counsel in QCAT). There is a very real reason to insist on the particularization of states of mind in disciplinary tribunals, including particulars of actual and constructive knowledge. These details do not always get left out just because it is thought that disciplinary tribunals are not courts of pleading and such minutiae is not appropriate. Nor do they just get left out because they are thought to be inherent in the allegation, or because of incompetence, or mere mistake. Rather, they get left out because bureaucrats have investigated incompetently and when competent counsel come to plead disciplinary applications based on the investigation, they do not have a sufficient factual foundation to make these allegations, or perhaps are simply too timid.

But sometimes counsel with civil practices, untutored in the art of prosecutorial restraint, and safe in their private belief that the practitioner is in fact much more evil than incompetent investigation established, might fall prey to temptation. Mealy-mouthed, ambiguous allegations might be made which require the practitioner to get into the witness box. Then, all manner of unpleaded allegations as to states of mind and as to completely un-pleaded conduct, justified in relevance as tendency evidence or circumstantial evidence of the pleaded facts, might be cross-examined out of the practitioner and an unpleaded case presented to the disciplinary tribunal in closing. In a tribunal not bound by the rules of evidence, such questioning may be waved through with lip service to the proposition that objections will be dealt with by according appropriate weight to the evidence in the final analysis. Queensland leads the charge against such conduct, and I can’t help thinking it’s because Supreme Court judges seem to get involved in disciplinary decisions more often up there. All power to them. So impressed am I with this latest judgment, I have decided to go on a study tour of the Sunshine Coast in the September school holidays.

A Queensland law firm acted for a woman who said her brother owed her money. Proceedings for its recovery were contemplated. An Adelaide silk whose first name is Malcolm and whose middle name is Fraser (now a Supreme Court judge) was involved, as an acquaintance of the client rather than as counsel instructed by the law firm.

The lawyer followed the client’s instructions and lodged a caveat on her brother’s house asserting an entitlement ‘as equitable mortgagee pursuant to a loan agreement dated May 1990’. That did not refer to a written agreement, but the Statute of Frauds provides for writing requirements in respect of agreements creating interests in land such as equitable mortgages. So if there was no written agreement, it was a problem.

The lawyer believed that there was a written loan agreement providing for the equitable mortgage, but did not check, which she acknowledged was an error of judgment. The client had told the lawyer that the paperwork, including the agreements, were with an Adelaide silk. Of course there may have been written loan agreements, but it did not follow that they provided for the creation of an equitable mortgage.

The silk had provided particulars of the caveatable interest to the client, and the client to the solicitor, in writing. They did not say there was an equitable mortgage which satisfied the writing requirements.  The Commissioner suggested that the complexity of the particulars suggested, au contraire, that there was nothing so simple as an equitable mortgage which satisfied the writing requirements. But the particulars did refer to terms of the agreement without any suggestion that they were oral or implied.

Oddly, the particulars given by the silk are not set out in the judgment, and it seems that the silk had in mind the lodgment of a caveat: see [11]. If so, then unless the silk who is now a Supreme Court judge was equally negligent, this was a case in which the wrong caveatable interest was claimed rather than that a caveatable interest was claimed in circumstances where a competent lawyer would see that there was no caveatable interest. When the solicitor sent the caveat to the client, who was in contact with the silk at that time, the client signed it and returned it.  But when the caveat was challenged by requisition, it was not pursued and never registered, so there is something puzzling about the facts which are not fully set out in the Tribunal’s reasons.

The solicitor’s counsel summarised her position thus:

‘In short, whilst in hindsight [the solicitor] might have done better not to make the assumption about the written agreement it is apparent how the assumption came to be made – [the client] referred to a loan agreement, as did the particulars (which provided a date) and rather precisely expressed terms, [the client] said that documents including agreements were with [the silk], [the solicitor] believed there to be pressure from [the client] to prepare and lodge the caveat urgently and [the client] never said either when instructing [the solicitor] or later dealing with [the partner who took over when the solicitor went on holidays], that there was no written agreement.’

His Honour and the other members of the Tribunal found at [70] – [72] that:

‘the absence of [a date for the agreement and of any reference to clause numbers in the silk’s particulars], whilst it might have caused a practitioner to seek additional information, does not lead to the conclusion that the failure to inquire further amounted to a “very stark misapprehension of instructions” or a “stark lack of curiosity”.

This is not a case where there is any suggestion of dishonesty or unethical conduct, nor can it be concluded on the evidence that there was any substantial or repeated error. It was an isolated instance.

In the circumstances, the Tribunal finds that the conduct was more in the nature of a mere slip and certainly not, as is submitted by the Commissioner, a very stark misapprehension of instructions followed by an equally stark lack of curiosity and it was not conduct which fell so far short of accepted standards of competence that it amounted to unsatisfactory professional conduct. In terms of the decisions in [Legal Services Commissioner v McClelland [2006] LPT 13] and [Legal Services Commissioner v Bone [2013] QCAT 550], the conduct was not sufficiently substantial to be unsatisfactory professional conduct.’

The solicitor went on holidays and a partner of the firm took over her files while she was away, during which time the caveat was the subject of requisitions which led to the partner learning that there was no written agreement providing for an equitable mortgage, so that the caveat was never registered on the brother’s title. Nevertheless, the partner caused the firm to put out a bill which included entries for attempting to lodge the caveat. The Commissioner charged him too with unsatisfactory professional conduct constituted by billing for work which, because it was negligent and yielded no benefit for the client, should never have been billed.

The Tribunal found that even if the partner knew before putting out the bill that there was no written agreement, it did not follow that he knew or ought to have appreciated that a mistake had been made by the firm such as to disentitle it from billing for it.  It was not the firm that was being prosecuted

More fundamentally, however, there was no allegation that the partner billed the fees knowing that they were unbillable. There was, in fact, no allegation as to his state of mind at all, and this was determinative. The Tribunal only dealt with the Commissioner’s submissions as to inferences which should be drawn about the partner’s state of mind ‘for the sake of completeness’ and only, it may be inferred, because it wanted to point out that they were wrong. The Tribunal observed:

‘In the case of an allegation relating to the rendering of an account in circumstances where there is no entitlement to do so, a factor which will generally be regarded as significant is the knowledge which the practitioner has of the circumstances, which mean that there is no entitlement. It may also be relevant whether the practitioner should have been aware of the lack of entitlement or was reckless in the way in which the account was rendered. If the practitioner had no knowledge of these circumstances at the time the account is rendered, then another factor that might become relevant is the action taken by the practitioner after becoming aware of the lack of entitlement.

None of these issues are raised in the discipline application and so are not an aspect or element of the charge made against Mr Devlin.’

The Commissioner sought to criticize the partner for not amending the bill so as to abandon the claim for fees for the caveat once the facts finally came out after the solicitor’s return from leave. The Tribunal was admirably adamant: that conduct was not alleged in the charge, and it was not going to consider it, even as retrospectant circumstantial evidence telling upon the conduct which was charged.

Salvatore Russo, a solicitor of 29 years’ standing, was struck off NSW’s roll of solicitors on 16 April 2016 by NCAT.  He had received payment from his client for counsel’s fees but not paid counsel for years. Then he was high-handed in response to the client’s entreaties when counsel sued the client directly.  The Court of Appeal found a denial of procedural fairness by NCAT.  The Tribunal had telescoped the questions of liability and penalty into one hearing.  It had failed to give Mr Russo sufficient notice of the fact it was considering striking him off despite the fact by the end of the trial, the Commissioner was not seeking such an outcome any more. Now he’s been struck back on by the NSW Court of Appeal, a fine of $20,000 substituted for his misconduct: Russo v Legal Services Commissioner [2016] NSWCA 306.  (In fact, the striking off never came into operation, because he got a stay along the way.)

Mr Russo had briefed senior and junior counsel on behalf of an elderly client in a de facto relationships case.  The disciplinary prosecution concerned Mr Russo’s treatment of junior counsel’s fees.  The client paid Mr Russo’s bills, on which junior counsel’s fees were claimed as disbursements, quite promptly.  They were fully paid by August 2009.  But Mr Russo never paid junior counsel his fees.

Junior counsel sued Mr Russo in 2012 for his fees.  He also sued the elderly client who was undergoing heart surgery.  (How junior counsel was entitled to sue the client for fees notwithstanding that he was briefed by Mr Russo as instructing solicitor is unexplained.  To the extent that he did so in contract, the Court made clear that the suit was misconceived at [63].)

Though the client’s son told junior counsel that his father had already paid the fees and would defend the suit, junior counsel entered judgment in default of defence.  For reasons which are unexplained by the judgment, an application to set aside judgment failed and junior counsel executed upon it, seizing the amount standing to the client’s credit in the client’s bank account.

Mr Russo was asked to satisfy the judgment against the client.  He denied any liability to do so and criticised the client’s solicitors for wasting money applying to set aside the judgment.

Nearly four and a half years after the event, after a long period of abject non-cooperation with the Legal Services Commissioner following a complaint by the client, Mr Russo finally admitted having been paid by the client and having failed to pass on payment to junior counsel.  He refunded to the client the amount of the barrister’s fees without interest.  The clients’ solicitors asked Mr Russo to pay the client’s legal costs associated with junior counsel’s suit for fees and indemnify the client for the difference between the amount to which junior counsel had become entitled and the amount refunded by Mr Russo.   When that demand went unmet, the client’s daughter paid out junior counsel who, it may be inferred, was, rather enthusiastically one might say in the circumstances, still enforcing his default judgment.

In February this year, Mr Russo paid an amount in compensation to the client following agreement with the client which was less than the sum of the amount seized by junior counsel from the elderly client’s bank account and the amount paid by the client’s daughter to pay out the judgment in favour of junior counsel.  So it does not seem to have included any allowance for the client’s expenditure on legal fees in the suit brought by junior counsel.

The Tribunal found Mr Russo guilty of misconduct on three bases:

1. First, Mr Russo breached the obligation to pay trust monies into the trust account.  That part of the payments in respect of the bills which satisfied the bills’ claim for junior counsel’s fees as a disbursement were trust monies, the Tribunal found, citing Council of the Law Society of NSW v Andreone (no.1) [2014] NSWCATOD 49.  The person on whose behalf that part of the monies were received by Mr Russo was counsel.  (This is a different case from that considered by the High Court in Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, where the Court held that no part of monies received by a solicitor were trust monies held on behalf of counsel where they were received on account of fees to be rendered generally in the future by the solicitor, counsel and experts.  Nevertheless, Gillespie-Jones was not considered in Andreone and I am not 100% satisfied that the two decisions are consistent.)
2. Secondly, Mr Russo deliberately or recklessly failed to pay counsel’s fees.  On appeal, the Court found at [54] that ‘Implicitly, payment of invoices which included a component for counsel’s fees must (in the absence of any instruction to the contrary) have been understood as conveying a direction to pay those fees.’
3. Thirdly, Mr Russo failed to account to the client.  His bills had claimed one lump sum for disbursements.  In fact that sum claimed counsel’s fees, but the bill did not make that explicit, or state what fee had been charged by which counsel for what work over which period.

Then, to everyone’s surprise by the sound of it, the Tribunal struck him off. The Commissioner’s application to the Tribunal had originally sought that sanction but the Commissioner contended by final submissions that such a sanction was unnecessary.  The Tribunal did indicate that it did not intend to hold a second hearing to determine penalty, and did make oblique references to the possibility of striking off.  But Mr Russo did not adduce character evidence, probably because all the Commissioner was seeking was a reprimand and a fine and perhaps also because his representatives had assumed (reasonably enough) that there would be a second hearing to deal with penalty.

The Court did not refer to the Victorian Court of Appeal’s erudite survey, just a couple of weeks ago, of the authorities on the circumstances in which it constitutes appellable error not to hold two separate hearings, one to determine whether there has been conduct warranting discipline and the other to determine what that discipline should comprise: Pham v Legal Services Commissioner [2016] VSCA 256.  Had it done so it might have found a failure to accord procedural fairness in the very circumstance of telescoping liability and penalty into one hearing.

It is of interest to me that the Tribunal wasted little ink on its reasoning in favour of the ultimate sanction.  Certainly, it did not grace readers with any analysis of why some lesser sanction was not apt to achieve the protective purpose of the disciplinary jurisdiction (e.g. removing Mr Russo’s entitlement to receive trust monies).  The public policy in favour of the law relating to the adequacy of reasons is generally said to be so that the parties can understand why the decision was made, so that they can decide whether to appeal, and so that the appeal court can understand, and if necessary find the fault in, the reasoning.  But there is surely another reason.  The requirement to articulate and explain reasoning tends to enhance it.  Sometimes an absence of reasons is indicative of absence of conscientious reasoning.  One could not safely advance that hypothesis in this case, because substantial fresh evidence was received on appeal, such that the appeal Court did not disapprove of the Tribunal’s reasoning on the evidence before it (rather, it disapproved of the procedure by which the evidence was got in).  Nevertheless, the quality of reasoning in relation to the penalties imposed in disciplinary sanctions frequently compares unfavourably with the quality of reasoning in criminal sentencing where the sanctions are commensurate, and varies greatly between decision makers.  The Victorian Court of Appeal has introduced new rigour into the process over the last decade and has several times reversed VCAT for erroneous and inadequate reasoning in relation to disciplinary sanctions.

The Court found at [47] that:

‘In circumstances where the Commissioner had clearly taken the position before the Tribunal that removal from the Roll was not pressed, and it may be accepted that Mr Russo did not seek to adduce character evidence or otherwise make submissions at that stage as to his fitness to continue to practise as a solicitor on the assumption that that was not an order that was being sought against him, the complaint as to denial of procedural fairness is made out.’

Having decided to set aside NCAT’s decision, the Court decided it was appropriate to re-exercise the discretion in relation to penalty rather than remit the matter to a differently constituted NCAT for re-consideration.  That is a modern approach, especially since the Court made different findings of fact based on fresh evidence given on affidavit by Mr Russo without having seen him cross-examined at first instance.  The Court gave leave to Mr Russo to adduce evidence which he would have adduced had he appreciated that striking off was on the cards (character evidence) and evidence to rebut an inference which the Tribunal had drawn based on an absence of evidence to the contrary (that, based on the daily balances in Mr Russo’s office account, financial pressure gave him a motive to act as he did).  Having heard the fresh evidence, the Tribunal did not draw that same inference.  Mr Russo also gave evidence as to how he had turned over a new leaf in his accounting practices in relation to counsel’s fees.

The Court requested submissions in relation to the history of fines in cases about the discipline of lawyers over the preceding 12 years.  It engaged in a diligent analysis of that history in a manner which is commendable but rare in disciplinary decisions (with the result that fines are all over the place both within and between jurisdictions and so difficult to predict). I have set out the review of fines in this post. For present purposes, it suffices to note that the lowest fine was $2,000 and the highest $48,000.  The parties agreed that the maximum fine should be treated as still being $75,000 (though it is now $100,000 for professional misconduct and $25,000 for unsatisfactory professional conduct).  Though there were some cases with similarities in which fines of $5,000 to $10,000 had been issued, the fact that this former client was ‘elderly and unwell’ seems to have been seen as justifying, in combination with all the other factors, a fine of $20,000.

Russo v Legal Services Commissioner [2016] NSWCA 306 was the subject of my previous post. The Court engaged in a comparatively sophisticated review of disciplinary outcomes in like cases.  The purposes of this post is to reproduce that review and comment on the variables which ought to be taken into account in any proper survey of past outcomes.

To survey penalties in like cases has always been an important part of sentencing and should be an important part in imposing disciplinary sanctions.  Barbaro  (2014) 253 CLR 58; [2014] HCA 2 and Cth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 do not suggest to the contrary.  They say that the purpose of a survey of like sanctions is to promote consistency in penalties but not the establishment of a range of available sanctions deviation from which is appellable.  Buchanan JA observed in R v Macneil-Brown [2008] VSCA 190, (2008) 20 VR 677 at [130]:

‘counsel can best assist a sentencing judge, not by advancing what they consider to be sentences at the lower or upper limits of a sound sentencing discretion, but by making submissions as to the existence and nature of aggravating and mitigating circumstances and providing some guide to the manner in which other judges have approached like cases by supplying sentencing statistics and citing passages from decided cases which bear upon aspects of the instant case.’

I would submit that any survey of fines as a disciplinary sanction must take into account, as an important aspect of the analysis, the financial situation of the person or persons liable to pay it.  The specific deterrence of a fine will vary greatly from one practitioner to another.  Practitioners who struggle, for personal reasons, are more likely to get themselves into trouble in the first place, and to exacerbate it by less than perfect intercourse with the Legal Services Commissioner.  Their financial situations often deteriorate too.  Specific deterrence may be achieved by imposition of a fine much smaller than would be imposed on a flourishing practitioner raking it in.  General deterrence will also be achieved if the Tribunal is transparent in taking account of financial circumstance.  In such a case, the Tribunal might indicate the kind of fine which might have been imposed had the practitioner enjoyed an average post-tax income.

Furthermore, the costs burden borne by the practitioner ought also to be taken into consideration.  Costs and fine are inter-related in this way: Environment Protection Authority v Barnes [2006] NSWCCA 246 at [88] (Kirby J speaking for the Court) applied by analogy in LSC v Bechara [2009] NSWADT 313. The extraordinary costs practitioners are liable to in Victoria following disciplinary prosecutions would very often be more than adequate to achieve specific and general deterrence.  If you are prosecuted and reprimanded, made the subject of an editorial on the front page of the Commissioner’s website, and have to cough up $40,000 in unrecoverable solicitor-client costs reasonably incurred and costs liability to the Legal Services Commissioner, that is going to make you think just as hard about doing it again as any comparatively trivial fine you might cop.

Finally, one must be astute to inflation.  In my experience, people tend to exaggerate the effect of inflation when considering older fines.  Here is a calculator which assists in measuring in today’s dollars a fine imposed some years ago.

For some reason, notwithstanding that NSW is now a part of the legal profession uniform law, the other participant in which is Victoria, no Victorian fines were part of the survey.  That strikes me as unusual, since there is a whole statutory office the purpose of which is to promote interstate uniformity in the application of the Uniform Law: the Commissioner for Uniform Legal Services Regulation.  Russo’s Case was decided under the old legislation which the LPUL replaced, and which legislation in fact governed the prosecution was one of the issues on appeal.  Interestingly, apparently because it was thought that there were no relevant differences between the two regimes, that question was not decided.

This is what the NSWCA said about its survey of fines, and about the appropriate fine in this case:

67. As to the fine, the Commissioner, with the consent of Mr Russo, forwarded a supplementary submission (at the Court’s request) as to the fines that have been levied in legal profession disciplinary proceedings between 2005 and 2016. Mr Russo also filed written submissions on this issue.
68. In summary, over the period referred to in the Commissioner’s submissions, fines ranging from $2,000 in a range of matters to $48,000 in Legal Services Commissioner v Bryden and Hagipantelis (No 3) [2012] NSWADT 225 have been imposed for a variety of misconduct – the highest fine relating to breach of advertising regulations. The Commissioner notes that, earlier, in 2002, a fine of $35,000 was imposed (Law Society of New South Wales v Shad [2002] NSWADT 236) for the false witnessing of signatures on mortgage documents and attempts to mislead the Law Society, the Court and a bank.
69. Mr Russo submits that the most comparable matters to take into account in determining the amount of the fine (which he accepts should be a “significant fine”) are those of Council of the Law Society of New South Wales v Ross [2013] NSWADT 106 and Law Society of New South Wales vHannam [2006] NSWADT 24 where the fine imposed for the misconduct in each case was $5,000. In Ross, the practitioner received fines of $5,000 each for two matters – deliberate transfer of $9,900 for costs from trust to office without authority; and subsequently failing to pay counsel’s fees after authorisation to transfer from trust to office of a sum of $2,200 more than required for those fees in any event. In Hannam, there was a failure to keep proper accounting records in respect of 16 client matters. The agreed fine, which the Tribunal considered lenient, was $5,000.
70. Mr Russo submits that in the cases where the fine imposed has been at or above $10,000 the conduct in question was more egregious than his. In particular, Mr Russo refers to the following cases.
71. First, Council of the Law Society of New South Wales v Hancock (No 2) [2009] NSWADT 327, where there was a gross delay in performance of a retainer (the stamping of documents), a failure to communicate with the client for three years, and failure to comply with a s 660 notice. Mr Russo says, here, that although he accepts he unsatisfactorily “failed to engage with the substance” of the Client’s correspondence, that was for a lesser period of time (about 12 months) and he did comply with the statutory notice (although it should be noted that the s 660 notice was issued following delay in his response to the Commissioner’s earlier requests for information). The fine there imposed was $12,000.
72. Second, Legal Services Commissioner v McCarthy [2010] NSWADT 269, where the practitioner had been the subject of three earlier unrelated findings and professional misconduct and the fine of $10,000 was based on a failure to comply with a s 660 notice preceded by persistent failure to respond to correspondence from the clients and the Commission.
73. Third, Bar Association of New South Wales v Miller (No 2) [2011] NSWADT 148, where the practitioner was fined $10,000, having ignored a s 660 notice and not having otherwise explained his conduct.
74. Fourth, Legal Services Commissioner v Tsalidis [2013] NSWADT 101, where the practitioner had been found in earlier and separate proceedings to have engaged in unsatisfactory professional conduct and professional misconduct and was later the subject of four applications in which there were five findings of professional misconduct and three findings of unsatisfactory professional conduct, including a failure to comply with four s 660 notices and failures to comply with the Tribunal or other statutory requirements. The practitioner was fined $12,000.
75. Fifth, Council of the Law Society of New South Wales v McHugh [2014] NSWCATOD 37, where there was consent to a fine of $10,000. The matter involved trust account breaches in respect of 11 client matters and a failure to remit GST and superannuation contributions in respect of employees.
76. Finally, Council of the Law Society of New South Wales v Vaughan [2015] NSWCATOD 156, where the practitioner was fined $20,000, having borrowed $40,000 from a client that subsequently denied the fact of the loan and that the lender was a client, and having transferred fees of $4,400 from trust to office without authority.
77. Reference is also made to Re Robb (1996) 134 FLR 294 at 310 (to which the Tribunal had itself made reference), where trust funds were transferred to an office account to pay counsel but the payment was delayed for several months and the conduct was found to amount to professional misconduct. There, the Court said:

Where the solicitor holds a client’s funds for the very purpose and uses them for the solicitor’s own means, the solicitor’s conduct is that the Court must take steps to ensure that the solicitor concerned and other members of the profession who might act likewise, whether through indifference or ignorance, understand the seriousness of their breach of duty.

…

It is necessary then that the order of the Court, although not punitive in character, deliver the message that no matter how efficient, eminent or popular the practitioner, conduct like that in the present case must be understood by all professional practitioners to amount to professional misconduct.

78. Under the Legal Profession Act, s 562(7), the maximum fine for professional misconduct was $75,000 and for unsatisfactory professional conduct was $10,000. For completeness, it may be noted that under the equivalent earlier legislation in 1987, the amounts were $50,000 and $5,000 respectively and under the Uniform Law (which Mr Russo contends is the applicable legislation under which the Commissioner’s application should have been determined) there is now a maximum fine for professional misconduct of $100,000 (s 302(1)(l)) and for unsatisfactory professional conduct of $25,000 (s 299(1)(f)).
79. Counsel for Mr Russo characterises the present case as one where the application was founded on Mr Russo’s dealings with one matter, for one client, in respect of one (of the two) counsel retained in the matter, and related to Mr Russo’s conduct in respect of a small number of invoices. It is said that the evidence did not suggest that Mr Russo’s failings were systemic or widespread (though the manner in which the general office account was operated might well give rise to questions as to how counsels’ fees were invoiced and accounted for in other matters). As to the compensation to the Client, it is submitted that the compensation paid (in the amount sought by the Client’s legal representative) resulted in the net amount paid by the Client to Mr Russo being less than the sum of the relevant invoices. (That, of course, does not take account of the stress occasioned to the Client. Nor is it clear whether the Client received full reimbursement of costs incurred by him in addressing the matter.)
80. It is submitted that, on the evidence before the Tribunal, the likely explanation for what occurred was inadvertence; that this is not a case where the solicitor deliberately used moneys held on trust for his own purpose; that it is an isolated incident, which should have been resolved at the time it arose; and that Mr Russo accepted before the Tribunal that the fact that it was not so resolved was his fault.
81. That said, Mr Russo’s misconduct involved obvious deficiencies in his application of trust moneys (and a failure to recognise that moneys paid for counsel’s fees were properly to be regarded as trust moneys). His failure satisfactorily to account to his former client (both in an accounting sense and in the sense of accepting that he was accountable to the Client for what had occurred) for moneys received in payment of counsel’s fees was exacerbated by the high-handed and dismissive manner in which Mr Russo responded to queries made on behalf of the Client.
82. The fine to be imposed must convey to the legal profession and to the community in general that such conduct is unacceptable.
83. The Court was informed that it was common ground between the parties that the applicable maximum penalty would not be increased beyond that applicable at the time the matter was dealt with (T 16.14). Approaching the matter on the agreed basis that the maximum penalty would be $75,000, the appropriate fine to mark the Court’s censure of this misconduct in the present case is $20,000. For the reasons given above, particularly at [52] – [54], this was a serious case of professional misconduct involving an elderly and unwell former client and none of the cases cited by Mr Russo as a “comparable” stands in the way of that conclusion.

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The legendary foundation author of Quick on Costs, Roger Quick, has asked me to put this old workmanlike paper on my blog so that he can cite it and link to it in the second edition of that monumental text which he is kindly working on for all our benefits.

What follows does not deal with any developments in the law since 2010, or indeed anything I have learnt since 2010, when I delivered the paper, and so it is out of date, but it might still be of use in some jurisdictions which have not adopted the Legal Profession Uniform Law or by analogy in some cases which are governed by that law.  Sorry about the formatting, which is the product of copying and pasting a Word document into WordPress.

1. Summary

This paper does not deal with contingent, or no-win no-fee retainers.  In relation to all other matters, the take-home points are these:

The Legal Practice Act, 1996 continues to apply to matters in which the lawyer was retained after 1 January 1997 and first instructions were taken before 12 December 2005. Matters in which first instructions were taken after that are dealt with under the Legal Profession Act, 2004, regardless of when the retainer or costs agreement were entered into.

The Family Law Act, 1975 provided a disclosure regime for costs of Family Court litigation, and gave jurisdiction to the Family Court to decide costs disputes. It covered the field and impliedly repealed the state legislation.  By virtue of legislative amendment, however, the Legal Profession Act, 2004 has applied to fees for work after 1 July 2008.

The provisions of the 2004 Act are not a code; the onerous pre-existing obligations arising at common law and equity remain: Nicholson v Behan & Speed [2000] VLPT 28 (see my blog here). In other words, ticking the boxes of the disclosures mandated by legislation may not be enough, especially in the case of hourly rate costs agreements providing for charges well in excess of scale / PRO.

Solicitors have disclosure obligations to ‘clients’ and ‘third party payers’ alike in all matters in which the estimated total costs (including disbursements) are $750 or more, unless certain exceptions are applicable.

There are two separate disclosure regimes: costs disclosure, and disclosure requirements associated with bills. Non-compliance with each has different consequences.

1.1 Costs disclosures

Solicitors have obligations to give costs estimates and other information before being retained, or, if that’s not possible, as soon as reasonably practicable afterwards.

They have obligations to make disclosures relating to fees during the retainer too, for example upon briefing counsel, and at settlement.

They have obligations to give estimates of counsel’s fees, but if counsel do not provide them with the information to enable them to pass it on, the consequences of non-disclosure will not be visited on the solicitor’s own professional fees or on disbursements other than the affected fees of the counsel in question.

Solicitors have obligations to give written updates of matters disclosed should they change.

All the disclosures except those upon settlement of litigation must be given in writing, and be given in clear language.

There are numerous exceptions to the obligation to give costs disclosures some of which rely on complicated definitions within the Corporations Act, 2001. Many lawyers make the mistake of thinking that there is no need for a formal costs agreement in those cases where costs disclosure is unnecessary, but that is not so.

If there is any breach of any of the costs disclosure obligations (as opposed to the billing disclosures):

• • any lawyer ‘involved in’ the failure may be investigated for unsatisfactory professional conduct or professional misconduct, and then reprimanded (in which case the Legal Services Commissioner’s discretion to go easy on him or her next time within the next 5 years will be limited) or charged in disciplinary proceedings at VCAT, where any loss carries an obligation to pay the Commissioner’s costs of the proceeding, and publication on Austlii and on the Register of Disciplinary Action;
  • the partners of the firm may also be deemed to have engaged in unsatisfactory professional conduct or professional misconduct by virtue of being ‘principals’, subject to limited defences in relation to which they bear the onus of proof, and so may be investigated and reprimanded or prosecuted as well;
  • the client ‘need not pay the legal costs’, and the firm may not ‘maintain proceedings for recovery of the legal costs’ unless and until (i) they have first been taxed in a solicitor-client taxation (generally, in such circumstances, at the firm’s expense) or (ii) been the subject of a ‘costs dispute’ in the Office of the Legal Services Commissioner and possibly after that in VCAT;
  • at taxation the Supreme Court’s Costs Court (formerly known as the Taxing Master) may reduce the taxed costs as a penalty for non-compliance;
  • in non-2004 Act matters in VCAT, decision makers have used unconscionability provisions to penalize lawyers for non-compliance by reducing the fees allowed;
  • the amount of costs may probably be reduced as well in a civil complaint about fees and disbursements of $25,000 or less per matter, (commonly known as a ‘costs dispute’) in VCAT via the office of the Legal Services Commissioner;
  • non-compliance is one of the factors VCAT is directed to take into account in an application to set aside a costs agreement; and
  • significant non-compliance may result in the Costs Court exercising its (relatively new) jurisdiction to conduct a taxation on scale / PRO rather than against a costs agreement, even where no application has been made to set aside the costs agreement (in which case the taxed costs may be further reduced by the penalty for non-compliance).

1.2 Bill disclosures

The firm may not commence proceedings to recover fees until 65 days after a bill conforming with the Act’s requirements has been ‘given’. Proceedings brought in contravention of that prohibition will be stayed.

The disclosures required to be part of a bill are about the options for challenging the fees to which the bill relates. The time limits for exercising the options have been varied by amendment, as have the rules relating to interest, and lawyers’ bills frequently get things wrong.  The errors are  unnecessary because there is a prescribed form which may be used, avoiding the problems.

If the bill disclosures are not given properly, then at least arguably, the various time limits which are counted from the ‘giving’ of the bill will not have started. A year down the track, when you finally decide to sue for fees, you might find you have to re-render a conforming bill.  Not only would you then have to wait another 65 days to sue, but you would give the client an opportunity they would not otherwise by then have had to seek what used to be called a bill of costs in taxable form (now ‘itemised bill’) or apply for taxation.

Additionally, bills are required to contain a statement as to the interest which will be charged if they are paid late. If they do not, the firm may not charge any interest at all.

2. The Legislation

We have had costs disclosure obligations mandated by legislation for a long time now.  The Legal Practice Act, 1996 came into operation on 1 January 1997, and applied to matters in which the solicitor was retained after that date, and to costs agreements made after that date: cl 18, Schedule 2.  There is a similar regime under the Legal Profession Act, 2004, which came into force on 12 December 2005 but, as we will see, the differences are kickers. The Legal Profession Regulations, 2005 contain provisions relevant to about the costs disclosure and bill disclosure regimes alike.

The 1996 Act continues to apply to all matters in which the lawyer was retained in or after 1997 and instructions were first received before 12 December 2005, regardless of when the costs agreement was entered into.

Where counsel were first briefed after 12 December 2005: the 1996 Act continues to apply both to the solicitors’ retainer and the barrister’s brief.  See cl. 3.1 of Schedule 2 of the 2004 Act.  (A similar transitional provision was to be found in the 1996 Act.)

The Fair Trading Act, 1999 has a relevance too.  Even in those cases where the Legal Profession Act, 2004 does not specify consequences of non-compliance as having application, VCAT has proved creative in fashioning remedies under the Fair Trading Act for such non-compliance, as we will see below.

3. Who must give disclosures?

Obviously, solicitors must give disclosures to their clients, and barristers engaged directly by clients on a direct access basis stand in the same position vis-à-vis their clients.  But so too must barristers give disclosures to solicitors, as must other lawyers who are retained by the client’s principal solicitors, like town agents and costs consultants.  In fact, the obligation to give disclosures is cast on ‘law practices’.  So it is cast on the company in the case of an incorporated practitioner, and on the partners in the case of a firm.

4. To whom must disclosures be given?

Costs disclosures must be given to ‘clients’ (s. 3.4.19) and, to the extent relevant to ‘associated third party payers’, to them as well (s. 3.4.18A).  The former are defined as follows:

‘client includes a person to whom or for whom legal services are provided’ (s. 1.2.1).

I cannot envisage any other person who might be a client so as to justify the inclusive definition. Evidently, though, disclosures are to be given to a broader class of person than those law firms have either a retainer and/or costs agreement with.

‘Third party payers’ are non-clients who are under a legal obligation to pay some or all of the legal costs for legal services provided by the client: s. 3.4.2A.  The obligation may arise under contract, pursuant to legislation, or ‘otherwise’ (perhaps pursuant to Court order): sub-s. (2).  All third party payers may apply for taxation of a bill, but the disclosure obligations to clients are extended only to ‘associated third party payers’.  They are third party payers who owe an obligation to the lawyers directly to pay their fees, as opposed to owing an obligation to the client to indemnify  the client’s liability to the lawyers for fees (a ‘non-associated third party payer’). Examples, depending on the parties’ contractual relationships, may include:

• • litigation funders;
  • liability insurers who hire lawyers to conduct insureds’ defences;
  • a brother who hires a lawyer to get his sister out of jail.

5. To whom need disclosures not be given?

Some but not all of the costs disclosure requirements need not be given in certain circumstances.  The exceptions do not apply to disclosure requirements upon settling litigation, to the provision of progress reports, or to bill disclosures. The Act speaks of all clients’ ‘right to obtain reasonable information’ in relation to the matters which are required to be disclosed by s. 3.4.9 (that is, the principal costs disclosures required to be made by solicitors at the start of the retainer), even if the law firm is not excepted from the obligation voluntarily to disclose it: s. 3.4.12(5)(b).

The class of persons to whom costs disclosures need not be given is not the same as the class of ‘sophisticated clients’; it is wider. ‘Sophisticated client’ is defined by s. 3.4.2 to mean the class of person described in ss. 3.4.12(1)(c) and (d), two of the provisions specifying classes of person to whom disclosures need not be given.  They are described under sub-headings 5.3 and 5.5 below ‘Tenders’ and ‘Classes of client’.[1] In addition to them, disclosures need not be made to clients who have agreed to waive their rights to disclosure, pro bono clients, and certain classes of clients prescribed by regulation.

Bill disclosures must accompany all bills (s. 3.4.35), except those addressed to sophisticated clients: sub-section (2).  People often forget to put the disclosures on bills of costs in taxable form, and I have seen it argued that such bills are not ‘given’ if they do not have disclosures accompany them any more than a lump sum bill given at first instance is given if unaccompanied by the disclosures.

When pleading an allegation of non-disclosure, I plead out the facts which take the solicitor-client relationship outside the classes of excepted relationship.

The paragraph numbering below in this section 5 of the paper is to sub-paragraphs of s. 3.4.12(1), and what follows are the cases where costs disclosure need not be given.

5.1  Fees less than $750

No costs disclosures have to be given for so long as the estimated total legal costs of the matter, excluding disbursements, are $750 or less: s. 3.4.12(1)(a) and sub-section (2).

‘Legal costs’ are defined to mean:

‘amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest.’ (s. 1.2.1)

Whether counsel’s fees are disbursements or not for the purposes of various provisions has been a surprisingly vexed topic over time.[2]  I remain unsure, but would err on the side of assuming that likely counsel’s fees are counted towards the $750 limit.

5.2  Client waiver

Law firms need not make costs disclosures to existing clients who have been given disclosures within the last year and who have agreed in writing to waive their rights to further disclosures.  But only if a partner ‘decides on reasonable grounds that, having regard to the nature of the previous disclosures and the relevant circumstances, the further disclosure is not warranted’: s. 3.4.12(1)(b).   A written record of such a decision must be made and placed on the solicitor’s file, and the Act goes out of its way to say that the reaching of a decision that further disclosure is not warranted on grounds other than reasonable grounds may amount to unsatisfactory professional conduct or professional misconduct: sub-ss. (3) and (4).

I am unaware of any law on this provision, and so I would use it only in those situations where to give disclosure after disclosure to the same person within the same client in relation to essentially the same recurring matter to be conducted by the same person at the same rates and much the same cost would be to succumb to nonsensical bureaucracy. Why buy into the issue of the reasonableness of derogation from the Act where getting it wrong may have disciplinary consequences for the person concerned and the partners, and when compliance with the Act is easy enough?

5.3 Tenders

Costs disclosures need not be given

(d)       if the legal costs or the basis on which they will be calculated have or has been agreed as a result of a tender process.

5.4 Pro bono etc.

Costs disclosures need not be given

(e)        if the client will not be required to pay the legal costs or they will not otherwise be recovered by the law practice.

Note that ‘legal costs’ includes disbursements: s. 1.2.1.  Many modern pro bono retainers used by large firms require the client to pay hard disbursements, so that the exception may be inapplicable.

I would suggest that by virtue of the second limb of this exception, it would not be available in that species of pro bono retainer in which the law firm is entitled to recover fees if the client is entitled to recover from the other side in litigation pursuant to the rules of the court (e.g. of and incidental to amendment) or pursuant to a court order, and only to the extent of such recovery.  (In relation to this kind of retainer, incidentally, see Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474.)

5.5 Classes of clients

By virtue of s. 3.4.12(1)(c), and of sub-section (f) read with r. 3.4.2 of the Legal Profession Regulations 2005, in the case of costs disclosures only, they need not be made to clients who are:

(c)(i)    A law practice or an Australian legal practitioner. ‘Australian legal practitioners’ are lawyers who hold an Australian practising certificate: s. 1.2.1.  A ‘law practice’ is:

(a)        such a lawyer in sole practice as a solicitor or a barrister;

(b)       a law firm (that is, a partnership of Australian practising certificate holders, certain foreign lawyers, and/or incorporated legal practices);

(c)        a multi-disciplinary partnership (a partnership of lawyers and others provided for by the 2004 Act);

(d)       an incorporated legal practice (such as Slater & Gordon Ltd); or

(e)        a community legal centre (such as the Fitzroy Legal Service).

(f)        An overseas-registered foreign lawyer or a foreign law practice.

(c)(ii)   A public company within the meaning of the Corporations Act, 2001. Section 9 of that Act is its definitions section.  That says ‘“public company” means a company other than a proprietary company,’ and ‘“proprietary company” has the meaning given by subsection 45A(1)’. That section provides:

‘A proprietary company is a company that is registered as, or converts to, a proprietary company under this Act.

Note 1:       A proprietary company can be registered under section 118 or 601BD. A company can convert to a proprietary company under Part 2B.7.

Note 2:       A proprietary company must:

*   be limited by shares or be an unlimited company with a share capital

*   have no more than 50 non‑employee shareholders

*   not do anything that would require disclosure to investors under Chapter 6D (except in limited circumstances). (see section 113).

(c)(ii)   A subsidiary of a public company within the meaning of the Corporations Act, 2001. By s. 9, it defines ‘subsidiary’ to mean ‘in relation to a body corporate, … a body corporate that is a subsidiary of the first-mentioned body by virtue of Division 6 [of Part 1.2].’  Division 6 comprises ss. 46 – 50AA.  Section 46 (‘What is a subsidiary?’) says:

‘A body corporate (in this section called the first body ) is a subsidiary of another body corporate if, and only if:

(a)  the other body:

(i)        controls the composition of the first body‘s board; or

(ii)       is in a position to cast, or control the casting of, more than one‑half of the maximum number of votes that might be cast at a general meeting of the first body; or

(iii)      holds more than one‑half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b)  the first body is a subsidiary of a subsidiary of the other body.’

(c)(ii)   A large proprietary company within the meaning of the Corporations Act.  A company may vary between large and small proprietary company status from financial year to financial year. Presumably it is the financial year in which the disclosure is given that is determinative. It may not be possible, with some companies, accurately to predict whether the company will be a small proprietary company in the relevant financial year.  The Corporations Act’s definition is in s. 45A(3):

‘(3)      A proprietary company is a large proprietary company for a financial year if it satisfies at least 2 of the following paragraphs:

(a)        the consolidated revenue for the financial year of the company and the entities it controls (if any) is $25 million, or any other amount prescribed by the regulations for the purposes of paragraph (2)(a), or more;

(b)       the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is $12.5 million, or any other amount prescribed by the regulations for the purposes of paragraph (2)(b), or more;

(c)        the company and the entities it controls (if any) have 50, or any other number prescribed by the regulations for the purposes of paragraph (2)(c), or more employees at the end of the financial year.’

(c)(ii)   A foreign company within the meaning of the Corporations Act.  The definition is in that Act’s s. 9:

‘(a)      a body corporate that is incorporated in an external Territory, or outside Australia and the external Territories, and is not:

(i)        a corporation sole; or

(ii)       an exempt public authority; or

(b)       an unincorporated body that:

(i)        is formed in an external Territory or outside Australia and the external Territories; and

(ii)       under the law of its place of formation, may sue or be sued, or may hold property in the name of its secretary or of an officer of the body duly appointed for that purpose; and

(iii)      does not have its head office or principal place of business in Australia.’

(c)(ii)   A subsidiary of a foreign company within the meaning of the Corporations Act.  See above for the definition of ‘subsidiary’.

(c)(ii)   A registered Australian body within the meaning of the Corporations Act. Section 9’s definition is ‘a registrable Australian body that is registered under Division 1 of Part 5B.2.’  ASIC’s website says:

‘These are bodies not registered under the Corporations Act 2001. They can be either:

• • • a registered body that is not a company, recognised company, exempt public authority or corporation sole, or
    • an unregistered body having certain rights and obligations (may sue or be sued, or may hold property in the name of its secretary or of an officer of the body duly appointed for that purpose). Examples include trading co-operatives and incorporated associations.

Registrable Australian bodies carrying on or wishing to carry on business outside their state of registration are registered on a national basis and each is allotted an Australian Registered Body Number (ARBN).

Registrable Australian bodies do not include foreign companies.’

(c)(iii)  A financial services licensee within the meaning of the Corporations Act.  Apart from certain exempt persons (see s. 911A(2)), ‘a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services’: s. 911A. Division 4 of Part 7.1 deals with financial services.  It commences at s. 766A, which says that a person provides a financial service if they provide financial product advice, deal in a financial product, make a market for a financial product, operate a registered scheme, provide a custodial or depository service, or engage in conduct prescribed by regulation, the meaning of which concepts is set out in ss. 766B – 766E.

(c)(iv)  A liquidator, administrator or receiver ‘as referred to in’ the Corporations Act.

(c)(v)   A partnership that carries on the business of providing professional services if the partnership consists of more than 20 members or if the partnership would be a large proprietary company (within the meaning of the Corporations Act) if it were a company.  ‘Partnership’ is not defined by the 2004 Act, but see s. 5, Partnership Act, 1958 and Fletcher, The Law of Partnership in Australia (Thomson, 9^th ed., 2007), ch. 2.

(c)(vi)  A proprietary company within the meaning of the Corporations Act formed for the purpose of carrying out a joint venture, if any shareholder of the company is a person to whom disclosure of costs is not required.  See above for the definition of ‘proprietary company’.

(c)(vii) An unincorporated group of participants in a joint venture, if any member of the group is a person to whom disclosure of costs is not required and if any other members of the group who are not such persons have indicated that they waive their right to disclosure.

(c)(viii) A Minister of the Crown in right of a jurisdiction or the Commonwealth acting in his or her capacity as such, or a government department or public authority of a jurisdiction or the Commonwealth. ‘Public authority’ is not defined in the 2004 Act.

(f)        A corporation that has a share capital and whose shares or the majority of whose shares are held beneficially for an Australian government.

6. What must be disclosed?

6.1 Costs disclosures

(a) The costs estimates

Section 3.4.9(1)(c) requires the provision of:

‘an estimate of the total legal costs or, if that is not reasonably practicable-

(i)        a range of estimates of the total legal costs; and

(ii)       an explanation of the major variables that will affect the calculation of those costs’.

There is not a lot of law on this provision,[3] but in Casey v Quabba [2005] QSC 356, the statement ‘it is estimated the possible range of fees and costs recoverable will be between nil and $250,000 (approximately)’ did not satisfy the NSW correlate of s. 3.4.9(1)(c) as not being a ‘genuine attempt to inform the client as required by the [correlate provision].’  The case was reversed on appeal on a different point.

Also relatively unexplored is the extent to which it is permissible to limit retainers to stages of a ‘matter’.  So, for example, a retainer may define the work to be done as that necessary to achieve post-discovery mediation, or just the work necessary to draft, file, and serve originating process.  Absent such a consensual limitation, the estimate ought contemplate both the best and worst case scenarios for the ‘matter’ the subject of the retainer, i.e. the costs of arriving at a point where settlement might be achieved because the solicitor knows enough about the case to be able to provide advice as to settlement (best reasonable case) and to the end of a contested trial with as many joined parties and counterclaims as may be in contemplation as possibilities (worst reasonable case).

(b) The principal initial disclosures

Section 3.4.9(1) requires the following disclosures in all matters:

(b)       The client’s right to-

(i)        negotiate a costs agreement with the law practice;[4] and

(ia)      receive a bill from the law practice; and

(ii)       request an itemised bill within 30 days after receipt of a lump sum bill.

(h)       The client’s right to written progress reports upon reasonable request in relation to the progress of the matter and in relation to the costs to date of the matter;

(j)        The availability of, and the time limits applicable to: what used to be called taxation[5], applications to set aside costs agreements, and making complaints to the Legal Services Commissioner (e.g. disciplinary complaints for gross overcharging and that species of civil complaints that used to be called costs disputes);

(m)      Information about the client’s right to choose a different law [principally applicable, presumably, where the client is interstate].

The  disclosures above, under this sub-heading are taken to have been made if disclosures in the following form are made, but use of the form is not mandatory (and is, for some reason, uncommon):

‘Legal Profession Act 2004 Legal costs-your right to know

You have the right to-

• • • Negotiate a costs agreement with us
    • Receive a bill of costs from us
    • Request an itemised bill of costs within 30 days after you receive a lump sum bill from us
    • Request written reports about the progress of your matter and the costs incurred in your matter
    • Apply for costs to be assessed within 12 months if you are unhappy with our costs
    • Apply for the costs agreement to be set aside
    • Make a complaint to the Legal Services Commissioner. This includes making a complaint that involves a civil dispute to the Legal Services Commissioner within 60 days after the legal costs were payable or, if an itemised bill was requested in respect of those costs, within 30 days after the request was complied with
    • Accept or reject any offer we make for an interstate costs law to apply to your matter
    • Notify us that you require an interstate costs law to apply to your matter

For more information about your rights, please read the fact sheet entitled Legal Costs-Your Right to Know. You can ask us for a copy, or obtain it from the Legal Services Commissioner (or download it from their website).’

The Commissioner’s fact sheet is here.  (See also the fact sheet ‘Your Right to Challenge Legal Costs’, available here.)

The following disclosures are required in all matters as well, but there is no form prescribed in respect of them:

(a)        The basis on which legal costs will be calculated, including

(a)        whether a practitioner remuneration order [e.g. the Practitioners Remuneration Order (PRO), formerly known as the SRO] or scale of costs [e.g. the County Court scale of costs appended to the Rules of Civil Procedure] applies to any of the legal costs.

(b)(iii) The client’s right to be notified of any substantial change to the matters disclosed under section 3.4.9.[6]

(e)        Details of the intervals (if any) at which the client will be billed.

(f)        The rate of interest (if any) that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest [the maximum interest chargeable is a benchmark rate plus 2%, namely the Reserve Bank’s Cash Target Rate; as to interest more generally, see below].

(i)        Details of the person whom the client may contact to discuss the legal costs.

(l)        That the law of Victoria applies.

Section 3.4.9(1)(g) additionally requires disclosure in all ‘litigious matters’[7] of an estimate of:

(i)        The range of costs that may be recovered if the client is successful in the litigation.

(ii)       The range of costs the client may be ordered to pay if the client is unsuccessful.

(c) Legal Aid

Rule 39.2(b) of the Solicitors’ Professional Conduct and Practice Rules 2005 provides that a solicitor must:

‘when taking instructions from a client, or as soon as possible thereafter, inform the client of any rights the client may have to apply for legal aid unless there is no real possibility that the client is eligible to receive legal aid.’

(It is convenient to note this obligation here, since it is a disclosure to be provided at the outset, but because it is not an obligation under the 2004 Act, the only one of the consequences of not complying with it discussed below is the disciplinary consequence.)

(d) Counsel’s fees

Section 3.4.10 deals with disclosures of counsel’s fees, and the fees of other lawyers retained by the principal solicitor.  A note in the legislation summarises it as follows:

‘An example of the operation of this section is where a barrister is retained by a firm of solicitors on behalf of a client of the firm.  The barrister must disclose to the firm details of the barrister’s legal costs and billing arrangements, and the firm must disclose details to the client.  The barrister is not required to make a disclosure directly to the client.’

I am not sure how this section would be interpreted in the case where solicitors briefed counsel, but the barrister made a fee agreement direct with the client.  It would all depend on whether a brief is a ‘retainer’ if unaccompanied by a promise to pay.

(e) Upon settlement

Section 3.4.13 requires that if a firm negotiates the settlement of a litigious matter on behalf of a client, the law practice must disclose to the client, before the settlement is executed:

• • A reasonable estimate of the amount of legal costs payable by the client if the matter is settled, including any costs payable to any other party; and
  • A reasonable estimate of any contributions towards those costs likely to be received from another party (i.e. any party party costs payable by another party and, I would suggest, the prospects of executing successfully on any such costs order).

The idea is that the client should know how much he will get in his pocket if he accepts a settlement offer.

Note that there is no express requirement of writing.

(Note also that rule 39.2(a) of the Solicitors’ Professional Conduct and Practice Rules 2005 provides that solicitors must:

‘When it is practicable to do so, prior to the settlement of a litigious matter, provide to the client a written estimate of the net amount that the client will receive should the matter be settled in accordance with the proposed settlement.’

Once again, non-compliance with this conduct rule may only result in the disciplinary consequence below.)

(f) Updates when things change

Section 3.4.16 says:

‘A law practice must, in writing, disclose to a client any substantial change to anything included in a disclosure already made under this Division as soon as is reasonably practicable after the law practice becomes aware of that change.’

This is an obligation observed in the breach, and it causes problems for lawyers regularly.  Telling a client that the fees have already exceeded the estimate by the difference between  the estimate and the total billed to date, which is what often passes for compliance, is unlikely to amount to compliance with the obligation.

(g) Progress Reports

Section 3.4.18 requires firms upon reasonable request to give a written report of the progress of the matter and of the costs incurred by the client to date, or since the last bill.  Barristers need not respond to such a request from a client, but must provide solicitors with sufficient information to allow them to respond to a client request.

6.2 Bill disclosures

Bills are required to make disclosures about options for challenging the legal fees billed, and about the interest which will be charged in the event of late-payment. Both the time limits for exercising the avenues to dispute fees and the permissible rate of interest chargeable on unpaid fees have changed since the 2004 Act came into force.  Many solicitors’ billing practices have failed to keep up with these developments with sometimes disastrous consequences for them.

(a) Options for challenging bill

Section 3.4.35(1) provides:

‘A bill must include or be accompanied by a written statement setting out-

(a)        the following avenues that are open to the client in the event of a dispute in relation to legal costs-

(i)        costs review under Division 7;

(ii)       the setting aside of a costs agreement under section 3.4.32;

(iii)      making a complaint under Chapter 4; and

(b)       any time limits that apply to the taking of any action referred to in      paragraph (a).’

‘Costs review’ under Division 7 of Part 3.4 of the 2004 Act is what used to be known as solicitor-client taxation.   Whereas before, the Supreme Court’s Taxing Master conducted them, now the Costs Judges or Costs Registrars of the Costs Court of the Supreme Court conducts them. According to the Legal Services Commissioner’s fact sheet ‘Your Right to Challenge Legal Costs’, the situation is as follows for matters caught by the 2004 Act:

‘If you received the bill before 9 May 2007, an application for costs review must be made within 60 days of receiving the bill. If you received the bill on or after 9 May 2007, an application for costs review must be made within 12 months after –

• • • the bill was given or the request for payment was made to you; or
    • the costs were paid if neither a bill was given nor a request was made.’

The conditions for extending the time vary.  Under the latest regime, ‘sophisticated clients’ may not have the time extended.

As to how a bill is ‘given’, and as to the presumptions as to when it is given, see ss. 7.2.3 and 7.2.4; they are relevant in ascertaining the deadline for seeking taxation.

Costs agreements may be set aside, on application by a client, if they are not ‘fair or reasonable’ according to a myriad of matters VCAT is to have regard to.  Where a costs agreement is set aside, bills may have to be re-drawn on scale and the difference between the amounts billed and paid, and the scale allowances, refunded.  According to the Legal Services Commissioner, there is no time limit for applying to have a costs agreement set aside.

Complaints under Part 4 of the Act encompass disciplinary and civil complaints.  One species of civil complaint is the ‘costs dispute’. Such a civil complaint may be brought only where the costs of the entire matter are $25,000 or less. Disclosure only ever seems to be given of the availability of costs disputes, despite the potential for disciplinary complaints about costs.  This appears to be acceptable to the Legal Services Commissioner.  The time limit for bringing a costs dispute is:

60 days after the legal costs were payable or, if an itemised bill was requested in respect of those costs, within 30 days after the request was complied with.

Happily proper notice of all this complexity may be deemed to have been achieved by the provision of a form (B4) mandated by r. 3.4.5, Legal Profession Regulations, 2005 which says:

‘Legal Profession Act 2004 Your rights in relation to legal costs

The following avenues are available to you if you are not happy with this bill-

• • • requesting an itemised bill
    • discussing your concerns with us
    • having our costs assessed
    • making a complaint to the Legal Services Commissioner
    • applying to set aside our costs agreement

There may be other avenues available in your State or Territory (such as mediation). Time limits apply to the avenues for resolving costs disputes. For more information about your rights, please read the fact sheet titled Your Right to Challenge Legal Costs. You can ask us for a copy, or obtain it from the Legal Services Commissioner (or download it from their website).’

Surprisingly few lawyers use it.  They should, because errors in bills are manna from heaven to costs lawyers retained by disgruntled clients.

(b)   Interest

Section 3.4.21(3) provides:

‘A law practice must not charge interest … on unpaid legal costs unless the bill for those costs contains a statement that interest is payable if the costs are not paid and of the rate of interest.’

Lawyers are no longer entitled to charge interest at the penalty rate provided for by the Penalty Interest Rate Act, 1983 on unpaid bills.  Lawyers are free to negotiate any interest regime they like, so long as the rate does not exceed the rate 2% greater than the Cash Rate Target specified by the Reserve Bank which was applicable on the day the bill was ‘given’.  See s. 3.4.21.  That means that unlike the former regime, where the rate applicable varied in respect of any one bill over time, depending on the rate applicable during each subsequent period of arrears, now each bill will carry interest at the same rate for the entire period of arrears, though bills rendered at different times may carry interest at different rates from each other.

These legislative amendments are treated in some detail on my blog here.

7 When must disclosures be given?

Costs disclosures to clients must be given before or as soon as reasonably practicable after being retained: s. 3.4.11.

Disclosures to third party payers must be given at the same time unless the law firm was unaware of the third party’s obligation to pay, in which case the disclosure is to be made as soon as reasonably practicable after it becomes aware: s. 3.4.18A.

A question which often arises is to what extent a second or subsequent solicitor can take the benefit of disclosures made by a previous solicitor.  The answer is apparently not at all; in JDRL Pty Ltd v Vintrix International Pty Ltd [2008] VCAT 985, where a solicitor joined a new firm and the new firm did not reiterate the disclosures given originally by the solicitor who worked on the matter throughout.  See my blog here.

A useful costs disclosure may often not be able to be provided until the client has been interviewed, and the papers read.  I think the courts will recognize that.  I suggest entering into a costs agreement and providing the disclosures which can be provided at the outset, as well as an estimate of the total costs of reading into the matter to be able to provide an estimate of the whole matter, and then providing an estimate of the total costs later. Camillins Solicitors Pty Ltd v Yu [2008] VCAT 984 supports my belief that, in appropriate cases, ‘as soon as reasonably practicable’ may be relatively liberally interpreted:

‘A legal practitioner is obliged to update a costs estimate “as soon as reasonably practicable” after becoming aware of a change: s.3.4.16 Legal Profession Act 2004.

This matter [which was the subject of the retainer] had been neglected by [the clients], and they were confronted with entry of judgment for $68,000 unless the matter was given the attention it deserved. In the space of seven working days, [the solicitor] endeavoured to become familiar with the background to the Magistrates’ Court proceedings, prepared an affidavit in opposition to the application, drafted an amended defence and the proposed counter-claim, drafted an affidavit of documents, prepared a brief to counsel, attended a lengthy conference with counsel out of hours, attended the hearing to instruct counsel, and participated in settlement negotiations. [The solicitor] was hindered by the fact that [one of the clients] failed to provide him with all relevant documents.

Bearing the above circumstances in mind, particularly the short period of time that [the solicitors] acted for [the clients], I find that it was not “reasonably practicable” in terms of time to update the estimate in writing prior to the tax invoice being rendered on 25 September 2007. [The solicitors] did not contravene s.3.4.16 of the Act, and I reject the defence based upon that section.’

Bill disclosures must be given with the bill.  If they are given later, I suspect the result would be that the whole bill would be taken to have been given properly, for the first time, when the disclosures which should have been on the bill in the first place are given.

8 How must disclosures be given?

The costs disclosures must be given in ‘clear plain language’, in writing.  For the illiterate they must be given orally as well.  For those whose first language is not English, they may be in another language.  See s. 3.4.15.

In Smirnios v Byrne (No 2) [2009] VSC 86, the Costs Judge diminished the fees payable to the respondent barrister by 30% on account of inadequate explanation of a fee agreement drafted and executed in English entered into by a Greek man with limited English.  As we will see below, the discount was halved to 15% on appeal.

The service provisions of the 2004 Act should be noted, in particular s. 7.2.3.[8]  Neither email nor fax transmission constitutes good service under the Act, though as usual in the law,[9] this is only an issue if the client does not admit receipt of the notice.  So should the specific service provision applicable to bills be noted: s. 3.4.34(4).  Note that the only agents to whom bills may be delivered on behalf of clients are ‘an agent, law practice or Australian legal practitioner who has authority to accept service of legal process on behalf of the [client]’: sub-section (6).

9  Consequences of non-compliance (costs)

Section 3.4.17 is headed ‘Effect of failure to disclose’.  But the consequences of not following the disclosure regime are not limited to the effects there provided for:

• • For a start, the provision appears to relate only to failures to disclose, as opposed to misleading disclosures. The law of misleading and deceptive conduct may be relevant where a disclosure is inaccurate in circumstances where the law firm cannot establish a reasonable basis for the representation, which is necessarily as to future matters.[10]
  • And as we will see, VCAT is enthusiastic about using the unconscionability provisions in the Fair Trading Act, 1999 to fashion remedies where they are not provided for in the 2004 Act.
  • Finally, 3.4.44A is undoubtedly a consequence of serious non-disclosure, and the likely reason it is not included in s. 3.4.17 is that it was introduced by amendment after s. 3.4.17 was drafted. In cases of substantial non-disclosure, it allows the Costs Court to disregard a costs agreement, and tax a bill against scale, even where the costs agreement has not been set aside by VCAT, the tribunal charged with deciding such applications brought pursuant to s. 3.4.32.

What s. 3.4.17 states as consequences are:

• • client need not pay until after taxation;
  • law firm may not sue until after taxation (these first two I refer to as the ‘two kicker provisions’);
  • client may apply for setting aside of costs agreement;
  • costs allowed on taxation may be reduced proportionately to the seriousness of the non-disclosure; and
  • disciplinary consequences.

9.1   Exceptions

Before we examine the consequences, there are a couple of circumstances in which they do not have operation.

(a)   Costs disputes at VCAT via LSC’s office

The two kicker provisions do not have operation where the costs have been the subject of a costs dispute civil complaint.  Taxation is not available in respect of legal costs that are or have been the subject of a civil complaint, i.e. a costs dispute in VCAT via the office of the Legal Services Commissioner (s. 3.4.48). So where the quasi-taxation afforded by VCAT’s costs dispute jurisdiction has been invoked, the 2004 Act recognizes that there is no need for the further step of taxation before lawyers who have failed to disclose may recover what they are entitled to under the law.  Note that the exception is apparently dependent on the historical fact of the initiation of a dispute, not on its resolution by VCAT.  See s. 3.4.17(7).

(b)           Solicitors not penalized by barrister’s non-disclosure

Section 3.4.17(5)(a) is a provision designed to save law firms from being affected by non-disclosures by barristers (and other lawyers retained on behalf of the client, e.g. interstate agents and costs consultants).  Paraphrased, it says:

If a firm briefs a barrister on behalf of a client but fails to disclose something to the client solely because the barrister failed to disclose relevant information to the firm as required by s. 3.4.10(2), then the four principal effects of non-disclosure (client need not pay fees and firm may not sue for fees until taxation, client may apply to set aside costs agreement, and costs may be reduced on taxation) do not apply to the legal costs owing to the firm on account of legal services provided by it, to the extent that the non-disclosure was so caused.

Sub-section (b) makes clear that those consequences do apply to the barrister’s fee.

(c)    Third party payers

Section 3.4.17(5A) provides that where there was non-disclosure to a third party payer but disclosure was made to the client who is also liable to pay the fees, then the adverse consequences flow only in favour of the third party payer.  And vice-versa, and so on.

9.2   The kickers

Where there is non-disclosure of anything required to be disclosed by Division 3 of Part 3.4 (‘Costs disclosure’), then until the fees have been the subject of a solicitor-client taxation, the client ‘need not pay’ the fees, and the firm ‘may not maintain proceedings for the recovery of legal costs’.  See ss. 3.4.17(1) and (2).

The disclosures required by Division 3 definitely include:

• • The basis for charging, and the estimated total fees for the matter, estimated recoverability of those fees if litigation successful, and estimated fees payable to other side if litigation unsuccessful (s. 3.4.9);
  • The rights of the client to various things, such as an itemized bill, progress reports, and to challenge legal fees (s. 3.4.9);
  • Formal matters such as what law applies, who will do the work, who to complain to, billing intervals, and interest on arrears of fees (s. 3.4.9);
  • Barristers’ fees (s. 3.4.10);
  • What the client will get in his pocket if a proposed settlement is accepted (s. 3.4.13);
  • Any substantial change to anything initially disclosed (s. 3.4.16).

Arguably, the information required to be provided by progress reports upon reasonable request (s. 3.4.18) is also within the class of things ‘required to be disclosed’ by Division 3.

I have seen hundreds of solicitors’ files and could probably count on one hand the number in which there was unarguably full compliance with all of these obligations. Of course I tend to see the problematic ones. Even those solicitors who are punctilious about these things at the time of retainer do not observe the obligations in relation to barristers’ fees or updating estimates in writing along the way.  In other words, many solicitors’ fees are amenable to substantial attack by a skilled lawyer for a client.

Deferral of payment pending taxation is a terrible consequence.  Taxation takes a long time: many months at least.  Most firms need to hire costs consultants to appear. Their fees are high: often between 7 and 10% of the bill of costs in taxable form as drawn (not a percentage of the fees allowed on taxation, i.e. of the bill as taxed). Each taxation involves several appearances.  The Costs Court can be very tough on fees for attendances the duration of which are not marked on the file (records exclusively in a time costing system are not looked upon favourably).  So too on attendances of which a proper file note as to the matters attended to justifying the time taken is not kept.  In these cases, solicitors tend to have to give evidence that they did the work, or about the subject matter of a conference, and risk being cross-examined.  To the extent their memory has faded, it is their bad luck.

Section 3.4.45(2)(b) gives rise to a presumption that the firm will pay the client’s costs of the taxation even where it ‘wins’ it in the traditional sense of justifying at least 85% of the fees claimed.  It says:

‘Unless the Costs Court otherwise orders … the law practice to which the legal costs are payable or were paid must pay the costs of the review if … (b) the Costs Court is satisfied that the law practice failed to comply with Division 3 [i.e. the ‘costs disclosure’ provisions].’

But what is even worse, as noted below under heading ‘Costs Court’s Discretion to Disregard Costs Agreement’, the Costs Court has a discretion to disregard entirely a costs agreement where it is associated with substantial non-compliance with the costs disclosure regime.

(a)  Is the client indebted to the solicitor pending taxation?

There is competing authority as to whether a solicitor is entitled to maintain a lien over documents where there has been a costs disclosure default.  See Dal Pont, Law of Costs (2^nd ed., Lexis Nexis, 2009) [2.31], fn 114, citing Patterson v Cohen [2005] NSWSC 635 at [12]-[17]; Kelly v Hogan [2004] NSWSC 238 at [35]; and Reynolds v Whittens [2002] NSWSC 155; (2002) 57 NSWLR 271 at [41].

9.3  Applications to set aside costs agreements

The 2004 Act goes out of its way to remind clients that disclosure defaults are one of the matters the Act directs VCAT to take into account in any application by a client to set aside a costs agreement on the basis that it was not fairly entered into, or that its terms were not objectively reasonable.  The reminder is in s. 3.4.17(3) and the provision about setting aside costs agreements is in s. 3.4.32.  It should not be thought that where there is non-disclosure, even substantial non-disclosure, the drastic step of setting aside the costs agreement will tend to follow; it is just one matter to be considered.  On the other hand Bariamis v Coadys [2007] VCAT 645 is a case where VCAT cancelled a costs agreement in part because no re-estimate of costs was given where it was practicable to do so and they exceeded the $5,000 estimate by $13,000.

9.4  Reduced fees

If you do not give the disclosures required by Division 3, then on taxation the Costs Court is entitled to ‘reduce the amount of the costs’ allowed ‘by an amount considered by the Costs Court to be proportionate to the seriousness of the failure to disclose’ (s. 3.4.17(4)). As we will see, the reduction is specifically provided for only in the case of taxation. But VCAT at least has proved willing to use unconscionability provisions in the Fair Trading Act, 1999 to achieve the same result in VCAT cases.

(a)  Taxation

A 15% reduction seems relatively standard in cases of non-disclosures which are not trifling.  I have heard of reductions in the realm of 50% in gross cases.  In Smirnios v Byrne (No 2) [2009] VSC 86 Justice Lasry said, in halving the reduction applied by the Taxing Master to 15%:

‘35 A reduction of the amount of costs by a Master pursuant to s 3.4.44(2)(b), as permitted by s 3.4.17(4), is directed at what is fair and reasonable in all the circumstances, not at disciplining a solicitor.’

(b) Other instances

Solicitor-client taxations are conducted by the Costs Court, a division of the Supreme Court.  Many cases about legal fees are heard in VCAT’s Legal Practice List, either under the costs dispute provisions of the civil complaint scheme under Part 4.3 Division 1 of the 2004 Act (ss. 4.3.1 and following), or under the Fair Trading Act, 1999’s ‘consumer and trader disputes’ jurisdiction (ss. 107 and following).

VCAT, and the Legal Profession Tribunal before it, was accustomed to exercising a power to reduce the costs allowed in costs disputes under s. 91 of the 1996 Act, which is not replicated in the 2004 Act.  For example:

• • In Ieremia v Salinger Bown Pty [2006] VCAT 1419, VCAT knocked 15% off a bill where the solicitor gave no estimate of the total cost or ranges of total costs at all in a no-win no-fee personal injuries case.
  • In Robert J Lawyers v Kirby [2006] VCAT 2609, VCAT knocked 15% off a bill of $7,000 where the costs disclosure had estimated total fees at $6,250 plus however much it cost to draw a lease. The hourly rates quoted were $375 to $390 for partners, $250 to $325 for senior associates and $100 per hour for support staff. The rate in fact charged was $200. The 15% was knocked off on the basis that there had been no estimate of the total costs of the matter by virtue of there having been no estimate of the cost of the lease.  See my blog here.

The Legal Practice List has found a way to reduce the amount of fees allowed to lawyers who breach the costs disclosure provisions in VCAT cases, notwithstanding that a correlate of the s. 91 power is not to be found in the 2004 Act.

For example:

• • In Wilkins v Johanssen Solicitors [2006] VCAT 2199, VCAT’s Legal Practice List said, in knocking about 7.5% off a bill:

‘There should have been more extensive advice given by [the solicitor] in relation to legal fees. It was practicable to do so. The failure to give this advice is unconscionable.’

• • In Pentony and Richardson v Goodwin [2007] VCAT 1199 (see my blog, here), the Legal Practice List said:

‘7 The ultimate account which was rendered some three months later [than an estimate of $11,305] is in the order of $7,000 greater than that estimate. The continuing by the [solicitors] to incur fees for the [client] in that amount without giving an adequate disclosure is in my view unconscionable conduct and therefore falls within the ambit of the Fair Trading Act 1999. The estimate … is a total of $11,305. The client … has paid to the [solicitors] $10,205. There is therefore a discrepancy of $1,100. In all the circumstances it is the order of the Tribunal that the [solicitors’] account be appropriately reduced in order that the sum of $1,100 is outstanding and I order that the [client] is to pay to the [solicitors] the sum of $1,100 forthwith in full satisfaction of the account rendered by [them].’

In the summary, I suggested that a reduction in fees allowed, by virtue of non-disclosures, is probably available when VCAT hears that species of civil complaint under the 2004 Act known as costs disputes.  When they do so, they exercise exclusively Legal Profession Act, 2004 jurisdiction unless someone takes the initiative to invoke the Fair Trading Act, 1999.  I said the reduction is probably available simply on the basis that if VCAT is enthusiastic enough to use the Fair Trading Act, 1999’s unconscionability provisions in Fair Trading Act matters, its enthusiasm will probably get over the hurdle of having resort to the Fair Trading Act.

9.5  Discipline

Non-compliance with the 2004 Act is the paradigm example of both professional misconduct and unsatisfactory professional conduct (s. 4.4.4(a)).  Deliberate non-compliance would theoretically be regarded seriously (and constitute professional misconduct) because of the contempt for the law it would evince, and would likely be characterized as professional misconduct.  Disciplinary consequences await not only any lawyer ‘involved in’ the non-compliance (s. 3.4.17(6)), but, by virtue of s. 7.2.12, a deeming provision providing for a particularly strict version of vicarious liability, every partner of the firm.  (In practice, however, what the Legal Services Commissioner seems to look for is one partner who is willing to take responsibility, in which case, he leaves the other partners alone.)

I am not aware of anyone having been prosecuted for disciplinary wrongs comprised exclusively of non-compliance with the costs disclosure provisions, but no doubt there have been plenty of reprimands and cautions, limiting the Legal Services Commissioner’s discretion to go easy on further disciplinary infractions made out within the next five years (see s. 4.4.13(3)(c)(ii)). And where the Commissioner does prosecute, the costs disclosure defaults may be thrown in for good measure. No doubt too, the threat of disciplinary sanction, whether or not expressly articulated by a client or third party payer, has put solicitors on the back foot in many a cost dispute, since VCAT’s decisions in disciplinary prosecutions are published on Austlii, and if the solicitor loses, disciplinary orders are published on the Register of Disciplinary Action (see s. 4.4.26).

9.6   Discretion to disregard costs agreement

Finally, in circumstances of a costs agreement’s ‘non-compliance in a material respect’ with a costs disclosure obligation, the Costs Court has a discretion to disregard a costs agreement, with the result pursuant to s. 3.4.19 that the taxation would proceed against scale, an applicable Practitioner Remuneration Order, or in the event neither applied, what is fair and reasonable: s. 3.4.44A.

The provision is poorly drafted, since it is not readily apparent that costs agreements are required to comply with any costs disclosure obligations; the costs agreement, and the costs disclosures which should ideally precede the retainer, are different things.

Nevertheless, the Costs Court has exercised the discretion at least once: Schirmer v Ledermans, (unreported, Supreme Court of Victoria, Costs Court, Wood AsJ, 26 Mary 2009; this was the first occasion of the exercise) where no estimates of the likely total costs were given, misleading statements were made in relation to other mandatory costs disclosures, and an attempt was made to obtain a waiver of entitlement to further disclosures under s. 3.4.12(1)(b) on the basis that it was burdensome and expensive for the solicitor to keep on complying with the Act.

10  Consequences of non-compliance (bills)

The entitlement to sue for fees is predicated on the provision of a conforming bill more than 65 days earlier: s. 3.4.33(1).  Proceedings brought in breach of are stayed.  Clients often then set in train the process of taxation.  Once the taxation has come to a conclusion there will almost always be an order that the client pay the firm a sum of money, by which point the suit for fees in VCAT or the Court will serve no purpose, and the costs of bringing the suit will not be recovered.  In such a case, the client must have a reasonable claim to costs of the proceedings incurred by him.

Furthermore, until a conforming bill is given, other times counted from the date of giving the bill, such as the times within which to lodge a costs dispute with the Legal Services Commissioner, or seek taxation of the bill do not commence to be counted.  The client may tie the firm up in taxation, or even just the provision of an itemized bill, regaining the initiative.

The consequences of not including a notice as to the interest rate to be charged are also unfortunate: the firm is not entitled to charge any interest at all.  Whether this consequence will be visited on firms which do provide notice, but get the details wrong (e.g. specify interest under the Penalty Interest Rate Act) is a matter that remains to be authoritatively worked out so far as I know.

Footnotes

[1] In fact, the section headed ‘Classes of client’ describes a slightly larger class, in that it includes persons to whom disclosure need not be given by virtue of sub-para (f), which says disclosure need not be given to classes of person prescribed by regulation.

[2] See Bhalla v Wisewoulds, unreported, Legal Profession Tribunal, T1010 of 1999; Dimos v Hanos [2001] VSC 173; Coady’s v Getzler [2006] VCC 1838; Equuscorp Pty Ltd v Wilmoth Field Warne [2006] VSC 28, [53].

[3] The 1996’s Act’s provision was s. 86.  Research may be conducted against the following correlates in other states: Legal Profession Act, 2006 (ACT) s. 269, Legal Profession Act, 2004 s. 309 (formerly Legal Profession Act, 1987 (NSW) s. 175), Legal Profession Act, 2006 (NT) s. 303, Legal Profession Act, 2007 (Qld) s. 308, Legal Profession Act, 2007 (Tas) s. 291, Legal Profession Act, 2008 (WA) s. 260.  Links to these statutes are at my blog, here.

[4] This makes obvious why the disclosure statement and costs agreement should be two separate things.

[5] Note that it is permissible to contract out of obligations under Division 7 of Part 3.4 of the 2004 Act, which deals with what used to be called taxation, with sophisticated clients and associated third party payers who would be sophisticated clients if they were clients: s. 3.4.48A.  Should that have occurred, then it is obviously undesirable to advise them of the availability of rights which they have contracted out of.

[6] Why the disclosure is limited to the right to be notified of changes to matters disclosed under s. 3.4.9 is puzzling given that s. 3.4.16 (the notification of changes provision) does not appear to be limited to disclosures under s. 3.4.9.

[7] The term is undefined.

[8] As to the interpretation of that provision, see Victorian Lawyers RPA Ltd v Kearney [2002] VSC 470 at [16].

[9] Unless the client is a sophisticated client and requested the bill to be given electronically: s. 3.4.34(5A).

[10] See Dal Pont, Law of Costs, (2^nd ed., Lexis Nexis, 2009) [2.33], citing Alexander v Home Wilkinson Lowry [2007] VCAT 2297 at [10]-[12].

If there were such a thing as a model paedophile, the respondent in Legal Services Commissioner v Ferguson [2021] QCAT 205, a gentleman in his early 60s, might be it.  He had psychiatric ill health and other life difficulties and turned to booze and porn, a small fraction of which was child pornography.  (No one suggested that his collection of presumably legal non-child porn was relevant in any way to his fitness to practice.)

The porn which was the subject of the criminal prosecution was accessed in 2018 and 2019.  By downloading it from a peer to peer service, he facilitated others’ viewing of the same material, so his conduct was not entirely passive. There was, however, ‘clear and convincing evidence of insight, remorse and rehabilitation’.  He had cooperated fully with the criminal law process and the disciplinary process, and voluntarily sought treatment.

In late 2019, the criminal law handed him an 18 month suspended sentence which had presumably expired without incident at the time of QCAT’s decision, though not at the time of the hearing which was, remarkably, given that it was a plea, five months earlier in February of this year.

The respondent notified his conviction to the Law Society, which many a solicitor fails to do, unaware of the obligation.  In May 2020, the Law Society cancelled his practising certificate and told him not to bother trying for another one for two years, i.e. until May 2022.  There was no challenge to this administrative action.

The other day, unrepresented, he pleaded guilty to a charge of professional misconduct brought by the Legal Services Commissioner, ‘namely that his convictions in the District Court for the serious offences constituted professional misconduct or unsatisfactory professional conduct.’  That’s the first oddity about this case: being convicted is not conduct of the practitioner, and since he pleaded guilty, one might think that he did the right thing vis-a-vis the criminal process, but perhaps that’s a bit semantic.

Then QCAT, constituted by Justice Daubney and two others, had to work out what to do with him.  Generally speaking, there is a reluctance to allow persons serving terms of imprisonment to practise whilst ‘imprisoned’, but QCAT went further.  What the Legal Services Commissioner asked the Tribunal to do is not apparent from the reasons; nor what the respondent submitted an appropriate sanction would be.

The Tribunal recorded, as always, that the purpose of the disciplinary prosecution was protective and not punitive, and recognised that the cases say that ‘Convictions for, or arising out of, child pornography offences are not prima facie evidence that a person is not a fit and proper person … even an individual convicted for the sexual abuse of minors can, albeit in a very small number of conceivable circumstances, remain a fit and proper person to practise law in this country.’

Then, unusually, it expressly found that there was no utility in striking him off for the purpose of protecting the public and there was no ‘worthwhile deterrent element in this case’.

Then the Tribunal concluded:

‘That being said, the gravity of the Respondent’s offending should be reflected in an appropriate sanction.  As was said in [Legal Services Commissioner v Woodman [2017] QCAT 385 at [49]]:

The respondent’s offences were serious and distasteful enough to require a significant period of disqualification or suspension from practice.  It is desirable to signify the seriousness with which such conduct is regarded, and to enable rehabilitation to take place, and to maintain public confidence in the profession.

Having regard to the circumstances of this case, the time which has elapsed since the offending, and the demonstrated efforts to undergo rehabilitation, the Tribunal considers that the appropriate sanction is a suspension for three years from the date of the Respondent’s conviction for the subject offences.’

Woodman had engaged in conduct beyond consuming child pornography.  He had groomed a child and used the internet to procure a child.

The Tribunal ordered the respondent not be granted a practising certificate for a period of 3 years from the date of conviction, i.e. until November 2022, extending by 6 months the prohibition imposed by the Law Society when it cancelled his practising certificate, but without expressly considering why the Law Society’s evaluation of the date when it was anticipated suspension would   no longer be appropriate was wrong.  Presumably the respondent had held a practising certificate and practised during that 3 year period, so it is a bit of an odd order, but again, perhaps that’s a bit semantic.

Why protection of the public required the practitioner not to practise for six months (or indeed at all) beyond the Law Society had told him not to practise is not really apparent from the reasons though.  The implication is that the reputation of the profession required a three year non-practise period, but clearly the Law Society did not think so.  And would the public really look askance at the profession if it did not require a  model paedophile like the respondent who had been dealt with by the criminal law and served his sentence, to stand out of the profession for a further period in addition to copping a finding of misconduct, a costs order and a reprimand, especially where there was no recorded assertion by the prosecution that rehabilitation was incomplete, and no finding to that effect?  Quite possibly, I suppose, but I would like to know how the reasoning goes for that conclusion.

The finding of professional misconduct which empowered the Tribunal to make the penal orders it made proceeded according to the following logic:

1.  Professional misconduct was defined by a provision which said conviction for a serious offence is conduct which is capable of constituting professional misconduct.

2. The test for infamous conduct in a professional respect in Allinson v General Council of Medical Education & Registration [1894] 1 QB 750 (conduct which would be reasonably regarded as disgraceful or dishonourable by other members of the profession of good repute and competency) was without doubt satisfied.

3. Accordingly, the conduct was conduct which would justify a finding that the practitioner was not a fit and proper person to engage in legal practice.

Now, one might think the provision referred to in the first step in the exercise to be a waste of ink, unless one of its messages is that conviction of a solicitor for a serious offence will not necessarily amount to professional misconduct for a solicitor. Never could that be more so than when the conduct was entirely within the private life of the practitioner, entirely unconnected with his professional life. Why this consumption of pornography fell within the class of serious offences which do amount to professional misconduct is not apparent from the reasons.

Secondly, the Allinson test is nowadays used as the test for professional misconduct at common law, and cannot be satisfied by a finding of personal misconduct in the sense of conduct unconnected with legal practice, or so I argue by reference to a High Court case which seems never to be cited when it needs to be.  And I note that Professor Dal Pont in Lawyer Discipline (2019) seems to agree, at [2.20].  If I am right, then the Allinson test was inapposite.

Thirdly, it does not follow at all from a finding of professional misconduct at common law that a solicitor is not fit to engage in legal practice, as evidenced by the many findings of such misconduct which do not result in any interference with the right to practice.

Summary A drunken male barrister approached a seated female assistant clerk whom he did not know at a dinner at a barristers’ clerks conference, lightly pushed her head downwards towards the table and away from his person and said to her in her colleagues’ presence ‘suck my dick’, moments after greeting another barrister on the clerk’s floor, his friend, at the table by sticking his middle finger out, grabbing the other barrister’s head and pulling it to and from his crotch.

The Bar Council did not seek to interfere with the barrister’s entitlement to practise, but sought a finding of professional misconduct at common law, other statutory species of professional misconduct, a behaviour management course, and a fine of $15,000 – $25,000, none of which the Tribunal granted, instead reprimanding the barrister for unsatisfactory professional conduct and ordering him to pay the costs of the prosecution.

The Bar Council appealed, contending that the Tribunal erred in not finding professional misconduct, and in imposing a penalty which was too lenient.  The  Court of Appeal (Bathurst CJ; Leeming JA; Simpson AJA) unanimously dismissed the appeal and ordered the Bar Council to pay the barrister’s costs.

I think the case establishes and/or reaffirms the following:

• • When the Court is exercising its inherent jurisdiction, the enquiry is whether the practitioner is a fit and proper person to remain on the roll, and accordingly whether professional brethren of good repute and competency would regard the conduct in question as disgraceful or dishonourable (the Allinson test) is only indirectly relevant as a useful enquiry in aid of the determination of the true test of fitness.
  • In the exercise of the Supreme Courts’ inherent jurisdictions, they may make a declaration that some specific conduct amounted to professional misconduct at common law (though such a declaration is unnecessary as a stepping stone to a finding of unfitness), if there is some good reason to do so, but the declaration is one of that conduct rendering the practitioner unfit to remain on the roll by virtue of that conduct, not a declaration that professional brethren of good repute and competency would regard the conduct in question as disgraceful or dishonourable.
  • Such a declaration may be made only in respect of conduct which has a real and substantial connection with professional practice.
  • Although the inclusive definition of ‘professional misconduct’ in the Legal Profession Uniform Law is intended to include the concept of professional misconduct at common law within the statutory concept of professional misconduct, the test for that concept is the fitness test, which is not necessarily satisfied by making out the Allinson test.  Accordingly, a disciplinary tribunal like NCAT, whose jurisdiction is constrained by the definitions in its enabling legislation — here, the LPUL — cannot find professional misconduct by application of the Allinson test.
  • The class of conduct within the Allinson test is indistinguishable from the class of conduct within one of the statutory definitions of professional misconduct (conduct which, if established, would justify a finding that the practitioner was not a fit and proper person to engage in legal practice): [160].
  • Conduct which justifies such a finding does not necessarily require interference with the practitioner’s entitlement to engage in legal practice because even though conduct may justify such a finding, it does not necessarily require such a finding when all the surrounding circumstances are fully explored: [164].
  • Conduct which is discreditable to a barrister and brings the legal profession into disrepute, such as the barrister’s ‘appalling’, ‘poorly judged, vulgar and inappropriate’ conduct ([172]-[173]), which was ‘crass’, and ‘demeaning, humiliating and inexcusable’ ([194]) does not necessarily mean that the practitioner is not a fit and proper person to engage in legal practice: [169]-[173].
  • The Supreme Courts’ inherent jurisdictions to deal with their officers is entirely protective of the community: [178].  So are statutory disciplinary tribunals’ jurisdictions entirely protective: [179].
  • In the absence of other detriments to the practitioner occasioned by conduct such as the barrister’s, such conduct warrants something more than a reprimand, namely a substantial fine.
  • But other detriments including extra-curial punishment, loss of reputation, and the costs and anxiety of protracted legal processes may mean that nothing more than a reprimand is necessary.

The barrister’s conduct was appalling, and the outcome seems at first glance to be lenient.  But the whole episode occasioned a mental illness in the barrister, who lost his marriage, lost some of his reputation despite pseudonym orders, and had suffered:

• • castigation in the media;
  • significant financial detriment (a professional indemnity insurance premium increase of more than $60,000 per annum, and liability for his own costs and the costs of the Commissioner in the first instance proceedings); and
  • the anxiety of four years of the glacial, grinding disciplinary process.

Quite what ‘entirely protective’ of the community means as a description of the disciplinary jurisdiction over professionals is, I find, perpetually elusive, especially since within the concept of protection of the community is said to be a need to protect the reputation of the legal system.  But I think it does mean this, inter alia: that, especially where there is no real risk of repetition of the conduct by the professional, a decision maker must look at all that has befallen the practitioner as a result of their misconduct, including the costs of the disciplinary process, and ask whether anything more than a declaration of wrongdoing and perhaps a caution, or in more serious cases a reprimand, is needed in order that an informed patron at the front bar of a pub would be satisfied that the practitioner has suffered enough.  Costs are the real driver in nearly every disciplinary prosecution I have been involved in, not the fine or other penalty which often pales in comparison with the costs (though unlike Victorian barristers’ insurance cover from the LPLC, this NSW barrister’s defence costs were covered by his professional indemnity insurance policy).  This case appropriately recognises all this, I think.

There is a whole other aspect of the decision about when anonymisation of practitioners’ identities is warranted, which I will not deal with in this post, except to note the following.  The NSW legislation, the relevant provisions of which are outside of the Uniform Law, and so may be different from the Victorian law, required that notwithstanding the making of an anonymisation order in respect of the barrister and the other protagonists in the dinner’s drunken events, the details of the conduct must be recorded against the practitioner’s name in the disciplinary register.  But it is not easy to search the NSW register so as to ascertain the identity of this barrister.

The detail Four and a half years ago now, on 21 July 2017, a few months before the New York Times article about Harvey Weinstein which launched the Me Too movement, a married male barrister attended a dinner which was part of a conference of barristers’ clerks.  Drunk, he approached a friend’s table and ‘greeted [him] in a fashion that the Tribunal interpreted as “a ritualised greeting which, in part, parodied oral sex”,’ as follows: he ‘stuck his middle finger of his right hand up and towards [his friend], [and] pulled his friend’s head backwards and forwards towards his … crotch’.  (If you ask me, this is the weirdest aspect of the case.  Must be a Sydney thing …)

The assistant clerk to his friend’s floor, whom the barrister did not know, was also at the table. The barrister went and ‘stood behind her, and placed his left hand on the back of her head.’

The assistant clerk’s evidence was that the barrister had taken hold of her head, pulled her head to and from from his crotch, and said to her ‘suck my dick’, until she pulled away after a few seconds, whereupon she said ‘what the fuck?’ and the barrister said something like ‘Oh, don’t report me to the Bar Association’.

The events were captured on CCTV from several angles, but there was no audio.  The video did not bear out the assistant clerk’s version of events, or various particulars of the conduct alleged by the Bar Council which were not included in her version of events.  She was regarded as truthful, but unreliable.  The Tribunal found, and the Court of Appeal said that the video showed, that the barrister lightly pushed her head towards the table she was sitting at, away from him, without putting his other hand near his crotch, said ‘suck my dick’, and she moved back to her original position and did not say anything to the barrister.  How the Bar Council managed to misconstrue the video so badly is left unexplained.

The assistant clerk immediately told the clerk for the floor what had happened.  She said that the assistant clerk was visibly distressed, her hands trembling.

Ultimatlely, following or perhaps during a glacial, convoluted, apparently incompetent and rather chaotic sounding disciplinary process, the barrister developed major depressive disorder, experienced suicidal ideation, went to a detoxification and health retreat, was divorced by his wife as a result of the shame he had brought on the family, and was left with limited contact with his children.  Professional referees said that the barrister’s conduct was out of character.

The clerks and others both made written statements within days. A director of the assistant clerk’s floor of chambers gave the statements to the Executive Director of the NSW Bar on 25 July 2017.  Why they didn’t make a complaint to the Legal Services Commissioner is unexplained.  The Bar’s man forwarded them to the police ‘in what he considered to be compliance with s 465 of the Uniform Law.’ There was no evidence that anything eventuated from that referral.

On 3 August 2017, the day after he had been advised that the Bar Council was considering his conduct, the barrister apologised in writing to the assistant clerk, without actually admitting her version of events, on the basis that he had no recollection of them.  The apology has the hallmarks of being settled by lawyers.  I cannot help wondering whether a proper apology — I’m told this is what I did; I cannot believe my own stupidity in behaving so appallingly; please let me know what I can possibly do to make amends; I understand the effect my disgraceful conduct must have had on you; I am truly sorry and will feel this guilt until the day I die; I have given up the claret; I stand ready to take whatever consequences life and the legal process deal me — might have resulted in a different and better set of sequelae.

More than a month later, the Bar Council made a complaint about the barrister to the NSW Legal Services Commissioner, who referred the complaint back to the Council for investigation.  The Court observed at [29] that this was presumably pursuant to the Commissioner’s delegation power (s. 406, LPUL), but perhaps the Bar Council was appointed to investigate under s. 282(2), and the power to determine the complaint was delegated.  It is odd that the Bar Council was at once the complainant, the investigator, the decision maker, and the prosecutor.

The complaint was that the barrister had made ‘a sexually inappropriate advance involving physical contact’.   Presumably what they meant was an inappropriate sexual advance, as NCAT, VCAT’s NSW sister tribunal, observed.

The Court also recorded at [29] that the next day NCAT notified the Commissioner of the complaint, but this is probably an error; what likely happened is that the Bar Council made the complaint to the Commissioner on that day, 8 September 2017.

The Bar Council did not resolve to investigate the complaint until 21 November 2021, even though it was the complainant.  A response to the complaint was not made by the barrister until nearly three and a half months later.  About six weeks later, the Bar Council tentatively decided to bring a disciplinary prosecution.  Nearly two months later, the barrister provided a response to this tentative decision.  Nearly two more months later again, the Bar Council decided to investigate further before finalising its decision.

Two weeks later, it withdrew its complaint and made a new one, namely that the barrister ‘made sexually inappropriate advances, including physical contact and words spoken, to an assistant clerk [H] and to another in her presence,’ particulars of which were given.  Again the Commissioner referred it back to the Bar Council, but it did not decide to investigate its own complaint for nearly a further fortnight, nearly two years after the dinner, on 12 September 2018.

In December 2018, the Bar Council again tentatively decided to prosecute, but provided a further opportunity for the barrister to make submissions.  The submissions did not move the Bar Council, which decided to prosecute four months later, on 6 June 2019.  But for reasons unexplained, it did not get around to prosecuting for another six months.

The Bar Council alleged (and the barrister admitted) that his conduct towards the assistant clerk was ‘sexually inappropriate conduct’ ‘in that’ he made ‘sexually inappropriate advances’.  The prosecution alleged that the barrister’s conduct was conduct in connection with the practice of law, and that it was properly characterised as one or more of three species of professional misconduct, or was unsatisfactory professional conduct (which can only be established in respect of conduct in connection with legal practice).  The three species were:

• • breach of the conduct rules which say that barristers must not engage in conduct which is discreditable to a barrister or that barristers must not bring the legal profession into disrepute (s. 298(b));
  • conduct in connection with the practice of law or otherwise that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice (s. 297(1)(b)) (even though they did not seek any orders which would interfere with his right to practise, and the authorities had not cancelled his practising certificate in the years between the dinner and the disciplinary prosecution’s determination);
  • misconduct at common law, which the Tribunal was said to be free to hand out statutory punishment in respect of, by implication, given the inclusive definition of ‘professional misconduct’ in s. 297.

The Tribunal found that the barrister’s conduct was not a sexual advance.  Given that is what the barrister was charged with, it is unclear why that was not the end of the case.   It characterised the conduct as unsatisfactory professional conduct, not professional misconduct.  It found that the conduct did not have the connection with legal practice required by A Solicitor v Council of the Law Society of NSW (2004) 216 CLR 253 to establish professional misconduct at common law, and so declined to decide the barrister’s contention that the Tribunal did not have jurisdiction to hear a charge of professional misconduct at common law.

Since the conduct did not justify a finding that the barrister was not fit and proper to engage in legal practice, all that was left was the breach of the rules which it found established, but better characterised as unsatisfactory professional conduct than professional misconduct.  In so finding, the Tribunal rejected an argument that the rules in question, which appear under the heading ‘Advocacy’ only applied to conduct in the course of legal practice, a finding which was not in issue on the appeal.

The Tribunal found that the barrister was truly repentant and contrite, insightful, and that there was no risk of repetition of the conduct, indeed that it was confident that there would be no recurrence of it.  NCAT reprimanded the barrister and ordered him to pay the costs of the disciplinary prosecution, declining the Bar Council’s invitation to order a fine and to require the barrister to engage in a course of sexual behaviour counselling.

The Bar Council appealed against the refusal to find professional misconduct, and against the penalty.  It said the Tribunal applied the wrong test for professional misconduct at common law, erred in concluding that the conduct was not in connection with the practice of law, and erred in concluding that the conduct was not conduct which justified a finding that the barrister was not fit and proper to engage in legal practice.

The Court identified Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 as the source of the test familiar to those who practise in professional discipline:

“‘If it is shewn that a medical man, in the pursuit of his profession, has done something with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency’, then it is open to the General Medical Council to say that he has been guilty of ‘infamous conduct in a professional respect’.”

(The words ‘then it is open to’ are almost always forgotten when versions of this test are propounded, but it seems to me that the test recognised that not all conduct which was disgraceful and dishonourable in the relevant sense would necessarily be characterised as infamous conduct in a professional respect.  So, not only does only some professional misconduct at common law justify striking off, but only some relevantly disgraceful or dishonourable conduct will constitute professional conduct at common law.)

The Court observed that the inherent jurisdiction of the Supreme Courts to strike off practitioners is the flipside of its inherent jurisdiction to admit lawyers as their officers.  It looked, appropriately, principally to the High Court cases. And it found that the High Court cases about the exercise of the inherent jurisdiction, focused on the question of fitness to remain on the roll, an enquiry which was separate from any application of the Allinson ‘disgraceful and dishonourable’ test.  Consideration of that test might be a useful way of approaching the question of fitness, but it is not determinative.  The Court concluded that:

‘156 There is, in NSW, no category of professional misconduct constituted by conduct that would reasonably be regarded (by professional peers) as “disgraceful or dishonourable”.

157 That is not to say that the Allinson formulation is irrelevant; as can be seen from the cases discussed above, it has been treated as a useful test in the determination of the fitness of a legal practitioner to remain on the roll. It does not, however, as the Council would have it, create or constitute a category of professional misconduct independent of, and different from, that class of conduct contemplated as rendering the legal practitioner “not a fit and proper person” to remain on the roll of legal practitioners.

158 There is also this to be considered: the Allinson formulation is directed solely to the conduct under consideration. As the judgment of Kitto J in Ziems demonstrates, the issue of fitness encompasses more than mere conduct. The “fit and proper person” test is directed to character, which may be determined by conduct alone, but which may also take into account other circumstances.

159 One of the statutory definitions (s 297(1)(b) of the Uniform Law) of “professional misconduct” is “conduct … that would, if established, justify a finding that the lawyer is not a fit and proper person to engage in legal practice”.

160 “Professional misconduct” determined against the “critical criterion” of “a fit and proper person” is indistinguishable from “professional misconduct” as defined in s 297(1)(b) of the Uniform Law. There was therefore nothing to be achieved by the Tribunal approaching its determination on the basis that professional misconduct at common law is something different from professional misconduct as defined in s 297(1)(b).’

In doing so, it departed from its previous decision in New South Wales Bar Association v Cummins (2001) 52 NSWLR 279; [2001] NSWCA 284, which asserted that the test for professional misconduct at common law was that in Allinson, and that it could be established by reference to conduct unrelated to legal practice, and by conduct in connection with legal practice but lacking a real and substantial such connection.  I criticised Cummins in this blog post in 2010, and thereafter watched with dismay as its heresy gained more and more adherents.  And now the NSW Court of Appeal has corrected itself, for precisely the reasons I posited, namely that it was inconsistent with the High Court’s decision in Re A Solicitor v Council of the Law Society of NSW (2004) 216 CLR 253; [2005] HCA 1.

The Court provided useful explanation of s. 297(1)(b) of the Uniform Law, which provides:

‘For the purposes of this Law, professional misconduct includes conduct of a lawyer whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the lawyer is not a fit and proper person to engage in legal practice.’

The Court explained why the Tribunal did not err in finding that the barrister’s conduct did not constitute this species of professional misconduct.  First, the Court said:

“160 Professional misconduct” determined against the “critical criterion” of “a fit and proper person” is indistinguishable from “professional misconduct” as defined in s 297(1)(b) of the Uniform Law. There was therefore nothing to be achieved by the Tribunal approaching its determination on the basis that professional misconduct at common law is something different from professional misconduct as defined in s 297(1)(b).’

Since the Court seemed clearly to endorse the proposition that professional misconduct at common law must comprise conduct with a real and substantial connection to professional practice, and since s. 297 clearly applies to conduct otherwise than in connection with the practice of law, and since the Court found that the Tribunal should have accepted the barrister’s admission that  his attendance at the dinner was in connection with the practice of law, this statement must be understood as being made in the context of the facts of this case.  Plainly, the true test of professional misconduct at common law is not indistinguishable from s. 297’s test, because conduct unconnected with legal practice is within s. 297 but without the common law concept.

Then the Court said:

‘163 … The Council pointed out, correctly, that what it needed to prove to establish professional misconduct under s 297(1)(b) was that the respondent’s conduct (as found) would justify a finding that he was not a fit and proper person to engage in legal practice. It is not necessary that the Council establish that the respondent was, in fact, not a fit and proper person.

164 We accept that, in rejecting the Council’s contention that the respondent’s conduct constituted professional misconduct within the meaning of s 297(1)(b), on the basis that it was not established that he was not a fit and proper person, the Tribunal applied a more rigorous test than is called for by the provision. Conduct that would justify a finding of unfitness is not necessarily conduct that must result in such a finding: there is a range of conduct that would justify, but not necessarily result in, such a finding; there is a range of conduct with respect to which reasonable minds might differ on whether it did, in fact, demonstrate unfitness. Section 297(1)(b) is concerned with the capacity of the conduct to constitute unfitness. We accept that the reasoning of the Tribunal was, in this respect, flawed. That does not mean that the ground must be upheld. Flawed reasoning does not necessarily mean that the conclusion reached is incorrect; a correct conclusion may be drawn notwithstanding flaws in the reasoning process.

165 By ground 5 the Council similarly complains of error in the failure of the Tribunal to find that the respondent’s conduct did in fact constitute professional misconduct within the meaning of s 297(1)(b). This ground also relied on what the Council contends to have been a flawed reasoning process.

166 The Council’s argument was, in essence, that the Tribunal’s failure to find that the respondent’s conduct constituted professional misconduct within the meaning of s 297(1)(b)was inconsistent with three of its factual findings, namely:

• • that the respondent had engaged in inappropriate sexual conduct with A;
  • that the dinner at which the conduct took place was a function connected with the practice of law; and
  • that the respondent’s conduct was conduct that was discreditable to a barrister and was likely to bring the legal profession into disrepute.

167 Put another way, the Council’s argument was that the only correct conclusion for the Tribunal to reach, on the basis of these three findings of fact, was that the respondent’s conduct justified a finding that he was not a fit and proper person to engage in legal practice.

168 We do not agree.

169 There is something of a paradox in s 297(1)(b). On a literal interpretation the paragraph focuses on the objective circumstances of the conduct found (“conduct of a lawyer whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law”). Yet, as the majority judgments in Ziems, (particularly that of Kitto J), show, a finding of unfitness involves more than an objective analysis of the impugned conduct, absent other relevant (often extenuating) circumstances. The question of fitness to engage in legal practice focuses not only on the objective circumstances of the conduct in question but also on the personal qualities of the lawyer in question, and other circumstances that bear upon the conduct. Unfitness is ultimately a finding about character, although conduct plays an important role in the evaluation of character.

170 As noted earlier in these reasons, the issue in Ziems was whether a conviction for manslaughter (by driving whilst intoxicated) was of itself sufficient to establish unfitness. By majority, the High Court held that it was not. In the passage already quoted, Kitto J drew a distinction between conduct which, of itself, demonstrated unfitness and conduct that shows “a defect of character” demonstrating unfitness.

171 To justify a finding of unfitness the conduct in question must be seen in context. But, in the two-stage process by which disciplinary proceedings are ordinarily conducted in the Tribunal, much of that which properly informs a holistic assessment of the character of the lawyer concerned, and therefore his or her fitness to engage in legal practice, will not be known until Stage 2 – by which time the conduct has been characterised as unsatisfactory professional conduct or professional misconduct. It does not seem right to characterise conduct as professional misconduct merely because, objectively speaking, it would justify a finding of unfitness if, after consideration of other relevant factors, such a finding would not be justified or warranted. It is only necessary to look at the facts in Ziems and A Solicitor to see that unfitness is not measured by the objective circumstances of the conduct alone.

172 A finding that the impugned conduct would justify a finding of unfitness needs to be made in the context of all available evidence at the time of Stage 1 of the proceeding. It may be, in some cases, that the Commissioner or the relevant professional association has available to it evidence of other instances of conduct similar to, or equally discreditable as, that under consideration; clearly that would be a relevant factor in the determination of whether the conduct in question (not being isolated) was such as to justify a finding of unfitness. That is not this case: so far as the evidence (at the Stage 1 hearing) goes, this was indeed an isolated instance of appalling conduct on the part of the respondent. (At this point, the evidence given at the Stage 2 hearing that adds weight to that inference must be ignored).

173 “Poorly judged, vulgar, and inappropriate” as the Tribunal correctly found the conduct to be, we are not persuaded that the Tribunal was wrong to decline to characterise it as conduct that would (of itself) justify a finding of unfitness. There was nothing to add to that conduct to warrant a finding of unfitness.’