A-G v Kehoe [2000] QCA 222

[1] de JERSEY CJ: I have had the advantage of reading the reasons for judgment of Thomas JA. I agree that the appeal should be dismissed, with costs to be assessed, for the reasons expressed by His Honour. I wish to add only this.

[2] The analysis provided by Thomas JA establishes that there was sufficient, good reason for the approach taken by the Solicitors Complaints Tribunal. Had the Tribunal expressed a condensed form of that justification, as the reasons for its decision, this appeal would most likely have been avoided.

[3] With a tribunal like this, the purpose of expressing, preferably publishing, sufficient reasons for such a decision, is not confined in the usual way to satisfying the parties that the issues have been addressed and properly informing a court to which an appeal may subsequently be brought. It is, in addition and importantly, to satisfy the public that the Tribunal is properly discharging its role.

[4] This Tribunal generally conducts its proceedings in public. Because of the public significance of its determinations, which relate to those to be held out as fit to practise as solicitors, it is important that interested members of the public have the opportunity to come to know of the Tribunal's justification for any decision it may make, and thereby satisfy themselves that the disciplinary process is being carried through properly.

[5] THOMAS JA: This is an appeal against a penalty imposed by the Solicitors Complaints Tribunal ("the Tribunal") in respect of unprofessional conduct. It is brought by the Honourable The Attorney-General and Minister for Justice ("the Minister") under s 6Z of the Queensland Law Society Act 1952 ("the Act").

[6] The Tribunal imposed a fine of $7,500 on the practitioner and ordered him to pay the costs of the Queensland Law Society Incorporated ("the Society"). The impost of those costs is likely to have the effect of approximately doubling the fine. The submission on behalf of the Minister is that the penalty was manifestly inadequate and that an order should have been made removing the name of the practitioner from the roll of solicitors.

[7] The charge that was laid against the practitioner was of unprofessional conduct or practice under s 3B(1) of the Act and in particular that he "failed to maintain reasonable standards of competence and diligence".

"(1) A practitioner commits "unprofessional conduct or practice" if the practitioner, in relation to the practitioner's practice, is guilty of-

(c) failure to maintain reasonable standards of competence or diligence.

(2) Subsection (1) does not, by implication, limit the type of conduct or practice that may be regarded as unprofessional for this Act".

[9] The charge was confined to conduct of the kind stated in s 3B(1)(c). It is important to note that no allegation of personal dishonesty on the part of the practitioner is raised in this case.

[10] The charge arose out of a transaction in which the practitioner's firm received instructions from another firm of solicitors (Delaney's) to act for a party (the lenders) in relation to an advance of $620,000 to a company ("XL Properties"). The principal of Delaney's was a director and shareholder of XL. The only security for the loan was to be a first registered mortgage over a property situated at Hervey Bay (the Hervey Bay property") which XL was purchasing at a price of $350,000. There was a valuation of the property prepared a little more than 12 months previously by Jacksons International Pty Ltd at $884,000.

[11] A fuller picture of the transaction, and of the practitioner's role in it can be obtained from the agreed statement of facts that was presented to the Tribunal, supplemented by evidence provided to the Tribunal by the respondent and by his secretary, Ms Chapman.

1. By contract dated 21 January 1998 X.L. Properties Pty Ltd, ACN 081 359 515 ('X.L.') contracted to purchase from Ladbroke Grove Pty Ltd, ACN 010 167 781, property comprising 4.2231 hectares of vacant land situated at Pulgul Street, Urangan, Hervey Bay. The consideration payable by X.L. pursuant to the contract was $350,000.00

2. Delaney's acted for X.L. in relation to the purchase.

3. At all material times, the directors of and shareholders in X.L. were:

Mr Delaney is a solicitor and the principal of the firm of Delaney's; Mr Moore was at all material times employed by Delaney's as Finance Mortgage Manager.

4. Acting on instructions from Delaney's, a valuation of the subject property was provided on 27 February 1998 by Russell G Jackson in the sum of $884,000.00.

5. Settlement of the purchase by X.L. was effected on 30 March 1998. The purchase was funded by loans totalling $620,000.00 made to X.L. by the lenders set out in Annexure A to the Notice of Charge ('the lenders'). Those loans were made for a term of 12 months on the basis that interest was payable six months in advance at the rate of 15 percent per annum reducible to 11 percent per annum for prompt payment. The loans were to be secured by first registered mortgage over the subject property.

6. Each of the lenders was approached by Moore and agreed to lend funds to X.L. on the terms set out in paragraph 5.

7. At the request of Delaney's, the practitioner agreed to act for the lenders in relation to the loans to X.L.

8. On 30 March 1998, the practitioner received into his trust account from Delaney's the sum of $620,000.00 representing the total of the amounts to be loaned to X.L.

9. Settlement of the purchase by X.L. was effected on 30 March 1998.

10. Mortgage investment authorities were prepared by Delaney's on or about 31 March 1998 for execution by each of the lenders.

11. By facsimile dated 31 March 1998, Delaney's advised the practitioner's firm, Proctor Kehoe that authorities had been prepared and were ready to send with a covering letter to the lenders. Delaney's proposed that Proctor Kehoe provide to Delaney's Proctor Kehoe letterhead to enable Delaney's to send out the authorities on that letterhead.

12. Proctor Kehoe provided its blank letterhead to Delaney's for that purpose.

13. On or about 2 April 1998, Delaney's sent to each of the investors on Proctor Kehoe letterhead letters dated 31 March 1998 which, inter alia, enclosed a mortgage investment authorities for execution by the lenders.

14. By facsimile dated 2 April 1998, ... Delaney's provided Proctor Kehoe with a copy of the form of letter to lenders referred to in paragraph 13.

15. The practitioner disbursed the sum of $620,000.00 in the manner recorded in his trust ledger account ...

16. The practitioner failed to obtain and peruse a copy of the valuation referred to in paragraph 4 hereof at any time prior to settlement.

17. The practitioner did not communicate with any of the lenders prior to settlement on 30 March 1998 and in particular:

(a) failed to give them or any of them any advice in relation to the transaction;

(b) failed to obtain any mortgage investment authorities".

[13] The respondent's evidence which was not contradicted or seriously challenged was that his firm is a small one consisting of himself, his secretary (not professionally qualified) and a qualified part-time consultant. His secretary made arrangements concerning this matter with Delaney's and he had no knowledge of what happened until a routine audit from a Law Society auditor drew it to his attention well after the event. His secretary had not followed the usual procedures whereunder the practitioner would be immediately notified of any new mortgage lending transaction. His normal procedure would have led to the issue of a specific authority to the lender noting any unusual circumstances such as the discrepancy between the valuation and the contract price. She conducted the matter entirely without reference to him. She unilaterally sent a bill for $500 to the client. The normal professional fee in such a matter should have been approximately one per cent of the loan amount, and would have come to about $6,000. Had he been consulted he would have attended to the matter properly and professionally and have charged the normal fee.

[14] The practitioner was appalled when he found out what had happened. He immediately put measures into place to ensure that such a scenario would not happen again. The employee was severely reprimanded, and a former bank manager was thereafter employed as mortgage clerk in respect of private mortgage lending matters.

[15] In the light of events that have subsequently transpired the project which was based on use of the Hervey Bay property has progressed without loss to any person (and in particular the lenders) in this transaction.

[16] The affidavit of the secretary includes the following:

"1. On or about 24th day of March, 1998, I received a telephone call from Sandy, the conveyancing clerk at Delaney's Solicitors. She said to me, and I verily believe, that their office had a mortgage advance transaction that she would forward the Valuation and Contract to our office for me to handle.

2, A day or two afterwards, I received a copy of the Contract and Valuation and raised the issue of the price discrepancy with Sandy. I was advised by Sandy and verily believe that Jeff Moore (Delaney's Mortgage Manager) had contacted all of the investors and informed them of the identity of the Borrowers and of the difference between the Contract price and the Valuation price.

3. Sandy advised me that she was attending to all matters and that she would forward all the relevant authorities to our office once they were received and after the Lenders had been advised of the matters above and had agreed to lend.

4. I said to Sandy that I was very busy working 12 to 14 hours a day at the time. Sandy offered to prepare the necessary mortgage documentation for me and authorities on our behalf to save time.

5. Sandy advised settlement had to be effected on an urgent basis and that she was forwarding all executed documentation to our office.

6. In all previous mortgage lending matters, I had always advised Mr Myles Kehoe of our office of any incoming loans. For whatever reason, which I cannot explain, I did not advise Mr. Myles Kehoe of the situation in relation to this transaction.

7. I advise that I have learnt a very valuable lesson and I have been given a severe reprimand by Mr. Kehoe. All new matters are brought to his attention immediately for his consideration, if notice of the transaction comes firstly to me rather than Mr. Kehoe.

8. I have read the contents of the Affidavit of Myles Anthony Kehoe and say to the extent that such affidavit refers to me or to my actions the contents of such affidavit are true and correct".

[18] The case reveals that the client lender was deceived into thinking that it had independent legal representation when in fact it did not. It was left to the mercy of the borrower. It was not however a case of a practitioner knowingly permitting himself to be used to enable such a pretence to be maintained. Had he knowingly been involved in such a purpose the conduct would have been far more serious than that alleged here, and presumably a different charge would have been preferred. The gravamen of what is alleged against him is that he failed adequately to supervise his secretary. He did not find out any relevant details of the transaction. Money was paid in and out of his trust account and he signed relevant cheques apparently without adverting to the circumstances. This is credible given the fact that Delaney's had handled the necessary mortgage investment authority and had sent them to the client on the practitioner's letterhead which Delaney's had improperly obtained from his secretary. If he had not placed undue reliance on his secretary he may have been expected to have personally ascertained that the money was clear and that the necessary authorities were in place.

[19] The circumstances give rise to the suspicion that the practitioner was permitting his secretary in effect to practice as if she was a qualified solicitor or to share receipts from the practice. But no such case was brought. Further evidence would have been needed to establish professional misconduct of that kind[1], and a different charge would need to have been laid. It would be improper for the tribunal or this court to frame a penalty on the basis of such a suspicion.

[20] It is necessary to confine the case to what is alleged in the charge and what is proved. This comes down to a failure of the principal of a small firm to supervise the actions of his secretary, resulting in reprehensible conduct by the secretary which permitted the client to be deceived by a sham organised by Delaney's and assisted by her. That conduct involved actual deceit. This tellingly identifies the consequences that can so easily follow from lax supervision in a professional office. Having said that however, the personal misconduct of the practitioner in this case does not carry the adverse reflection upon a practitioner's character that is cast by deceit or dishonesty. The practitioner did not profit from his secretary's misconduct and may be thought to have been disadvantaged by it quite apart from the consequences of the present proceedings.

The Tribunal's decision - Was the penalty manifestly inadequate?

[21] Unfortunately the Tribunal failed to give even an elementary statement of its reasons. The practitioner pleaded guilty. Having heard evidence of the relevant circumstances the Tribunal simply announced that the charge was proved, found the practitioner guilty of unprofessional conduct and stated that "the Tribunal fines the practitioner the sum of $7,500" with "the normal order as to costs" to be agreed or taxed.

[22] The Tribunal is a statutory Tribunal with an important public function to perform. It has a statutory obligation[2] to state its "findings in relation to the facts of the case", and the common law recognises a wider duty to give reasons[3]. As has been stated with respect to another administrative tribunal, "the provision of reasons engenders confidence in the community that the Tribunal has gone about its task appropriately and fairly"[4]. This is not the first occasion on which this court has expressed disapproval of the practice of simply announcing orders without providing a statement of facts or reasons. It is timely to repeat what was said by the Full Court in Adamson v Queensland Law Society Incorporated[5]:

"Unfortunately the Committee has given no indication of the level or gravity of the conduct except from the fact that it made an order for striking off. Once again this raises problems for this Court that would have been entirely avoidable by the giving of reasons.

The practice of failing to find facts and give reasons is undesirable for a tribunal such as the Statutory Committee which exercises so important a function as removing the names of professional persons from the professional roll. It is under the express statutory duty to make a statement of its findings "in relation to the facts of the case" (Queensland Law Society Act s.6(3)(b)). A failure adequately to perform that duty led to a miscarriage of judicial process in Walter v. Council of the Law Society [1988] HCA 8; (1988) 62 A.L.J.R. 153 which attracted the notice of the High Court (at 157). The duty will not necessarily be discharged by a short formula or perfunctory observation. Furthermore it is a tribunal whose decisions are subject to a statutory right of appeal. It is well established that reasons should be given by courts which are the subject of a right of appeal (Donovan v. Edwards [1922] ArgusLawRp 2; [1922] V.L.R. 87, 88; De Iacovo v. Lacanale [1957] VicRp 78; [1957] V.R. 553, 558-559; Pettit v Dunkley [1971] 1 N.S.W.L.R. 376; Hill v. Arnold (1976) 9 A.L.R. 350, 357). The basis for this lies in the difficulty of proper review whether an error has been made unless reasons are given. The duty has been described as "an obligation to give reasons where that is necessary to enable the matter to be properly considered on appeal" ( , 666 per Gibbs C.J.; at 388). The present case is plainly one where an obligation of this kind arose on the part of the Statutory Committee. Although it is not a court, its proceedings are essentially judicial in character and it is subject to a right of appeal to this Court which is prima facie in the form of the traditional rehearing on the evidence given below. ( s.6(4); 1987, rr. 25-32). The duty will arise whenever there is conflicting evidence, and whenever the Committee has a view that may help to explain why it concludes that professional misconduct is established. Indeed, quite apart from its statutory obligation to make findings of fact, on the above principles it is difficult to imagine cases in which at least basic findings and reasons ought not to be formulated".

[23] A failure to give reasons does not ipso facto amount to an error of law, and the occasions when a Court of Appeal will identify such a failure as an error of law will vary according to the nature of the case[6]. Generally speaking, an error of law is discerned when the Court draws the inference that the relevant tribunal has failed in some respect to exercise its powers according to law[7]. A lack of transparency, or obfuscation of the true basis of a decision may make it easier for a court to identify such an error[8].

[24] In the present case there is no conflict in the evidence. The absence of reasons in such a case does not present a disadvantage to the extent that occurs when it is impossible to tell which evidence the Tribunal has acted on. The disadvantage created by the Tribunal's failure to make findings is that it has not exposed to scrutiny the inferences which it, as a Tribunal of experienced practitioners, was prepared to draw in relation to the conduct in question, and there is no discussion of the range of penalty that was considered to be appropriate for conduct of this kind.

[25] The case has exposed some of the difficulties inherent in the present disciplinary system. The courts have long recognised that the end objective of such a system is not the punishment of the practitioner but the protection of the public. The Minister's role in the present litigation is as public interest guardian in relation to the disciplinary system of an honourable profession that is largely self-regulated. Under the present system the Queensland Law Society is the designated prosecutor. The mechanism therefore exists in which the Minister may, in the public interest, challenge a decision where it might be perceived that the public interest has not been met. The proceedings of the Tribunal are not all carried out in public, although s 6L requires them to be held in public "unless the Tribunal orders otherwise". The actual orders of the Tribunal are necessarily public documents[9]. It is difficult however to glean an appropriate level of penalty from an order unless adequate reasons or a summary of the evidence are also available. A Tribunal could provide considerable assistance to a court which has the task of assessing the propriety of a particular penalty, by referring to previous decisions where the misconduct was at a comparable level so that a comparison might be made. It may be noted that counsel for the Minister did not in the present case refer to any previous decision in which conduct of equal or less seriousness than this practitioner has been visited with a higher penalty. It is recognised however that the system renders that a difficult task, particularly in the absence of a body of decisions containing reasons that could give meaning to bare penalties. The present appeal has certainly exposed the undesirability of failure by such Tribunals to give reasons for their decisions.

[26] It is not suggested that lengthy reasons are necessary, but even on a plea of guilty some brief indication of the material facts, the inferences the Tribunal draws from them and the basis upon which a particular penalty is considered to be appropriate should be given.

[27] Having made these comments in relation to the present system and the difficulties which have been exposed in the present matter, the plain fact is that, on analysis, the conduct of the practitioner in this case does not reveal moral turpitude. It does however reveal a practice which would expose clients (ie the public) to danger. When exposed the error was quickly corrected, and in the event actual harm did not result to the client.

[28] Counsel for the Minister submitted that for conduct of the present kind a fine was inappropriate. He referred to the practitioner's conduct as an unexplained abandonment of his duty. He submitted that in order to provide a proper incentive to practitioners to control their practices an order for suspension was the "irreducible minimum" order that should be made. Experience suggests that orders for striking off a practitioner are appropriate where the conduct reveals the practitioner to be a person unfit to exercise the powers and privileges afforded to solicitors. Suspension may be regarded as the next most serious level of punishment. It is appropriate in cases of relatively serious misconduct where the Tribunal or the court considers that suspension from practice for a designated period is called for and where it has reason to think that at the expiry of such period the practitioner will have learned his or her lesson and will be of appropriate character to resume practice. It is recognised that orders for striking off or for suspension carry with them a strong element of disgrace and a serious element of economic loss through deprivation of the capacity to practise the profession for which the practitioner has been trained. A variety of other penalties are available, including fines, orders to pay costs, and orders for re-education[10].

[29] Having considered the range of available responses, I cannot say that the order made by the Tribunal was manifestly inadequate. I did not understand counsel for the Minister to contend that the matter should be sent back to the Tribunal with directions for the giving of reasons, or for the opportunity to be given the Queensland Law Society to lead further evidence so that more serious inferences could be drawn against the practitioner. Indeed such a procedure would not be fair to the practitioner in circumstances like these. He has undoubtedly been seriously affected by the event, has shown credible remorse, has made satisfactory rearrangements, has suffered a degree of ignominy and has been fined and ordered to pay costs. In all the circumstances I consider that the penalty is within appropriate limits.

[30] Whilst it was appropriate for the Minister to have brought the present appeal, particularly having regard to the Tribunal's failure to give reasons, that was not a matter for which the practitioner was in any way responsible. The appeal has failed, and in my view the usual result should ensue in relation to costs. The appeal will be dismissed with costs to be assessed.

[1] Cf Adamson v Queensland Law Society Incorporated [1990] 1 Qd R 498.

[3] Cypressvale Pty Ltd v Retail Shop Lease Tribunal [1995] QCA 187; [1996] 2 Qd R 462, 476-477, 482-484.

[4] Commonwealth v Pharmacy Guild of Australia (1989) 91 ALR 65, 88 per Sheppard J, with respect to the Pharmaceutical Benefits Remuneration Tribunal.

[5] [1990] 1 Qd R 498, 508.

[6] McIntyre & Anor v Tully [2000] QCA 115, 6 March 2000; Absolon v NSW Technical and Further Education Commission NSW CA 40367/97, 30 August 1999 BC9905386 at p 23, p 38 and p 44.

[7] Absolon above at par 67 per Powell JA; cf Repatriation Commission v O'Brien [1985] HCA 10; (1984-1985) 155 CLR 422, 445-446; contrast T v The Medical Board of South Australia (1992) 58 SASR 382, 408-409, 422.

[9] See s 6 V, s 6W and s 6X of the Act.