Council of the Law Society of New South Wales v Gallego

The relevant conduct of the Solicitor

1. The Grounds of the Law Society's application and the Particulars accompanying them are set out in full in our earlier decision, together with our findings relating to them. In the present context, the following aspects of them should be mentioned.
2. Grounds 1 to 3 and 5 were concerned in different ways with the failure by the Solicitor, over a period of more than three years between 2006 and 2009, to abide by restrictions attaching to his practising certificate. During this period, the certificates issued to him contained conditions to the effect that he could only practise as an employee or as a 'restricted/non principal'. But he in fact practised pursuant to arrangements whereby he was designated as a 'consultant' to a law practice. On occasions, he was the 'consultant' to two or more law practices concurrently. In addition, he signed and/or filed documents indicating or implying that he was the solicitor on the record for a party to legal proceedings, when this was not the case. He did this more than once even though (according to him) the other party or parties and their legal representatives were aware of the true situation.
3. It was for these reasons that we found Ground 5 to have been established. This Ground was in the following terms: 'The Solicitor… [p]ractised outside the conditions of his practising certificate between 10 December 2004 and 1 July 2010.'
4. We also found that Grounds 1, 2 and 3 were established. Each of them alleged that he prepared a document for use in legal proceedings which stated or implied that he was the solicitor on the record for a party to these proceedings, when in fact his status was that of an employed solicitor or a 'consultant'.
5. We further found that the conduct to which these Grounds referred was professional misconduct. In so concluding, we attached weight to the fact that the Solicitor had, by his own admission, failed both (a) to take out professional insurance relating to his activities as a 'consultant' and (b) to take reasonable steps to ensure that the law practices by which he was engaged in this role had obtained insurance cover for him. At [75], we stated: 'His attitude to these important matters may fairly be described as cavalier.'
6. As explained at [71 - 75], we based our finding of professional misconduct on three provisions of the Act. These were: (i) section 58(1), which prohibits the holder of a practising certificate from contravening a condition attaching to it; (ii) section 498(1)(a), which states that any contravention of the Act is 'capable of being unsatisfactory professional conduct or professional misconduct; and (iii) section 497(1)(a), which includes the following in the definition of professional misconduct:- (a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence…
7. At [74 - 75], we stated:- 74 In our judgment, each instance of the Solicitor taking steps in legal proceedings… in circumstances where (at best) he was a 'consultant' of some kind to a legal practice and (at worst) no such consultancy arrangement existed must be viewed as, at least, an instance of unsatisfactory professional conduct… 75 The numerous such instances, occurring over more than three years, constitute a course of conduct that 'involves a substantial or consistent failure to reach or maintain a reasonable standard of competence' within the meaning of section 498(1)…
8. In the remaining Ground, Ground 4, it was alleged that the Solicitor 'attempted to mislead the Court of Appeal' in the following manner. In the course of a hearing during November 2011, he was questioned by judges of the Court as to whether he held an unrestricted principal practising certificate at the time (January 2009) when he filed a Notice of Appearance on behalf of a client implying that he did hold such a certificate. He gave the false and misleading answer that this was in fact the case.
9. At the hearing on 8 May 2014, Ms Groenewegen advised us that the Law Society no longer claimed that the Solicitor intended to mislead the Court.
10. In our earlier decision at [79 - 80], we set out the following conclusions regarding Ground 4:- 79 In our opinion, the Solicitor's behaviour on that occasion fell well short of appropriate professional standards. We make allowance for the fact that because he did not expect questions on this specific topic he was thrown into a state of confusion and might well have been unable to recall when indeed he did obtain an unrestricted principal certificate. But what he should have done was to admit that he could not immediately provide a correct answer to the Court's questions. Instead, he supplied answers that he should have known to be seriously misleading… 80 In our opinion, this behaviour manifestly did not meet 'the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner'. We find that it amounted to unsatisfactory professional conduct under section 496 of the Act…

The Solicitor's response to the Law Society's application

1. In his Reply, the Solicitor denied Ground 4. But after the Law Society indicated at the hearing that it withdrew its allegation of an intention to mislead the Court of Appeal, the position adopted by him did not differ significantly from that the Society.
2. The Solicitor also denied Ground 5. His principal contention was that his engagement as a 'consultant' did not constitute a breach of the conditions attaching to his practising certificate. He also denied, or did not admit, allegations in the Particulars to Ground 5, to the effect that he had not been covered by professional indemnity insurance and that in acting for a particular client in legal proceedings he had assumed the role of solicitor on the record. He gave evidence and was cross-examined on each of these matters. Our findings on each of them were in the Law Society's favour.

The Solicitor's evidence at the second hearing

1. The letters from the National Australia Bank that the Solicitor tendered were to the effect that the Bank had cancelled two credit cards held by him. The total of the debts owed on these cards was about $11,000.
2. In his affidavit sworn on 2 December 2014 and in oral evidence at this hearing, the Solicitor testified that he was in severely straitened financial circumstances, for the following reasons. He had been unemployed throughout 2014, despite having made many attempts to find unemployment. His only income was a New Start Allowance of about $658 per fortnight, which commenced during May 2014. He was owed substantial sums, including amounts totalling about $22,000 that he held in his trust account but was not permitted to withdraw. But he did not have the resources to seek recovery of them. If and when his claim of entitlement to them was successful, the net amount that would remain in his hands would only be about $11,000, because of his debt to the Bank. He had been compelled to withdraw money from a superannuation fund in order to pay his debts. He did not own a car or any real property. He had been ordered to vacate a unit that he rented because he had not been able to maintain his rent payments.
3. The Solicitor also testified that he suffered from chronic back pain and from depression.
4. This evidence was not challenged in cross-examination.

The Law Society's submissions on penalty

1. In her written and oral submissions, Ms Groenewegen placed emphasis on the following aspects of the Solicitor's conduct.
2. By purportedly acting as a 'consultant', he 'enjoyed the privileges of being a principal', but 'evaded' and 'shirked' the requirement to obtain insurance imposed on principals by section 406(1)(a) of the Act. His attitude to the question of insurance cover, which we characterised as 'cavalier', created a real risk that one or more of his clients would be denied recovery for losses caused by his conduct of their matters.
3. His contravention of the conditions attaching to his certificate constituted not only professional misconduct (as we had found) but also a criminal offence, under section 58(1) of the Act.
4. The period of time during which this contravention occurred was more than five and a half years - from 10 December 2004 to 1 July 2010.
5. The Solicitor's conduct had the effect of diverting judicial officers away from their 'proper focus'. This was because they were obliged to determine the question of his status in the relevant proceedings.
6. When questioned by Beazley JA and Sackville AJA in the Court of Appeal in the manner outlined in Ground 4, he gave answers that he should have known to be seriously misleading. Their Honours were so dissatisfied with his response that they arranged for a complaint to be made to the Office of the Legal Services Commissioner.
7. Ms Groenewegen argued that in view particularly of these aspects of his conduct, there were reasons for believing that he did not fully appreciate 'the nature, extent and gravity of his wrongdoing'.
8. This was, she maintained, a case in which we should 'grasp the opportunity to educate members of the profession by demonstrating its abhorrence of conduct comprising acting beyond the confines of a practising certificate and/or without binding insurance'. We should be mindful, however, that the Tribunal's jurisdiction in disciplinary proceedings is 'protective of the public, not punitive of the practitioner'.
9. In her written submissions, which were filed before the second hearing, Ms Groenewegen maintained that in order to fulfil this purpose we should order by way of penalty that the Solicitor be reprimanded and that he pay a substantial fine. At the hearing, however, she submitted that in view of the evidence of his impecuniosity, which was not challenged, a fine might not be required and might indeed operate as a form of punishment.

The Solicitor's submissions on penalty

1. Ms Merkel did not dispute that the penalty of a reprimand was warranted in this case. She argued, however, that we should not impose a fine, for the following reasons.
2. First, there was no finding that the Solicitor, when acting as a 'consultant', fell outside the scope of the insurance policies maintained by the various law practices which engaged him. In fact, no client had made a claim against him, but if one had been made, it was at least possible that he would have been covered.
3. Secondly, there was no finding of any fraudulent intent on his part. For this reason, Ms Groenewegen's use of terms such as 'evaded' and 'shirked' to describe his conduct was not justifiable. Because this would appear to be the first case in disciplinary proceedings in which it has been decided that a solicitor engaged as a 'consultant' should ensure that he or she has insurance cover, it was understandable that the Solicitor did not realise that this was required of him.
4. Thirdly, it was clear from the uncontested evidence as to his impecuniosity and, indeed, his physical and psychological disabilities that the impact of any fine imposed on him would be punitive.

Our conclusions on penalty

1. We are conscious of the fact that at the hearing on penalty, Ms Groenewegen acknowledged that the imposition of a fine might not be necessary so long as a reprimand (as to which both counsel agreed) was administered.
2. The main reason, however, why the Law Society has made this concession is the Solicitor's financial situation. We recognise that impecuniosity is a factor that should be taken into consideration when determining the amount of any fine imposed under section 562 of the Act. We are not convinced, however, that in the circumstances of this case it should be treated as a ground for not imposing any fine at all.
3. Our reasons are as follows. But for the Solicitor's impecuniosity, we would have little hesitation in deciding that his behaviour should attract a fine as well as a reprimand. It involved conduct, over a period of at least three years, that contravened restrictions on his practising certificate, took no account of a real risk that he lacked insurance cover and more than once conveyed to judges (if not also to opposing parties) a misleading impression as to the capacity in which he acted for parties to legal proceedings. Even at the first hearing of the present proceedings, he showed himself to be unwilling to acknowledge that when he entered into a 'consultancy' agreement with a law practice, the responsibility lay on him to make sure of two things: (a) that he was not in breach of any restriction currently attaching to his practising certificate; and (b) that he had insurance cover.
4. We have decided that the Solicitor's impecuniosity provides a reason for fixing a fine at a much lower level than would otherwise be appropriate, but not for deciding that there should be no fine at all.
5. Our orders by way of penalty are that the Solicitor be reprimanded and that he pay a fine of $1,000.

The costs of the proceedings

1. As indicated above, the orders sought by the Law Society included an order that the Solicitor pay its costs of the proceedings. At the second hearing, we were advised that the parties had agreed the costs at $12,000.
2. According to the law to be applied to these proceedings (as to which, see [3] above), the governing provision (now repealed) is section 566 of the Act. Subsections (1) and (6) of this section state:- (1) The Tribunal must make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner, a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist. (6) The Tribunal may fix the amount of costs itself or order that the amount of costs be assessed by a costs assessor under Part 3.2.
3. In her written submissions, Ms Groenewegen maintained that there was no material before the Tribunal that would support a finding of 'exceptional circumstances' under subsection (1). She cited Council of the New South Wales Bar Association v Miller (No 2) [2012] NSWADT 129 (at [44]) as authority for the proposition that 'not even bankruptcy alone will constitute exceptional circumstances'.
4. At the second hearing, however, she suggested that while 'mere impecuniosity' would not amount to exceptional circumstances, a costs order should not be made where this would prevent financial rehabilitation by the respondent practitioner.
5. Ms Merkel argued that the following factors constituted 'exceptional circumstances': (a) the Solicitor was impecunious; (b) he lacked any capacity to pay costs; (c) he was in an age group where re-instatement in employment is difficult; (d) in the two matters (described in the Law Society's application) where his representation of clients had been called into question, costs had been awarded against him personally; (e) he had serious physical and psychological disabilities; and (f) a lengthy hearing had not been required in this case.
6. Ms Merkel relied on the decision of the Administrative Decisions Tribunal in Council of the Law Society of New South Wales v Hinde [2011] NSWADT 20. In that case, the Tribunal, having recorded a finding of professional misconduct against the respondent solicitor, went on to rule that by virtue of 'exceptional circumstances', he should not be ordered to pay the Law Society's costs. It based this ruling principally on his poor financial circumstances of the respondent solicitor and on the fact that he was 82 years of age. It summarised its reasons as follows, at [32 - 33]:- 32 The features of this case that support a finding of 'exceptional circumstances' are… the advanced age of the Respondent and his straitened financial situation. The relevant aspects of his financial situation are these: (a) he has a very small regular income, taking the form of a state pension; (b) he has no assets of significant value; (c) due in particular to his age, he has no significant prospect of obtaining gainful employment; and (d) any costs order against him could only be satisfied by small instalment payments commencing on a future date and lasting over a significant period of time. 33 In the context of disciplinary proceedings such as these, we are satisfied that these constitute 'exceptional circumstances'. They fall within the phrase 'out of the ordinary course, or unusual, or special, or uncommon', used in R v Kelly (Edward) [2000] QB 198 at 208 and adopted by the Queensland Legal Practice Tribunal in Legal Services Commissioner v Scott (No 2) [2009] QLPT 9 at [19]. The hearing of disciplinary proceedings against a legal practitioner who is both as far past the normal age of retirement and as impoverished as the Respondent is indeed a most unusual phenomenon.
7. In considering these submissions, we take account of a later decision of the Administrative Decisions Tribunal that was not mentioned in the parties' submissions. In Council of the Law Society of New South Wales v Webb (No 2) [2012] NSWADT 212, the Tribunal held that an order for payment of only 50% of the Law Society's costs was justified in the light of 'exceptional circumstances'. At [52], it outlined these as follows:- 52… The trial was longer than it need have been; the Solicitor remains liable to pay a very substantial sum towards the costs of the investigation of his practice; his financial circumstances are relatively poor…
8. We have decided that this is also a case in which 'exceptional circumstances' exist, but only to the extent of providing partial relief from liability for costs.
9. In so deciding, we take account of the following matters. The degree to which the Solicitor is impoverished is comparable to that of the respondent in Hinde. His prospects of re-employment, at least in the immediate term, are low and that they might be reduced by being ordered to make a significant payment on account of costs. He raised relatively little opposition to the case brought by the Law Society, though the opposition that he did raise inevitably contributed to the scale of the costs incurred by the Society.
10. Our order is that he is to pay the sum of $2,000 to the Law Society on account of costs. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 February 2015