Council of the Law Society of New South Wales v Hinde

Our conclusions regarding the Respondent's conduct 4The evidence adduced by the Law Society comprised an affidavit sworn on 20 August 2010 by its solicitor, Mr Raymond Collins, and an affidavit sworn on 7 October 2010 by Ms Jean Sayer, a chartered accountant. 5On 19 November 2007, the Supreme Court appointed Ms Sayer as Receiver of a law practice, Jeffrey Hinde Solicitor, of which the Respondent had been the sole principal until he sold the practice in February 2007. Ms Sayer annexed to her affidavit a copy of a report, dated 11 March 2008, that she had prepared in her capacity as Receiver. 6The only evidence adduced by the Respondent was an affidavit sworn by him on 27 October 2010. He stated in paragraph 2 of this affidavit that he consented to the orders sought by the Law Society except as to costs. He did not dispute any of the factual allegations contained in the Law Society's evidence. He supplemented his affidavit with brief oral testimony and was cross-examined. 7The evidence sufficiently establishes the conduct of the Respondent that was alleged and particularised in the Disciplinary Application. We are satisfied that this conduct amounts to professional misconduct, both at common law and under the Legal Profession Act 2004 ('the LP Act'). We are further satisfied that by virtue of this conduct - in particular, the Respondent's misappropriation of a substantial sum of money entrusted to him by Ms Rauker - the Respondent is not a fit and proper person to engage in legal practice and that his name should be removed from the local Roll of lawyers.

Principles governing the question of costs 8Relevant provisions. The costs of proceedings brought in the Tribunal under Chapter 4 of the LP Act are regulated by section 566 of that Act. Subsections (1), (6) and (7) are of direct relevance in this case. These 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. (7) An order for costs may specify the terms on which costs must be paid. 9The present proceedings fall within the scope of subsection (1), because professional misconduct was admitted by the Respondent and found by us to be established on the evidence. Accordingly, we are obliged to order the Respondent to pay costs unless we are satisfied that 'exceptional circumstances exist'. 10Relevant case law . The only case directly bearing on section 566(1) that the parties cited to us was Law Society of NSW v Markovski [2009] NSWADT 92. In that case, the respondent solicitor signed documents as the witness to signatures purporting to be those of the parents of the respondent's client and provided a certificate stating that she had given independent legal advice to the parents. In fact, she had never met the parents or been instructed by them. In disciplinary proceedings instituted in the Tribunal under the LP Act, the respondent admitted the matters alleged against her by the Law Society and conceded that they amounted to professional misconduct. The Tribunal, having made a finding of professional misconduct, held that she should be reprimanded, that she should be required to attend and pass a course in ethics and that her practising certificate should be restricted for a period of five years. 11The Tribunal did not, however, make an order requiring the respondent to pay costs. In so determining, it did not refer to section 566(1) of the LP Act or to the requirement in this provision that if professional misconduct is found against a respondent the Tribunal must order him or her to pay costs unless it is 'satisfied that exceptional circumstances exist'. Its reasons for not awarding costs were stated in the following terms, at paragraph [28]:- 28 The Tribunal is not minded to make an Order that the Respondent pay the costs of the Law Society as agreed or assessed, not because the Law Society is not so entitled but rather because, if this Respondent, at her age, is to re-enter the ranks of practising solicitors and make a fist of her employment she needs to have the opportunity to somehow dig herself out of the personal and financial hole in which she now finds herself and a costs order would only serve to dig a deeper financial hole from which she would be unlikely to ever emerge. 12In other decisions to which we have given consideration, the conduct of the party seeking costs under section 566(1), or under an equivalent provision within interstate legislation governing the legal profession, has been held to constitute 'exceptional circumstances'. 13In Law Society of New South Wales v Oliveri (No 2) [2008] NSWADT 157, for instance, the Tribunal refused to award costs to a former client seeking compensation from the respondent solicitor even though it had made a finding of unsatisfactory professional conduct. Its reason, explained at [34 - 36], for concluding that there were 'exceptional circumstances' under section 566(1) was that the client had rejected what the Tribunal described as a 'very reasonable settlement offer' made by the respondent. This offer had been made and rejected before the client made the complaint to the Legal Services Commissioner that led to the institution of Tribunal proceedings. 14In Legal Services Commissioner v O'Connor (No 2) [2006] LPT 2, the Legal Practice Tribunal of Queensland considered an application by the Queensland Legal Services Commissioner for an order that the respondent practitioner, who had been found guilty of unprofessional conduct, should pay the Commissioner's costs under section 286(1) of the Legal Profession Act 2004 (Qld) (being the provision then equivalent to section 466(1) of the LP Act). The Tribunal set out the following response to this application at [15 - 21]:- [15] The respondent has submitted that there should be no order as to costs on the basis that exceptional circumstances exist. Counsel for the respondent has listed eleven separate matters to support the submission that exceptional circumstances exist. Many of those matters, however, relate to factors relied on by the respondent in mitigation of penalty, such as that the respondent did not deliberately intend to breach a professional obligation or the previous unblemished professional record of the respondent. Those sorts of matters do not assist in establishing exceptional circumstances for the making of an order which departs from the usual order for costs of the disciplinary proceeding where a practitioner has been found guilty. [16] The respondent also relies on the manner in which the Commissioner conducted the proceeding against the respondent as raising exceptional circumstances for the purpose of s 286(1) of the Act. They can be summarised as: (a) the Commissioner did not formulate the final terms of the charge until the morning of the hearing and, in particular, did not articulate the terms of the professional obligation that was breached by the respondent until the hearing; (b) the Commissioner did not proceed with the charge as originally formulated and particularised in the application; (c) it was not until the commencement of the hearing of the application that the Commissioner abandoned the position that he had adopted from 22 July 2005 that was reflected in the particulars of the charge until the amendment made at the hearing that a complaint pursuant to the Act was protected by absolute privilege pursuant to s 11 of the Defamation Act 1889; and (d) a substantial part of the respondent's written submissions filed prior to the hearing of the application dealt with the issue of whether a complaint under the Act attracted absolute privilege and were wasted. [17]...The respondent relies on the observations which I made in paragraph 26 of the reasons including that the Commissioner had no prospects of discharging the burden of proving the serious allegation that was made in the charge as originally framed. [18] The Commissioner fulfils an important public role under the Act in investigating complaints, making decisions on whether to dismiss them or to commence proceedings before a disciplinary body in relation to the complaint and prosecuting such proceedings. It is a matter of fairness, however, to the practitioner who is the subject of the complaint that the Commissioner formulates the charge against the practitioner with precision and gives careful consideration to the matters raised by the practitioner in the practitioner's response that is usually provided to the Commissioner at an early stage of the investigation of the complaint. [19] The charge which the respondent ultimately had to meet at the hearing of this application was different both in the terms and the particulars of the charge and the gravity of the offence than the charge that was set out in the application that commenced this proceeding. This resulted in the Commissioner incurring costs that were wasted and caused the respondent to incur costs that were wasted. That is sufficient to establish the exceptional circumstances which enable a departure from the usual order provided for in s 286(1) of the Act. [20] In determining what is the appropriate order that should be made for costs, it remains relevant that the prima facie position is that, if there is a finding of guilty against the practitioner, the practitioner should pay the costs of the Commissioner. [21] The exceptional circumstances that exist should be recognised by reducing the extent of the Commissioner's costs which can be recovered against the respondent. I have therefore concluded that the respondent should pay two-thirds of the Commissioner's costs of the proceeding to be assessed on the standard basis. 15In Legal Services Commissioner v Scott (No 2) [2009] QLPT 9, the Queensland Legal Practice Tribunal had previously found the respondent practitioner guilty of professional misconduct on two occasions and guilty of unprofessional conduct on two other occasions. During the proceedings, however, the applicant Commissioner had withdrawn three out of the eight charges initially brought, a fourth charge had been struck out and a number of amendments materially reducing the scope of the remaining charges had been made by the Commissioner. The Tribunal held that under section 462(1) of the Legal Profession Act 2007 (Qld) (being the provision now equivalent to section 466(1) of the LP Act), it could determine that following a finding of 'exceptional circumstances', it could order a respondent practitioner to pay part only of the applicant's costs. It held at [22] that the respondent should pay 'the Commissioner's costs to the extent that they were incurred in relation to matters on which the application was successful'. 16In discussing (at [17 - 19]) the phrase 'exceptional circumstances', the Queensland Legal Practice Tribunal said:- [17] Section 462(1) requires the Tribunal in unexceptional circumstances to make an order requiring the guilty person to pay costs. It does not specify the amount of costs which must be ordered nor the basis on which the amount must be decided. Those matters are left to the discretion of the Tribunal: s 462(5). Nor does the section identify in respect of what the costs must be ordered. However in Baker v Legal Services Commissioner [2006] QCA 145 at [56], McPherson JA, with whom Jerrard JA and Douglas J agreed, wrote: "In my view ... the criterion adopted in s 286(1) is whether the practitioner has been found guilty of one or more of the forms of misconduct specified in s 286(7). If he has, then an order requiring him to pay costs must be made against him unless the Tribunal is satisfied that 'exceptional circumstances' exist. It is true that s 286(1) refers simply to 'costs' and not to all the costs of the proceedings; but the latter is I consider its primary meaning in this context. Section 286(1) is not designed to confer or preserve the broad discretion over costs commonly found in statutory provisions conferring power to award costs. If it had been intended to do so, it could and would have been expressed to that effect. On the contrary, the mandatory rule imposed by s 286(1) is designed to follow unless the Tribunal is satisfied that exceptional circumstances exist that call for some other order to be made, either generally or in terms of an amount under s 286(5)(a) or (b) [these are the equivalents of subsections 566(6) and (7) of the LP Act] or against the Commissioner under s 286(4)." [18] That passage was technically obiter dictum. Moreover it is not completely clear what his Honour meant by "its primary meaning", nor what other meanings might be available. It is unlikely that this passage represents the last word of the Court of Appeal on this question. The section could quite naturally be read in such a way that "costs" did not cover costs incurred in relation to charges not proceeded with and, perhaps, charges substantially transformed at a late stage of proceedings. Nonetheless, it covers the present case and I do not consider that, sitting as the Tribunal, I should not apply it. [19] The Act does not identify what is meant by "exceptional". The Commissioner relied on a passage from Attorney-General for the State of Queensland v Francis [2008] QCA 243 at [92]: "The issue of what are exceptional circumstances in a particular case is one that depends on judicial determination. It is fruitless to attempt to define what exceptional circumstances might be but a practical working approach to it is to be found in the following passage from R v Kelly (Edward) [2000] QB 198 at 208, where Lord Bingham of Cornhill CJ had to construe the term in a statutory context. He said: 'We must construe 'exceptional' as an ordinary, familiar English adjective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon. To be exceptional a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly, or routinely, or normally encountered'." Although that was said in relation to different legislation, I am prepared to apply it in the present context.

The evidence and submissions regarding costs 17The 'exceptional circumstances' claimed by the Respondent. Mr Chegwidden, who appeared as counsel for the Respondent, argued that a number of matters described in Mr Collins's affidavit, the Respondent's affidavit and the Respondent's oral testimony constitute 'exceptional circumstances'. 18A significant proportion of these matters relate to the Respondent's current personal circumstances. In outline, they are as follows. 19The Respondent is now aged 82 and is unemployed. Due to the failure of his legal practice and to his failure to pay tax to which he had been assessed, he was made bankrupt on 15 November 2007. He was not discharged from this bankruptcy until 14 November 2010. His only income is an old age pension, currently at the rate of $650 per fortnight. He has no assets other than his household and personal effects and a small sum in a bank account. At the date of his affidavit, this sum was $5; at the date of the hearing, it was $50. He lives in a Housing Commission flat, for which he pays rent of $70 (this is presumably a weekly rent, though the evidence is not clear on this point). He is paying off a fine of $250 for a traffic offence by fortnightly instalments of $10, and will not have paid it off completely until a date in or about December 2011. He is divorced and his grown up children have their own financial responsibilities. He currently owes money to them and is not prepared to accept any further financial assistance from them. 20Mr Chegwidden maintained also that the Respondent co-operated fully with the Law Society in relation to its complaint against him. He admitted his misconduct as soon as he received a copy of the complaint against him and he took no other step of significance that would delay the proceedings against him or cause unnecessary costs to be incurred. 21Correspondence annexed to Mr Collins's affidavit supports this description of the Respondent's reaction to being notified of the complaint. The Law Society sent a copy of the complaint to him on 9 December 2009 and sent a copy of Ms Sayer's report on 22 December 2009. In a letter dated 24 December 2009 to the Law Society, Mr Chegwidden stated as follows on his behalf: (a) that he agreed with Ms Sayer's report 'in its entirety'; (b) that although it might have been arguable that he held the money entrusted to him by Ms Rauker in a personal capacity, not as a solicitor, he did not wish to raise this argument in disciplinary proceedings; (c) that he admitted misappropriating money held by him on trust and using it for his own purposes; and (d) that if, as seemed probable, the Law Society applied to the Tribunal for an order removing his name from the Roll, he would raise no objection. 22In a further letter to the Law Society, dated 19 May 2010, Mr Chegwidden argued on the Respondent's behalf that since his practising certificate had been cancelled and he was prepared to undertake not to apply for another certificate, there was 'no real benefit to the Society or to the public' in having his name removed from the Roll. This letter also contained an admission that the Respondent's 'stupid action and bankruptcy' had 'caused him disgrace'. 23This letter of 19 May 2010 stated in addition that the Respondent, since being admitted to practice as a solicitor in July 1987, had assisted juveniles as a duty solicitor at Katoomba Local Court for nine years, had been social secretary for the Blue Mountains Law Society and had taken on the role of a judge at mock trials over a period of 20 years. It claimed also that he 'now lives a frugal life and assists his local Church in charity work'. 24On 7 July 2010, after the Respondent had been informed that the Law Society had resolved, subject to any submissions from him, to institute the present proceedings against him, he indicated once again through a letter written by Mr Chegwidden that he admitted the alleged misconduct and would consent to the orders sought against him, except as regards costs. 25In his oral testimony before us, the Respondent did not seek to withdraw any of these admissions. He stated that it was never in doubt that he 'did this terrible thing' and that there was 'no excuse' for his 'stupidity'. But he also maintained, in forceful terms, that the Law Society's decision to bring these proceedings was unnecessary and indeed 'vindictive', because he had not held a practising certificate for more than three years and there was clearly no prospect of his ever practising again, or even applying for a practising certificate. 26Mr Chegwidden also suggested in his submissions that the proceedings were unnecessary. But he then agreed with an observation from the Bench that once the Law Society had made its complaint, based on Ms Sayer's findings, against the Respondent, it was obliged by the LP Act to investigate the complaint in order to determine whether there was a reasonable likelihood that the Tribunal would make a finding of professional misconduct (see section 525(1)) and was also obliged, if it so determined, to institute proceedings in the Tribunal (see section 537(2)). 27The Law Society's claim that no 'special circumstances' exist. Mr Boyd, who appeared for the Society, argued that there were no 'exceptional circumstances' warranting departure from the normal requirement in section 466(1) that a legal practitioner whom the Tribunal had found guilty of professional misconduct or unsatisfactory professional conduct should be ordered to pay costs. 28With reference to the contention that the Respondent's very limited income and lack of substantial assets constituted 'exceptional circumstances', Mr Boyd drew attention to the fact that the Respondent's recent bankruptcy had come to an end on 14 November 2010. He referred also to admissions made by the Respondent to Ms Sayer and recorded in her report, to the effect that during the period when he misappropriated the funds held by him on trust for Ms Rauke, he indulged in gambling and enjoyed a lavish lifestyle. 29On the footing that Mr Chegwidden's letter to the Law Society dated 19 May 2010 (to which Mr Chegwidden had referred in his submissions) contained evidence of the Respondent's 'good character', Mr Boyd advised us that the Respondent had been the subject of earlier disciplinary proceedings in the Tribunal. In its decision ( Law Society of New South Wales v Hinde [2005] NSWADT 199), the Tribunal found him guilty of professional misconduct, on the ground that he had failed to honour an undertaking given to an estate agent. It ordered that he be publicly reprimanded, that he pay a fine of $3,000 and that he also pay the Law Society's costs. 30Mr Boyd submitted that pursuant to subsections (6) and (7) of section 566(7), the Tribunal should itself fix an amount due on account of costs (he suggested that $1,500 would be appropriate) and should order that it be paid by instalments. Pointing out that any costs paid by a legal practitioner were remitted to the Public Purposes Fund, he suggested that an order of this nature was akin to an order, such as already bound the Respondent, to pay a traffic fine by instalments of a small amount such as $10.

Discussion and conclusions regarding costs 31It is implicit in section 566(1) that an order exempting a respondent practitioner found guilty of professional misconduct from paying costs incurred by the applicant is not warranted simply because 'exceptional circumstances' of some kind or other are present. The nature of the 'exceptional circumstances' must be such as to justify displacement of the normal rule that a costs order should be made. 32The features of this case that support a finding of 'exceptional circumstances' are, as Mr Chegwidden argued, 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. 33In 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. 34The next and more difficult question is whether these 'exceptional circumstances', considered in conjunction with other relevant factors relating to costs orders, are such as to justify an order relieving the Respondent from his prima facie liability to pay costs under section 566(1). 35In this connection, Mr Chegwidden placed strong emphasis on his submission that the Respondent took no step of significance that would prolong the proceedings against him or cause unnecessary costs to be incurred. In consequence, only a small amount ($1,500) was suggested by Mr Boyd as appropriate. 36In our opinion, the evidence before us substantiates this submission, which was not significantly contested by Mr Boyd. In correspondence with the Law Society, the Respondent admitted the misconduct alleged against him and indicated that he would not dispute that by virtue of this misconduct an order removing his name from the Roll would be appropriate. 37We would not regard these particular circumstances as 'exceptional'. The Tribunal is frequently informed in proceedings such as these that from the outset the respondent practitioner has freely admitted the wrongful conduct alleged against him or her and has acknowledged that it did or might amount to professional misconduct. But these circumstances are relevant in determining whether, in the light of the 'exceptional circumstances' that do exist, an order relieving the Respondent of his prima facie liability to pay costs should be made. 38Both in Mr Chegwidden's letter of 19 May 2010 to the Law Society and, more vehemently, when giving evidence at the hearing, the Respondent maintained that these proceedings should never have been brought, on the grounds that his practising certificate had been cancelled and there was no prospect that he would ever again practise or seek to practise. In his oral testimony, he indeed accused the Law Society of acting maliciously and vindictively. 39We have given careful consideration to the implications, for present purposes, of this aspect of the Respondent's conduct. It indicated that he had signally failed to understand why the Society was compelled, both by the provisions of the LP Act and by its duty to protect the standing of the legal profession in the eyes of the public, to seek a finding of professional misconduct against him and an order removing his name from the Roll. 40It is beyond doubt that if the matters to be decided by us included the dispositive order or orders to be made by us - i.e., whether the Respondent's misconduct warranted removal from the Roll or suspension from practice or some lesser penalty or penalties - this aspect of the Respondent's conduct would count against him. Numerous decisions of courts and disciplinary tribunals support this proposition. 41It does not follow, however, that this aspect of his conduct should of itself defeat a claim by him that due to 'exceptional circumstances' he should not be required to pay costs. 42The cases that we have outlined above do not assist us greatly on this matter. The only one of them in which the personal situation of the respondent was put forward as a ground for not awarding costs was Law Society of NSW v Markovski [2009] NSWADT 92. But the Tribunal, while acceding to the respondent's argument, did not mention, let alone discuss at any length, the statutory requirement of 'special circumstances'. Within the other cases, the only passage that appears to us to furnish guidance on the question now being considered is the paragraph (para [15]) in the decision in Legal Services Commissioner v O'Connor (No 2) [2006] LPT 2 where the Legal Practice Tribunal of Queensland distinguished 'factors relied on by the respondent in mitigation of penalty' from 'matters that assist in establishing exceptional circumstances'. 43Taking our lead from this passage, we consider that while the Respondent's failure to appreciate the necessity for proceedings such as these to be taken against him would clearly be relevant to the question of penalty, it should not be considered significant in determining whether the 'exceptional circumstances' that have been identified warrant absolving him from liability to pay costs. The same, we think, should apply to both the evidence of 'good character' that he adduced and to the evidence of prior disciplinary sanctions against him that Mr Boyd (quite properly in the circumstances) brought to our attention. 44Having regard to this ruling, the 'exceptional circumstances' that we have identified, coupled with the fact that the Respondent took no step of significance that would prolong the proceedings against him or cause unnecessary costs to be incurred, justify in our opinion the conclusion that a costs order, such as would normally be made against him under section 566(1) of the LP Act, should not in fact be made. 45We should add that we have considered but rejected a suggestion by Mr Chegwidden that payment of a nominal amount, such as $100, might be ordered. We agree with him that the terms of subsections (1) and (6) of section 566 permit such an order. But we do not see how any useful policy objective would be served by such a measure. 46Our conclusion on this particular matter relieves us of the need to consider a question raised but not answered by the Queensland Legal Practice Tribunal in Legal Services Commissioner v Scott (No 2) [2009] QLPT 9 at [17 - 18]. This is whether a costs order limited to only part of the costs of the successful applicant might be made under section 566(1) (in a situation, for example, such as arose in Scott ) without it being necessary to identify 'exceptional circumstances'.

Our orders 47For the foregoing reasons, we order as follows:-

1. The Respondent is guilty of professional misconduct.
2. The name of the Respondent is to be removed from the Roll of local lawyers.
3. The Applicant's application for an order that the Respondent pay its costs of these proceedings is dismissed.

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: 02 February 2011