Council of the Law Society of New South Wales v Morgan

NCAT Occupational|2015-04-30

Solicitors: A Foord, Law Society of New South Wales (Applicant) Casula & Kelso Solicitors (Respondent) File Number(s): 1420264

The Application

On 1 August 2014, the Council of the Law Society of New South Wales ('the Law Society') filed an Application in the Tribunal alleging that the Respondent solicitor, Catherine Jane Morgan ('the Solicitor'), was guilty of professional misconduct on two Grounds.
These Grounds were formulated as follows: Catherine Jane Morgan is guilty of professional misconduct because she failed to: 1. comply with her undertaking for the quarters 31 Dec 10 and 31 March 11; and 2. subsequently comply with her undertaking.
The Law Society sought orders that the Solicitor: 1. be reprimanded; 2. pay the costs of the applicant as agreed or assessed; and 3. be subject to any other order as the Tribunal deems appropriate.
The Particulars set out in the Application were as follows: Background 1. Catherine Jane Morgan ['the Solicitor']: a. was born on 21 January 1958 and is currently 56 years of age; b. was admitted to the roll of the Supreme Court of NSW on 20 December 1996. 2. The Solicitor became bankrupt on 3 March 2010. 3. By letter dated 16 June 2010 and received by the Law Society on 18 June 2010, the Solicitor declared to the Law Society her bankruptcy as a 'show cause event' under the Legal Profession Act 2004 ['the Act']. 4. By letter dated 15 September 2010 received by the Law Society on 16 September 2010 the Solicitor disclosed a second 'show cause event' under the Act, being a conviction in August 2009 for tax offences. 5. The offences described in paragraph 4 above related to failure to lodge Business Activity Statements due on or before 1 February 2007 and 20 August 2009. 6. On 19 October 2010 the Solicitor's practicing certificate was suspended by statutory force under section 70(1)(b) of the Act. 7. Pursuant to section 70(1)(a) of the Act, the Office of the Legal Services Commissioner ['the OLSC'] took over the determination of the matter, specifically, whether the Solicitor was a fit and proper person to hold a local practicing certificate. 8. On 11 November 2010 the OLSC completed its determination stating: '... that Catherine Jane Morgan is a fit and proper person to hold a restricted practicing certificate allowing her to practice under supervision only and on condition that she complies with the undertakings given to the Law Society and attached hereto.' 9. The relevant undertakings ['the Undertakings'] given by the Solicitor to the Law Society on or about 11 November 2010 are as follows: 'For the period up to an including 30 June 2015 (vi) the Solicitor shall continue to meet her obligations with respect to the lodgement (sic) and payment by her (within the requisite statutory period) of any tax returns to be lodged with the Australian Taxation Office. (vii) the Solicitor shall continuously retain an independent expert acceptable to the Council of the Law Society: (a) such expert shall supervise the Solicitor's financial affairs an (sic) in particular her reporting and payment obligations to the Australian Taxation Office, and (b) such expert shall provide to the Council of the Law Society a quarterly report indicating that the Solicitor has complied with her reporting and payment obligations to the Australian Taxation Office and to her staff (if any). Such reports are to be received by the Council of the Law Society no later than 21 days after the end of each quarter, the first of which shall be due for the quarter ending 30 September 201 (sic) and then for the quarters ending 31 December, 31 March, 30 June and 31 (sic) September in each year until 30 June 2015. (viii) immediately upon becoming aware of any failure to comply with this undertaking the Solicitor shall notify the Law Society in writing of the circumstances and particulars of the breach, and forthwith take such steps as are necessary to remedy the breach of (sic) prevent it's (sic) continuation.' First Complaint 10. By letter dated 9 June 2011 the Society wrote to the Solicitor noting that an expert report as to her payment obligations to the Australian Taxation Office ['ATO'] due to the Law Society on or before each of 21 January 2011 and 21 April 2011 had not been received. 11. On 9 August 2011 a further letter from the Society was sent to the Solicitor noting that expert reports due to the Law Society on or before each of 21 January 2011, 21 April 2011 and 21 July 2011 had not been received by the Law Society. 12. The Society received no response from the Solicitor to its letters. 13. On 1 September 2011, the Professional Conduct Committee resolved to make a complaint against the Solicitor based on her failure to comply with the Undertaking for the quarters 31 Dec 2010 and 31 March 2011. 14. By letter dated 25 October 2011 received by the Law Society on 1 November 2011 the Solicitor forwarded to the Law Society, Tax Agent Portal Activity Statements downloaded on 10 September 2011 as follows: PERIOD COVERED BY ACTIVITY STATEMENT LODGMENT DUE DATE DATE LODGED EXPERT REPORT DUE TO LAW SOCIETY 1 Jan 11 to 31 Mar 11 28 Apr 11 15 Jul 11 21 April 1 Apr 11 to 30 Jun 11 28 Jul 11 15 Jul 11 21 Jul 11

By 1 November 2011 the Solicitor had failed to furnish to the Law Society an Activity Statement or an expert's report relating to the same, for the periods ending 30 September 2010, 31 December 2010 and 30 September 2011. 16. By letter dated 30 June 2012 received by the Law Society on 13 July 2012 the Solicitor forwarded to the Law Society, Tax Agent Portal Activity Statements downloaded on 25 June 2012 as follows: PERIOD COVERED BY ACTIVITY STATEMENT LODGMENT DUE DATE DATE LODGED EXPERT REPORT DUE TO LAW SOCIETY 1 Oct 11 to 31 Dec 11 28 Jan 12 25 Jun 12 21 Jan 11 1 Jan 12 to 31 Mar 12 28 Apr 12 25 Jun 12 21 Apr 12 1 Apr 12 to 30 Jun 12 28 Jul 12 25 Jun 12 21 Jul 12

By letter dated 20 July 2013 received by the Law Society on 25 July 2013 the Solicitor forwarded to the Law Society, copies of Business Activity Statements as follows: PERIOD COVERED BY ACTIVITY STATEMENT LODGMENT DUE DATE DATE LODGED EXPERT REPORT DUE TO LAW SOCIETY 1 Jul 12 to 30 Sep 12 29 Oct 12 Unknown 21 Oct 12 1 Oct 12 to 31 Dec 12 28 Feb 13 Unknown 21 Jan 13 1 Jan 13 to 31 Mar 13 26 Apr 13 Unknown 21 Apr 13 1 Apr 13 to 30 Jun 13 29 Jul 13 Unknown 21 Jul 13

Other than for the quarter ending 30 June 2012, any of the Solicitor's Business Activity Statements were received outside the terms of the Undertaking. 19. By letter dated 25 July 2013 to the Solicitor, the Law Society: a. sought from the Solicitor by 12 August 2013: i. a Business Activity Statement for the quarter ending 30 September 2011; ii. evidence of compliance with all the Solicitor's tax obligations; b. reminded the Solicitor that her Undertaking required her to: i. meet her obligations with respect to the lodgment of any tax returns within the requisite statutory period; and ii. provide an expert's report evidencing compliance within 21 days after the end of each quarter. 20. By letter dated 20 August 2013 from Ms Heather Jones, Manager Lithgow, H & R Block, accountants for the Solicitor, Ms Jones confirmed that the Solicitor's: 'outstanding returns for years ending 30 June 2010, 2011, 2012 and the current year 2013, through us as her acting Tax Agent ... are completed and will be lodged with the taxation office for processing within the next few days.' The Second Complaint 22. The Solicitor failed, within the time frame set out in the Undertaking, to provide to the Law Society an expert's report evidencing the Solicitor's compliance with her reporting and payment obligations to the ATO for the quarters ending: i. 30 September 2011 ii. 31 December 2011 iii. 31 March 2012 iv. 30 September 2012v. 31 December 2012 vi. 31 March 2013 23. In breach of clause viii of the Undertaking, the Solicitor failed, immediately upon becoming aware of any non-compliance with the Undertaking, to notify the Law Society in writing of the circumstances and particulars of the breach. 24. By fax dated 30 April 2014 received by the Law Society on 30 January 2014, H & R Block confirmed that all lodgments on behalf of the Solicitor with the ATO by way of tax returns and Business Activity Statements were up to date.
The two Complaints mentioned in the Particulars were the complaints on which the Application was based. They were made by the Law Society on 1 September 2011 and 19 September 2013 respectively.
From now on, we will refer to individual paragraphs of the Particulars by prefacing their number with the letter P.
The terms of the Solicitor's undertaking to the Law Society referred to in both Grounds of the Application (hereafter 'the Undertaking') are set out in P9.

The Reply

In a Reply filed on 16 December 2014, the Solicitor specifically denied the allegations in P12 and (in part) P15. She made a number of other assertions by way of qualification of the Law Society's allegations. She pleaded that the evidence that the Law Society had filed did not provide a basis for a finding of professional misconduct with respect to either of the two Complaints and that the Tribunal should therefore dismiss both of them.

The hearing

The Application was heard before us on 30 April 2015. Ms B Tronson of counsel appeared for the Law Society and Mr B Kelso, of Casula & Kelso, for the Solicitor.
We were advised that the parties wished to deal with all aspects of the Application at this single hearing. We indicated that we were happy with this course.
The only evidence tendered by the Law Society was an affidavit sworn on 23 July 2014 by its solicitor, Ms A-M Foord, and filed on 1 August 2014. It was accompanied by a volume of exhibited material. The Solicitor tendered affidavits sworn by herself on 15 December 2014 and 20 April 2015 and a bundle of correspondence comprising a letter from Mr Kelso to Ms Foord dated 29 January 2015 and a reply by Ms Foord dated 2 February 2015.
This evidence was admitted without objection and the Solicitor was cross-examined. Having then heard submissions from both parties, we stated that we would reserve our decision.

Relevant aspects of the evidence

The Solicitor's denial of P12 was borne out by the evidence. It contains nothing to suggest that the Law Society received any written response to the letters referred to in this paragraph (i.e., its letters to the Solicitor dated 9 June and 9 August 2011). But during August 2011 the Solicitor made a telephone call to Ms Foord, who is both the solicitor for the Law Society and the Manager, Professional Standards. In her first affidavit, she stated that she did this late in August 2011, though during cross-examination, she maintained that the date of the call was 'just before 9 August 2011'. In addition, she telephoned Ms Barbara Dobosz, a solicitor employed by the Society, on 28 September 2011.
Ms Foord did not give any evidence as to the contents of any conversation with the Solicitor during August 2011. The Solicitor testified that she told Ms Foord that because she was studying full time she could not afford to retain an independent expert to supervise her financial affairs and provide quarterly reports to the Society, as required by paragraph (vii) of the Undertaking. According to her, Ms Foord said in response that she could 'deal directly with the ATO [the Australian Taxation Office] to produce such evidence'.
Ms Dobosz recorded in a file note the content of her conversation with the Solicitor on 28 September 2011. According to this note, the Solicitor told Ms Dobosz that she had had a difficult time financially and therefore could not afford to retain the expert required by paragraph (vii). She said also that she was awaiting evidence of her compliance with her tax obligations from the ATO. Following some discussion of the matter, the Solicitor said that she would call at the ATO's office in Sydney and ask for this evidence.
Ms Dobosz was not called as a witness. But during re-examination, the Solicitor acknowledged that the file-note constituted the 'best evidence' of the conversation recorded in it.
In her first affidavit, the Solicitor stated that early in 2011 she had commenced a full time Master's level course in Teaching at Sydney University, with the consequence that her income from legal work was 'negligible'. She stated also that at some unspecified time she 'attended the offices of the ATO in Sydney and was unable to obtain such evidence [of compliance]'.
In the letter of 25 October 2011 to the Law Society to which P14 refers, the Solicitor stated as follows: As you are aware I contacted Anne-Marie Foord by telephone to advise that I was in the process of contacting my previous accountants to provide the necessary documentation from the ATO to comply with my undertaking. I disclosed to Ms Foord that I had complied with my undertaking by lodging the necessary BAS statements by telephone. When the statements are lodged in this fashion the only documentation provided by the ATO is a reference number that is given over the telephone. As a result of my financial situation I was no longer in a position to engage the services of my accountant to obtain the supporting documentation and advised Ms Foord that I would approach the ATO myself. However, I prefaced this with the fact that, given previous dealings with the ATO, I was not in a position to advise when documentation would be made available. To date, I have not received a response from the ATO. In the meantime I pursued my accountant and they have recently provided me with the necessary documentation to show the necessary BASs have been lodged and I have complied with my undertaking. I attach copies of the activity statements.
Two Business Activity Statements ('BASs') accompanied this letter, being the statements described in P14.
The implications of this evidence can be summarised as follows. Contrary to the allegation made in P12, the Solicitor responded to the Law Society's letters of 9 June and 9 August 2011. She did so by telephoning Ms Foord and Ms Dobosz. Although her testimony as to what she said to them contains internal contradictions and (so far as her conversation with Ms Dobosz is concerned) is not entirely in accord with Ms Dobosz's contemporaneous file note, the following two matters are established. First, she explained to the Law Society why she was not in a position to comply with the requirement in the Undertaking to provide expert reports on her compliance with her tax obligations. Secondly, she encountered no objection to her proposal that, as an alternative, she should provide to the Law Society relevant statements supplied to her by the ATO or other documentary evidence that she had complied with her lodgement and payment obligations to the ATO.
As stated above [8], the Reply filed by the Solicitor contained a partial denial of P15. This was justifiable in so far as it referred to the quarterly period ending 30 September 2010. For reasons explained below, the Law Society conceded at the hearing that she had no obligation under paragraph (vii)(b) of the Undertaking to provide a report with respect to this period.
At the hearing, Mr Kelso advised us that, contrary to what she indicated in the Reply, the Solicitor no longer admitted subparagraph (b)(ii) of P19. This subparagraph alleges that in a letter dated 25 July 2013 to the Solicitor, the Law Society 'reminded' her that the Undertaking required her to 'provide an expert's report evidencing compliance within 21 days after the end of each quarter'.
The Solicitor's withdrawal of this admission was justified. The Law Society's letter made no mention of any requirement to provide an 'experts' report'. This accords with the position that, as just outlined, the Society adopted when advised by the Solicitor during the second half of 2011 that at that time she could not afford to pay for such reports.
Subject to the qualifications that we have just outlined, we find that the matters alleged in the Particulars were established by the evidence put before us.
Several further aspects of the evidence should be outlined. They are as follows.
In a letter to the Solicitor dated 5 September 2011, Ms Dobosz advised her of the making of the First Complaint by the Law Society (as to which, see P13) and sought her response within 14 days. Having received no response, Ms Dobosz sent a reminder letter on 26 September 2011.
Ms Dobosz's file note of her conversation with the Solicitor on 28 September 2011 records (a) a statement by Ms Dobosz that she was dealing with the First Complaint; (b) a question from the Solicitor (who claimed to be unaware of this Complaint) as to who made it; (c) a description of the Complaint by Ms Dobosz; (d) a reminder by Ms Dobosz that a response to it was required; and (e) an acknowledgment by the Solicitor that she should treat compliance with the Undertaking and responding to the Complaint as important and serious matters.
In her first affidavit and during cross-examination, the Solicitor stated that since as a full-time student she earned income below the GST threshold during the quarter ending 30 September 2011, she believed that she was not required to file a BAS with the ATO and was not subject to any reporting obligation under paragraph (vii)(b) of the Undertaking.
In a letter to the Solicitor dated 10 November 2011, Ms Dobosz, after acknowledging receipt of the Solicitor's letter of 25 October 2011 (with attachments), wrote 'I will be in touch with you again in due course.' The Law Society did not however communicate again with the Solicitor until 17 June 2013. This was the case even though on 30 June 2012 she had sent BASs to the Law Society for the quarters ending 31 December 2011, 31 March 2012 and 30 June 2012. In her first affidavit, the Solicitor stated that she was 'surprised' to receive the Society's letter of 17 June 2013 because the matter had not been 'active' for about 18 months.
In this letter of 17 June 2013 Ms Dobosz pointed out that the obligations set out in the Undertaking related not only to BASs but to 'any tax returns', and that they continued until 21 July 2015.
In a letter to the Law Society dated 23 August 2013, the Solicitor acknowledged that she had been in breach of the Undertaking 'in some respects' and 'sincerely' apologised for this. She added that in circumstances where there was no tax payable she had regarded the filing of returns and BASs as a 'formality', but had come to realise that filing the returns 'in a timely fashion' was 'a priority in terms of the undertaking'. She attached the letter dated 20 August 2013 from her accountants, H & R Block, to which P20 refers and stated that she would continue to engage their services 'to ensure vigilant compliance with the undertaking in the future'.
This letter of 23 August 2013 from the Solicitor was accompanied by a copy of an email bearing the same date sent to her by H & R Block. This email was in the following terms: 'Indications from the tax office show that all BAS' (sic) up to date have been lodged and processed'. In her letter, the Solicitor added the comment that this amounted to confirmation that her BAS for the quarter ending 30 September 2011 had been 'filed'.
In her second affidavit, dated 20 April 2015, the Solicitor listed a number of reports on compliance with her tax obligations that her accountants had submitted to the Law Society with respect to the quarters ending 31 March 2014, 30 June 2014, 30 September 2014, 31 December 2014 and 31 March 2015. She then advanced the claim that 'all reporting in strict compliance with Undertaking (vii)(b) has been lodged for all periods from 1 January 2014'.
During cross-examination, however, the Solicitor admitted that she had failed to observe the time limit of 21 days when providing BASs for the quarters ending 30 September 2013, 31 December 2013, 31 March 2014, 30 June 2014 and 30 September 2014.

The Law Society's claim of professional misconduct

In the course of her submissions, Ms Tronson provided the following advice as to the scope of the case ultimately advanced by the Law Society. First, the Society did not allege any breach of paragraph (vi) of the Undertaking. Secondly, it did not press any claim that the provision of reports by an expert was required in order to fulfil the requirements of paragraph (vii)(b). It would instead be sufficient for the Solicitor to provide documents obtained from the Australian Taxation Office or other appropriate evidence demonstrating that she had complied with her reporting and payment obligations to this Office. Thirdly, the Society did not press any claim of breach of paragraph (vii)(b) with respect to the quarter ending 30 September 2010, for the reasons that (a) this quarter was erroneously described in the Undertaking as 'the quarter ending 30 September 201' (sic) and (b) the Undertaking was not in fact signed until a date on or about 11 November 2010. (A further reason, we would add, is that the two Grounds of the Application do not allege any breach with respect to this period, although such a breach is alleged in P15.)
Ms Tronson summarised as follows the breaches of paragraph (vii)(b) of the Undertaking alleged by the Law Society: 1. In relation to one quarter, ending 30 September 2011, the Solicitor gave no notification to the Law Society as to her filing of a BAS with the ATO as required by this paragraph. 2. Except in relation to two quarters, ending 30 June 2011 and 30 June 2012 respectively, all of the Solicitor's notifications to the Law Society as to her filing of BASs with the ATO were provided after the date required by this paragraph. 3. Except in relation to two other quarters, ending 30 June 2013 and 31 December 2013 respectively, these notifications were 'very late'. 4. It was not until 20 August 2013 that she provided (through her accountant) any notification that she had filed income tax returns. The accountant's letter covered her returns for the tax years 2010, 2011, 2012 and 2013.
In addition, Ms Tronson said, the Law Society alleged that the Solicitor had breached paragraph (viii) in the following ways: 1. She did not at any time notify the Society in writing immediately upon becoming aware of any failure to comply with the Undertaking. 2. Except in relation to the BAS for the quarter ending 30 June 2013, she did not take steps 'forthwith' to remedy any breach or prevent its continuation.
The Law Society's claim was that the conduct alleged against the Solicitor and established by the evidence would be regarded as 'disgraceful or dishonourable' by reputable and competent members of the legal profession and therefore amounted to professional misconduct at common law. The Society made no claim of statutory professional misconduct.
The question whether this conduct did in fact amount to professional misconduct was the principal matter argued before us.

The parties' submissions on professional misconduct

Near the commencement of her submissions on behalf of the Law Society, Ms Tronson drew our attention to the circumstances (summarised in P2 to P7) in which the Legal Services Commissioner had required the Solicitor to give the Undertaking. She pointed out that, as is expressly stated in the passage from the Commissioner's determination quoted in P8, the Commissioner considered the Solicitor to be fit and proper to resume legal practice only under supervision and on condition that she complied with the Undertaking. According to Ms Tronson, this heightened the importance of compliance with the Undertaking and rendered more serious any instance of non-compliance.
With respect to the instances of non-compliance on which the Law Society relied, Ms Tronson submitted that even if the Solicitor, during the period when she was a full-time student, could not afford the expert reports required by paragraph (vii)(b), this did not prevent her filing within the specified time limit of 21 days her own evidence of compliance with the ATO's requirements, given that the Society had indicated that this would be sufficient. She failed, however, to meet this modified obligation. With two exceptions, each of the BASs that she sent to the Law Society for the periods between 1 October 2010 and 30 September 2014 was sent after the deadline specified by the Undertaking. This was the case even though on a number of occasions (for example, in her conversation with Ms Dobosz on 28 September 2011 and her letter to the Society on 23 August 2013) she stated that she appreciated the importance of timely compliance.
In Ms Tronson's submission, an additional and important aspect of the Solicitor's defaults under paragraph (vii)(b) was her failure to provide any evidence at any stage as to compliance with her tax obligations relating to the quarter ending 30 September 2011.
The Solicitor's position on this included the contention, stated in paragraphs 9 and 13 of the Reply, that even though she had been registered for GST at all material times she did not have to provide any such evidence, because her 'net amount' (for GST purposes) during this period was below the applicable threshold.
Ms Tronson's arguments opposing this claim were as follows: (a) the terms of paragraph (vii)(b) clearly required a report to be provided to the Law Society even if no reporting or payment obligations to the ATO had arisen during the relevant quarter; and (b) in any event, s 31-5 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) states that taxpayers who are registered for GST purposes must submit a GST return even if their 'net amount' during the relevant period is zero.
With reference to the obligation imposed by paragraph (viii) of the Undertaking, Ms Tronson pointed out that the Solicitor failed to comply with it on numerous occasions. Although her provision of BASs at quarterly intervals was almost invariably late (and in respect of one quarter did not occur at all), she did not at any stage notify the Law Society of the 'circumstances and particulars' of these breaches of paragraph (vii)(b) and did not 'forthwith' take such steps as were necessary to remedy them.
Ms Tronson submitted also that the Solicitor, on at least one occasion, claimed not to have been in breach of the Undertaking even though this was clearly not the case. Ms Tronson referred in this context to the Solicitor's statement in her second affidavit (sworn on 20 April 2015) that 'all reporting in strict compliance with Undertaking (vii)(b) has been lodged for all periods from 1 January 2014'. As indicated above at [34], the Solicitor was compelled during cross-examination to admit that this claim was incorrect. According to Ms Tronson, the existence of this statement in the Solicitor's affidavit showed that she had not at any stage understood the precise nature of the obligations imposed on her by the Undertaking. This reinforced the Law Society's contention that the Solicitor had never appreciated the importance of fully complying with them.
In support of her submissions on professional misconduct at common law, Ms Tronson cited four decisions of the Administrative Decisions Tribunal. We will outline relevant aspects of them.
In Law Society of New South Wales v Waterhouse [2002] NSWADT 204, the Tribunal held that in the particular circumstances of the case the respondent solicitor's breach of an undertaking given to a fellow solicitor amounted to unsatisfactory professional conduct, not (as the Law Society had claimed) to professional misconduct. It explained this conclusion as follows (at [24 - 29]): 24 As is said in the New South Wales Solicitors Manual by Riley, "it is of fundamental importance to the administration of justice, and to the orderly transaction of their clients' business affairs, that legal practitioners can trust one another and that they can be relied upon to do what they say they will do" (para 20,005). 25 We consider therefore that the Solicitor's conduct was in breach of his professional obligations. However, did it amount to professional misconduct or did it simply constitute unsatisfactory professional conduct? 26 Although ordinarily we would expect that non-compliance with a solicitor's undertaking would be regarded as professional misconduct, there are in our view particular circumstances here which put the conduct in the less serious category of unsatisfactory professional conduct. 27 The circumstances we refer to are that the Solicitor has asserted that the undertaking in question was procured from him by deceit and for reasons which we have described above, we are constrained to treat that assertion as an arguable one. If the Solicitor had been able to persuade the court that his assertions were well founded and that there had not been reliance on the undertaking by anyone not bound by the allegedly deceitful conduct, he would in our view have had reasonable prospects of obtaining a release from his undertaking. His error was in not applying to the court for a release. His view that the alleged deceit entitled him to ignore the undertaking was wrong but how obviously wrong was it? 28 We have been informed by the Law Society that there does not appear to be any New South Wales publication which would suggest that an application to the court by a solicitor is the appropriate course to be taken in these circumstances. Although, as we have pointed out above, the decision in Queensland of Griffiths CJ and the English and Welsh practice book point in that direction, we do not consider that the Solicitor's failure to take the appropriate course was so obviously wrong that it was conduct that, to use the well known description in Allinson v General Council of Medical Education and Registration (1894) 1 QB 750, would be regarded "as disgraceful or dishonourable by" the Solicitor's "professional brethren of good repute and competency". Nor was it conduct that "amounts to grave impropriety affecting" the Solicitor's "professional character" and "indicative of a failure either to understand or to practice the precepts of honesty or fair dealing in relation to the courts" the Solicitor's "clients or the public" (Kennedy v Council of Incorporated Law Institute of New South Wales (1939) 13 ALJ 563). 29 We derive some support for this view from the fact that it was accepted by the Law Society during the hearing before us that the course of applying to the Court for release from the undertaking was not brought by the Law Society to the Solicitor's attention during the course of the correspondence that passed between them. It was not of course the Law Society's job to advise the Solicitor what to do but nevertheless the absence of any reference to an application to the court tends in our view to confirm that the appropriateness of that course was not glaringly obvious.
In Law Society of New South Wales v Konstantinidis (No 2) [2005] NSWADT 87 at [52], the Tribunal said: 52 We have not been able to locate any case in which breach of, or delay in complying with, an undertaking to the Law Society, or indeed the Bar Association, has been the basis of a finding of professional misconduct or unsatisfactory professional conduct. In a line of cases dealing with breaches of undertakings to fellow-practitioners, the very great importance of strict compliance has been regularly emphasised. In one such case recently before the Tribunal, Law Society of New South Wales v Martin [2002] NSWADT 27, the respondent practitioner, having been found to have committed professional misconduct, was reprimanded and ordered to pay $1,000 on account of costs.
In New South Wales Bar Association v Howen [2008] NSWADT 148, the Tribunal held that the respondent barrister's failure to abide by an undertaking given to the Bar Association amounted to professional misconduct. At [60 - 61], it said: 60 Whilst the failure to comply with an undertaking given to another solicitor does not always amount to professional misconduct, it can and often does so (see Law Society of New South Wales v Waterhouse [2002] NSWADT 204 at [22-26].) 61 An undertaking given to the Barrister's professional association which is charged with the duty to investigate allegations of professional misconduct is in a similar position although the likelihood that non compliance with an undertaking will amount to professional misconduct is in our view even stronger in the case of an undertaking given to a professional association than it is in the case of an undertaking given to a fellow practitioner (see as to an undertaking to the Law Society of NSW, Law Society of NSW v Konstantinidis (No.2) [2005] NSWADT 87).
The case of Law Society of NSW v Ling [2010] NSWADT 48 involved an undertaking by the respondent solicitor to the Law Society in terms similar to those of the Undertaking in this case. Like the Solicitor, the respondent had previously committed tax offences, and he gave the undertaking as a condition of being permitted to hold a practising certificate. The Tribunal found that he had breached his undertaking and also had contravened s 671 of the Legal Profession Act 2004 through failing to comply with the requirements of an Investigator. It held that he had committed professional misconduct and imposed penalties which included a reprimand and a fine of $2,500.
Ms Tronson referred us to the following two passages (at [47] and [52]) in the Tribunal's reasons: 47 Notwithstanding the Solicitor's expressed opinion that he was "...not committing a particularly, or rather a very serious breach", the undertaking was serious and was relied upon by the Society in deciding to allow the Solicitor to continue to practise. This makes his subsequent and continuing breach all the more serious, as it strongly suggests a lack of bona fides in his dealings with the Society. 52 However, this is not merely a case involving breach of undertaking and it is clear on the evidence that the Solicitor did not comply with his obligations under Section 671 of the Act for a period of almost 3 years…
We turn now to the submissions made by Mr Kelso on behalf of the Solicitor.
Mr Kelso's primary contention was that the Solicitor's conduct established by the evidence could not on any view be characterised as 'disgraceful or dishonourable' so as to fall within the definition of professional misconduct contained in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750. It followed, he said, that the only decisions open to the Tribunal were dismissal of the Application or, in the alternative, a finding of unsatisfactory professional conduct.
The principal grounds on which he based this contention were twofold.
First, the Law Society could not complain of the Solicitor's failure to arrange for an independent expert to supervise her financial affairs and provide quarterly reports to the Society. The reason for this was that in its dealings with her during August and September 2011 it had accepted her claim that she could not afford to retain an expert and had informally consented to her providing quarterly statements (notably BASs) herself.
Secondly, although the Solicitor had not complied with this modified obligation within the timeframe specified in paragraph (vi)(b) of the Undertaking, she had ultimately provided all the required statements. This submission by Mr Kelso was at odds with an assertion by Ms Tronson (see [42] above) that the Solicitor had not at any stage provided evidence of compliance with her tax obligations relating to the quarter ending 30 September 2011. In so submitting, Mr Kelso relied on a claim by the Solicitor made in her letter of 23 August 2013 to the Law Society (see [32] above). This was that the accompanying copy of an email to her from her accountant provided confirmation that her BAS for this quarter had been filed.
An additional submission by Mr Kelso was that the evidence showed the Solicitor to have 'communicated with the Society extensively' in a 'bona fide effort' to provide appropriate reports to it. She did this even though the two Complaints made by the Society were 'badly drafted and confusing' and the Society on occasions (for example in its letter to her dated 25 July 2013) 'ignored their own acquiescence/waiver to accept direct BAS filings'.
Mr Kelso also argued that the Law Society should have recommended to the Solicitor that, in view of her difficulties in complying with paragraph (vii)(b) of the Undertaking, she should consider applying to the Supreme Court for this part of the Undertaking to be varied.
In response, Ms Tronson contended that the Society was not under any obligation to provide such advice and that it was the Solicitor's responsibility to investigate possible courses of action such as this. She added that the Solicitor could easily have ascertained (for example, by consulting Riley Solicitors Manual at [28,030] or reading Law Society of New South Wales v Waterhouse [2002] NSWADT 204) that undertakings could be varied in this way.
Mr Kelso submitted further that because the Law Society did not correspond with the Solicitor for a period of about 19 months between November 2011 and June 2013 (see [29] above), the Solicitor was entitled to assume that the First Complaint was not being pressed.
Ms Tronson's argument in response was that the obligations imposed by the Undertaking on the Solicitor remained binding on her irrespective of whether or not the Law Society sent letters to her reminding her of their existence and content.
We understand Mr Kelso to have conceded on his client's behalf that her obligation under paragraph (vii)(b) of the Undertaking remained operative even if in a particular quarter no reporting or payment obligations to the ATO had arisen.
Mr Kelso made the following submissions relating to three of the cases that Ms Tronson had cited. First, the decision in Waterhouse illustrated what should be an appropriate outcome in the present case: namely, a finding of unsatisfactory professional conduct. Secondly, the relevant passage in Konstantinidis confirmed that there was limited authority on the disciplinary consequences of failing to comply with undertakings to the Law Society or the Bar Association. Thirdly, the decision in Ling was clearly distinguishable because (a) the Tribunal's finding of professional misconduct was based on more than the respondent's failure to comply with an undertaking to the Law Society and (b) even at the time of the hearing, the respondent had not fully complied with it.
Mr Kelso also referred to two decisions of the Administrative Decisions Tribunal relating to the provision in the Legal Profession Act 2004 (s 497(1)(a)) whereby unsatisfactory professional conduct of a 'substantial or consistent nature' may be held to amount to professional misconduct. He argued that according to the criteria laid down in those decisions, this provision would not be applicable to the conduct of the Solicitor that had been alleged and proved.

Our conclusions on the claim of professional misconduct

At [35] to [37] above, we summarised the specific allegations of non-compliance with the Undertaking that the Law Society maintained at the hearing.
Subject to two qualifications, we find that the evidence substantiates these allegations. These qualifications are as follows. First, we accept Mr Kelso's submission that in the Solicitor's correspondence with the Law Society of 23 August 2013 (as to which see [31 - 32] above), she discharged her obligation under paragraph (vii)(b) of the Undertaking to notify the Society of her compliance with her reporting obligations to the ATO with respect to the quarter ending 30 September 2011. This is not to say, however, that she complied with paragraph (vii)(b) in this regard, because her notification was sent nearly two years later than it should have been. Secondly, it is not open to the Law Society to rely, in the present context, on any evidence of non-compliance with paragraph (vii)(b) with respect to any quarter after 31 March 2013. The reason for this is that the quarter ending on this date is the latest period with respect to which non-compliance is alleged in the Application. The relevant paragraphs in the Particulars are P17 and P22.
We add the observation here that we have found the Grounds and Particulars of the Application to be unnecessarily confusing. We do not understand, for instance, why a number of matters alleged under the heading 'First Complaint' - which would seem to refer back to Ground 1 - should include events occurring well after the period of time to which this Ground relates. As we pointed out above at [35], there is also an internal contradiction: the quarters to which Grounds 1 and 2 refer exclude the quarter ending 30 September 2010, but breach of a reporting obligation with respect to this quarter is alleged in P15.
Near the commencement of her oral submissions, Ms Tronson indicated that the Law Society did not press any claim that compliance with paragraph (vii)(b) of the Undertaking was dependent on the provision of reports by experts. In our opinion, this concession by the Society was entirely appropriate in view of the evidence regarding the Solicitor's conversations with Ms Foord and Ms Dobosz during August and September 2011. As a result of what the Solicitor was told during these conversations, she was entitled to assume that the Society would accept evidence such as copies of BASs or Tax Agent Portal Activity Statements in lieu of expert reports. So long as she complied with this modified obligation, it would not be open to the Society to claim that she had contravened the Undertaking and to institute disciplinary proceedings on the basis of such contraventions.
Since we have come to this conclusion, we regard as irrelevant the competing submissions regarding the procedure for varying undertakings by applying to the Supreme Court. The question whether the Solicitor was at fault for not making such an application and the question whether the Society should have advised her about this procedure do not arise for determination.
We wish also to express some concerns about the requirement in paragraph (vii)(b) of the Undertaking that the reports to be received by the Law Society within a specified period after the end of each quarter should be provided by an expert. In paragraph [28,030.15] of Riley Solicitors Manual (being a paragraph within the same section as the paragraph cited by Ms Tronson), solicitors are advised that they should not give undertakings to fellow practitioners which require compliance by a third party who is not a party to the undertaking. Furthermore, at the time when the Undertaking was given, Rule 27 of the Revised Solicitors' Professional Conduct and Practice Rules 1995 was to the same effect. As stated above, the Undertaking in the present case, like the undertaking given in Ling, was required by the Legal Services Commissioner to be given by the Solicitor as a condition of obtaining a practising certificate. It must be assumed that so long as she wished to resume practice, she had little or no control over its terms. In our opinion, the Commissioner and the Law Society should give consideration to ensuring, in circumstances such as these, that any such undertaking given by a solicitor is not absolute in its terms. It should make allowance for contingencies such as the solicitor being unable (as in the present case) to afford an expert, or the required reports being consistently late for the sole reason that the chosen expert has been dilatory in preparing and submitting them.
We turn now to the question of primary importance: namely, whether the Law Society has made out its claim that the Solicitor's breaches of the Undertaking amount to professional misconduct at common law.
In our opinion, this claim is made out, by virtue principally of the following four features of the Solicitor's conduct.
First, she made no attempt at all to comply with paragraph (vii) or (viii) of the Undertaking, and no attempt to communicate with the Law Society on the matter of compliance, until August 2011, some nine months after she gave the Undertaking. By this time, she had already defaulted on her obligations with respect to three quarterly periods.
Secondly, even after she had discussed these obligations with Ms Foord and Ms Dobosz and acknowledged to Ms Dobosz that compliance was a serious and important matter, she was late - in the majority of cases, very late - in complying with what we have called her modified obligation under paragraph (vii) with respect to the six periods listed in P22. These constituted all but one of the seven periods directly following her conversations with Ms Foord and Ms Dobosz.
Thirdly, as P20 makes clear, she did not provide any reports within the required period regarding her lodgement of income tax returns for the tax years 2010, 2011 and 2012. This aspect of her non-compliance did not receive a great deal of attention in the Law Society's submissions, but it was nonetheless pressed and no explanation for it was given in the Solicitor's evidence or submissions.
Fourthly, the Solicitor did not at any stage take the steps required by paragraph (viii) when defaults in her obligations under paragraph (vii)(b) occurred. Again, no explanation of these breaches of the Undertaking was forthcoming.
As Ms Tronson submitted, the fact that the Law Society did not remind the Solicitor of the obligations imposed by the Undertaking did not in any way excuse her from compliance with them.
Considered in conjunction, the above features of the Solicitor's conduct suggest two possibilities. One is that she failed to comprehend, or refused or failed to give careful consideration to, the specific requirements of paragraphs (vii)(b) and (viii) of the Undertaking. The other is that, well knowing what was required of her, she believed that it was sufficient for her to comply only intermittently with the former paragraph and not at all with the latter. Within the period from 21 January 2011 to 21 July 2013, she in fact only sent three reports of the kind required by paragraph (vii)(b). It is probably no accident that two of them were sent soon after the end of a financial year (i.e., in July 2012 and July 2013).
In short, the Solicitor, over a period of about two and a half years, paid only limited attention to the task of complying with these parts of the Undertaking. She adopted this attitude of partial indifference even though she acknowledged, when she discussed compliance with the Law Society following letters requiring her to comply, that it was a serious and important matter. She put forward no explanation for this attitude that might constitute a reasonable excuse for her continuing failure to comply.
We agree with the statement in Howen that non-compliance with an undertaking to a professional association is a more serious matter than non-compliance with an undertaking to a fellow practitioner. We also agree with the statement in Ling that when the provision of an undertaking of this nature is required by the Law Society or the Commissioner as a condition precedent to permitting a solicitor to resume or continue in practice, any breach of the undertaking is for that reason all the more serious. It is closely akin to a breach of a condition formally attached to a practising certificate. Continuing breaches of such conditions without reasonable excuse have more than once been held to amount to professional misconduct (see for example Mee Ling v Law Society of New South Wales [1974] 1 NSWLR 490 and Council of the Law Society of New South Wales v Gallego [2014] NSWADT 102).
We cannot agree with Mr Kelso that the decision in Waterhouse is applicable here, particularly since in that case it was 'arguable' that the undertaking had been procured by deceit (see the decision at [27]). In addition, we regard as irrelevant the decisions cited by him on s 497(1)(a) of the Legal Profession Act 2004. Our reason is that the Law Society explicitly stated that it made no claim of statutory misconduct.
For the foregoing reasons, we find that the relevant conduct of the Solicitor was such as would be considered 'disgraceful or dishonourable' by reputable and competent members of the legal profession. It therefore amounted to professional misconduct at common law.

Penalty

The order by way of penalty sought by the Law Society was a reprimand under ss 562(1) and 562(2)(e) of the Legal Profession Act. The Solicitor indicated that such an order would not be opposed, in the event that we made a finding of professional misconduct or unsatisfactory professional conduct.
The Law Society did not tender any evidence indicating that the Solicitor had in the past been found guilty of either of these disciplinary 'offences'.
In his submissions on penalty, Mr Kelso drew our attention to evidence that, as at the date of hearing, the Solicitor had furnished to the Law Society all the material required by what we have called her modified reporting obligations under paragraph (vii)(b) of the Undertaking.
Having regard to these considerations, we conclude that a reprimand is an appropriate penalty and we order accordingly.

Costs

The Law Society sought an order for the payment of its costs, relaying on cl 23(1) of Sch 5 of the Civil and Administrative Tribunal Act 2013. This provision states that where a finding of professional misconduct has been made against a legal practitioner, the Tribunal must make a costs order against him or her, unless 'exceptional circumstances' exist.
Mr Kelso contended that the Solicitor's straitened financial situation constituted 'exceptional circumstances' In her second affidavit, sworn on 20 April 2015, the Solicitor gave the following description of her financial circumstances. Her employment in a legal practice had been terminated about a month earlier and she had received an ex gratia payment of $2,000. She expected to receive a further $1,500 in several months' time after costs had been agreed in a compensation claim that had been settled. She currently received Centrelink benefits of $656.40 per fortnight, including rental assistance. Her weekly rent was $290 and she had 'very few funds'. This testimony was not supplemented or challenged in the Solicitor's oral evidence.
During his submissions, Mr Kelso advised us that the Solicitor had recently received $1,440 as her costs in the settled compensation claim, that she was still unemployed and that she received no maintenance from her husband, from whom she was separated. He argued that since she was now 57 years old, her prospects of obtaining further employment were low.
In support of the claim that we should make a finding of 'exceptional circumstances', Mr Kelso cited Council of the Law Society of New South Wales v Hinde [2011] NSWADT 20. In that case, the Administrative Decisions Tribunal made such a finding under section 566(1) of the Legal Profession Act 2004 (the predecessor to cl 23(1)).
In its reasons at [19], the Tribunal summarised as follows the evidence as to the respondent's financial circumstances: 19 The 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.
At [31 - 37] and [44], the Tribunal set out its reasons for concluding that these factors constituted a basis for a finding of 'exceptional circumstances' under s 566(1): 31 It 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. 32 The 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. 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. 34 The 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). 35 In 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. 36 In 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. 37 We 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. 44 … 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.
In the alternative, Mr Kelso submitted that if we determined that there were no 'exceptional circumstances' under cl 23(1), we should make an order fixing the amount of costs to be paid by the Solicitor, instead of ordering (in accordance with normal practice) that she should pay the Law Society's costs as agreed or assessed. He advised that in the course of correspondence with him, the Law Society had mentioned $9,000 as an estimate of its costs.
Ms Tronson submitted that there were no 'exceptional circumstances', that the Solicitor should therefore pay the Law Society's costs and that the order should be for its costs as agreed or assessed. She advised us that although there had only been one day of hearing in this case, these costs were 'quite high' because there had been a large quantity of correspondence. She added that the Law Society was not in a position to specify any fixed amount as appropriate to be awarded on account of costs.
In our judgment, the Law Society's claim for a costs order should be upheld, for the following reasons.
Although the pattern of circumstances which according to Mr Kelso's submissions should be characterised as 'exceptional' is comparable to that relied on in Hinde, that is not enough of itself to render them 'exceptional'. A factor of prime importance in Hinde was evidently the advanced age of the respondent. Being 82 years old, he was well past the age when future employment, even of a part-time nature could be contemplated. This cannot be said of the Solicitor.
A further matter distinguishing this case from Hinde is that, unlike the respondent in that case, the Solicitor contested the Law Society's Application. She maintained both before and during the hearing that it should be dismissed. Save in one letter to the Law Society (her letter of 23 August 2013, referred to at [31] above), her primary stance was that she was complying with the Undertaking. In the alternative, she maintained that any failure in this regard was not serious enough to warrant a disciplinary sanction or (in the further alternative) could only support a finding of unsatisfactory professional misconduct. The Law Society was accordingly required to prepare and argue its case on liability. By contrast, the Tribunal in Hinde (at [44]) took account of the fact that the respondent 'took no step of significance that would prolong the proceedings against him or cause unnecessary costs to be incurred'.
We consider also that the Solicitor has not established any ground for departing from the normal form of costs order.
We accordingly order that the Solicitor pay the Law Society's costs as agreed or assessed. 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: 13 July 2015

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