Council of the Law Society of New South Wales v Winter

Council of the Law Society of New South Wales v Winter - [2019] NSWCATOD 2 - NSWCATOD 2018 case summary — Zoe

The Law Society's Application and the Solicitor's Reply

Proceedings before the Tribunal were first commenced on 20 December 2017. By amended application lodged 15 May 2018 the Law Society asserts professional misconduct, and seeks orders that the Solicitor's name be removed from the Roll of local lawyers, and that he pay the Law Society's costs of the application. It also notes that the complainant against the Solicitor, Mr Rohan Cains (Mr Cains), seeks compensation.
The Law Society asserts as Ground 1 of its application that the Solicitor is guilty of professional misconduct in that during the period December 2014 to 3 March 2015, he: 1. Misled Mr Rohan Cains by purporting to act for Ronro Pty Ltd (ACN 097 231 368) (Ronro) in: a. registering a Certificate of Judgment in the Local Court, Sydney on Ronro's behalf; b. filing a Notice of Motion with the Supreme Court of New South Wales on Ronro's behalf to obtain funds from security for costs that Groz Investments Pty Ltd (ACN 070 820 236) (Groz) provided in Supreme Court of New South Wales proceedings no. 2010/363898 (Proceedings); c. conducting negotiations for the settlement of costs orders made (prior to deregistration) in favour of Ronro; and d. preparing and finalising consent orders and a Heads of Agreement, which reflected the terms of the agreed settlement, in circumstances where the Respondent knew, or ought to have known, that Ronro: i. had ceased to exist as a legal entity by reason of its deregistration by ASIC on 16 November 2014; and/or ii. did not validly instruct the Respondent to act for it.
The Solicitor denies this ground.
Ground 2 of the Law Society's application asserts that the Solicitor is guilty of professional misconduct in that during the same period he: 2. Misled Mr Cains by holding himself out as a director of Ronro in circumstances where: a. the Respondent was automatically disqualified as a director by reason of being bankrupt; and b. the Respondent knew, or ought to have known, that Ronro had ceased to exist as a legal entity by reason of its deregistration on 16 November 2014.
The Solicitor: 1. Admits ground 2(a); 2. Admits that he is guilty of unsatisfactory professional conduct by reason of the matters admitted in respect of ground 2(a); 3. Denies ground 2(b); and 4. Otherwise denies that he is guilty of professional misconduct by reason of the matters alleged in ground 2.
The third ground is that the Solicitor is guilty of professional misconduct in that during the same period: 3. The Respondent misled the Court by purporting to act for Ronro in: a. registering a Certificate of Judgment in the Local Court, Sydney on Ronro's behalf; b. filing a Notice of Motion with the Supreme Court of New South Wales on Ronro's behalf to obtain funds from security for costs that Groz provided in the Proceedings; and c. preparing and finalising the consent orders and Heads of Agreement which were filed with the Supreme Court of New South Wales on Ronro's behalf, in circumstances where the Respondent knew, or ought to have known, that Ronro: i. had ceased to exist as a legal entity by reason of its deregistration by ASIC on 16 November 2014; and/or ii. did not validly instruct the Respondent to act for it.
The Solicitor denies the whole of ground 3.

[3]

Relevant legislation

It was common ground, and we are satisfied, that the Tribunal has jurisdiction to hear and determine these disciplinary proceedings pursuant to the Uniform Law. The complaint that commenced the Law Society's investigative process, which eventually led to the commencement of these proceedings, was referred by the Legal Services Commissioner to the Law Society on 1 October 2015. Part 5 of the Uniform Law which includes sections 300 to 305 concerning the initiation and prosecution of proceedings in this Tribunal, and determinations made by it, applies.
Part 5.4 of the Uniform Law provides for disciplinary matters. The relevant definitions are: 296 Unsatisfactory professional conduct For the purposes of this Law, unsatisfactory professional conduct includes conduct of a lawyer occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer. 297 Professional misconduct (1) For the purposes of this Law, professional misconduct includes - (a) unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and (b) conduct of a lawyer whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the lawyer is not a fit and proper person to engage in legal practice. (2) For the purpose of deciding whether a lawyer is or is not a fit and proper person to engage in legal practice as referred to in subsection (1)(b), regard may be had to the matters that would be considered if the lawyer were an applicant for admission to the Australian legal profession or for the grant or renewal of an Australian practising certificate and any other relevant matters. 298 Conduct capable of constituting unsatisfactory professional conduct or professional misconduct Without limitation, the following conduct is capable of constituting unsatisfactory professional conduct or professional misconduct - … (b) conduct consisting of a contravention of the Uniform Rules; …
The Legal Profession Uniform Law Australian Solicitors Conduct Rules 2015 (Uniform Rules) include: 19 Frankness in court 19.1 A solicitor must not deceive or knowingly or recklessly mislead the court. … 22. Communication with opponents 22.1 a solicitor must not knowingly make a false statement to an opponent in relation to the case (including its compromise).

[5]

Background and Agreed Facts

The Solicitor was admitted as a solicitor in July 1980, and held an unrestricted practising certificate from July 1981. He was declared bankrupt on 4 February 2013. On notification of his bankruptcy to the Law Society the Solicitor was permitted to continue practice on conditions (including a condition that he not operate a trust account). Since his discharge from bankruptcy on 5 February 2016 he has continued to hold an unrestricted practising certificate with those conditions removed.
It was common ground, based on the Solicitor's admissions to certain facts as pleaded by the Law Society, that: 1. Ronro Pty Ltd (ACN 097 231 368) (Ronro) was registered with ASIC on or about 22 June 2001; 2. the Solicitor was Ronro's sole director from 22 June 2001 to 31 May 2011, and from 19 January 2013 to 4 February 2013, the latter date being the date of automatic disqualification as a director under section 206B(3) of the Corporations Act 2001 (Cth) by reason of his undischarged bankruptcy; 3. the Solicitor was Ronro's secretary during the period 22 June 2001 to 16 November 2014; 4. Groz Investments Pty Ltd (ACN 070 820 236) (Groz), of which Mr Cains was at material times, and is, sole director, manager and Company Secretary commenced proceedings against Ronro in the Supreme Court of New South Wales in November 2010 (the Supreme Court proceedings); 5. on 30 September 2014, a costs determination was made in the Supreme Court proceedings in favour of Ronro. A certificate of determination of costs and a certificate of determination of costs of costs assessment was issued (collectively the Costs Determinations); 6. on 16 November 2014, ASIC deregistered Ronro pursuant to section 601AB (1A) of the Corporations Act; 7. on or about 9 January 2015 the Solicitor, on Ronro's behalf, registered the Costs Determination as a judgement in the Local Court, Sydney (the Judgement Debt); 8. during the period December 2014 to 3 February 2015 the Solicitor exchanged several emails with Mr Cains seeking to negotiate payment of the Judgement Debt; 9. on 22 January 2015 the Solicitor, on Ronro's behalf, filed a notice of motion and supporting affidavit with the Supreme Court of New South Wales to obtain the Judgement Debt from security for costs that Groz had provided in the Supreme Court proceedings; 10. by 4 February 2015, Mr Cains and the Solicitor reached agreement concerning the payment of the Judgement Debt. In the days preceding 4 February 2015, the Solicitor prepared consent orders and a Heads of Agreement document reflecting this agreement; 11. on 4 February 2015, the consent orders and Heads of Agreement were filed with the Supreme Court of New South Wales. With respect to those documents: 1. the consent orders and Heads of Agreement provided that the sum of $30,000 would be paid to Ronro from the security for costs that Groz had earlier provided in the proceedings; 2. the Solicitor executed the Heads of Agreement adjacent to the words "signed by the defendant " meaning Ronro; 1. on 24 February 2015 the Solicitor sent Mr Cains an email in which he represented he was a director of Ronro; 2. On 3 March 2015 the Solicitor sent Mr Cains an email in which he represented that he was a director of Ronro; and 3. The Solicitor did not notify ASIC of the fact of his undischarged bankruptcy.
In his Amended Reply to the Amended Application for Disciplinary Findings, the Solicitor states that in registering the Costs Determinations in the Local Court, in filing the Notice of Motion and supporting affidavit to obtain the Judgment Debt, in preparing the consent orders and Heads of Agreement for payment of the Judgment Debt, and in filing the consent orders and Heads of Agreement with the Supreme Court and executing the Heads of Agreement on behalf of Ronro, he acted in his capacity as Ronro's solicitor.
In the Amended Reply, the Solicitor states that in representing in the emails to Mr Cains of 24 February 2015 and 3 March 2015 that he was a director of Ronro, 1. He was intending to convey that it was not him personally who owed money to Groz pursuant to the judgment debt it had obtained; and 2. That the use of the word "director": 1. Was not correct because at the time he was an undischarged bankrupt and therefore automatically disqualified by operation of s 206B(3) of the Corporations Act from acting as a director of Ronro; 2. Was not used with the intent to deceive or mislead Mr Cains of the registration status of Ronro about which he held an honest belief that Ronro was registered; 3. Had the effect of misleading Mr Cains as to his directorship of Ronro because at the time he was not a director by reason of his undischarged bankruptcy and the operation of s 206B(3) of the Corporations Act.

[7]

Deregistration of Ronro
The Solicitor's affidavit evidence (ex R1, paragraph 8; ex R2, paragraphs 3-6), which was not disputed, was that Ronro was a family company involved in the business of property development projects on its own or in various joint venture projects. The Solicitor and his wife Rosalie were both shareholders, and Mrs Winter was the main investor in the company. The company ceased trading in late 2012/early 2013.
Ronro was deregistered on 16 November 2014 pursuant to s 601AB(1A) of the Corporations Act 2001 because the annual review fee had not been paid.
The Law Society contends that the Solicitor knew or ought to have known that Ronro had ceased to exist as a legal entity, because: 1. He was the only person with any real involvement in the management and control of Ronro's affairs during the relevant period; 2. The provisions of the Corporations Act regulating corporate governance and the fundamental duties and obligations of company officeholders were not beyond the Solicitor's knowledge and contemplation; and 3. It was not beyond the Solicitor's knowledge and contemplation that he and Ryde Taxation & Accounting (as Ronro's registered contact address) were the only relevant persons whom ASIC was required to notify of its proposed and actual deregistration of Ronro.
The Solicitor admits that he was and is aware of the provisions of the Corporations Act relating to directors' duties and that s206B(3) automatically disqualifies a person from managing a corporation if the person is an undischarged bankrupt, and that he and Ryde Taxation & Accounting were the only relevant persons whom ASIC was required to notify of its proposed and actual deregistration of Ronro. As to his knowledge of the deregistration of Ronro, the Solicitor states: 1. He did not receive ASIC's notice of intention to deregister Ronro dated 4 September 2014 as it was addressed to him at an address in Meadowbank NSW when by that date he had moved to a different address in Meadowbank NSW, a move that occurred on or about 23 August 2014; 2. He did not immediately update Ronro's registered business address as all other ASIC correspondence to Ronro was sent to Ryde Taxation & Accounting and he had a reasonable expectation that correspondence would continue to be sent to that address; 3. At the date of the move on 23 August 2014 he had an honest but mistaken belief that all Ronro's annual fees had been paid; 4. In the alternative, even if the fees were not paid he had a reasonable basis to believe that ASIC would not deregister a company for non payment of annual fees for at least three years of non payment; 5. He did not receive and ASIC did not send any notice informing of its actual deregistration of Ronro; 6. Between December 2014 to 3 March 2015 he had an honest but mistaken belief that Ronro remained registered and thus continued to exist as a legal entity.
In her affidavit of 19 December 2017 (ex A5) Ms Nalbandian states that she is a public accountant and registered tax agent providing accounting services as a sole trader under the registered business name Ryde Taxation & Accounting. She was Ronro's accountant from 2 April 2009 to 26 May 2017. From 2 April 2009 to 16 November 2014 Ryde Taxation & Accounting's post office box was Ronro's contact address for the purposes of s 146A of the Corporations Act 2001 (Cth) to which ASIC sent notices. In a letter to the Law Society dated 11 July 2016 annexed to her affidavit Ms Nalbandian states that her role with ASIC was to assist with basic compliance issues, that is conveying the annual company statements to the client and updating changes as advised by the public officer. Also annexed to that affidavit are an email dated 25 June 2013 to the Solicitor forwarding the annual company statement for Ronro and ASIC fees payable by 22 August 2013, and an email dated 26 June 2014 to the Solicitor forwarding the annual company statement.
The ASIC fee notices are annexed to Ms Nalbandian's affidavit. The annual fee payable by 22 August 2013 was $230.00. The notice issued 22 June 2014 states that there is an outstanding balance of $529.00 payable immediately and a fee of $236.00 payable by 22 August 2014.
The Solicitor accepts that he received the fees notices from Ms Nalbandian in June 2013 and June 2014. In relation to the 2013 notice, the Solicitor's affidavit evidence was (ex R1, paragraph 35) that at that time the company had not been trading for approximately six months, had closed its bank account, and had no money to pay the fee; he was unable to recall whether he passed on this renewal notice to his wife to pay but believes that he would have done so. He did not follow up with his wife whether or not she in fact paid the fee.
In oral evidence to the Tribunal the Solicitor stated that he handed the notice to Mrs Winter. Before 2013 either he or Mrs Winter would pay, and the arrangement between them was informal.
In relation to the 2014 notice, the Solicitor's affidavit evidence (ex R1, paragraph 37) was that he recalled giving this second ASIC renewal fee invoice to his wife to pay; as he was bankrupt and could not act as director of the company, he did not want to pay the fee himself. At paragraph 40 he states that he did not follow up with his wife as to whether or not she had in fact paid; at that time his and his wife's financial position generally was a touchy matter and he thought it best to leave Mrs Winter to attend to matters relating to Ronro on her own. In oral evidence the Solicitor acknowledged that based on the 2014 invoice it was clear that the 2013 invoice had not been paid. He assumed she would pay it. In response to a question whether he should have made inquiries of his wife to ask her if she had paid, the Solicitor stated that he would not ordinarily have done that.
The 2013 and 2014 ASIC fees invoices were addressed to Ronro c/- Ryde Taxation & Accounting's post office box address. The Company Statement for June 2013 records the registered office and principal place of business for Ronro as a residential address. The Company Statement for June 2014 records the registered office and principal place of business for Ronro as a different residential address. The ASIC Notice of intention to deregister Ronro, dated 4 September 2014 (ex R1, p 61), and the Notice of Deregistration dated 16 November 2014, were addressed to that latter residential address. In correspondence to the Law Society on 22 July 2016 annexed to her affidavit of 19 December 2017 (A1, p 30) Ms Nalbandian states that on a search of her files she can find no documents or notices from ASIC concerning the proposed and actual deregistration of Ronro.
The Solicitor states in his affidavit (ex R1, paragraph 44) that he and his wife had moved from the address to which the ASIC deregistration notices were sent approximately two weeks earlier. He says that he did not receive the letter and that if he had received it he would have realised that his wife had not paid the renewal fees. He would have ensured that she paid the renewal fees immediately. The Solicitor states that he intended to ask Ms Nalbandian to update their residential address with ASIC, but did not do so immediately because the move on 23 August 2014 was hurried, and they had a pre-booked holiday for 7 to 12 October, and he overlooked advising Ms Nalbandian until early 2015.
In oral evidence the Solicitor stated that he understood the importance of paying ASIC fees and that as an experienced legal practitioner in company law understood the consequences of not paying such fees; one of which being that ASIC could undertake the process of issuing a notice of an intention to deregister, then actually deregistering. He further conceded that there would be a problem if he, as a solicitor, was acting for a company that was deregistered. After the Solicitor handed to his wife the ASIC invoices he took no further steps, he concedes, to assure himself that the fees had been paid. He denies receiving any deregistration notice nor being aware that the fees had not been paid.
In his affidavit the Solicitor states (ex R1, paragraph 45) that he did not want the company deregistered as it would be deprived of the ability to recover its costs of the Supreme Court litigation. In oral evidence the Solicitor rejected the proposition that he had intended not to pay so as to have ASIC deregister Ronro: he had no intention to deregister Ronro and would have expected to get a notice from ASIC of any intention to deregister the company and did not get such a notice. His experience was that it would usually take ASIC three to five years to deregister a company, while accepting that it had power to deregister after 12 months, pursuant to s 601B(1A) of the Corporations Act. The Solicitor did not accept that he had overlooked payment of the fee, stating that he expected he would receive notice of the intention to deregister the company.
The Solicitor's evidence (ex R1, paragraph [52]) was that he found out that Ronro had been deregistered for failing to pay the annual fee when he received an email from Mr Cains on 3 March 2015. That email is in evidence (ex R1, p 62), and in it Mr Cains asks "Ron, is it true that Ronro was deregistered in November 2014?".

[8]

Discussion and Findings

The Law Society accepts that the evidence before the Tribunal does not substantiate a finding that the Solicitor received the ASIC notice of intention to deregister or the notice of deregistration, such that he had actual knowledge that Ronro was deregistered on 16 November 2014. The Law Society submits that the Solicitor was well aware in June 2014 that Ronro had not paid the fee due in 2013, and he knew at that time of the consequences of non payment. The Law Society submits that the Solicitor had an obligation to inquire of ASIC or his wife if the fees had been paid, and his failure to do so meant he was wilfully blind to the prospect of the company being deregistered.
The Solicitor submits that the Tribunal should find that he did not receive the notice of intention to deregister and the notice of deregistration; that he left the payment of fees to Mrs Winter; that his experience was that ASIC took 3-5 years to deregister a company; and that he did not intend for Ronro to be deregistered.
There is no evidence to counter, and we accept, the Solicitor's evidence that he did not find out that Ronro had been deregistered until March 2015. There is no evidence that the notice of the intention to deregister or the notice of deregistration was sent either to Ronro's accountant, or to the residential address to which the Solicitor and his wife had moved. We accept his evidence that he received the two emails from Ryde Taxation & Accounting of 25 June 2013 and 26 June 2014, and passed on the renewal invoices to his wife for payment. We also accept the evidence that the Solicitor took the steps that he did in paragraph 19-(13) not knowing that, at the time, Ronro had been deregistered by ASIC. We therefore find that the Law Society has not established those parts of Grounds 1 and 3 of misleading either Mr Cains or the Court by purporting to act for Ronro in taking the litigation steps referred to above in circumstances where the Solicitor knew that Ronro had at the time ceased to exist by reason of its deregistration.
We do find, however, that in undertaking these litigation steps in the period December 2014 to March 2015 the Solicitor, as a solicitor acting in litigation for a corporation of which he was a shareholder and a former director, should have taken reasonable steps to ensure that the company for which he was acting existed as a legal entity. The Solicitor knew in June 2014 that the 2013 fees had not been paid, and knew of the potential for ASIC to deregister the company on that ground. He failed to inquire of his wife as to whether the ASIC fees were paid and thereby satisfy himself that the company that he was acting for in litigation had not been deregistered, in circumstances where he knew that failing to pay ASIC fees would ultimately result in deregistration. He failed to advise Ronro's accountant of the change of address in August 2014 until early 2015. Those failures are unexplained, and inconsistent with his affidavit evidence (ex R2, paragraph 10) that he was responsible for all the administrative work associated with Ronro, including liaising with the accountant. Further, his explanation in oral evidence that he overlooked notifying the accountant of the change of residential address is not consistent with the position he adopted in his Reply (at 15(iii)) that he had a reasonable expectation that ASIC correspondence would continue to go to the accountant's address. The Tribunal finds that in the circumstances, the Solicitor ought to have known that there was at least a real prospect that Ronro's registration was in jeopardy in June 2014, when on his evidence he became aware that the 2013 fee had not been paid; and he ought to have taken steps both to ensure the fee was paid and to maintain the correct address with ASIC. His failure to do so was, as submitted by the Law Society, recklessly careless.

[9]

Representations to Mr Cains
The Solicitor admits in his reply to Ground 2(a) that he misled Mr Cains by holding himself out as a director of Ronro in circumstances where he was automatically disqualified as a director by reason of being bankrupt. That the Solicitor held himself out as a director is established in the following correspondence: 1. Email dated 24 February 2015 to Mr Cains (ex A1, p 105) in which the Solicitor states: I again seek to make it quite clear that it is not ME who owes this money. The debtor is Ronro Pty Ltd, I am a director and NOT a shareholder. The matter is due to be discussed between the shareholder, myself, and the accountants for the company on Friday and I will respond on behalf of the company after that meeting in accordance with the shareholders directions. 1. Email dated 3 March 2015 to Mr Cains (ex A1, p 109) in which the Solicitor states: … You still seem to be under the incorrect impression that Ronro Pty Ltd is my company. I once again advise that I have no interest in this company and that I am merely a director of it. I can only relay the instructions of Ronro…. … I have answered your allegations and questions as best I can, I do not believe that there is anything to be gained by entering into further discourse in the matter as my instructions are quite final on the subject.
The latter email includes the statement that the Solicitor is acting on instructions from Ronro. Other correspondence during the period in which the Solicitor was negotiating with Mr Cains for payment of the Judgment Debt, in which the Solicitor represented that he held instructions to act as solicitor on behalf of Ronro, included: 1. email dated 19 January 2015 stating he was "… Instructed that" Ronro would not consent to Mr Cains' intended application for review being filed out of time; and that he was "further instructed that the company rejects the offer" contained in Mr Cains' email of 16 January 2015; 2. email dated 27 January 2015 forwarding to Mr Cains a notice of motion and affidavit in support. The Solicitor's signature appears adjacent to the words at the foot of the motion "signature of legal representative". Below those words are the words "capacity (e.g. solicitor, authorised officer, role of party)" the words "authorised officer, role of party" have been ruled through. The affidavit attached to the email is an affidavit of the Solicitor, dated 22 January 2015, and opening with the words "I am the solicitor for the defendant [Ronro] and have carriage of this matter" Annexure D to that affidavit is a copy of a registration of certificate of judgement entered in the General Division of the Local Court issued 9 January 2015 recording a judgment amount of $32,703.55 in favour of Ronro against Groz; under "filing details" are the words "legal representative Ron Winter Legal"; 3. email dated 28 January 2015 responding to a settlement offer, requesting information "…so that I can properly advise Ronro Pty Ltd…", and noting that a complaint would not be made "…if I influence my client to accept your offer…".
In addressing the emails to Mr Cains of 25 February 2015 and 3 March 2015 in which he held himself out as a director of Ronro, the Solicitor says that it was his intention to convey to Mr Cains that it was not him personally who owed any money to Groz pursuant to the judgement. He accepts in his affidavit (ex R1, paragraph 50) that his use of the word "director" in his email of 24 February 2015 was misleading because "… at the time I was bankrupt and therefore disqualified from acting as a director of the company and was not its director". He says it was not his intention to mislead Mr Cains about his status as a director of Ronro. He accepts that the use of the word "director" was incorrect in the circumstances and gave the misleading impression that he was the company director when that was not the case. He says that he was acting at the time in the capacity as the solicitor for Ronro, being unaware when doing so that the company had been deregistered. A similar statement is made in relation to the email of 3 March 2015 (ex R1, paragraph 51).
In oral evidence the Solicitor stated that referring to himself as director was an unfortunate and ill-considered choice of words, and that he was trying to impress upon Mr Cains that it was the company that owed him money. The Solicitor was further questioned about the reference in the email of 24 February 2015 to a meeting between the shareholder, himself and the accountants on Friday. When taken to an email sent to Mr Cains on 27 February 2015 (ex A1, p 111) which records that "a general meeting of Ronro Pty Ltd has been held", and states advice said to have been provded by the accountant, the Solicitor accepted that the accountant had not been present at the meeting and that the advice from "the accountant" had in fact been given by him. He acknowledged that it was a mistake to say that the accountant had attended.

[11]

Instructions to act on behalf of Ronro
The Law Society contends that between 4 February 2013 to 3 March 2015 the Solicitor knew, or ought to have known, that Ronro did not validly instruct him to act for it, because: 1. He knew that in that period Ronro had no directors or other officeholders; 2. He knew or ought to have known that the power to manage Ronro including the power to give instructions in relation to litigation was vesting in Ronro's directors; 3. He knew or ought to have known that Ronro could in the period from 4 February 2013 onwards have taken steps to appoint a new director or directors but had not done so; 4. He knew or ought to have known that there was no person authorised to give instructions on behalf of Ronro from 4 February 2013 to 3 March 2015.
The Solicitor responds in his Reply that: 1. Both he and his wife were involved in the management and control of Ronro's affairs between 22 June 2001 to 3 February 2013; 2. Mrs Winter also managed and controlled Ronro's affairs from 4 February 2013 to 3 March 2015; 3. Between 22 June 2001-30 May 2011 and 4 February 2013- 3 March 2015 Mrs Winter was a director of Ronro within the meaning of the term "director" in s 9(b)(i) of the Corporations Act; 4. Between 31 May 2011- 19 January 2013 Mrs Winter was a director of Ronro within the meaning of the term "director" in s 9(a)(i) of the Corporations Act and the Solicitor was a director within the meaning of the term "director" in s 9(b)(i) of the Corporations Act.
In his second affidavit sworn on 20 June 2018 the Solicitor explained the management of Ronro, stating that he and Mrs Winter ran the business together and always made decisions in respect of the business together (aside from the period when he was bankrupt); that much of the business was conducted without formal meetings or records of resolutions; and that there was no strict division between directorship and management of the company. At paragraph 67 he states that he and Mrs Winter made the decision together that Ronro would defend the proceeding and that he would act as its solicitor. At paragraph 70 he states that when judgment was handed down in Ronro's favour on 12 June 2013 he advised Mrs Winter of the outcome; by that time he was bankrupt and could not make decisions in respect of Ronro. On the issue of purporting to act as solicitor for Ronro following the deregistration of that company in November 2014, the Solicitor says that the steps that he took for the company following that date were taken when he was "completely oblivious" to the fact that the company had been deregistered. He says that he took the steps that he did on the instructions of his wife. Such steps included arranging for the costs assessors cost to be paid, receiving the Certificate of Determination, registering the judgement, and filing and serving the notice of Motion and affidavit in support. He says that if he had known that the company had been deregistered for non-payment of the annual renewal fee he would not have taken steps to enforce payment of the Certificate of Determination until such time as the company was reinstated.
In oral evidence the Solicitor agreed that between 4 February 2013 and when it was deregistered Ronro had no appointed director. During the course of the Supreme Court litigation between Ronro and Groz the Solicitor received instructions from his wife. If he had known that the company had been deregistered in November 2014 he would have filed a notice of discontinuance. He did not have regard to the technicalities involved with whether or not his wife, as a shareholder, could instruct him on behalf of the company. He agreed that it was important for a company to have an appointed director but did not turn his mind to the arrangement at hand and did not specifically consider his wife's legal capacity to instruct him for Ronro. To his mind his wife was expressing the will of the company as a de facto director. He believed that she had authority to instruct as shareholder. If he had turned his mind to the issue of his wife's capacity, at law, to instruct him on behalf of Ronro, but came to the view that she did not have that capacity, he would have ceased acting.

[12]

Discussion and findings

The Solicitor submits that he did have authority to act on behalf of Ronro and did so in his capacity as its solicitor from 3 February 2013 by reason that Mrs Winter as de facto director of Ronro continued to give instructions to himon behalf of Ronro in respect of the Supreme Court proceedings and aftermath. Throughout the life of Ronro both the Solicitor and Mrs Winter acted as its director irrespective of whether they occupied the position of formally appointed directors or acted as de facto director. The company had only two shareholders and there was a high degree of informality without a strict division of directorship depending on formal appointment.
We accept the Solicitor's evidence that at material times he and his wife made decisions in respect of the business conducted by Ronro; further, that his wife was involved in the management of the company; and that by the period in question the company's only activity was the conduct of the Supreme Court proceedings. We accept the Solicitor's evidence that his wife behaved as if she were a director and that she discussed with him the steps to be taken in the obtaining of the costs order.
Consideration of this issue requires reference to the relevant provisions of the Corporations Act and to Ronro's constitution.
Section 9 of the Corporations Act defines "director": "director " of a company or other body means: (a) a person who: (i) is appointed to the position of a director; or (ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and (b) unless the contrary intention appears, a person who is not validly appointed as a director if: (i) they act in the position of a director; or (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes. Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body. Note: Paragraph (b)--Contrary intention--Examples of provisions for which a person referred to in paragraph (b) would not be included in the term "director" are: * section 249C (power to call meetings of a company's members) * subsection 251A(3) (signing minutes of meetings) * section 205B (notice to ASIC of change of address).
The Solicitor relies on six propositions drawn from the principles stated by the Full Court of the Federal Court in Grimaldi v Chameleon Mining NL & Anor (No 2) (2012) 200 FCR 296 at 321-325, which can be summarised as follows: 1. A person may be a director without any purported appointment of that person to that position at any time; 2. The words "acts in the position of a director" contemplate that to some degree the person has been doing the work of a director; 3. The roles and functions performed vary with the commercial context, operations and governance structure, and may be at variance with what is permitted by the Corporations Act or the company's constitution; 4. The extent of a person's participation in the affairs of a company must be more than administrative arrangements and there must be a real contribution in the making of decisions involving the affairs of the company; 5. Where there is a de jure director that does not preclude a person being a de facto director; 6. While third party perceptions are relevant they are not determinative and cannot change the true character of the position in which a person acts.
The Law Society relies on Ronro's constitution (ex A3, Annexure A) which provides in cl 80 that "…the business of the Company shall be managed by the Directors …", and in cl 75 that "…the Company may by resolution remove any director and may by resolution appoint another person in his stead". Ronro had no director from 4 February 2013 and could have, but did not, appoint one or more directors. There was no capacity for it to conduct its affairs through a shareholder. To the extent that it might be said that Mrs Winter was empowered to instruct the Solicitor as de facto director, the evidence does not suggest that she performed functions for the company that only a director could perform, and despite the informality in the way the company was said to have operated it was still the case that directors were formally appointed and changed over the years. Mrs Winter could not be said to be acting as director despite not being validly appointed as she had ceased, formally, to be a director. Further, there is no evidence from Mrs Winter as to the role she performed for the company after 19 January 2013, and no minutes of any meetings recording the giving of instructions. That the Solicitor kept Mrs Winter abreast of developments in litigation or that they agreed on the taking of certain steps does not indicate that Mrs Winter was performing the role that a de jure director would normally perform. Even if the Tribunal could find that Mrs Winter was at the relevant time a de facto director under the Corporations Act that would not answer the question as to whether she was authorised to instruct the Solicitor on behalf of Ronro: the designation of a person as de facto director does not carry with it an authorisation of the person's conduct as the conduct of a director (s198A Corporations Act), rather the function of that designation is to expose the person to the duties and liabilities ordinarily borne by a director, relying on Corporate Affairs Commission v Drysdale [1978] HCA 52; (1978) 141 CLR 236.
The Solicitor's explanation to the Tribunal that he considered that Mrs Winter was expressing the will of the company as de facto director is contrary to his response to questions in a Notice issued by the Law Society investigator on 17 February 2017. In a statutory declaration made on 30 March 2017 in response to questions as to the legal basis on which Mrs Winter as shareholder was authorised to manage and control the affairs of Ronro, receive legal advice concerning the affairs of Ronro, or instruct him in his capacity as solicitor for Ronro, the Solicitor stated (ex A1, p 318) that in his view the shareholders in general meeting are entitled to pass resolutions relating to the affairs, management and control of the company and to receive legal advice and by resolution, entitled to instruct. In oral evidence the Solicitor explained that that was an inept explanation of the legal basis, and agreed that his explanation was different to his argument now because he has had time to reflect and take legal advice. He did not refer back to the constitution of Ronro, and relied on his knowledge of comparable matters.
The Tribunal has difficulty reconciling the Solicitor's stated belief that his wife had authority to instruct him as shareholder of the company, or that she was expressing the will of the company as a de facto director, given both his extensive experience of over 30 years in legal practice including in company matters, and the disparity between his evidence to the Tribunal and his earlier responses to the Law Society. The Tribunal accepts that the Solicitor and his wife managed the affairs of Ronro by mutual discussion and agreement, without regard to which of them was at that time formally an officeholder. However, the Tribunal is not persuaded that during the period from December 2014 to March 2015 the Solicitor in fact turned his mind to whether the instructions that he was receiving from his wife represented valid instructions from Ronro, given his knowledge that she was not at the time a director but a shareholder. By that time, on the Solicitor's evidence, the only activity engaged in by Ronro was the conduct of the litigation to obtain the benefit of the costs order.
Mrs Winter had ceased formally to be a director of Ronro on 19 January 2013. There is no evidence of Mrs Winter in the proceedings before us. We draw no adverse inference from that having regard to the affidavit of Dr Thangavel (ex R3) concerning Mrs Winter's medical condition. However, there is no evidence of records of meetings or formal resolutions of Ronro's shareholders, such as might support a claim that it was the shareholders who instructed the Solicitor to act. Even if Mrs Winter could be regarded as a de facto director (based on the principles identified in Grimaldi), the consequence would be, based on the authorities including Grimaldi and Corporate Affairs Commission v Drysdale (1978) 141 CLR 236, to impose obligations on her in discharging the duties as director and potential liability for breaches of the Corporations Act, rather than confer on her the power to instruct a solicitor. The Tribunal does not accept that the Solicitor, as shareholder and former director who had been actively involved in the management of Ronro with his wife, could rely on any ostensible authority of Mrs Winter to validly give instructions to him to act on behalf of the company.
The Tribunal finds that the Solicitor knew that Ronro had no formally appointed directors during the period December 2014 to 3 March 2015. The Tribunal does not accept his explanation as to why he regarded his discussions with Mrs Winter as conferring authority on him to act on behalf of Ronro. The Tribunal finds that as an experienced practitioner, including in company law matters, who had been actively involved in the business activities and administration of Ronro, he ought to have known that Ronro could not and did not validly instruct him to act in the conduct of the litigation with Groz.

[13]

Characterisation of conduct

The Law Society submits that the Solicitor's conduct, if found to have been engaged in knowingly, or recklessly, constitutes both conduct that substantially or consistently failed to reach or maintain a reasonable standard of competence and diligence, thus amounting to professional misconduct under the Uniform Law, and is conduct that would be considered by practitioners as "dishonourable or disgraceful" as those terms are used in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750. The Law Society submits that conduct might amount to professional misconduct even though it does not involve deliberate dishonesty, relying on Law Society of New South Wales v Carvan (unreported, Court of Appeal, 14 May 1981 (BC8111397)) and Bolster v Law Society of New South Wales (unreported, Court of Appeal 20 September 1982 (BC8211696)) referred to in Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83.
The statutory definitions of "unsatisfactory professional conduct" and "professional misconduct" in ss 296 and 297 of the Uniform Law are at [13] above. The definitions are inclusive. The definition of professional misconduct includes conduct that would be considered by practitioners as "dishonourable or disgraceful" as those terms were used in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750.
In Council of the Law Society of New South Wales v Webb [2013] NSWCA 423 Meagher JA, with whom Leeming JA and Simpson J agreed, considered the term "substantial or consistent failure" in paragraph (a) of the definition of "professional misconduct": 22. The distinction made by that definition is between conduct which involves a "substantial" failure to reach or maintain the required standard and conduct which involves a "consistent" failure to do so. The former directs attention to the nature and consequences of the failure, which may be sufficiently serious to raise questions as to the lawyer's competence and diligence and thereby warrant the description "substantial". The reference to a "consistent failure" is to ongoing or persisting acts of failing on different occasions to reach or maintain the required standard. The same or similar failures which occur on a series of related occasions and are explained by an overarching error of judgment on the part of the lawyer (which is not itself the or a relevant failure which is the subject of complaint) do not involve a "consistent failure" in the sense in which that expression is used in this definition.
After considering the discussion in Xu v Council of the Law Society of NSW [2009] NSWCA 430, where Handley AJA (Tobias and Basten JJA relevantly agreeing) described the reference to a "consistent failure" as being to acts or omissions involving failures to comply with the requisite standard which occur in a number of transactions, Meagher JA said: 26…. The references to the need for the failures or mistakes to occur in a "variety of situations" or for them to be "repeated in other transactions" emphasise that it is the persistent occurrence of the same or similar failures to reach or maintain a reasonable standard of competence and diligence on separate occasions which gives them the quality of being "consistent". The fact that they have that quality makes it likely that the explanation for the conduct is a want of fitness or competence rather than a series of casual or uncharacteristic lapses or, as in this case, a single overarching mistake made in the context of related transactions.
The Law Society submits that the Solicitor's conduct of the litigation cannot be explained as a mere oversight or as posing no real detriment to the Court or the opponent in the litigation; that he knowingly made a false representation to a legally unrepresented party; and that his conduct should be considered in the context of other misrepresentations he made to Mr Cains in the course of written communications including in the email of 27 February 2015. The Law Society submits that whether taken individually or cumulatively the Solicitor's conduct ought to be characterised as professional misconduct.
The Solicitor submits that the conduct alleged in ground 2(a) is best characterised as unsatisfactory professional conduct as there was no dishonest intention in the conduct and it does not amount to disgraceful and dishonourable conduct. The Solicitor submits that the Law Society has not proved grounds 1(a) or (b), 2(b) or 3(a) or (b) to the requisite standard.

[15]

Findings on Ground 2

Ground 2 is that the Solicitor misled Mr Cains by holding himself out as a director of Ronro when: (a) he was automatically disqualified from being a director of Ronro by reason of his being an undischarged bankrupt; and (b) he knew, or ought to have known, that Ronro had ceased to exist as a legal entity, and that in the circumstances his conduct amounted to professional misconduct.
The Solicitor admits in response to Ground 2(a) that he misled Mr Cains by holding himself out as a director of Ronro in circumstances where he was disqualified as a director by reason of being bankrupt, and admits that this conduct amounts to unsatisfactory professional conduct.
We have found that the misleading statements were made, and that the Solicitor knew they were false, and that we do not accept that making them was in mistake. For those reasons, the decision of the Tribunal in Council of the Law Society of New South Wales v CZD [2017] NSWCATOD 153 on which the Solicitor relied, is distinguishable. In that instance the Tribunal was satisfied that the practitioner's conduct in certifying copies of documents as true copies without properly assessing the documents provided by the client to determine that they were original documents was not knowingly false and misleading. We are satisfied that in knowingly making a false statement to Mr Cains the Solicitor breached Conduct Rule 22.1. That breach is capable of constituting unsatisfactory professional conduct, or professional misconduct: s 298 Uniform Law. Having regard to the discussion in Webb as to the definition in s 297(1)(a), we conclude that this conduct, which was deliberate and not inadvertent, was sufficiently serious to raise questions as to the Solicitor's competence and diligence and thereby warrant the description that it was a substantial failure to maintain a reasonable standard of competence and diligence. Whether or not the representation could have altered the conduct of the litigation does not detract from that conclusion. We find that the Solicitor is guilty of professional misconduct under Ground 2(a).
As to ground 2(b), in the absence of a positive finding that the Solicitor knew that Ronro had ceased to exist as a legal entity at the time he made the representations as to his position as a director in the emails, we do not regard his conduct as particularised in Ground 2(b) as of such seriousness as to constitute professional misconduct. In circumstances where his failure to take steps to ensure that Ronro was still registered was recklessly careless, his conduct was well short of the standard of competence and diligence expected of a reasonably competent lawyer, and was unsatisfactory professional conduct as defined in s 296 of the Uniform Law.

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