Solicitors:
Mr L Pierotti (Applicant)
File Number(s): 1520227
[2]
Background
On 5 November 2015 the Council of the Law Society of New South Wales (the applicant) filed an application for disciplinary findings and orders naming John Francis Thomas Mahony as the respondent (the respondent). The application seeks the following orders:
1. That the respondent be reprimanded;
2. That the respondent be fined;
3. That the respondent pay the costs of the applicant as agreed or assessed; and
4. Such further or other orders as the Tribunal deems fit.
In addition the application stated that: "compensation in the sum of $6,600.00 plus applicable interest is sought by Mr W Muddle SC".
On 2 March 2016 the respondent filed a reply to the application for disciplinary findings.
On 25 May 2016 both parties filed an Agreed Statement of Facts (ASOF) which has been signed by Anne-Marie Foord on behalf of the applicant and by the respondent personally. That document is set out more fully later in these reasons. It was tendered at the hearing on 1 August 2016 and marked Exhibit A.
At the hearing of the application counsel for the respondent indicated to the Tribunal that the respondent conceded that the facts contained in the ASOF constituted professional misconduct by the respondent. However, counsel for the respondent submitted that the respondent should only be reprimanded and that no fine should be imposed.
Counsel for the applicant informed the Tribunal that the applicant would submit that the Tribunal ought to impose a fine on the respondent.
Counsel for the applicant tendered without objection the documents which are referred to in the ASOF. The ASOF is set out in paragraph 14 and in respect of the documents referred to in the ASOF we have included in square brackets the Exhibit number in respect of each document. The Exhibits tendered at the hearing are as follows:
1. Email from M Seifoor to the respondent dated 2 November 2012 at 2:34pm, email from the respondent to M Seifoor dated 2 November 2012 at 3:06pm, email from M Seifoor to the respondent dated 2 November 2012 at 4:30pm, email from M Seifoor to the respondent dated 8 November 2012 at 11:38am, item 11 to the schedule to the document described as LGIA (Exhibit B);
2. Letter from the respondent to the applicant dated 24 February 2014 (Exhibit C);
3. Letter from the respondent to the applicant dated 11 September 2013 (Exhibit D);
4. Letter from the respondent to the applicant dated 20 February 2013 (Exhibit E);
5. Email from C Carney to W Muddle SC cc the respondent dated 27 March 2012 (Exhibit F);
6. Email from W Muddle SC to C Carney cc the respondent dated 27 March 2012, email from C Carney to W Muddle SC dated 28 March 2012 (Exhibit G);
7. Email from W Muddle SC to C Carney attaching memo of fees dated 30 March 2012, email to C Carney to W Muddle SC dated 30 March 2012 (Exhibit H);
8. Email from W Muddle SC to C Carney cc the respondent dated 9 May 2012, email from C Cary to the respondent cc M Muddle SC dated 10 May 2012, email from W Muddle SC to C Carney dated 11 July 2012 (Exhibit I).
The respondent tendered the following:
1. Paragraph 28 of the affidavit of the respondent sworn 8 April 2016 (Exhibit 1);
2. Paragraph 10 of the affidavit of the respondent sworn 8 April 2016 (Exhibit 2); and
3. Paragraph 29 of the affidavit of the respondent sworn 8 April 2016 (Exhibit 3).
The proceedings on 1 August 2016 then concluded with directions made for the filing of a joint tender bundle as well as other directions. The other directions included provision for the respondent to file and serve evidence as to character and to identify the parts of the respondent's affidavit relied upon in mitigation. Similarly, the applicant was directed to notify the respondent and the Tribunal of the parts of the affidavit evidence already filed upon which it intended to rely. Directions were made for submissions to be made by both parties. A direction was made for the applicant to inform Mr Muddle SC (the complainant) of the state of the proceedings so that he might be in a position to indicate whether he pressed a claim for compensation. The proceedings were stood over for a hearing on 9 November 2016 but on the basis that that hearing would only proceed if the parties could not agree that the Tribunal could decide the proceedings on the papers without the necessity for the hearing proposed for November to actually take place. By the 8 November 2016 the parties had agreed to the proceedings being dealt with on the papers but the Tribunal decided not to dispense with the hearing.
At the hearing on 9 November 2016 the applicant tendered the following evidence:
1. The affidavit of W Herrick dated 19 November 2016 (Exhibit J);
2. The affidavit of A M Foord (Exhibit K); and
3. The affidavit of J Sofiak (Exhibit L).
The respondent did not object to the tender of the above three exhibits provided that in the case of the affidavit of W Herrick the affidavit was received relevant only to the question of any penalty. The tender was received on that basis.
The applicant filed written submissions dated 29 August 2016, 28 October 2016 and 1 November 2016. Counsel for the applicant additionally made oral submissions.
The respondent tendered the following evidence:
1. The affidavit of the respondent dated 8 April 2016 (Exhibit 4);
2. The affidavit of J Walker dated 1 November 2016 (Exhibit 5);
3. The affidavit of G Power dated 26 October 2016 (Exhibit 6); and
4. The affidavit of A Cadman dated 3 November 2016 (Exhibit 7).
The ASOF states the following:
In this Agreed Statement of Facts:
the Act means the Legal Profession Act 2004
Ms Carney means Ms Catherine Carney.
the Complainant means Wayne Muddle SC.
Mr Herrick means Mr Wayne Herrick.
the ILP means Taren Legal Group Pty Ltd trading as Mahony Taren Lawyers.
the Lessor means Bronco Pty Limited.
LGIA means the Loan and Guarantee Indemnity Agreement between the ILP as borrower, Reliance as lender, and Mr Herrick as guarantor.
the Regulations means the Legal Profession Regulation 2005.
Reliance means Reliance Leasing Pty Ltd.
Mr Sofiak means Mr Jim Sofiak, trust account investigator.
Mr Steinberg means Mr Garry Steinberg, the Managing Director of Reliance.
the Society means the Law Society of New South Wales.
the Solicitor means John Francis Thomas Mahony, the Respondent to these proceedings.
Ground 1: Complaint by the Law Society - The Solicitor falsely witnessed the signature of Wayne Herrick.
1. The Solicitor was the sole legal director of the ILP in the period March 2011 to September 2012.
2. The non-legal director of the ILP at all relevant times was Mr Herrick.
3. In about late 2012 the ILP sought to borrow $15,600.00 from Reliance to pay the rental bond on its office premises.
4. On 2 November 2012 the Solicitor was informed by the solicitors acting for the Lessor that the ILP would be locked out of its offices unless an outstanding security deposit was paid by 2 November 2012.
(a) Email from Morri Seifoor to the Solicitor dated 2 November 2012 at 2:34pm (Tab 10 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015) [Exhibit B]
5. On 2 November 2012 the Solicitor sought an extension from the Lessor in which to provide the security deposit to 5:00pm on 9 November 2012.
(a) Email from the Solicitor to Morri Seifoor dated 2 November 2012 at 3:06pm (Tab 10 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015) [Exhibit B]
6. On 2 November 2012 the Lessor extended the time for payment of the security deposit to 5:00pm on 9 November 2012.
(a) Email from Morri Seifoor to the Solicitor dated 2 November 2012 at 4:30pm. (Tab 10 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015) [Exhibit B]
7. On or about 2 November 2012 the Solicitor emailed Mr Steinberg seeking finance in the sum of $15,600.00 by 9 November 2012 on behalf of ILP.
8. On 8 November 2012 the Solicitor was informed by the solicitors acting for the Lessor that the locks would be changed on the offices of the ILP to prevent access if the security deposit was not received prior to 5:00pm on 9 November 2012.
(a) Email from Morri Seifoor to the Solicitor dated 8 November 2012 at 11:38am. (Tab 10 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015) [Exhibit B]
9. Between on or about 8 November 2012 to 14 November 2012 Mr Herrick was absent from Sydney.
10. The Solicitor negotiated with the solicitors acting for the Lessor and obtained a further extension in which to pay the security deposit to 12 November 2012.
(a) Letter from the Solicitor to the Society dated 24 February 2014. (Tab 5 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015) [Exhibit C]
11. On 12 November 2012 Mr Steinberg sent the Solicitor the following documents by email:
(a) a Declaration of Purpose; and
(b) the LGIA.
12. Mr Steinberg informed the Solicitor that a copy of the executed Declaration of Purpose and LGIA forwarded to Reliance by email would be sufficient to enable Reliance to make the disbursement of $15,600.00 direct to the Lessor prior to close of business on 12 November 2012 on the basis that the original signed documents were provided to Reliance upon Mr Herrick's return to Sydney.
13. The Declaration of Purpose:
(a) named the borrower of the amount of $15,600.00 as the ILP; and
(b) required the "signature of each borrower".
14. The LGIA set out the terms and conditions of the borrowing.
15. Under the terms and conditions of the LGIA, in the event of default, Reliance was entitled to lodge a caveat over any or all of the properties owned by Mr Herrick.
(a) Item 11 of the Schedule to the LGIA. (Tab 10 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015) [Exhibit B]
16. The Schedule to the LGIA contained the words "Executed by", followed by spaces for three signatures, specified to be:
(a) for "Borrower Taren Legal Group Pty Ltd in accordance w s 127(1) of the Corporations Act 2000": the signature of sole Director/Secretary, Mr Herrick;
(b) for "Guarantor": the signature of Mr Herrick; and
(c) for a witness to the signature of Mr Herrick as Guarantor.
17. On 12 November 2012 the Solicitor was in Sydney.
18. On 12 November 2012 Mr Herrick was not in Sydney.
19. Following the receipt of the documents from Mr Steinberg on 12 November 2012, Mr Herrick's signature was photocopied by the Solicitor.
20. The photocopy of Mr Herrick's signature was affixed onto the Declaration of Purpose by the Solicitor.
21. By affixing the photocopied signature of Mr Herrick to the Declaration of Purpose, the Solicitor represented that Mr Herrick had signed the Declaration of Purpose.
22. The representation referred to at paragraph 21 was false.
22A Although the Solicitor believed that he had the authority to attach a photocopy of the signature of Mr Herrick to the Declaration of Purpose at the time that he did so, he now accepts that in the circumstances it was inappropriate to act as he did.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [28] [Exhibit I]
22B The Solicitor did not have authority from Mr Herrick to attach a photocopy of Mr Herrick's signature to the Declaration of Purpose.
23. The photocopy of Mr Herrick's signature was affixed to the LGIA by the Solicitor:
(a) as the signature of the sole Director/Secretary, Mr Herrick, as "Borrower Taren Legal Group Pty Ltd in accordance w s 127(1) of the Corporations Act 2000"; and
(a) as the "Guarantor".
24. The Solicitor signed the LGIA as witness to Mr Herrick's signature and printed his name below his signature.
25. By affixing his signature on the LGIA as the witness the signature of Mr Herrick as Guarantor, the Solicitor represented that Mr Herrick had signed the Schedule in the presence of the Solicitor.
26. The representation referred to at paragraph 25 was false.
26A Although the Solicitor believed that he had the authority to attach a photocopy of the signature of Mr Herrick to the LGIA at the time that he did so as an officer of the ILP, he now accepts that in the circumstances it was inappropriate to act as he did.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [28].
26B The Solicitor did not have authority from Mr Herrick to attach a photocopy of Mr Herrick's signature to the LGIA.
26C The Solicitor now accepts that in the circumstances it was inappropriate to act as he did in affixing his signature on the LGIA as the witness the signature of Mr Herrick as Guarantor.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [28] [Exhibit 1]
27. Mr Herrick did not personally affix his signature on the Declaration of Purpose on 12 November 2012.
28. Mr Herrick did not personally affix his signature on the LGIA on 12 November 2012.
29. By email dated 12 November 2012 at 3:50pm the Solicitor sent an email to Mr Steinberg attaching copies of the Declaration of Purpose and LGIA purportedly signed by Mr Herrick.
30. Following receipt of the Declaration of Purpose and LGIA from the Solicitor, Reliance paid the amount of $16,500.00 to the Lessor on 12 November 2012 on behalf of the ILP.
30A The Solicitor accepts that the standards appropriate to his conduct the subject of Ground 1 were the standards necessarily required of a legal practitioner and not that as an officer of the ILP.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [29] [Exhibit 3]
30B The Solicitor accepts that he did not hold any document signed by Mr Herrick authorising the Solicitor to act as he did in relation to the financing of the ILP.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [30] [Exhibit 2].
30C The Solicitor accepts that he ought to have obtained some document signed by Mr Herrick authorising him to act as he did and/or otherwise to act generally on his behalf in relation to the financing of the ILP.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [30]
Ground 2: Complaint by the Law Society - The Solicitor attempted to mislead the Law Society of NSW.
31. By letter dated 11 September 2013 (Tab 3 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015), the Solicitor told the Society inter alia that: [Exhibit D]
(a) the Solicitor held instructions from Mr Herrick to "do whatever it took" to have the loan funded through Reliance on 9 November 2012; and
(b) that the loan from Reliance had been repaid by Mr Herrick.
32. By letter dated 24 February 2014 (Tab 5 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015), the Solicitor told the Society that: [Exhibit C]
(a) the Solicitor affixed Mr Herrick's signature on the Declaration of Purpose and LGIA with Mr Herrick's consent;
(b) at all times the Solicitor "…had the authority to do whatever was required to ensure that the funding of the security bond was put in place by the deadline of 5:00pm on 12 November 2012, so as to avoid being locked out of the firm's premises after 5:00pm that day. That authority included the affixing of Mr Herrick's electronic signature to the loan documents";
(c) the loan from Reliance "…was funded on 12 November 2012 and has since been repaid by Taren Legal Group Pty Ltd in the normal manner".
32A Although the Solicitor believed that he had the authority to attach a photocopy of the signature of Mr Herrick to the Declaration of Purpose and the LGIA at the time that he did so, he now accepts that in the circumstances it was inappropriate to act as he did.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [28] [Exhibit 1]
32B The Solicitor accepts that he did not hold any document signed by Mr Herrick authorising the Solicitor to act as he did in relation to the financing of the ILP.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [30] [Exhibit 2].
32C The Solicitor accepts that he ought to have obtained some document signed by Mr Herrick authorising him to act as he did and/or otherwise to act generally on his behalf in relation to the financing of the ILP.
(a) Affidavit of John Francis Thomas Mahony sworn 8 April 2016 at [30].
33. Mr Herrick did not instruct or authorise the Solicitor to place an image of his signature on the Declaration of Purpose and LGIA to give the appearance that Mr Herrick signed those documents.
34. Further or in the alternative to paragraph 33, Mr Herrick did not instruct or authorise the Solicitor to affix his 'electronic signature' on the Declaration of Purpose and LGIA to give the appearance that Mr Herrick signed those documents.
35. Mr Herrick was not aware of the Solicitor's actions until his return to Sydney on or about 14 November 2012.
Ground 3: Complaint by Wayne Muddle SC - The Solicitor failed to pay the Complainant's fees.
36. During the period March to July 2012, Ms Carney was an employed solicitor of the ILP.
37. On 27 March 2012 Ms Carney sent an email to the Complainant cc. the Solicitor by which the Complainant was briefed to appear in the Supreme Court of New South Wales on 30 March 2012 for a client named Mr Neale (Neale Proceedings).
(a) Affidavit of James Sofiak sworn 2 November 2015 at page 17. [Exhibit F]
38. On 27 March 2012 the Complainant replied to Ms Carney's email cc. the Solicitor attaching the Complainant's fee agreement, stating relevantly:
Thank you for the brief… I attach my fee agreement as required. I understand that your firm will be paying one days fees ($6000 + GST) for me to appear on this motion…
(a) Affidavit of James Sofiak sworn 2 November 2015 at page 16. [Exhibit G]
39. On 28 March 2012 Ms Carney sent an email to the Complainant relevantly stating:
Your fee agreement has been brought to the attention of John Mahony director of Mahony on the basis that it is to be paid by the firm and is to be paid promptly.
(a) Affidavit of James Sofiak sworn 2 November 2015 at page 16.
40. On 30 March 2012 the Complainant sent an email to Ms Carney attaching his Memorandum of Fees in the Neale Proceedings.
(a) Affidavit of James Sofiak sworn 2 November 2015 at pp. 18 and 19. [Exhibit H]
41. On 30 March 2012 Ms Carney replied to the Complainant's email of the same date, relevantly stating:
Fee received and being attended to.
(a) Affidavit of James Sofiak sworn 2 November 2015 at page 18.
42. On 9 May 2012 the Complainant sent an email to Ms Carney cc. the Solicitor attaching a statement of outstanding fees in the Neale Proceedings.
(a) Affidavit of James Sofiak sworn 2 November 2015 at pp 20 and 21. [Exhibit I]
43. On 10 May 2012 Ms Carney sent an email to the Solicitor cc. the Complainant relevantly stating:
You will recall that we undertook to pay counsel's fees for Mr Neale in the sum of $6600. Can you please authorise Leonard to make the payment?
(a) Affidavit of James Sofiak sworn 2 November 2015 at page 20.
44. On 11 July 2012 the Complainant sent an email to Ms Carney regarding his outstanding fees in the Neale Proceedings.
(a) Affidavit of James Sofiak sworn 2 November 2015 at page 20.
45. The Complainant's email of 11 July 2012 was brought to the attention of the Solicitor by Ms Carney. The Solicitor represented to Ms Carney that he considered the payment of the Complainant's fees a priority and that the ILP would pay those monies as soon as possible.
(a) Letter from the Solicitor to the Society dated 20 February 2013 (Tab 15 of Exhibit AMF-1 to the affidavit of Anne-Mare Foord sworn 3 November 2015).
46. On 27 July 2012 the Complainant had a telephone conversation during which the Solicitor said to the Complainant words to the following effect:
I apologies that I haven't paid you for Neale yet but I will be paying you very shortly.
(a) Letter from the Solicitor to the Society dated 20 February 2013 (Tab 15 of Exhibit AMF-1 to the affidavit of Anne-Marie Foord sworn 3 November 2015).
47. As at 2 July 2013, the Complainant's fees had not been paid.
48. The Society repeats paragraph 1 of this Application.
[3]
Jurisdiction
Both the applicant and the respondent agreed that the Legal Profession Uniform Law (NSW) does not apply to these proceedings but rather the applicable law is that contained in the Legal Profession Act 2004 (the LP Act). The Tribunal agrees with the parties for the reason set out in the following paragraph.
The applicant commenced its investigation of the matters giving rise to the three grounds set out in the Agreed Statement of Facts in 2013. The Legal Profession Uniform Law provides that an investigation that had begun but not had been completed under the relevant provisions of the Legal Profession Act will continue to be dealt with in accordance with the provisions of the "old legislation" (i.e. the Legal Profession Act) - see cl 26 of Sch 4 of the Legal Profession Uniform Law.
[4]
Applicant's submissions
Although the applicant contended, and the respondent conceded, that the respondent's conduct as described in the ASOF in relation to all three grounds constituted professional misconduct, whether such conduct in fact constitutes professional misconduct is a matter for the Tribunal. However, the applicant submitted that in light of the respondent's concessions the Tribunal should be so satisfied and thus make a finding accordingly. The applicant contended that the appropriate orders included a reprimand, a fine and an order that the respondent pay the applicant's costs. The applicant contended that the respondent's conduct was serious and the Tribunal should impose a substantial fine to mark the Tribunal's disapproval of the respondent's conduct and as a deterrent to the respondent and other practitioners, and, also to assure the public that serious lapses in the conduct of legal practitioners will be appropriately dealt with.
In relation to the imposition of a fine, the applicant submitted:
1. That the Tribunal has a wide discretion as to the orders it may make where a practitioner is found guilty of professional misconduct or unsatisfactory professional conduct including a power to pay a fine (see s 562(4)(a) of the LP Act);
2. The power of the Tribunal to make orders under s 562 is not inhibited by the orders sought by the applicant;
3. An order made imposing a fine under s 546(4) of the LP Act must not exceed $10,000.00 in the case of unsatisfactory professional conduct or, $75,000.00 in the case of professional misconduct; and
4. The seriousness with which the Tribunal views the respondent's conduct will impact on the quantum of the fine.
The applicant submitted that the purpose of imposing a fine is to mark the Tribunal's disapproval of the respondent's conduct (see Law Society of New South Wales v Walsh [1997] NSWCA 185 at 40 per Beazley JA). Although the jurisdiction of the Tribunal in disciplinary matters is exercised to protect the public, not to punish the legal practitioner, the object of protection of the public also includes deterring the legal practitioner in question from repeating the misconduct and deterring other practitioners who might be tempted to fall short of the high standards required of them. Thus an element in deterrence is an assurance to the public that serious lapses in the conduct of legal practitioners will not be passed over or lightly put aside, but will be appropriately dealt with (Law Society of New South Wales v Foreman [1994] 34 NSWLR 408 at 470 per Giles A-JA).
The applicant referred the Tribunal to a number of decisions where fines were imposed following findings by the Tribunal that the lawyer in question had engaged in similar conduct to the respondent's conduct the subject of these proceedings. The decisions to which the Tribunal was referred were:
1. Law Society of New South Wales v Gathercole [2016] NSWCATOD 27;
2. Council of the New South Wales Law Society v Vaughan [2015] NSWCATOD 156;
3. Council of the New South Wales Law Society v Ly [2011] NSWADT 210;
4. Law Society of New South Wales v Martin [2010] NSWADT 245;
5. Law Society of New South Wales v Georges [2008] NSWADT 82;
6. Law Society of New South Wales v Shad [2002] NSWADT 236; and
7. Fraser v Council of the Law Society of New South Wales [1992] NSWCA 72.
The applicant submitted that the false witnessing of loan documents constitutes professional misconduct at common law (see Law Society of New South Wales v Georges - pars 31 and 37). The applicant submitted that the respondent concedes and that the evidence is clear that the respondent did not witness Mr Herrick sign either the document called a Declaration of Purpose or the Loan and Guarantee Indemnity Agreement (the LGIA) but in fact the respondent affixed a photocopy of Mr Herrick's signature to those documents following which, in the case of the LGIA, he purported to witness Mr Herrick's signature as being affixed in his presence.
The applicant submitted that even if the respondent genuinely held the belief that he had Mr Herrick's authority, his actions were inconsistent with the usual actions of an agent executing a document on behalf of a principal.
The applicant made submissions concerning aspects of the respondent's letter to the applicant dated 24 February 2014. In that letter the respondent stated:
(g) the actions which I took were motivated not for personal financial gain, but rather to ensure that the legal practice was not locked out of its premises, thereby resulting in significant disruption and disadvantage being suffered by clients of the legal firm...
(h) My sole motivation was to ensure that the interests of the clients of the legal practice were not prejudiced and that those clients did not suffer loss or damage as a result of the legal firm being unable to access their documents and conduct their matters properly.
The submission of the applicant was that although there was a bond payable to the landlord of the incorporated legal practice (the ILP) (in respect of which the respondent was the legal director) the payment of the bond was well overdue. Thus, the applicant submitted, it could be said that the respondent elected to act improperly to solve another problem which would have occurred had he not done so.
The applicant submitted that in each of the decisions of Law Society of New South Wales v Gathercole, Law Society of New South Wales v Martin, Law Society of New South Wales v Georges and Fraser v Council of the Law Society of New South Wales (cited above), the Tribunal found that the motivation of the legal practitioner was not informed, in whole or in part, by a desire to obtain a financial benefit or gain. Those decisions may be contrasted to the present proceedings, in that the purpose of the respondent's actions in falsely witnessing the signature of Mr Herrick was to obtain a loan to pay an outstanding rental bond due by the ILP. Further, by falsely affixing Mr Herrick's signature on the documents, the respondent caused Mr Herrick to be wholly and personally liable for funds that were borrowed for the benefit of the law practice. Mr Herrick was required by the lender to guarantee the loan made to the ILP. The ILP, as the borrower was obligated to repay the loan. Thus, the ILP derived a benefit at the expense of Mr Herrick.
In respect of ground three (which concerns the failure of the respondent to pay the complainant's fees) the applicant drew attention to and relied upon s 250 of the LP Act which provides:
250 Liability of principals of law practice
(1) A provision of this Part or the regulations made for the purposes of this Part expressed as imposing an obligation on a law practice imposes the same obligation on the principals of the law practice jointly and severally, but discharge of the practice's obligation also discharges the corresponding obligation imposed on the principals.
(2) References in this Part and the regulations made for the purposes of this Part to a law practice include references to the principals of the law practice.
Section 7(3)(c) of the LP Act defines a "principal" of a law practice as a legal practitioner director in the law practice in the case of an incorporated legal practice. As the sole legal director of the ILP, the respondent was the principal of the law practice. If the ILP was obligated to pay the complainant's fee, s 250 imposes the same obligation on the respondent.
[5]
Respondent's submissions
The respondent filed written submissions dated 29 September 2016 and 7 November 2016. In addition, counsel for the respondent made oral submissions at the hearing.
In the submissions of 29 September 2016 the respondent did not concede that the conduct described in the ASOF constituted professional misconduct. At the hearing that position was clarified such that the respondent made that concession. The respondent submitted that his actions were believed by the respondent to have been taken at the direction of and pursuant to the authority of Mr Herrick (who was the sole shareholder and a director of the ILP). The respondent submitted that the fact that Mr Herrick continued to make payments in respect of the transaction was a clear indication of his adoption of the transaction.
The respondent submitted that in determining the seriousness of the respondent's conduct the Tribunal should take into consideration not less than the following matters:
1. At all times the respondent believed, and it was logical and reasonable for the respondent to so believe, that Mr Herrick had vested the respondent with broad ranging authority and a mandate to do whatever was necessary, to ensure that the deadline for providing the lease security bond, and thereby preventing the eviction of the legal practice from its premises, would be met;
2. There was no opportunity from the respondent to seek formal confirmation from Mr Herrick, as to the manner in which the respondent intended to carry out the mandate granted to him by Mr Herrick;
3. The respondent acted on the understanding (reasonably held) that ratification of his actions would be made by Mr Herrick upon his return to Sydney;
4. At that time, original documents executed by Mr Herrick in the normal manner would be provided to the financier, as had been agreed to by the financier;
5. While acting in the capacity of a solicitor, the respondent was at the same time acting as an employee of the company owned by Mr Herrick believing he was acting with authority and not as a legal practitioner (without derogating from the ASOF);
6. The respondent's actions were motivated not for personal gain but rather for the economic protection of the legal practice for which he then worked, and more importantly, for the protection of the interests of, not only the clients of the legal practice, but also third parties with whom those clients were dealing, in their various matters; and
7. Significant loss and inconvenience would have occurred for the clients of the practice and third parties dealing with them, in the event that the legal practice was locked out of its premises on such short notice.
The respondent submitted that it is open to the Tribunal to view the respondent's conduct as less serious than what might otherwise have been the case in other circumstances if the Tribunal accepts that the respondent found himself in a difficult conflict position. On the one hand the respondent had an obligation as a legal practitioner to act professionally and to a standard expected by solicitors in isolation and, on the other hand, the respondent was also at the same time acting as an employee of a company which was facing a crisis, which crisis could be averted by the respondent taking action authorised and directed by the sole owner and director of the ILP.
The respondent submitted that the resolution of the above conflict, in the particular circumstances, was to take action to protect clients of the ILP and other members of the public dealing with those clients by ensuring that there was no interruption to the carriage of their matters, as any such "interruption" would likely, cause substantial loss and damage to, not only the clients of the legal practice but also members of the public dealing with them.
The respondent submitted that it is open to the Tribunal to find that in the circumstances, the resolution of that conflict favoured the protection of the clients of the ILP and members of the public dealing with them.
The respondent submitted that the public will not be properly served by punishing the respondent in circumstances where the respondent's sole motivation was protection of the interests of the clients of the ILP.
It was submitted by the respondent that it would be open to the Tribunal to find that the respondent's conduct was not a serious lapse in conduct, but rather conduct necessary to be taken to resolve an unusual conflict position, the resolution of which prioritised interests of the clients of the legal practice. The respondent may well have been open to criticism from clients had he allowed the practice to collapse because he was not prepared to take action in accordance with the wishes of the owner of the practice.
The respondent referred to the cases cited by the applicant and submitted that the factual situations in those matters can and should be distinguished from the factual situation in this case. In particular here, the respondent believed that he was acting under the authority of the person whose signature was affixed to the documents and the respondent knew that the signature affixed to the documents was that of the alleged signatory, albeit a copy of the signature. In addition, the respondent's execution as a witness to Mr Herrick's signature was at least confirmation that the signature was a copy of that of the signatory and that it was affixed to the documents pursuant to the authority of the signatory and in the presence of the respondent.
The respondent further submitted that the delivery of the "photographed" signature of Mr Herrick on the loan documents, by email to the lender, was never intended to be the final document to be produced to the lender but was nothing more than an indication that Mr Herrick wished to proceed with the transaction. It was submitted that the lender at all times knew, that the documents with an original signature by Mr Herrick, would be provided subsequent to the funding of the loan. Accordingly, the documents delivered by email were documents which the lender knew would be superseded by documents bearing an original signature of the signatory.
The respondent submitted that he was in an unfortunate conflict situation, which on the one hand, invited him to act in a manner other than that which would normally be expected of a solicitor but on the other hand invited him to act in a commercial and practical manner and in accordance with instructions received by him in his other capacity as an employee of a corporation. The respondent submitted that his motivation in the matter was driven by reasons other than to obtain a personal financial benefit or gain. The purpose of the respondent's actions was to obtain a facility to enable payment of a rental bond owned by the ILP to enable it to continue operations. It is incorrect and grossly unfair to characterise the respondent's actions as being driven by a desire for personal financial benefit or gain.
The respondent submitted that although as a result of the respondent's conduct, Mr Herrick reasonably and properly became liable for funds which were borrowed for the benefit of the ILP and Mr Herrick.
In respect of ground three (non-payment of the complainant's fees) the respondent submitted that he at all times indicated to the complainant on behalf of the ILP that the ILP would pay the complainant's fees as soon as possible. Subsequently the ILP was financially unable to meet that commitment but the respondent's commitment was made in good faith and in the reasonable expectation that the ILP would subsequently be able to meet the commitment made by the respondent to Mr Muddle SC on behalf of the ILP. The respondent did not give any personal undertaking to the complainant.
The respondent submitted that s 250 of the LP Act also refers to a discharge of the legal practice's obligation which also discharges the corresponding obligation imposed on the principal. The respondent submitted that upon the winding up of the ILP, as is the case with other debts of any company being wound up, the ILP's obligation to the complainant was thereupon discharged and became as a matter of law a provable debt of the ILP. To extend a payment obligation as is sought suggests an obligation not otherwise available in law. Accordingly, at that time, the obligation of the respondent was also discharged.
Although the applicant made no submissions with respect to ground two (misleading the applicant) the respondent submitted that ground two can only be made out if the respondent's evidence is not accepted. Further, on the evidence as to intention, there is no evidence that the respondent intended to mislead the applicant. The evidence shows that the respondent believed that the information that he provided to the applicant was true at the time that he communicated it to the applicant.
In summary, the respondent submitted that the respondent should be subjected to nothing more than a reprimand. A fine should not be imposed as the respondent's actions and resolution of the conflict in which he found himself were taken not only in good faith but in the interest of clients and members of the public with whom the clients were then dealing.
In the submissions of 7 November 2016 the respondent submitted that at no time until well after the relevant documents were signed did Mr Herrick take issue with the respondent in relation to the respondent's actions. The respondent submitted that Mr Herrick ratified the transaction by virtue of the fact that he did not seek to have the loan set aside and nor did he allege that the loan should not have been made. The fact that he renegotiated the commercial terms of the loan to more favourable terms does not detract from his ratification of the respondent's actions which were a necessity to obtain a loan advance at the time. The respondent submits that these matters mitigate against the severity of the penalty.
The respondent also relied upon a statutory declaration which was part of Exhibit B being a declaration of G Steinberg who was the managing director of the business lending the funds to the ILP and to whom the relevant documents were being sent. Mr Steinberg states in paragraphs 5 and 6 of his statutory declaration that he was aware that Mr Herrick was absent from Sydney on 12 November 2012 (when the documents were being executed) and that it was not possible on that day for Mr Steinberg to receive an original set of documents executed by Mr Herrick. He states that he advised the respondent that a copy of the executed documents forwarded to his company would be sufficient to enable his company to make the advance on the same day (12 November 2012) on the basis that original signed documents were provided upon Mr Herrick's return to Sydney. The respondent submitted that that declaration must be considered admissible evidence on its face as it was exhibited to an affidavit filed in the proceedings by the applicant.
At the hearing counsel for the respondent submitted that the Tribunal should take into account that the respondent was a very senior practitioner who has been in practice for almost forty years. There are no other complaints leading to findings of professional misconduct or unprofessional conduct having been made out against the respondent. In support of the respondent's good character the respondent relied upon the affidavits earlier listed being Exhibits 5, 6 and 7.
Counsel for the respondent referred to the Court of Appeal decision in Russo v Legal Services Commissioner [2016] NSWCA 306 in support of the submission that a fine should not be imposed in this case. In that case, the Court of Appeal decided that the appropriate order included a fine of $20,000.00 and set aside the Tribunal's order that the solicitor's name be removed from the roll. The underlying facts concerned a failure by the solicitor to pay counsel's fees. The Court of Appeal found the solicitor to have acted in a high handed manner and in a manner which was dismissive of legitimate queries. The client had paid the solicitor's invoices (which included a component for counsel's fees) and such payment must be understood as conveying a direction to pay counsel's fees. There was no finding of dishonesty or misappropriation.
The Court of Appeal decided that the solicitor should be publically reprimanded and that a fine should be imposed. The Court canvased previous decisions imposing fines in the period between 2005 and 2016. According to the Court, over such period fines from $2,000.00 in a range of matters to $48,000.00 have been imposed for a variety of misconduct. The Court described the solicitor's misconduct as involving obvious deficiencies in his application of trust monies and a failure to recognise that monies paid for counsel's fees were properly to be regarded as trust monies. The Court stated that the fine to be imposed must convey to the legal profession and to the community in general that such conduct is unacceptable. In the circumstances, the maximum penalty available under the legislation was $75,000.00 and the Court found that the appropriate fine to mark the Court's censure of the solicitor's conduct was $20,000.00. Counsel for the respondent submitted that the conduct in the Russo case was much more serious than is the case in these proceedings.
Counsel for the respondent relied upon the decisions in Council of the Law Society of NSW v Andreone (NO.1) [2014] NSWCATOD 49 and Legal Services Commissioner v Wen [2016] NSWCATOD 36. That case concerned a young solicitor who had forged his client's signature to an affidavit and falsely attested to witnessing the client's signature. The Tribunal decided the appropriate order included a suspension of the solicitor's practicing certificate for three months. A fine was not imposed. Law Society of NSW v Andreone involved a failure to pay substantial sums to counsel following receipt of monies from clients paid for the purpose of payment to counsel. The case also involved misappropriation of trust money. The Tribunal ordered the solicitor's name be removed from the roll.
It was submitted that the conduct in those cases was much more serious than the conduct of the respondent referred to in these proceedings.
Counsel for the respondent drew attention to Exhibit 4 (the affidavit of the respondent dated 8 April 2016) in which the respondent acknowledged that it was inappropriate for him to act as he did "even though I believed that I had an authority to do so from Mr Herrick". Counsel also drew attention to an affidavit of Mr Herrick dated 19 November 2015 (part of Exhibit A) in which Mr Herrick states that he encouraged the respondent to obtain a loan. These references were made in support of the submission that the respondent was of the belief that he had authority from Mr Herrick although he now accepts that he should have obtained some document signed by Mr Herrick authorising him to act as he did or otherwise to act generally on his behalf in relation to the financing of the ILP.
With respect to ground 2 (the complaint that the respondent attempted to mislead the Law Society) counsel for the respondent conceded that it is open to the Tribunal to find that the respondent's letter of 24 February 2015 mislead the Law Society. Counsel submitted that the letter to the Law Society should have been clearer and less ambiguous.
With respect to ground 3, counsel for the respondent conceded that non-payment of counsel's fees may amount to professional misconduct.
Finally, counsel submitted that having regard to all of the facts including the affidavits concerning the solicitor's character (Exhibits 5, 6 and 7) the appropriate penalty is a reprimand and that no fine should be imposed.
[6]
Applicant's submissions in reply
The applicant's submissions in reply include the submission that there is no evidence of the basis of the respondent's belief that he held a broad ranging authority and mandate from Mr Herrick as asserted in the respondent's submissions. The applicant submitted that the affidavit of Mr Herrick suggests otherwise and referred to pars 13-16 of Mr Herrick's affidavit.
The applicant filed supplementary submissions dated 1 November 2016. Those submissions concern the affidavit of Mr Power who is not legally qualified. The applicant submitted that Mr Power's affidavit should be given little weight because the relevant enquiry for the Tribunal to consider concerns the fitness of the respondent to practice law and that only experienced lawyers are good judges of character in this context because they are able to make an appropriate assessment of the respondent's professional capacity.
The applicant did not make any submission concerning the amount of the fine which the applicant submitted the Tribunal should impose.
[7]
Ground 1
By the ASOF the respondent has acknowledged that:
1. The conduct of the respondent constituted making representations which were false;
2. Although the respondent believed that he had authority to do what he did, he accepts that it was inappropriate to act as he did; and
3. He did not have the authority of Mr Herrick to attach a photocopy of his signature.
The respondent also conceded that the facts contained in the ASOF constituted professional misconduct. We agree that that concession was appropriate because in our view the conduct of the respondent constituted professional misconduct. The misconduct arises because the respondent's conduct constituted a representation to the party relying upon the documents for the purposes of making a loan, which representation was false. Such conduct in our view falls within the description of professional misconduct in the sense described in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 being conduct which "would be reasonably regarded as disgraceful and dishonourable by his professional brethren of good repute and competency".
Accordingly, the Tribunal is satisfied for the purposes of s 562 of the LP Act that the respondent has engaged in professional misconduct and therefore it is able to make such orders as the Tribunal thinks fit including any one or more of the orders specified in s 562.
In considering the appropriate order or orders which the Tribunal should make, it is relevant to restate the purposes of such orders. As was stated by Mahoney JA in Law Society of New South Wales v Foreman, the protection of the public is a primary object of disciplinary proceedings of this kind and this extends to the protection of the public against similar defaults by other solicitors. In this sense, one purpose is to publicly mark the seriousness of what the respondent has done or, as the applicant submitted, to mark the Tribunal's disapproval of the respondent's conduct.
We were referred to the decisions earlier cited in these reasons and it is of relevance to briefly record the effect of those decisions:
1. Law Society of New South Wales v Gathercole: This involved a very experienced solicitor who was found guilty of professional misconduct "of a very high degree" in that he lent himself and his professional standing to a very serious fraud perpetrated by a husband upon the husband's wife. This involved the solicitor falsely purporting to witness the signatures of the wife on mortgage documents. The solicitor was reprimanded and fined $5,000.00;
2. Council of the New South Wales Law Society v Vaughan: Here, the Tribunal ordered that the solicitor be reprimanded and pay a fine of $20,000.00. The allegations against the solicitor included borrowing from a client, attempting to mislead the Law Society and paying trust monies into the general account without authority;
3. Council of the New South Wales Law Society v Ly: Here the Tribunal ordered that the solicitor be publicly reprimanded and pay a fine of $6,000.00. The facts concerned a solicitor who witnessed the signature of a mortgagor on a mortgage document. The signature of the mortgagor was already on the document when the solicitor purported to witness it and the solicitor did not physically meet the mortgagor. The Tribunal described the conduct as egregious;
4. Law Society of New South Wales v Martin: Here the solicitor was also fined $6,000.00. The complaint concerned the practitioner falsely witnessing the execution of documents.
5. Law Society of New South Wales v Georges: Here, the solicitor was fined $1,000.00. The allegation against the solicitor was that the solicitor appended his signature as a witness to mortgage documents when the solicitor did not in fact witness the signature. The solicitor had provided a certificate that he did so witness the signature. The Tribunal noted the fact that the solicitor acknowledged he had acted improperly, had no prior history of any other improper conduct and was unlikely to offend again. The conduct was described as falling within "the lowest end of the scale of professional misconduct";
6. Law Society of New South Wales v Shad: Here, the Tribunal imposed a fine on the solicitor of $35,000.00. The allegations concerned the solicitor purporting to witness the signature of a mortgagor on mortgage documents when in fact the mortgagor had never executed such documents. The Tribunal also found that the solicitor swore an affidavit which was misleading; and
7. Fraser v Council of the Law Society of New South Wales: Here, the Court of Appeal imposed a fine of $7,000.00. This case also involved the false signing of a certificate of explanation in respect of mortgage documents. However, the decision also records that the solicitor had been suspended from the roll for approximately seven months prior to the Court of Appeal Decision.
[8]
Ground 2
The ASOF records that the respondent told the Law Society by letter dated 11 September 2013 that he held instructions from Mr Herrick "to do whatever it took" to have the loan funded through Reliance (being the company providing the funds). The ASOF records that although the solicitor believed that he had authority to attach a photocopy of the signature to Mr Herrick to the relevant documents, he now accepts that in the circumstances it was inappropriate to act as he did.
The ASOF also records that the respondent told the applicant (by letter dated 24 February 2014) the facts which are described in par 32 of the ASOF, significantly that he had Mr Herrick's consent to affix Mr Herrick's signature.
The representation that the respondent had Mr Herrick's consent to affix Mr Herrick's signature was misleading because there was no evidence that Mr Herrick had provided such consent.
In our view, the two letters identified in the ASOF to the applicant were misleading for the reason that the representations in pars 31 and 32 were not true as is confirmed in pars 33 and 34 of the ASOF.
However, the ASOF acknowledges that the respondent believed he had the authority to attach a photocopy of Mr Herrick's signature. We accept the submissions of the respondent's counsel that it was reasonable for the respondent to believe that Mr Herrick had vested the respondent with broad ranging authority to obtain a loan for the ILP. This is supported by Mr Herrick's affidavit which records that Mr Herrick says he encouraged the respondent to obtain a loan.
In the circumstances it is our view that although ground 2 is made out and the conduct may be fairly described as professional misconduct, it is at the lower end of the spectrum of professional misconduct. A practitioner has an obligation to cooperate with the applicant fully and candidly by responding to correspondence comprehensively and with complete candour. Here, in our view, the respondent's letters were less than comprehensive and in consequence misleading.
[9]
Ground 3
In our view ground 3 reveals conduct which may be fairly described as professional misconduct.
Section 250 of the LP Act makes the respondent's obligations to the complainant clear.
We were not provided with any evidence concerning the winding up of the ILP and in particular whether the ILP's obligations to its creditors have been discharged. It is not possible to say on the evidence that the ILP's debt to the complainant has been discharged.
Even if the ILP has been wound up leaving the debt due to the complainant unpaid, the winding up does not necessarily constitute a discharge of the respondent's obligations which are owed jointly and separately with the ILP to the complainant. Accordingly, the facts identified in the ASOF constitute professional misconduct by reason that the authorities make it clear that a practitioner who incurs a debt with counsel but does not pay it is guilty of professional misconduct.
[10]
Conclusion
Our conclusion is that the applicant's submissions that a fine should be imposed are to be accepted. However, the matters raised in submissions made by the respondent are relevant in deciding the amount of the fine. These matters are:
1. The respondent believed that he had authority to do what was necessary to raise the funds for the security bond. It was reasonable for the respondent to have that belief and in the circumstances (the absence of Mr Herrick) there was no opportunity for the respondent to seek formal confirmation from Mr Herrick as to the manner in which the respondent intended to carry out the mandate granted to him. However, that mandate did not in our view include the use of Mr Herrick's signature or "witnessing" that signature as recorded in the ASOF. The respondent in our view should have explored with Mr Steinberg (who knew that Mr Herrick was absent) how the documents could be executed given the respondent's belief that he had authority;
2. The respondent's actions were motivated for the purposes of protecting the legal practice for which he then worked and for the protection of clients. There was no evidence that the respondent's actions were motivated for direct personal gain;
3. In respect of ground 2, there is no evidence that the respondent intended to mislead the applicant; and
4. The respondent is a very senior practitioner who has been in practice for almost 40 years. The affidavits of the referees are taken into account. No other complaints leading to findings of professional misconduct or unprofessional conduct have been made against the respondent.
As against the above matters, we have also taken into account the fact that there is force in the applicant's submission that the respondent took the action which he took in order to solve a more difficult problem which might have emerged if the security bond had not been provided. In other words, it could be said that the respondent elected to act as he did to avoid the creation of a more difficult problem.
The decisions in the other cases referred to are of some assistance but comparisons are difficult because each case has its own unique circumstances.
In all of the circumstances we are of the opinion that a fine of $4,000.00 is sufficient to meet the objectives of proceedings of this kind as identified my Mahoney JA in Law Society of New South Wales v Foreman. This amount takes into account that there are 3 grounds in the ASOF concerning the respondent's conduct.
Accordingly, the Tribunal makes the following orders:
1. The respondent is guilty of professional misconduct;
2. That the respondent be reprimanded;
3. That the respondent must pay a fine of $4,000.00 within two months of the date of these orders; and
4. That the respondent pays the costs of the applicant as agreed or assessed.
[11]
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: 04 January 2017