Legislation cited: ACT Civil and Administrative Tribunal Act 2008 s 55

Legal Profession Act 2006 ss 386, 419, 425, 433, 585

Powers of Attorney Act 2006 ss 34, 42, 48

Subordinate

Legislation cited: Legal Profession (Solicitors) Rules 2007(repealed) rr 1.1, 1.2, 7.2

Cases cited: Council of the Law Society of the ACT v Legal Practitioner 'P4' (No. 2) [2015] ACAT 35

Council of the Law Society of the ACT v Legal Practitioner RN [2016] ACAT 122

Council of the Law Society of the ACT v Legal Practitioner 'Y' (Chanaka Bandarage) [2012] ACAT 40

Council of the Law Society of the ACT v Legal Practitioner 201933 [2018] ACAT 101

Council of the Law Society of the ACT v Legal Practitioner 201933 [2020] ACAT 54

Council of the Law Society of the ACT v Legal Practitioner 20214 [2022] ACAT 33

''The Council of the Law Society of the Australian Capital Territory v Davey [2019] ACTSCFC 2

The Tribunal being satisfied that the respondent is guilty of unsatisfactory professional conduct, the Tribunal orders by consent:

1. The respondent pay a fine of $3,000, payable in six monthly instalments of $500 with the first instalment payment payable on or before 30 April 2022.

3. The respondent complete a course in ethics approved by the Law Society of the ACT within six months of him resuming practice as a legal practitioner.

4. The respondent pay the applicant's costs calculated on a solicitor own-client basis in accordance with the ACT Supreme Court scale in a sum to be agreed and, if not agreed between the applicant and respondent, as assessed by a cost specialist, namely LegalCost, and the respondent is to pay 90% of the costs so assessed plus disbursements in full.

1. These reasons concern an application for disciplinary action brought by the Council of the Law Society of the Australian Capital Territory (the Council) against the respondent under section 419 of the Legal Profession Act 2006 (the LP Act). The application charged the respondent with breaches of Rules 1.1, 1.2 and 7.2 of the Legal Profession (Solicitors) Rules 2007 (the Rules), as in force at the applicable time (2011). The Tribunal has jurisdiction to hear and determine the application pursuant to section 425 of the LP Act.

2. In response to the application, the parties reached agreement as to the facts; the respondent accepted that he had breached the identified provisions of the Rules, as charged; and the parties reached agreement regarding characterisation of the respondent's conduct and sanction. The parties recorded their agreement in a joint written submission. It was signed by their respective legal representatives and lodged with the Tribunal for the purpose of it making orders in accordance with their agreement (the joint submission).

3. Section 55 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act) states the circumstances in which the Tribunal may make orders by agreement. It provides:

55 Powers of tribunal if parties reach agreement

_(1) This section applies if, at any stage in dealing with an application - _

_(a) the parties reach agreement - _

(i) about the terms of a tribunal decision in relation to the application; or

(ii) about how to deal with a part of the application or a matter arising out of the application; and

(b) the terms (the agreed terms) of the agreement are reduced to writing, signed by the parties and lodged with the tribunal; and

_(c) the tribunal is satisfied that an order or decision in, or consistent with, the agreed terms would be - _

(i) within the powers of the tribunal; and

(ii) appropriate for the tribunal to make.

_(2) If the agreed terms are about a tribunal decision in relation to the application, the tribunal may, by order, make a decision in accordance with the agreed terms - _

(a) without holding a hearing; or

(b) if a hearing has begun - without completely dealing with the application at the hearing.

(3) ...

4. For the reasons that follow, I was satisfied that the criteria in section 55(1) for making orders in accordance with the joint submission were met. Accordingly, pursuant to section 55(2), I determined that the Tribunal should, by orders, make a decision in accordance with the agreed terms without holding a hearing.

5. In the joint submission, the respondent agreed to all of the facts pleaded in the application for disciplinary action. In summary, the relevant facts are as follows.

6. The respondent is an experienced legal practitioner. He was first admitted in 1988 and to the Supreme Court of the Australian Capital Territory in 1992.

7. In 2011, the respondent worked as an employed solicitor with a small private practice in Canberra. At this time, two persons who I will refer to as Mr and Mrs Smith[1] sought advice from the respondent regarding a proposed loan from Mrs Smith's mother. The context in which they sought advice is important.

8. On 8 November 2007, Mrs Smith's mother made an enduring power of attorney (the EPOA) under which she appointed Mrs Smith as her attorney. In 2007, Mrs Smith's mother was diagnosed with dementia.

9. In her capacity as her mother's attorney, Mrs Smith had sold her mother's house in Sydney for the purpose of procuring $480,000 to be paid to a nursing home by way of a bond to secure accommodation for her mother. The sale of the house produced a further $400,000, which Mrs Smith paid into her mother's savings account. Mrs Smith subsequently placed the money in a term deposit to obtain a higher rate of interest.

10. In 2011, Mr and Mrs Smith sought advice from the respondent about whether it would be permissible for them to borrow the $400,000 from Mrs Smith's mother (the Loan). They wished to use the money, temporarily, to reduce the principal owing on their mortgage.

11. The respondent advised Mr and Mrs Smith that the Loan was permissible. He gave a letter of advice to Mrs Smith's husband in which he stated that "... a properly structured arrangement reduced to writing that included an obligation to allow interest and protect the capital (for example, allowing a notional payment of interest, to be paid to the [mother's] estate and providing some security for example, a caveat, over the property of which the mortgage is secured)" would be permissible (the Advice Letter).

12. The respondent advised that a rate of interest between the amount that Mrs Smith's mother was receiving by way of interest payable under the term deposit and the amount that Mrs Smith and her husband were paying on their mortgage "would be appropriate".

13. The respondent did not advise Mrs Smith or her husband that the arrangement was not permitted by sections 34, 42 and 48 of the Powers of Attorney Act 2006 (the POA Act).

14. Section 34 states that a power of attorney[2] does not authorise an attorney to do anything "that would result in a benefit given to the attorney unless the power of attorney expressly authorises the giving of a benefit of that kind to the attorney". There was no suggestion that the Loan was so authorised under the EPOA.

15. Section 42(1) defines a 'conflict transaction' as a transaction that results, or may result, in a conflict between "the duty of an attorney towards the principal" and either "the interests of the attorney, or a relative, business associate or close friend of the attorney" or "another duty of the attorney". Section 42(3) provides that an attorney may enter into a conflict transaction "only if the principal authorises the transaction ... in the power of attorney". There was no suggestion that Mrs Smith's mother authorised the transaction in the EPOA.

16. Section 48 provides that an attorney for a property matter under an enduring power of attorney must keep the attorney's property separate from the principal's property. The Dictionary to the POA Act defines 'property' to include "money and financial assets". There was no suggestion that the Loan kept the principal's money separate from the attorney's money.

17. With reliance on the respondent's advice, Mrs Smith and her husband borrowed $400,000 from Mrs Smith's mother. Mrs Smith, in her capacity as her mother's attorney, facilitated the Loan from her mother. The arrangement was formalised in a deed of loan executed on 8 June 2011 prepared and witnessed by the respondent (the Deed of Loan).

18. The respondent did not advise Mrs Smith, in her capacity as her mother's attorney, to obtain security for the loan (except for the caveat) or to pay interest at a commercial rate.

19. Mrs Smith's mother died in July 2017. Probate was granted to Mrs Smith in September 2017. Soon after, Mrs Smith's sister became aware of the Loan and objected to it. Legal proceedings ensued regarding administration of the estate.

20. On or about this time, Mrs Smith and her husband separated and went through divorce proceedings.

21. The estate proceedings and the family law proceedings were finalised in a mediation conference. Under the settlement, Mrs Smith's husband paid $415,000 according to the loan agreement (presumably paid into the estate of Mrs Smith's mother) and Mrs Smith paid a further $160,086.27 into the estate by way of interest in consequence of her having not properly discharged her fiduciary responsibilities as her mother's attorney.

22. At the hearing of the application for orders under section 55 of the ACAT Act, Ms Binstock appearing for the Council explained that under the Deed of Loan Mr and Mrs Smith was liable to pay approximately $83,000 to Mrs Smith's mother by way of interest whereas the settlement of the estate proceeding entailed a payment (in total) of approximately $175,000 to the estate - a further $90,000.[3]

23. In addition, Mrs Smith and her husband incurred legal costs arising from the estate proceeding and its resolution. These events led to a complaint by Mrs Smith to the Law Society about the advice she had received from the respondent.

24. The Rules impose binding obligations on practitioners, including the respondent, pursuant to section 585(1) of the LP Act. The Rules include:

(a) Rule 1.1, which requires a practitioner to "treat his or her client fairly and in good faith, giving due regard to the client's position of dependence upon the practitioner, his or her special training and experience and the high degree of trust which a client is entitled to place in a practitioner".

(b) Rule 1.2, which requires a practitioner to "act honestly, fairly, and with competence and diligence in the service of a client", and "to accept instructions, and a retainer to act for a client, only when the practitioner can reasonably expect to serve the client in that manner and attend to the work required with reasonable promptness".

(c) Rule 7.2, which requires:

A practitioner who intends to accept instructions from more than one party to any proceedings or transaction [to] be satisfied, before accepting a retainer to act, that each of the parties is aware that the practitioner is intending to act for the others and consents to the practitioner so acting in the knowledge that that the practitioner

(ii) giving advice to one party which is contrary to the interests of another.

25. As a first charge, the Council charged the respondent breached rule 1.1 of the Rules by failing to treat Mrs Smith fairly and in good faith, having due regard to her position of dependence upon him. The alleged breach arose, in summary, from the conflict between Mrs Smith's own interests and the interests of her mother that Mrs Smith needed to uphold and protect in her capacity as her mother's attorney. The charge alleged that the respondent failed to advise Mrs Smith in her capacity as her mother's attorney (i.e. the lender) to obtain independent legal advice in relation to the proposed loan; failed to advise Mrs Smith in her capacity as her mother's attorney (i.e. the lender) about the commercial risks and disadvantage to her mother's interests arising from the proposed transaction;[4] and by preparing a deed containing inadequate provisions.

26. As a second charge, the Council charged that the respondent breached rule 1.2 of the Rules by failing to act with competence and diligence by failing to advise Mrs Smith, in her capacity as her mother's attorney, about section 34, 42 and/or 48 of the POA Act or that the EPOA did not permit the proposed transaction.

27. As a third charge, the Council charged that the respondent breached rule 7 of the Rules by acting for more than one party to the transaction, namely Mr and Mrs Smith (in their personal capacity as borrowers), and Mrs Smith (in her capacity as her mother's attorney i.e. the lender), where their interests were in conflict and where the respondent did not take steps to comply with rule 7.2.

28. In the joint submission, the respondent accepted that he had breached rules 1.1, 1.2 and 7.2 for the reasons particularised by the Council.

29. In the joint submission, the respondent accepted that his conduct, taken globally,[5] can be properly characterised as unsatisfactory professional conduct. Such conduct is defined in section 386 of the Act as including "conduct of an Australian legal practitioner happening 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 Australian legal practitioner".

30. The parties submitted that the following sanction is appropriate:

(a) A finding pursuant to subsection 425(1) of the LP Act that the respondent is guilty of unsatisfactory professional conduct.

(b) An order pursuant to subsection 425(5)(a) of the LP Act that the respondent pay a fine of $3,000 in six equal monthly instalments of $500 with the first instalment payment falling due on the final day of the month in which orders are entered.

(c) An order pursuant to subsection 425(3)(e) of the LP Act that the respondent be publicly reprimanded.

(d) An order pursuant to subsection 425(5)(b) of the LP Act that the respondent complete a course approved by the Law Society of the ACT in ethics within six months of orders being entered.

(e) An order pursuant to section 433(1) of the LP Act that the respondent pay the Council's costs calculated on a solicitor own-client basis in accordance with the ACT Supreme Court scale in a sum to be agreed and, if not agreed between the Council and the respondent, the costs are to be assessed by a cost specialist, namely LegalCost, and the respondent is to pay 90% of the costs so assessed plus disbursements in full.

31. At hearing, the Tribunal was told that the respondent has recently accepted employment with a Commonwealth Department in a non-legal role and that, at this time, he has decided not to practise as a sole practitioner. Ms Binstock (appearing for the Council) and Ms Webster SC (appearing for the respondent) agreed with the Tribunal's suggestion, therefore, that proposed order (d) be modified to require the respondent to complete an approved course in ethics within six months of him resuming practice as a legal practitioner rather than within six months of the date when the orders are entered.

32. Ms Binstock referred to two earlier tribunal decisions involving a practitioner who gave incorrect advice to the detriment of their client[6] but acknowledged that neither decision was of assistance regarding the appropriateness of the sanctions agreed in this case. Ms Binstock acknowledged that she did not "have anything that really speaks to $3,000 being an appropriate fine other than it's at the lower end [she submitted] of unsatisfactory professional conduct".[7]

33. The respondent swore an affidavit in which he commented on the charges, his conduct, the circumstances in which it occurred and the counselling he voluntarily undertook as a consequence of the complaint. The affidavit was accepted into evidence without objection and the respondent was not cross-examined. I accept the respondent's evidence.

34. In his affidavit, the respondent said that whilst he could recall Mrs Smith and her husband, he had very little recollection of the matter consequent upon the passage of time.

35. The respondent said that in or about October 2020 a third party gave him a copy of his Advice Letter which he 'self-disclosed' to the Council.

36. The respondent acknowledged that the Advice Letter did not properly deal with the inherent conflict that the proposed transaction created between the interests of Mrs Smith in her own capacity and Mrs Smith's interests in her capacity as attorney for her mother under the EPOA. The respondent accepted that whilst the Advice Letter was addressed to Mrs Smith's husband, Mrs Smith's conflicting interests "were at the heart" of the matter.

37. The respondent stated his sincere regret that his conduct did not "better protect" Mrs Smith's competing interests. The respondent stated that he has received counselling arising from this proceeding and that he has come to accept the serious errors he made.

38. The respondent also commented upon his limited financial circumstances, and that he requested a payment plan (as agreed in the proposed sanction) so that he would be able to comply with the orders involving payment of the proposed fine, the Council's legal costs and his own legal costs.

39. Ms Webster SC, appearing for the respondent, submitted that the proposed orders are "appropriate" for the tribunal to make. Ms Webster properly noted the Tribunal's protective jurisdiction. When assessing whether orders are appropriate, she submitted (correctly) that the focus must be on the protection of clients and the public, the maintenance of the reputation and standards of the profession and the avoidance of similar conduct by other practitioners. The focus is not on punishing the practitioner.[8]

40. Ms Webster submitted that the respondent has demonstrated appropriate and credible insight into his conduct, and acceptance of his unsatisfactory conduct. She noted that the respondent self-disclosed the Advice Letter notwithstanding its adverse consequences for him. She noted that the respondent has co-operated fully with the Council's investigations into his conduct, has voluntarily undertaken counselling regarding his conduct and has demonstrated remorse and understanding of the gravity of his conduct.

41. Ms Webster also referred to the respondent's limited financial circumstances. She pointed out that payment of the proposed fine, the applicant's legal costs and his own legal costs will leave him with little (if any) further disposable income.

42. In Council of the Law Society of the ACT v Legal Practitioner 201933,[9] with reference to earlier authority, I commented on the tribunal's role when determining an application for disciplinary action under section 55 of the ACAT Act. In this case, as in most cases, the joint submission evidenced that sections 55(1)(a) and (b) are met. I also accept that the five proposed orders are within power pursuant to the sections of the LP Act to which the parties referred.

43. The question, per section 55(1)(c)(ii) of the ACAT Act, was whether the orders are (in each case) "appropriate for the tribunal to make", meaning "suitable or fitting for a particular purpose"[10] referenced to the facts and circumstances of the issue or matter to be determined.

44. Regarding the proposed finding (unsatisfactory professional conduct), I had no reason to doubt the correctness of the facts admitted. Both parties were legally represented. I accept that the respondent's conduct was in breach of rules 1.1, 1.2 and 7.2 of the Rules and amounted to unsatisfactory professional conduct.

45. Mrs Smith and her husband asked the respondent for advice about whether it was permissible to use Mrs Smith's mother's money for their benefit. Referring to rule 1.1, Mrs Smith and her husband were in a "position of dependence upon the practitioner". The respondent knew that Mrs Smith was asking the question in a circumstance where she was her mother's attorney under the EPOA made under the POA Act. Even a cursory review of the POA Act and sections 34, 42 and 48 in particular, in conjunction with the EPOA, would or should have made it clear to the respondent that the proposed loan was legally impermissible. He should have advised his clients accordingly. Had he done so, the ensuing estate proceeding brought against his client and her husband, the repayments by Mrs Smith and her husband to the estate in settlement of that proceeding, the complication added to the divorce proceeding and the legal costs that resolution of these problems entailed might all have been avoided.

46. In some cases regarding poor legal advice, views will differ about how it should be characterised. Advice might be poor, incompetent or negligent, and might involve an action against the practitioner for compensation, but not be of a kind that warrants disciplinary action against the practitioner. However, in this case, I accept that the respondent's advice and the deed he drew to reflect his advice were so clearly wrong, and had such significantly adverse consequences for Mr and Mrs Smith, that it justifies a finding of unsatisfactory professional conduct.

47. Regarding the first proposed order (the fine), an assessment of an appropriate fine is necessarily subjective. Ms Binstock could not refer me to any decision in which a comparative fine was imposed for a comparative breach of the Rules, nor could I find such a decision. In any event, comparisons of this kind should be made with caution given that the facts and circumstances in a case invariably differ from the facts in another case.

48. Had I been asked to determine an appropriate fine by reference to the facts as agreed, I would have imposed a lesser fine. The purpose of disciplinary proceedings is not to punish. It is to protect the reputation of the profession and to maintain its standards. Appropriate sanctions need to be determined on the facts in each case. In this case, in my view, three factors in particular pointed to the appropriateness of a lesser fine.

49. First, the order that the respondent be publicly reprimanded will, in my view, do more to protect and maintain the standards expected of the profession than the imposition of a fine. Second, the respondent has already suffered significant consequences of this disciplinary proceeding. Third, the respondent has limited financial means which, for him, will cause a lesser fine still to be a significant penalty especially where he will also be required to pay the Council's costs and his own legal costs.[11]

50. However, for the purposes of section 55 of the ACAT Act, the tribunal's task is not to determine the fine it would impose but to determine whether the agreed fine is "appropriate". That needs to be determined according to all the circumstances. Two factors, at least, extraneous to my view about an appropriate penalty caused me to conclude that it is.

51. First, at all material times the respondent was legally represented. I am not privy, nor should I be, to the advice that the respondent received regarding the appropriateness of the agreed fine but I should, within reasonable limits, respect his agreement to it.

52. Second, at hearing, I shared with Ms Binstock my view that a lesser fine would be appropriate. Ms Binstock did not agree. She submitted that if the Tribunal was not satisfied that the proposed order was "appropriate to make" the Tribunal could not and should not make it, in which case the application would need to proceed to hearing. She submitted, correctly, that in response to an application under section 55 the Tribunal does not have power to make an order that differs from an agreed order.

53. Understandably, the respondent was very anxious that the Tribunal make orders in terms of the agreed orders. His legal costs and the Council's legal costs that the respondent would be obliged to pay if the matter proceeded to hearing were likely to significantly exceed the offset of achieving a lesser fine - if that were achieved. The idea that the practitioner could contend for a lesser fine in circumstances where he had previously agreed to the fine sought by the Council was also problematic.

54. In my view, these factors had to be weighed in the balance when deciding whether the fine was appropriate. For me to compel the application to proceed to hearing, contrary to both parties' wishes, was not a step I was prepared to take. Respect for the parties' agreement and regard for the additional costs that I would necessarily cause the respondent to incur outweighed my view about a lesser fine.

55. For these reasons, parties in future cases should be cautious about contending that consent orders made in a past case are a good indicator about what orders would be appropriate in a later case.

56. Regarding the second proposed order (the public reprimand), as Ms Webster noted, the Tribunal exercises a protective jurisdiction. Its focus must be on the protection of clients and the public, maintenance of the reputation and standards of the profession and the avoidance of similar conduct by other practitioners. The focus is not on punishment of the practitioner.

57. In this case, for the reasons discussed above, the respondent's advice was clearly and objectively wrong. He advised Mr and Mrs Smith that they could borrow money from Mrs Smith's mother where, to do so, was contrary to POA Act. He compounded the error by implementing his advice in the Deed of Loan. His clients suffered significant distress and financial loss as a result. A public reprimand is necessary to 'send a message' about the consequence for practitioners who fail to provide competent advice at such a basic objective level.

58. Regarding the third proposed order (professional training), I agree that the respondent's conduct demonstrates the need for him to complete a course in ethics consequent upon him not recognising and acting upon the obvious (in my view) conflict between Mrs Smith's interests in her capacity as her mother's attorney and her own interests that necessarily arose from a proposal to borrow a significant sum from her mother in circumstances where her mother lacked capacity to understand or approve the loan.

59. In circumstances where the respondent, at this time, does not propose to resume practice, I suggested to the parties that the respondent's need to complete the course should be referenced to the date on which he resumes practice (if that were to occur) rather than the date of the Tribunal's orders. Ms Binstock agreed, as did Ms Webster. As a consequence, I made an order with that agreed amendment.

60. Regarding the fourth proposed order (costs), it is necessarily appropriate to order the respondent to pay the Council's costs in circumstances where section 433(1) of the LP Act mandates that the Tribunal does so - noting that there are no suggested exceptional circumstances that would excuse the Tribunal from making that order.

[1] The name, Smith, bears no resemblance to the persons' real names and is chosen to protect their identity which is irrelevant for the purposes of this application.

[2] A 'power of attorney' is defined in the Dictionary to the Powers of Attorney Act 2006 to mean a "general power of attorney or an enduring power of attorney". In this case, Mrs Smith's mother had executed an enduring power of attorney appointing Mrs Smith as her attorney.

[3] Transcript of proceedings, 3 September 2021, page 34, lines 35-40

[4] For example, the lower interest that Mrs Smith's mother would receive, lack of security, risk about the ability of Mr and Mrs Smith to repay the loan and the term of the loan.

[5] See Council of the Law Society of the ACT v Legal Practitioner 'P4' (No. 2) [2015] ACAT 35 at [5]- [7]); Council of the Law Society of the ACT v Legal Practitioner RN [2016] ACAT 122 at [40], [44]

[6] Council of the Law Society of the ACT v Legal Practitioner 'Y' (Chanaka Bandarage) [2012] ACAT 40; Council of the Law Society of the ACT v Legal Practitioner 201933 [2020] ACAT 54

[7] Transcript of proceedings 3 September 2021, page 37, lines 18-19

[8] The Council of the Law Society of the Australian Capital Territory v Davey [2019] ACTSCFC 2 at [22]

[9] Council of the Law Society of the ACT v Legal Practitioner 201933 [2020] ACAT 54 at [42]- [43]

[10] Council of the Law Society of the ACT v Legal Practitioner 201933 [2020] ACAT 54 at [38]

[11] See Council of the Law Society of the ACT v Legal Practitioner 201933 [2018] ACAT 101 at [14]. For an elaboration of these factors, see Council of the Law Society of the ACT v Legal Practitioner 20214 [2022] ACAT 33 at [91] in which I considered the circumstances of another unrelated disciplinary proceeding brought against the same practitioner.