Dona v Council of the Law Society of New South Wales

Court of Appeal (NSW)|2014-12-05|Before: Barrett JA, Emmett JA, Gleeson JA

t File Number(s): CA 2014/205623 Decision under appeal Citation: [2014] NSWCATOD 27 Date of Decision: 2014-04-03 00:00:00 Before: D Patten, Principal Member; S Hale, Senior Member; and E Hayes, General Member File Number(s): 132005

Judgment 1BARRETT JA: This appeal concerns the following orders made on 3 April 2014 by the Occupational Division of the New South Wales Civil and Administrative Tribunal ("the Tribunal"): "1. That any law firm be prohibited (without approval under s 17 of the Legal Profession Act) from employing or paying in connection with the law practice engaged in by the firm, Mr Noel Dona. 2. That Mr Dona pay the Council's costs of these proceedings as agreed or assessed." 2Noel Dona ("the appellant") was, at material times, employed as a "paralegal" by Robert Wehbe & Partners, a firm of solicitors practising at Parramatta. He was described on that firm's website as "general manager".

The complaint and its consequences 3On 16 May 2012, Hughes & Taylor, solicitors acting for the executors of the will of Edith Bliss who died on 3 May 2012, made a complaint to the Legal Services Commissioner in respect of conduct of the appellant. They made allegations to the following effect:

Shortly before her death, Ms Bliss received approximately $800,000 under a total and permanent disablement insurance policy.
Ms Bliss was interested in investing most of this money with or through Yellow Brick Road. On contacting that organisation, she was referred to Robert Wehbe & Partners and spoke with the appellant.
Thereafter, Ms Bliss became party to a written agreement under which $600,000 was lent by her to the appellant as borrower. A company named Dgas Investments Pty Ltd was also a party to the agreement and was described as "guarantor".
There was no provision of independent advice to Ms Bliss in relation to the loan; nor was any security for repayment given.
The appellant was "able to gain the confidence of Ms Bliss due to his connection with the legal firm of Robert Wehbe & Partners".
Ms Bliss was terminally ill when she signed the agreement and made the loan and died less than three weeks later. The appellant was aware that she was terminally ill. 4The letter to the Legal Services Commissioner was accompanied by a copy of the loan agreement, a copy of the appellant's "profile" taken from the Robert Wehbe & Partners website and an email sent by the appellant to the daughter of Ms Bliss on 14 May 2012 concerning instructions the appellant had taken from Ms Bliss for the preparation of a new will. 5In consequence of the complaint, the Council of the Law Society of New South Wales ("the Council") applied to the Tribunal for an order under s 18(2) of the Legal Profession Act 2004 (NSW) prohibiting any law practice from employing or paying the appellant in connection with the legal practice engaged in by the law practice without approval under s 17 of that Act. After a hearing on 29 and 30 October 2013 at which evidence was led by both the Council and the appellant, the orders set out at [1] above were made. 6The Tribunal found that the appellant's conduct in entering into the loan agreement with Ms Bliss and receiving the loan proceeds from her was "an egregious breach of a basic obligation of those engaged in the practice of law not to allow their own interests to conflict with those of their clients"; and that the appellant's obligation "was heightened by the obvious ill health and consequence vulnerability of Ms Bliss".

The appeal 7The Tribunal's decision is, by virtue of cl 29(1)(a) of Sch 5 to the Civil and Administrative Appeals Tribunal Act 2013 (NSW), a "profession decision". Clause 29(2)(b) creates a right of appeal to the Supreme Court in respect of a "profession decision". Section 48(1)(a)(viii) of the Supreme Court Act 1970 (NSW) assigns such appeals to the Court of Appeal. 8Clause 29(4)(a) of Sch 5 states that an appeal of this kind is an appeal to which s 75A of the Supreme Court Act applies and, accordingly, is by way of rehearing rather than a new (de novo) hearing. Clause 29(5) preserves the operation of the provisions of s 75A of the Supreme Court Act relating to the receipt of evidence by the Supreme Court. 9In his appeal to this Court, the appellant challenges several findings made by the Tribunal, specifically: (a) that the conditions specified in s 18(2) of the Legal Profession Act were satisfied; (b) that, as at 13 April 2013, Ms Bliss was a client of Robert Wehbe & Partners; (c) that, in negotiating the loan transaction with Ms Bliss, the appellant owed her fiduciary duties; (d) that an order under s 18(2) was appropriate even though the conduct did not deserve the strongest reprobation. 10To be more explicit in relation to (d), the appellant says that it is wrong in principle to regard conduct not deserving of the strongest reprobation as warranting the s 18(2) sanction and that it makes no difference that s 17 creates a regime under which a person subjected to that sanction may be specifically approved for employment or retainer by a law practice. 11There are also grounds of appeal concerning holding out of the appellant as a lawyer through the Robert Wehbe & Partners website but, since the Council seeks to uphold the Tribunal's decision principally by reference to the loan transaction, the appropriate course, in the first instance, is deal with the appeal as it concerns that matter.

Facts 12This Court has before it the whole of the evidence that was before the Tribunal. The central facts may be briefly stated. On 16 March 2012, Ms Bliss, according to a Facebook message posted by her, "Had a meeting yesterday with someone from Yellow Brick Road about managing my money". Yellow Brick Road is a financial advisory company. Ms Bliss telephoned the Robert Wehbe & Partners office on 5 or 6 April 2012. Her call was put through to the appellant. She said to him that she had been "referred to your firm by Alan Khoudair of Yellow Brick Road, Parramatta". The quoted words appear in the appellant's affidavit. He deposed that Ms Bliss then said: "I want to discuss my family law matters and a new will. I also want to make the most of some money I have." 13The appellant deposed that he told Ms Bliss that he could not help her with the family law matter and that she would need to speak to Mr Robert Wehbe about that, to which she replied: "Yes. Mr Wehbe is the person that Alan Khoudair referred me to." 14The appellant then said that Mr Khoudair was "a business friend" of Mr Wehbe and that he "refers business to Mr Wehbe". 15The conversation between the appellant and Ms Bliss then moved on to the money that she wanted "to make the most of". She said that she needed to provide for her living expenses and her children's futures and that both Mr Khoudair and Mr Zoltan Tomanovic (also of Yellow Brick Road) had discussed with her how she might use her money and had said that if she was interested in lending it out she should "speak to you". The appellant said that he would contact Mr Tomanovic and "find out more". 16The appellant deposed that he thereafter telephoned Mr Tomanovic and that Mr Tomanovic said to him: "I discussed with Miss Bliss the return on her money she would need to get to achieve her financial objectives. She would need to get 12% pa - which is three times the current average interest rate paid on term deposits at the banks. She is not well. Make it easy for her. Go to her home." 17Mr Tomanovic sent the appellant an email dated 10 April 2012 in which he gave Ms Bliss's date of birth, address, telephone numbers and email address and recorded: "$700k 3 years plus year option 12%, 6 monthly in advance Will Divorce advice, separation of assets" 18On 11 April 2012, the appellant telephoned Ms Bliss, reminded her that they had spoken a few days earlier and said that he had spoken with Mr Tomanovic who had given him "details of your financial objectives so that I could draw up a simple agreement for you to consider". She replied that she would like to read it and that the appellant could bring it to her home on 13 April 2012. 19The appellant went to Ms Bliss's home as arranged. After some conversation about her health, Ms Bliss referred to the fact that she was "going through a divorce" and wanted to look after her children. She began to describe what she might receive from her husband by way of property settlement. The appellant said that she "might be entitled to more than that" and asked whether she would like him to get Mr Wehbe to talk to her "about that and other family law matters", explaining that he had come to the house to "discuss the loan you mentioned to me". He had prepared a draft loan agreement that he asked her to look at. Ms Bliss read the document and he asked whether she wanted "to discuss this agreement with anyone else". She said she did not and asked about the identity of Dgas Investments which, he explained, was "one of my companies" (it was in fact a company of which he was the sole director, sole secretary and sole shareholder). Ms Bliss then asked the appellant what other assets he had and he gave her some information on that subject. 20The conversation then moved to the amount of the loan and the rate of interest. Ms Bliss said that she wanted to lend $600,000 rather than $700,000 (the amount typed into the document, no doubt by reference to Mr Tomanovic's email to the appellant) and that she would prefer interest at 15 percent per annum rather than 12 per cent (the rate for which the document provided). The appellant changed the principal sum to $600,000 in handwriting and pointed out that the rate of 12 per cent for which the document provided was "a pretty good deal - three times better than the banks will pay". Ms Bliss signed the document, as altered by the appellant. The appellant then signed as borrower and as director of Dgas. The appellant deposed that no other adult was present and: "Ms Bliss told me 'Just scribble a witness in, it will be fine". So I did." 21Ms Bliss gave the appellant a cheque for $564,000, being the principal of $600,000 less six months' interest "prepaid". The appellant wrote the cheque and filled in the butt and Ms Bliss signed the cheque prepared by him. She wished the appellant well with the property development that he had mentioned as the intended destination of the borrowed funds. Ms Bliss then said: "Now that is done, can you help me with a new will?" 22The appellant said that he had not visited for that purpose and that Mr Wehbe would take care of a will when she spoke to him about family law matters. Ms Bliss said that the will would be "simple" and asked that the appellant "do me a favour and write down what I want now to save time". The appellant did so. A will was later drafted in the office of Robert Wehbe & Partners but no new will was signed before Ms Bliss' death on 3 May 2012. 23On 17 April 2012, that is, a few days after the appellant's visit to her home, Ms Bliss sent an email to Yellow Brick Road at Parramatta, as follows: "I had a meeting on Friday at 2pm with Noel Dona to discuss several legal issues including my will, my divorce and an investment of $600,000. I gave Mr Dona a cheque which I asked him not to bank until Monday. I explained to him that I had to move money from one financial institution to another and it normally took 2 days for this to happen. Mr Dona left my house and banked my cheque immediately. That put my account into overdrawn and left me without any available funds for the weekend. To say I was annoyed is putting it mildly. I sorted it out with Westpac on Monday morning." 24On 14 May 2012 (after Ms Bliss's death), in response to an enquiry, the appellant wrote to Ms Bliss's daughter referring to "your mother's instructions to me in relation to her final will and testament".

The fiduciary issue 25Submissions made by Mr Gray of counsel for the appellant sought to make good the proposition that, neither at 13 April 2012 when the loan agreement was executed and the cheque was handed over nor at any earlier time did the appellant stand in any fiduciary relationship to Ms Bliss or owe fiduciary duties to her. A corollary of that proposition is, of course, that the appellant was in no way constrained by equity from using his position vis-à-vis Ms Bliss to obtain an advantage for himself or from acting in ways that caused his interests to come into conflict with and to be afforded priority over hers. The substance of the submissions is that Ms Bliss never reached the point of becoming a client of Robert Wehbe & Partners and that the only relevant relationship between Ms Bliss and the appellant was a relationship of potential lender and potential borrower which, in due course, became a relationship of lender and borrower. 26The facts do not support any such characterisation. Ms Bliss was referred by Yellow Brick Road to Robert Wehbe & Partners. On the applicant's own version of relevant conversations, Ms Bliss told him that Mr Khoudair of Yellow Brick Road had suggested she contact the solicitor, Mr Wehbe. There was no suggestion that she should contact the appellant. However, her initial telephone call was put through to the appellant, presumably by a switchboard operator or other assistant. Ms Bliss immediately identified matrimonial matters, the making of a new will and the investment of money as the three things on which she was seeking assistance. The appellant said that Mr Wehbe could handle matrimonial matters for her and went on to discuss aspects relevant to the investment of money. As to that, the appellant said that he would contact Mr Tomanovic and "find out more"; and Ms Bliss obviously acquiesced in the proposal that he do so. In the course of the first conversation, nothing about a new will transpired beyond Ms Bliss's initial reference. The making of a will was obviously something that anyone would naturally assume could be dealt with by a firm of solicitors. 27At the end of the first conversation, the position was that the appellant was to find out more from Mr Tomanovic about matters relevant to the investment aspect, Mr Wehbe had been identified as the person within the firm who could deal with family law matters for Ms Bliss, the question of a new will was left unaddressed and, importantly, the appellant was to get back to Ms Bliss in due course - something that he in fact did a few days later after speaking with Mr Tomanovic. 28When the appellant visited Ms Bliss at her home, the first thing she mentioned was her divorce and what she might receive by way of property settlement, to which the appellant said that she "might be entitled to more than that" and that he could get Mr Wehbe to talk to her. Discussion then moved to the investment of money. The form of loan agreement was tabled, discussed, altered and signed. The cheque for $564,000 was prepared, signed and handed over. Finally, Ms Bliss pressed the appellant to take instructions for a new will and he did so. Thereafter, a new will was drafted by someone at Robert Wehbe & Partners. 29Circumstances and systems within Robert Wehbe & Partners were such that an unsolicited telephone call from a person who had been referred by a financial advisory company to that firm (or to Mr Robert Wehbe) was put through to the appellant. Thereafter, the appellant was the only person within the firm who had contact with Ms Bliss. As to matrimonial matters, he indicated on at least two occasions that Mr Wehbe could help. As to testamentary matters, he took instructions for a new will and those instructions were implemented within Robert Wehbe & Partners to the extent that a form of will was drafted. As to the investment of money, the appellant prepared an agreement by which Ms Bliss lent to him personally a very substantial sum, which agreement was signed within a short time after he gave it to her in the course of a meeting at which he and she were the only persons present. 30The sequence of events was such that Ms Bliss outlined to the appellant at the very outset the three areas in which she wished to obtain legal services; the appellant indicated immediately that Mr Wehbe could help with matrimonial matters and that he would himself pursue the investment matter; the appellant, with Ms Bliss's concurrence, spoke to Mr Tomanovic to "find out more" (clearly enough, "more" relevant to Ms Bliss's investment needs and objectives); the appellant spoke to Mr Tomanovic accordingly and received an email from him; and the appellant then visited Ms Bliss at her home by appointment. At the start of the meeting at her home, Ms Bliss first referred to her matrimonial situation and the appellant said that she might be entitled to a more favourable property settlement than she had in mind but that Mr Wehbe was the person to advise her on this. The meeting subsequently moved on to the matters of investment of money and the preparation of a will, with the taking of instructions for a will by the appellant following discussion and signing of the loan agreement and handing over of the cheque. 31The Robert Wehbe & Partners firm had, clearly enough, created a situation in which persons seeking professional services from it could be attended to and dealt with by the appellant. As is relatively commonplace, another person within the firm was identified as an appropriate provider of services of a particular kind lying beyond the scope of those provided by the individual with whom initial contact was made. On any available meaning of the expression "client", Ms Bliss was a client of Robert Wehbe & Partners after the conclusion of the initial telephone conversation on 5 or 6 April 2012 in which the appellant undertook to contact her again after speaking to Mr Tomanovic. He had, at that point, agreed to act by obtaining information and reverting to her with a view to further advice or action. He had also indicated that Mr Wehbe was available to advise her on matrimonial matters. The status of Ms Bliss as a client was confirmed at the start of the meeting at her home when she began to describe her understanding of her family law rights and the appellant said that she "might be entitled to more than that" and that Mr Wehbe would advise her on that. By that point, Ms Bliss obviously reposed trust and confidence in the firm of which the appellant was part. 32The evidence does not suggest that the appellant told Ms Bliss that he was a solicitor. Nor does it suggest that he told her that he was not. The inference must be that, having been put through to him after following up the referral by Mr Khoudair to Robert Wehbe & Partners (or Mr Wehbe), she took the appellant to be a solicitor or, at least, someone acting in the place, and in the capacity, of a solicitor. 33It is beyond argument that a solicitor stands in a fiduciary relationship to his or her client and that duties consistent with a relationship of that quality are owed by the solicitor accordingly, including a duty to refrain from allowing the solicitor's own interest to intrude so as to conflict with those of the client. Lord Westbury LJ said in Tyrell v Bank of London (1862) 10 HLC 26; 11 ER 934 that "the solicitor shall not be permitted to make a gain for himself at the expense of his client". This Court had occasion to reinforce that duty in its decision in Law Society of New South Wales v Harvey [1976] 2 NSWLR 154 where it was held that a solicitor should not normally act as a business consultant or loan broker and, if he or she does, will be precluded, by the very relationship with the client, from commending to the client a loan to a borrower in which the solicitor has an interest - and a fortiori where the solicitor is the borrower. 34The appellant, of course, was not a solicitor. It is therefore not possible to point to the solicitor-client relationship as the source of any fiduciary duty or constraint binding upon him. But it does not by any means follow that no fiduciary duty could have been at work. The circumstance that he was allowed to operate in the way described at [29] above and actually did so may well have been quite sufficient to give rise to a fact-based fiduciary relationship: see, for example, John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 at [93]. Indeed, in Abdurahman v Field (1987) 8 NSWLR 158 at 164-165, this Court proceeded on the footing that fiduciary duties were owed to a solicitor's client by the solicitor's articled clerk who, apart from not being subject to disciplinary control by the court, was "in every other respect . . . acting in relation to the plaintiff in precisely the same way as a solicitor would act". That description fits the appellant and his role within Robert Wehbe & Partners. 35It is, in the end, unnecessary to express any concluded view on the question whether the appellant owed fiduciary duties to Ms Bliss. This is because relevant constraints and disciplines arise from express prescriptions.

Legal Profession Act, s 18 36Section 18(2) of the Legal Profession Act allows the Tribunal to make a prohibiting order in respect of a lay associate. If such an order is made, the lay associate is not subjected to a prohibition or otherwise constrained. Rather, the making of the order causes the person concerned to be a "disqualified person" as defined by s 4(1), with the result that, if any principal or legal practitioner associate of a law practice knows of that status, s 17 operates to prohibit that law practice employing or paying the person except in accordance with an approval granted under s 17 itself. 37Section 18 is in these terms: "(1) This section applies to a person who is not an Australian legal practitioner and who is or was a lay associate of a law practice that: (a) engages in legal practice principally in this jurisdiction, or (b) employs or employed the person to work principally in this jurisdiction, and so applies whether or not the law practice subsequently ceased to exist or engage in legal practice principally in this jurisdiction and whether or not any person ceases, by death or otherwise, to be a legal practitioner associate of the law practice. (2) On application by a Council, the Tribunal may make an order prohibiting (without approval under section 17 (Associates who are disqualified or convicted persons)) any law practice from employing or paying in connection with the legal practice engaged in by the law practice a specified person to whom this section applies, if: (a) the Tribunal is satisfied that the person is not a fit and proper person to be employed or paid in connection with that legal practice, or (b) the Tribunal is satisfied that the person has been guilty of conduct that, if the person were an Australian legal practitioner, would have constituted unsatisfactory professional conduct or professional misconduct. (3) An order under this section may apply to a specified law practice or specified class of law practices or may apply to law practices generally. (4) An order under this section may be revoked by the Tribunal on application by a Council or the person against whom the order was made." 38Having regard to the definitions of "associate" and "lay associate" in s 7, one kind of person who is, for the purposes of s 18, a "lay associate" of a law practice is an employee of, or person paid in connection with, the law practice who is not an Australian legal practitioner. 39Section 17, so far as relevant, provides: "(1) A law practice must not have a lay associate whom any principal or legal practitioner associate of the law practice knows to be: (a) a disqualified person, or (b) . . . unless the associate is approved by the relevant authority under subsection (3). . . . (3) The relevant authority to approve a person for the purposes of subsection (1) is: (a) . . . (b) in the case of a disqualified person who is an associate of a solicitor-the Law Society Council, or (c) . . . . . . (5) An approval under this section may be subject to specified conditions. . . ." 40Section 17 contains (in sub-s (9)) a slightly expanded version of "lay associate" but, for present purposes, it is sufficient to pay attention to the aspect mentioned at [38] above. 41Section 18(2)(b) empowers the Tribunal to act if satisfied that a person who is (or was) "lay associate" of a law practice of the s 18(1) description has engaged in conduct that, if the person were an Australian legal practitioner, would have constituted unsatisfactory professional conduct or professional misconduct. The section thus directs attention to conduct of the lay associate and to an hypothesis, namely, that that conduct was engaged in by an Australian legal practitioner. It then poses the question whether, if the hypothetical Australian legal practitioner had engaged in the conduct in fact engaged in by the lay associate, the practitioner would be found to have engaged in unsatisfactory professional conduct (an expression defined in a non-exhaustive way by s 496) or professional misconduct (a non-exhaustive definition of which appears in s 497). 42Section 18(2)(b) does not, in any direct way, subject lay associates to the requirements and standards that apply to legal practitioners. Rather, it provides, in combination with s 17, a means of ensuring that law practices within the State (and, in consequence, clients of those practices and the public more widely) can be protected from the risk of harm through involvement, as employees or other paid participants, of non-lawyers who, by reason of particular conduct, do not conform to the standards of conduct applying to legal practitioners. 43Mr Gray of counsel submitted on behalf of the appellant that the yardstick by which a lay associate's conduct is to be measured for the purposes of s 18(2)(b) is not that which one would use for measuring the conduct of a legal practitioner. He said that neither the Act nor common sense requires an office cleaner or a practice bookkeeper (each of whom might be within the relevant "lay associate" definition) to act as a legal practitioner must act. 44That submission cannot be accepted. It is obvious that an office cleaner's tasks and duties are remote from those of a legal practitioner. But there is some necessary intersection of applicable standards of conduct for the purposes of s 18. Both a legal practitioner and an office cleaner will act reprehensibly by stealing money from a visiting client's purse or from the office cashbox. There may be good reason to exclude either species of thief from involvement in legal practice and thereby to protect the public. 45In the case of a bookkeeper, there is a greater area of intersection. A bookkeeper's task will, in general, involve direct attention to duties that are the practitioner's own duties with respect to financial records and the handling and safekeeping of money. These are matters in relation to which legal practitioners are subject to strict duties. A law practice's bookkeeper must be taken to be subject to equivalent expectations for the purposes of s 18. There are a number of recorded cases in which bookkeepers and similar employees have been made the subject of s 18(2) orders because of conduct in relation to trust moneys and trust accounts which, if engaged in by a solicitor, would have constituted unsatisfactory professional conduct or professional misconduct: see, for example, Law Society of New South Wales v Bonham [2008] NSWADT 55; Law Society of New South Wales v Rickard [2013] NSWADT 262; and, under corresponding provisions in Victoria, Kyriackou v Law Institute of Victoria Limited [2014] VSCA 322. 46The present case does not involve an office cleaner, a practice bookkeeper or any other employee having no direct contact with clients of the law practice and no direct role in the provision of legal services. To the contrary, it involves a "paralegal" (described as the practice's "general manager") whose position within the practice was such that a person contacting the practice by telephone with a view to obtaining legal services was put in touch with him; and he treated directly with that person and undertook to assist her - in the first instance by contacting the financial advisory company by which she had been referred to the practice. As I have said, the inference to be drawn from the evidence is that Ms Bliss took the appellant to be a solicitor or, at least, someone acting in the place, and in the capacity, of a solicitor. In those circumstances, there is nothing at all incongruous in judging the conduct of the appellant, in relation to the activities he actually undertook, according to the standards prescribed in relation to legal practitioners.

Professional Conduct and Practice Rules 47Section 57B of the Legal Profession Act 1987 (NSW) (now superseded) empowered the Council to make rules for or with respect to practice as a solicitor. Among the rules so made (and which, in 2012, continued in force by virtue of s 711 of the Legal Profession Act 2004) are rules 10 and 12 of the Professional Conduct and Practice Rules of 24 August 1995 (also now superseded). 48 Rule 10.1 provided: "A practitioner must not, in any dealings with a client - 10.1.1 allow the interests of the practitioner or an associate of the practitioner to conflict with those of the client; 10.1.2 exercise any undue influence intended to dispose the client to benefit the practitioner in excess of the practitioner's fair remuneration for the legal services provided to the client;" 49Rule 12.1 was in these terms: "A practitioner must not borrow any money, nor assist an associate to borrow any money from a person - 12.1.1 who is currently a client of the practitioner, or the practitioner's firm; 12.1.2 for whom the practitioner or practitioner's firm has provided legal services, and who has indicated continuing reliance upon the advice of the practitioner, or practitioner's firm in relation to the investment of money; or 12.1.3 who has sought from the practitioner, or the practitioner's firm, advice in respect of the investment of any money, or the management of the person's financial affairs." 50Later provisions of rule 12 created exceptions none of which is of present relevance. 51The rationale for these rules is plain. The Supreme Court of Canada noted in Galambos v Perez 2009 SCC 48; [2009] 3 SCR 247 at [30] that a Canadian rule against borrowing by lawyers from their clients represented "a specific application of the general rules about conflict of interest". The court continued: "There is concern that a lawyer's legal skill and training, coupled with the relationship of trust that arises between a solicitor and a client, creates the possibility of overreaching by the lawyer. A further concern is that the lawyer is in a position to arrange the form of the transaction and may therefore further his or her own interests instead of those of the client". 52There can be no doubt that, had a legal practitioner within Robert Wehbe & Partners acted in relation to Ms Bliss and the $600,000 loan transaction in the way in which the appellant in fact acted, that legal practitioner would thereby have been in clear and obvious breach of both rule 10.1 and rule 12.1.

Assessment of the appellant's conduct 53The question which then arises under s 18(2) is whether, if the conduct engaged in by the appellant had been engaged in by a legal practitioner in breach of rule 10.1 and rule 12.1, the conduct would have constituted unsatisfactory professional conduct or professional misconduct. It is relevant, at this point, to set out s 496 and s 497(1) of the Legal Profession Act. 54Section 496 is as follows: "For the purposes of this Act: 'unsatisfactory professional conduct' includes conduct of an Australian legal practitioner 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 Australian legal practitioner." 55Section 497(1) is in these terms: "For the purposes of this Act: 'professional misconduct' includes: (a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and (b) conduct of an Australian legal practitioner 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 practitioner is not a fit and proper person to engage in legal practice." 56The adoption of statutory definitions of this kind (even definitions of a non-exhaustive kind) is a relatively recent innovation. Speaking of that development in Xu v Council of the Law Society of New South Wales [2009] NSWCA 430, Basten JA said (at [4]): "T]here has been an expansion of the bases of disciplinary action from the general law principles which were restricted to cases of disgraceful or dishonourable conduct in a professional respect, so as to cover 'unsatisfactory professional conduct' which is defined by statute to include conduct '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 Australian legal practitioner': Legal Profession Act 2004 (NSW), s 496. In addition, the concept of 'professional misconduct' is now also the subject of statutory definition and includes unsatisfactory professional conduct 'where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence': s 497(1)(a). The variation in terminology between these two definitions is not presently significant; rather the issue relevant to the present case turns on the distinction between that which is merely a failure to reach or maintain a reasonable standard of competence and diligence and conduct which involves a 'substantial' or 'consistent' failure of that kind." 57The fact that the appellant's conduct in relation to the loan was of the quality referred to at [51] above means that it was conduct which, had it been engaged in by a legal practitioner, would have been "unsatisfactory professional conduct" within the s 496 definition. 58The Tribunal did not, in express terms, address the further question whether the departure from applicable norms of conduct involved a "substantial" or "consistent" failure to "reach or maintain a reasonable standard of competence and diligence" as referred to in the definition of "professional misconduct". By clear implication, however, it decided that the departure was of that quality. I say this because of the express finding that "what occurred was much more than an error of judgment by Mr Dona, it was an egregious breach of a basic obligation of those engaged in the practice of law not to allow their own interests to conflict with those of their clients". Implicit in the classification as "an egregious breach" of that "basic obligation" is a necessary finding that the breach, in a matter of "a reasonable standard of . . . diligence", was "substantial". 59The Tribunal's decision, in that respect, proceeded in part on the footing that there were circumstances of aggravation because of "the obvious ill health and consequent vulnerability of Ms Bliss". Counsel for the appellant challenges that finding. The challenge is without foundation. The appellant knew that Ms Bliss was ill. Mr Tomanovic said to him when the appellant telephoned him after the first contact from Ms Bliss: "She is not well. Make it easy for her. Go to her home." 60The Court is, I think, entitled to work on the basis that legal operatives within solicitors' firms do not generally visit clients at home and that such a course is taken only in exceptional circumstances. The appellant was told by Mr Tomanovic that Ms Bliss was "not well" and it may be inferred that it was for that reason that he visited her at home to "make it easy for her". The appellant himself gave evidence that, when he arrived at the house, he saw breathing apparatus and an oxygen tank in the dining room where his meeting with Ms Bliss took place. He also deposed that Ms Bliss "moved slowly but without any aids" and that "she did not appear well but did appear to be in good spirits"; also that he asked her whether she used the oxygen tank often, to which she replied, "Occasionally". He mentioned to her a relative of his who had had a lung disorder and often used an oxygen tank but "defied the odds" and made a full recovery, to which Ms Bliss responded: "My illness will not let me be so lucky and I probably have only a few years to live, but who knows?" 61There was an ample basis for the Tribunal's finding that Ms Bliss was ill and consequently in a state of vulnerability greater than that which would otherwise have prevailed; and that the appellant was aware of this. But even without that element, the Tribunal's adverse assessment of the appellant's conduct was correct. The fact of the loan is sufficient to warrant that conclusion. The conclusion is confirmed and strengthened when the terms of the loan and the surrounding circumstances are taken into account. The loan was for a very large amount. The appellant must have known or at least suspected that $600,000 represented a significant proportion of Ms Bliss's assets. The loan was unsecured and unsupported except by a guarantee of a company that was no more than an alter ago of the appellant himself. The appellant took the loan agreement to Ms Bliss's home intending to prevail upon her to sign on the spot, as she in fact did. According to his evidence, he asked her whether she wished to discuss the document with anyone else and she said that she did not. He did not recommend that she do so. He did not advise her to seek independent advice. He did not offer to leave the document with her so that she might read it at leisure and think about the matter before signing. He was content to ask a person who had approached his firm seeking legal services (including advice about the investment of a large sum of money) to contract for and advance a substantial loan to him personally without independent advice and without any opportunity for consideration and reflection beyond that she could manage as he sat opposite her waiting for her to finish reading. 62Not only was the appellant's conduct inconsistent with the norms laid down by rule 10.1 and rule 12.1, it also exhibited, in the particular context and circumstances, a substantial failure to maintain a reasonable standard of the diligence required of a legal practitioner, as referred to in s 497(1)(a) of the Legal Profession Act dealing with professional misconduct. It was reprehensible conduct. The case was undoubtedly within s 18(2)(b).

Exercise of discretion 63Mr Gray submitted on behalf of the appellant that the order made was manifestly disproportionate to the conduct found. He said that "the extreme professional sanction of striking-off" should be imposed only in case of conduct "deserving of the strongest reprobation, and indeed so heinous as to merit" that extreme professional penalty. The quoted words are found in the advice of the Privy Council in Felix v General Dental Council [1960] AC 704. It was held (at 720) in that case that a restricted meaning should be given to the phrase "infamous conduct in a professional respect" by adding the qualifier that the conduct must be of such a kind as is "deserving the strongest reprobation" and "so heinous as to merit . . . the extreme professional penalty of striking-off". At that time, "infamous conduct" carried with it only one penalty, namely, striking-off (and, in that respect, the regime considered in Felix v General Dental Council differed from that in Ex parte Meehan; Re Medical Practitioners Act [1965] NSWR 30 to which counsel also referred). 64Mr Gray emphasised that s 18(2) provides for one "penalty" only, being an order prohibiting any law practice from employing or paying the person concerned in connection with the legal practice engaged in by the law practice, except with approval under s 17. That being so, it was submitted, an order under s 18(2) should be reserved for conduct "deserving the strongest reprobation" and "so heinous as to merit . . . the extreme professional penalty of striking-off". 65As has been noted, s 17 has the effect that a law practice may not employ or retain a lay associate whom any principal or legal practitioner associate of the law practice knows to be a "disqualified person" unless the "relevant authority" (being the Council, in the case of a solicitors' practice) has approved the associate. Mr Gray submitted that, if the appellant is left in a position where his ability to operate as a lay associate is dependent on the grant of s 17 approval by the Council, he will be compelled to discharge the heavy onus borne by a practitioner who has been struck off and later seeks re-admission. That onus was described by Samuels JA in Ex parte Dennis; Re the Legal Practitioners' Act (Court of Appeal (NSW), 23 December 1988, unrep) in this way: "The applicant bears the onus - which is a heavy one - of satisfying the Court that he should be readmitted, and in order to do so he must displace the decision as to probable permanent unfitness which was the basis of his removal: Ex parte Munro: Re Legal Practitioners' Act (1969) 71 SR 448 at 454; Kotowicz v Law Society of New South Wales (No 2) (Court of Appeal 7 August 1987, unreported) per Kirby P at 19 and 20 and per Samuels JA at 3; Ex parte Lenehan (1949) 77 CLR 403 at 422. In reaching its decision the Court should act with the greatest caution and only on solid and substantial grounds, and must depend upon its own assessment of the applicant's character, uprightness, honour and trustworthiness: Incorporated Law Institute of New South Wales v Meagher (1909) 9 CLR 655 at 664 and 692; Lenehan at 422. It is, of course, equally well established that in discharging its responsibility to supervise the discipline of solicitors, the Court is not exercising a punitive but a protective role, having primary regard to the protection of the public interest and of the interests of the profession: Clyne v New South Wales Bar Association (1960) 104 CLR 186 at 201-2 and New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183." 66I do not accept these submissions. It is incorrect to characterize s 18(2) as a provision under which a person who has been admitted to a professional status on the basis of education and training is "struck-off". It is a provision under which all relevant law practices become subject to a conditional prohibition upon employing or retaining a person who has not been admitted to any professional status and who need not have undertaken any particular education or training. The prohibition arises from s 17 in consequence of the "disqualified person" status that flows from the making of a s 18(2) order. The prohibition is conditional in nature because it does not apply if the "relevant authority" (the Council, in the case of solicitors' practices), acting under s 17 itself, has granted an approval in respect of the person. But such an approval need not be of an "all or nothing" kind. An approval may be subject to specified conditions (s 17(5)) and the Council may, in that way, fashion a regime of approval dealing with specific matters concerning the particular person regarded as warranting special attention in the public interest. 67It is incorrect to equate an application for s 17 approval with an application for re-admission as a legal practitioner. Section 17 operates upon law practices by prohibiting their having disqualified persons as lay associates. It is therefore a law practice, not the person concerned, that must have approval under s 17. In the ordinary course, therefore, an application for approval will be made by a particular law practice wishing to employ or retain a particular disqualified person to perform particular functions; and the application will describe a particular regime under which that disqualified person is proposed to be employed or retained. An example may be found in Miedzinski v Council of the Law Society of New South Wales [2007] NSWADT 268, a case in which a solicitor sought administrative review of a decision of the Council refusing an application by a solicitor (Ms Miedzinski) for s 17 approval in respect of proposed employment of a struck-off solicitor (Mr Barwick) as a lay associate. The Administrative Decisions Tribunal said (at [20]): "In considering this application it is important to bear in mind that Mr. Barwick is not seeking to be restored to the roll. This application brought by Ms Miedzinski, is an application to permit Mr. Barwick to be engaged as a clerk. As is conceded by the respondent, it is an application at the lower end of the available forms of employment of disqualified persons." 68The Council, faced with an application for s 17 approval by a legal practice in respect of a person subjected to a s 18(2) order (or any other "disqualified person"), will have regard to the type of activity the person concerned is to undertake within the applicant law practice. If the person is an office cleaner or practice bookkeeper, the activities will not extend to advice to clients of the practice on matrimonial and testamentary matters and the investment of money. The application will be approached accordingly. If the person will, as in in Miedzinski v Council of the Law Society of New South Wales (above), work as a clerk (a position "at the lower end of the available forms of employment of disqualified persons"), there may also be expected to be no occasion for the person to perform legal services for clients. But in the case of a "paralegal", the activities may well extend to those matters in circumstances where direct or close supervision is lacking; and such an application will be viewed in that light. 69The ability of the Council to impose conditions under s 17(5) when granting s 17 approval is an important element of the statutory scheme. Its significance is suggested by the case of Ko v Council of the Law Society of New South Wales [2011] NSWADT 211, in which approval was sought in respect of employment as a lay associate of a person in relation to whom s 17 applied because of conviction of a serious criminal offence. The Administrative Decisions Tribunal said in that case (at [10]-[13]): "We refer to paragraph 6 of the Affidavit of Otto Stricher, which we regard as a list of the duties that Mr Stricher proposes to assign to Mr Ko if approval is granted for him to employ Mr Ko as a Lay Associate and for Mr Ko to be employed as a Lay Associate in Mr Stricher's practice. We have also heard oral evidence from Mr Ko, which was elicited by Mr Stricher during re-examination, regarding the practice and procedures in place within Mr Stricher's law practice. We note that Mr Ko will not be responsible in any way for the handling of any financial affairs of either the law practice or its clients and that Mr Stricher is the sole signatory to all financial accounts. We regard this as appropriate given the circumstances in which the convictions arose. We are satisfied to the required standard of proof that it is appropriate to grant approval for Otto Stricher to employ Stan Hung Ko (also known as Mark Ko) as a lay associate in his law practice provided that he conduct the duties and responsibilities proposed in paragraph 6 of Mr Stricher's Affidavit under his supervision and without giving advice independently of Mr Stricher or making any decisions relating to the law practice independently of him. Therefore, the Tribunal grants approval for Otto Stricher to employ Mr Ko as a lay associate in his law practice with a view to him performing the following duties: (a) having responsibility for technology and equipment within the office and assisting Mr Stricher with its servicing, repair and maintenance and negotiations with suppliers for the purchase of such equipment; (b) compiling leases subject to the supervision of Mr Stricher and any legal practitioner associate whom Mr Stricher may employ, but subject at all times to Mr Stricher's instructions and final approval; (c) compiling contracts for the sale of realty and businesses as instructed by Mr Stricher and on the proviso that they not be issued except with Mr Stricher's express approval; (d) assisting Mr Stricher in the preparation of briefs in criminal proceedings and litigation matters; and (e) translating and interpreting within the office." 70Items (a) to (e) were not, it seems, cast expressly as conditions of approval imposed pursuant to s 17(5). But that was the substantial effect of the decision. The significant point, for present purposes, is that s 17, taken as a whole, allows the Council to fashion a particular regime for employment of a "disqualified person", being a regime that restricts activities by way of protections and safeguards as to the things the person may do within the practice. It follows that, contrary to the submission made by counsel for the appellant, an application for s 17 approval does not depend on its being shown that probable permanent unfitness no longer exists. The nature of the s 17 approval mechanism and the ability it creates to fashion a particular regime are matters relevant to a decision whether to impose the s 18(2) sanction.

Conclusion 71For the reasons I have stated, there were ample grounds for the making of the s 18(2) order that the Tribunal made in respect of the appellant and there was no miscarriage of the Tribunal's discretion. Whether or not the appellant owed fiduciary duties to Ms Bliss, his conduct in relation to the loan agreement and the $600,000 loan made to him by Ms Bliss (who, at the time the agreement was executed and the loan was made, was a client of Robert Wehbe & Associates) was conduct of a kind comprehended by s 18(2)(b). It was conduct that, had it been engaged in by a legal practitioner, would have supported a finding that the practitioner was guilty of professional misconduct. The Tribunal's s 18(2) discretion was therefore exercisable. The particular exercise of the discretion does not attract the criticism that the appellant seeks to make. 72This is sufficient to dispose of the appeal. There is no need to address the issue concerning holding out of the appellant as a lagal pratitionerthrough the Robert Wehbe & Partners website that received attention in the Tribunal. 73I make one final comment. The appellant said in his affidavit read before the Tribunal that, when, during the meeting at Ms Bliss's home, the issue of a witness to signatures arose and no other adult was available: "Ms Bliss told me 'Just scribble a witness in, it will be fine". So I did." 74That the appellant should have embraced that suggestion bespeaks further ignorance of or disregard for standards of sound professional practice. 75I am of the opinion that the appeal should be dismissed with costs. 76EMMETT JA: The appellant, Mr Noel Dona, appeals from orders made by the New South Wales Civil and Administrative Tribunal (the Tribunal) on 3 April 2014 prohibiting any law firm from employing or paying Mr Dona in connection with the law practice engaged in by that firm. The Tribunal made that order, under s 18(2) of the Legal Profession Act 2004 (NSW), in circumstances where it found that Mr Dona had borrowed the sum of $600,000 from Ms Edith Bliss, who was a client of the firm of solicitors by which he was employed as a "paralegal" (though he was described on the firm's website as a "general manager"). In those circumstances, the Tribunal concluded that Mr Dona's conduct constituted "an egregious breach" of the obligation of a person in his position to avoid conflicts between his own interests and those of a person in Ms Bliss's position. 77I have had the advantage of reading in draft form the proposed reasons of Barrett JA. I agree with Barrett JA, for the reasons proposed by his Honour, that Mr Dona's appeal should be dismissed and that he should pay the costs of the respondent. 78GLEESON JA: I agree with Barrett JA.

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: 19 December 2014

Legal Profession Act 2004(NSW)

Civil and Administrative Appeals Tribunal Act 2013(NSW)

Legal Profession Act 1987(NSW)

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