Hughes v Law Society of NSW & Ors - State of NSW 14th Defendant - [2004] NSWSC 290 - NSWSC 2004 case summary

Supreme Court of NSW|2004-02-03|Before: Smart AJ

CITATION : Hughes v Law Society of NSW & Ors - State of NSW 14th Defendant [2004] NSWSC 290 HEARING DATE(S) : 2 & 3 February 2004 JUDGMENT DATE : 14 April 2004 JURISDICTION: Supreme Court JUDGMENT OF : Smart AJ at 1 DECISION : See paras 34-35

CATCHWORDS : Law Society of NSW is not "in the service of the Crown" within s 8 of the Law Reform (Vicarious Liability) Act 1983 Law Reform Commission Report LEGISLATION CITED : Law Reform (Vicarious Liability) Act 1983 Legal Profession Act 1987 Supreme Court Rules Pt 13 r 5 CASES CITED : Barwick v Law Society of NSW [2000] HCA 2 Black-Clawson v Papierwerke [1975] AC 591 PARTIES : Colin Frederick Hughes v Law Society of NSW & Ors - State of NSW 14th Defendant FILE NUMBER(S) : SC 20437/02 COUNSEL : (P) In Person (D) A M Colefax SOLICITORS : (P) In Person [D) Crown Solicitors Office

20437/02: Colin Frederick HUGHES v LAW SOCIETY OF NSW & ORS - STATE OF NSW - 14th DEFENDANT JUDGMENT

The motion of the State of New South Wales ("the State"), the fourteenth defendant, filed 25 July 2003, raises the question whether s 8 of the Law Reform (Vicarious Liability) Act 1983 renders the Crown vicariously liable in respect of the tortious conduct of the Law Society in the performance or purported performance by it of its functions under the Legal Profession Act 1987 (NSW). The plaintiff contends that it does The State in contending to the contrary submits that the answer is so clear that it can be resolved on this motion rather than at trial.

The State has sought these orders, amongst others: 1. That the proceedings be dismissed against the fourteenth defendant pursuant to Pt 13 r 5 of the Supreme Court Rules (relevantly dismissal on the ground that no reasonable cause of action is disclosed or that the proceedings are an abuse of process)

In the alternative to the order sought in para 1, that the Statement of Claim be struck out against the fourteenth defendant pursuant to Pt 15, r 26 …

[Pleading discloses no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay or is otherwise an abuse of process]

The plaintiff by his motion filed 23 May 2003 sought the following relief amongst other relief: "4. The Plaintiff applies for answers to the following questions of law:

4A. Does a breach of the sections of Part 10 of the [Legal Profession Act, 1987] referred to in the Statement of Claim (again set out in the Statement of Claim herewith) lead to the nullity of the proceedings initiated upon those breaches? [Pt 40 r 1]

4B. Does a breach of the sections of Part 10 of the Act referred to in the Statement of Claim (again set out in the Amended Statement of Claim herewith) give to a person who is subjected to those null and void proceedings and who thereby suffers damage a cause of action in tort for breach of statutory duty? [Pt 40 r 1]

4C. Does a breach of the sections of Part 10 of the [Legal Profession Reform Act, 1993] referred to in the statement of Claim (again set out in the Amended Statement of Claim herewith) give to a person who is subjected to those null and void proceedings and who thereby suffers damage a cause of action in tort for breach of statutory duty? [Pt 40 r 1]

4D. If the answer to 4B or 4C is affirmative is the State of New South Wales directly liable for the breach of statutory duty pursuant to the Law Reform (Vicarious Liability) Act 1983 9NSW0 or other statute or common law? [Pt 40 r 1]

4E. If the answer to 4C or 4D is in the affirmative the Plaintiff seeks summary judgment against the Sixth Defendant upon the basis of the affidavit of the Plaintiff filed herewith.

4F. Are the claims made in the Amended statement of Claim filed herewith in paragraphs numbered 27 (a) to (i) outside the 'good faith' defence of the Fourth and Fifth Defendants under the Act? [Pt 40 r 1 & Pt 13 r 2]

4G. Are the claims made in the Amended statement of Claim filed herewith in paragraphs numbered 27(f) to (j) outside the judicial protection of a Supreme Court judge as applied to the Fourth and Fifth Defendants under the Administrative Decisions Tribunal Act when the proceedings are null and void and they are not acting within their functions? [Pt 40 r 1]" 4. From 10 February 1978 to at least 29 June 1999 the plaintiff was a solicitor of this Court. In 1994, 1996 and 1998 a number of complaints were made against him by officers of the Law Society of New South Wales. After a lengthy hearing the Administrative Decisions Tribunal, Legal Services Division on 29 June 1999 ordered that his name be removed from the Roll of Legal Practitioners in New South Wales. Subsequently, and following the decision of the High Court of Australia in Barwick v Law Society of NSW [2000] HCA 2 (3 February 2000) the Law Society had the matter placed before an Appeal Panel of the Tribunal which at the Society's request made the following findings. "We make no orders but make the following findings:

(i) The objection to jurisdiction of the Appeal Panel made 10 April 2000 by the Law Society is established;

(ii) The Appeal Panel has no jurisdiction to hear the appeals by Mr Hughes from the Judgment in Matters No. 36 of 1996 and 36 of 1994;

(iii) For the purpose only of determining the jurisdiction of the Appeal Panel, we find that the decision and orders of the Tribunal made 29 June 1999 are void.

(See Hughes (No 2) v Law society of NSW [2002] NSW ADTAP 23)" 5. The plaintiff has taken no formal steps to set aside the orders made on 29 June 1999 but he may not need to do so when the orders have been found to be void. He has not sought a subsequent practising certificate.

By his amended statement of claim filed on 16 February 2001 the plaintiff sued the Law Society of NSW (1st defendant), The Members of the Council of the Law Society of NSW as at 30 June 1994, the second defendant, Andrew Brown (the Society's solicitor/manager appointed to the plaintiff's practice), the third defendant, Graham Molloy, Conrad staff and Dennis Mahon, (members of the Administrative Decisions Tribunal, Legal Services Division), the fourth, fifth and sixth defendants, Mortina Lo, Salme Juntunen, Nripresh Podder, Nada Padovan, Terence Cullen, Margaret Howard (former clients of the plaintiff and witnesses before the Tribunals) the seventh, eighth, ninth, tenth, eleventh and twelfth defendants, Jim Soffiak (the trust account inspector appointed by the Law Society), the thirteenth defendant and the State, the fourteenth defendant.

Neither the statement of claim nor the amended statement of claim have been served on the second, seventh, eighth, ninth, tenth or eleventh defendants. The State was served following a Status Conference on 30 April 2003.

On 5 March 2002 Master Macready dismissed proceedings as against the fourth, fifth and sixth defendants (the members of the Tribunal) on the basis that the amended statement of claim disclosed no reasonable cause of action against them having regard to the indemnity provided by cl 5 of Schedule 3 to the Administrative Decisions Tribunal Act 1997.

On 5 September 2002 Acting Master Berecry: (a) removed the twelfth defendant (a witness before the Tribunal) from the proceedings.

(b) struck out the amended statement of claim as against the first, second, third and thirteenth defendants (the Law Society, the members of its Council, the solicitor/manager appointed to the plaintiff's practice and the trust account inspector) on the basis that it disclosed no reasonable cause of action but granted leave to the plaintiff to replead (which was not done). 10. On 4 December 2002 Master Harrison dismissed the proceedings as against the first, second, third and thirteenth defendants by reason of the plaintiff's failure to comply with the order of Registrar Berecry on 2 July 2002 to provide security for costs.

On 26 September 2003 Barr J dismissed the plaintiff's appeals from the orders made by Berecry AM and Harrison M.

The statement of claim makes these allegations against the State: "124. The Fourteenth Defendant is responsible for the good government and welfare of the people of New South Wales and entrusted some of its functions of the administration of the Act [Legal Profession Act 1987] and the Reform Act [Legal Profession Reform Act 1993] 'the Acts' to the First Defendant. The administration of the Acts that was entrusted to the First Defendant included functions of the regulation of the legal profession in respect of Part 10 of the Act and the Reform Act 'the functions'. The First Defendant was required to at all times carry out the functions in accordance with law.

The Attorney-General of New South Wales is responsible to the Parliament of New South Wales for the good administration of the law of the State and was responsible to Parliament for the conduct of the functions entrusted to the First Defendant by Parliament.

The First Defendant contrary to the duty to act in accord with the law acted illegally against the Plaintiff as pleaded. Such illegality in respect of Part 10 of the Reform Act was confirmed by the High Court of Australia in the case of Barwick v Law Society of New South Wales handed down February 3, 2000 'Barwick'.

The Plaintiff was illegally subjected to proceedings section 61 breaches of the Act for 'misappropriation of trust funds' in the matters of Padovan, Estate of Gower and Cullen. The first two matters were dismissed on the basis that there was no case to answer as shown in the decision. The later matter should have been dismissed for want of jurisdiction but was illegally and wrongly and illegally determined by the Tribunal.

In the matter of Padovan the First Defendant did not read the files that were in its possession and if it did the First Defendant would not have brought baseless proceedings against the Plaintiff for misappropriation of trust funds

In the matter of Estate of Gower the Administrator had not lodged a complaint and the First Defendant alleged to the Administrator that the Plaintiff had failed to account to the Administrator and that allegation was shown and held to be wrong and there was no case to answer and no misappropriation of trust funds.

In the matter of Estate of Gower the Plaintiff could not legally disclose the full defence in illegal proceedings because it would have meant cross examining his own defence witness Gower about the pedophile activities of his brother in breach of section 171S and section 171P of the Reform Act. The Fourth, Fifth and Sixth Defendants did not have the power to cure this under the Reform Act. This was brought about because the First Defendant filed illegal proceedings as pleaded and therefore put the defence witness into the prosecution case. The Plaintiff therefore had no choice but to conduct a Clayton's cross examination of his own witness who was the person who had authorised and paid the legal fees of the Plaintiff as a full cross examination could have made the Plaintiff liable to committing an offence which entailed a term of imprisonment.

The Plaintiff should have succeeded in all matters and did not do so because of the reasons pleaded in detail above at paragraph 119(i)-(1) and should never have been the subject of false and illegal proceedings of misappropriation of trust funds.

The funds in the matter of Cullen that the Plaintiff was held by the decision to misappropriate were the funds of the Plaintiff paid by the Administrator and authorised by him and was also the subject to the instructions of Paul Freeman the business partner of Cullen. The First Defendant failed in its duties to carry out its functions in accordance with law and has illegally brought about the result the Plaintiff misappropriated his own money. The Plaintiff has filed with the Administrative Appeals Tribunal after the decision documents numbered 1 to 837 and a document headed 'Document 1' that shows the instructions authorising the payments to the Plaintiff were at all times known or should have been known to the First, Fourth, Fifth and Sixth Defendants as they were at all times in the case of the First Defendant and often repeated therein but ignored by the Fourth, Fifth and Sixth Defendants because of bias and partiality in favour of the First Defendant against the Plaintiff as pleaded. The actions of the First, Fourth, Fifth and Sixth Defendants were illegal.

The illegal and false findings of the decision was published on the Internet.

To cover the illegality of the First Defendant as shown by Barwick the former Attorney General of New South Wales Jeff Shaw QC handed the legislative drafting function of the State of New South Wales to the First Defendant to draft retrospective law to legitimate its illegality. When introducing retrospective and validating law the former Attorney General asked the members of the Legislative Council what he was doing wrong. [This last mentioned comment followed upon both sides of the Council agreeing and was jocular and was and should be so understood]

After passing the retrospective Legal Profession Amendment (Complaints and Discipline) Act 2000 and after extensive public outcry the Attorney-General of New South Wales resigned. Retrospective legislation overturns principles of the rule of law. Under the Westminster system of ministerial responsibility the Attorney General as the chief law officer of the State was responsible for the illegally (sic) of the First Defendant demonstrated by Barwick. Due to that illegality of the First Defendant within the portfolio of the Attorney General the Attorney General left the government and a new Attorney General was appointed.

The plaintiff claims the Fourteenth Defendant is vicariously responsible for the illegal conduct of the First Defendant and is liable to the Plaintiff for the loss and damage to the Plaintiff that has occurred by the illegal actions of the First Defendant."
These are unusual allegations and, in part, scandalous. They are argumentative in nature. They constitute a breach of the rules as to pleading. On pleading grounds alone these paragraphs would have to be struck out. They also constitute an abuse of process. These are subsidiary matters.

It is preferable that I deal with the substantive point as to the true construction of s 8 of the Law Reform (Vicarious Liability) Act 1983 as this will play a large part in deciding whether to grant the plaintiff leave to re-plead his case against the State.

The Law Society of NSW is not an instrumentality or emanation or agent of the Crown. The members of its Council are elected by solicitors holding practising certificates and the Council members elect their office bearers and appoint the Society's senior officers and staff.

Under the Legal Profession Act 1987 a solicitor is required to hold a current practising certificate. The Council of the Law Society is charged with the task of issuing practising certificates. The Council must refuse to issue a practising certificate in the circumstances specified in s 30(1) and s 41. It may refuse to issue a practising certificate in the circumstances specified in s 30(3), s 31, s 37, s 38 and s 38A. The Council also has the power in specified circumstances to suspend or cancel a practising certificate.

Section 54 provides, amongst other things, that in addition to its other functions the Law Society Council may cause an investigation of the conduct of a solicitor and institute prosecutions and other proceedings for the breach of any of the provisions of the Act. The Council is empowered to delegate to any of its committees the exercise of any of its functions under this Act (except the power of delegation).

Part 10 of the Act deals with complaints and discipline and provides for complaints being made to or investigated by the Council of the Law Society. The Council is also empowered to originate complaints. The Council has to institute proceedings in the Administrative Decisions Tribunal if satisfied there is a reasonable likelihood that the legal practitioner would be found guilty by the Tribunal of unsatisfactory professional conduct or professional misconduct. The Council is entitled to appear at a hearing conducted by the Tribunal.

Section 171Q of the Act provides, amongst other things, that a matter or thing done, or omitted to be done, by a Council or any member of the Council or any committee or sub-committee of the Council or member of the staff of the Law Society or the Law Society does not, if the matter or thing was done or omitted to be done in good faith for the purpose of the administration of this Part, subject any member of the Council or its committees or members of the staff of the Law Society to any action, liability, claim or demand.

It is envisaged that the Law Society, the Council, its Committees, the members thereof and the staff will act in good faith in accordance with the purposes of the Act and enjoy immunity from action. The members of the Council and its Committee and their staff exercise their own independent judgment having in mind the purposes of the Act. They are not acting as agents or servants of the Crown.

The Law Reform (Vicarious Liability) Act 1983 followed substantially the Law Reform Commission (NSW) Report on Proceedings By and Against The Crown (LRC 24-1975). That recommended the retention of the basic formula of the Claims Against the Government Act that, where a subject sues the Crown at law or in equity, "the proceedings and the rights of the parties therein shall as nearly as possible be the same … as in an ordinary case between subject and subject." The Report recommended that in some other respects changes should be made.

In Pt 13 of the Report entitled "Liability in respect of the torts of persons exercising an independent function conferred or imposed by law" the Commission considered in depth when the Crown should be liable for the torts of persons exercising an independent function conferred or imposed by law.

The Commission first recommended that "the master", whether the State, an instrument of the State or a private employer should be liable for torts committed by a servant in the performance or purported performance of a function conferred or imposed by law where such performance or purported performance was (a) directed to or incidental to the carrying on of any business, enterprise, undertaking or activity of the master; or (b) an incident of his service (whether or not it was a term of his contract of service that he performs the function)

(the word function was used as including power and as including duty) 24. The Commission next considered the liability of the State in respect of the tortious conduct of an officer who is not a servant of the State. The Commission stated that the task was to identify who are "officers of the State". They rejected three possible tests, namely,

(a) the officer performs a function of government; (b) his office is one which is public; (c) he was appointed to his office by the State.

The Commission recommended as the test: that the tortfeasor is in the service of the State. The report of the Commission continued: "We consider that the most satisfactory description of an officer of the State, where that person is not a servant of the State, is that notwithstanding that the relationship between him and the State is not that of servant and master, he is 'in the service' of the State. For example, the connotation, if any, in which a member of the police force is a servant of the State, may be far from clear: but there is no doubt that he is 'in the service' of the State. Again, there are holders of many statutory officer (sic) who clearly are 'in the service' of the State - albeit that they have only statutory duties to perform and, during their term of office, enjoy statutory independence."
These qualifications were added: (a) that the tortfeasor is paid out of Consolidated Revenue, or an appointed fund, and

(b) that the tortfeasor is not conducting his own business

(Parliament did not adopt qualification (a) and expanded qualification (b)

The Commission recommended that where a person who is in the service of the State, although not its servant, commits a rort in the performance or purported performance of a function conferred or imposed by law, and the tort is committed in the course of the service of that person, the State be liable.

The recommendations of the Commission are, substantially, reflected in s 8 of the Law Reform (Vicarious Liability) Act 1983 which provides: "8.(1) Notwithstanding any law to the contrary, the Crown is vicariously liable in respect of the tort committed by a person in the service of the Crown in the performance or purported performance by the person of a function (including an independent function) where the performance or purported performance of the function: (a) is in the course of his service with the Crown or is an incident of his service (whether or not it was a term of his appointment to the service of the Crown that he perform the function); or

(b) is directed to or is incidental to the carrying on of any business, enterprise, undertaking or activity of the Crown. (2) Subsection (1) does not apply to or in respect of a tort committed by a person in the conduct of any business, enterprise, undertaking or activity which is: (a) carried on by him on his own account; or (b) carried on by any partnership, of which he is a member, on account of the partnership." 29. Section 5(1) of the Act contains the following definition of "independent function": " independent function" , in relation to a servant or a person in the service of the Crown, means a function conferred or imposed upon the servant or person, whether or not as the holder of an office, by the common law or statute independently of the will of his master or the Crown, as the case may require." 30. Section 5(1) also provides that "person in the service of the Crown" does not include a servant of the Crown. 31. My approach is to construe the words of s 8(1) of the Act and ascertain their true meaning. As Lord Reid observed in Black-Clawson v Papierwerke [1975] AC 591 at 613 the task is to ascertain the true meaning of what Parliament said.

On its ordinary meaning the clause "by a person in the service of the Crown" is not capable of applying to the Law Society of NSW. Nor is it capable of applying to any of the other defendants. There is nothing to displace the ordinary meaning. The mere fact that the independent Law Society with its elected Council is entrusted with certain functions to assist with the good management and discipline in the public interest of solicitors and the solicitors' profession does not mean that the Law Society (or any of the other defendants) is in the service of the Crown. The position of the Law Society, the Council members and the Society's staff is to be contrasted with that of the Legal Services Commissioner. (ss 129-133 of the Legal Profession Act, 1987) The proposition that the Law Society is in the service of the Crown only has to be stated to be rejected. The Law Society of NSW deals with a large range of matters relating to the welfare of its solicitor members, including their financial interests. At times it will agree with the government (and the Crown). At other times it will be in sharp and open disagreement on what is proposed and what is done. The Law Society makes representations as to desirable reforms and public statements on a wide variety of matters.

If regard is had to the Law Reform Commission Report, it can be seen what was envisaged by the clause "in the service of the Crown". See also s 6 of the Act, which provides that a police officer shall be deemed to be in the service of the Crown and not a servant of the Crown. Section 8 is not limited to police officers. That section has an appreciably wider scope.

Leave to re-plead should not be given as the plaintiff's claim against the State has no prospects of success. It is accordingly dismissed.

It follows that para 4 of the plaintiff's motion cannot succeed. It is dismissed.

Following handing down judgment his Honour made the following additional order:

"Reserve position as to costs with liberty to either side to apply on 14 days notice. Notice may be given by letter."

Last Modified: 04/15/2004 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.

Legal Profession Act 1987(NSW)

Hughes v Law Society of NSW & Ors - State of NSW 14th Defendant

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