Johnstone v Victorian Lawyers RPA Ltd

Federal Court of Australia|2003-10-03|Before: Sundberg J

1 On 25 August 2003 the applicant wrote to Mr Phillip Borden of the firm Home Wilkinson and Lowry (HWL) about a proceeding in the Supreme Court of Victoria (No 2047/02) between Simon Eden as plaintiff and Alex Copland and Acland Investments Pty Ltd as defendants. It is a long letter and consists largely of complaints about the way in which HWL had conducted the case. Some extracts will disclose the flavour of the letter: "1. When we came into the case on 26th May 2003, the day your firm dropped out only 9 days before the case was then listed for hearing on an 8 day trial in the Supreme Court, we quickly realised: · that your firm had, up until then, conducted the case almost completely incorrectly …."

Particulars are given of this claim. They include having allowed the solicitors for the plaintiff to run the case "according to their own agenda", making a settlement offer that was far too generous, briefing junior counsel alone when silk should have been retained, briefing "quite hopeless Counsel", and failing to file a counterclaim. The basis for the counterclaim was described as follows:

The letter went on to say that now that the applicant had inspected the file, it was clear to him that the proceeding was not about a partnership dispute but about the plaintiff's and his solicitors' attempt to create a situation whereby, after Mr Copland's death, the plaintiff could claim that a will by which Mr Copland purported to revoke an earlier will under which the plaintiff was sole beneficiary was invalid, and the plaintiff could make a claim under s 91 of the Administration and Probate Act 1958 (Vict).

2 The applicant then said he felt obliged "forthwith" to apply to VCAT for an order appointing an Administrator for Mr Copland under Part 5 of the Guardianship and Administration Act 1986 (Vict). The reason for this was explained as follows: "We are firmly convinced that you or your firm has been outrageous in: (i) So setting our old friend, Alex, against us that he did not pay, forthwith upon receipt, our Bill of Costs, the full amount of $52,790, without question …. (ii) Being negligently or unconscionably conducting and or unduly influential towards Alex against us and, perhaps, in other ways where, presumably, for various so‑called reasons, you are permitted to charge Alex and Acland large fees and thereby rip off some of the assets/money which they possess; (iii) outrageously conducting a Defence to our VCAT claim for $52,790, probably without any instructions whatsoever from Alex …."

The letter went on to say that if the application for appointment of an Administrator was successful, the writer believed that "Alex would thereby be prevented for the rest of his life from making a valid will".

3 The letter continued: "We also intend to issue proceedings against you and/or your firm in the Supreme Court of Victoria claiming damages for your denying us our best client, Alex, for the rest of his life and the costs we would have got from him if we had continued as his solicitor, except for your negligence, undue influence and unconscionable conduct."

"The only reasons why: · we shall not apply to VCAT forthwith for Administration or the County Court for a Litigation Guardian; · we shall not send a copy of this letter to the Ethics Committee of the Law Institute of Victoria: would be if Acland pays $52,790 forthwith. This, of course, would not stop us in our claim against you and/or your firm." 4 On 2 September Mr Borden wrote to Mr Paul Bean, Professional Standards, Law Institute of Victoria. After setting out some background facts about the Supreme Court litigation, and referring to enclosures accompanying the letter, Mr Borden said: "We believe that the threats in the letter from Johnstone dated 25 August 2003 constitute an abuse of the process of the Tribunal and are made directly against this firm in its representation of its clients. Needless to say any such allegations are denied and are baseless. These threats have been explicitly made in order to extract payment from our clients in respect of legal fees, the liability for which they deny. These threats, as well as Johnstone's conduct generally, should, in our view, be the subject of enquiry by the Institute. We would be obliged if you would look into the matter and take such action as you may be able to under the relevant legislation." 5 On 11 September Elizabeth Gilbert, a solicitor and a delegate of the respondent, wrote to the applicant about HWL's complaint. She enclosed a copy of the complaint. Ms Gilbert continued: "Under the provisions of the Legal Practice Act 1996, as a delegate of your RPA, I have a statutory duty to investigate the matter. You will understand that at present the only information which I have, is that which has been supplied by the complainant. I have, of course, reached no conclusions or assumptions on the basis of the material supplied. Pursuant to s 149 of the Legal Practice Act 1996 I request you to provide me with a full written explanation of your conduct in the matter the subject of the complaint within 14 days. Additionally I request you to provide me with copies of any documents or any other information which you feel may be relevant to the complaint. It appears to me that the complainant is raising the following issues: 1. The complainant alleges that you made an improper threat in your letter dated 25 August to the complainant in relation to its representation of a client. Would you kindly address these issues and any others raised by the complainant in your response." 6 An "RPA" is a recognised professional association accredited under s 299 of the Legal Practice Act 1996. Division 3 of Part 2 of that Act (ss 15‑19) deals with the registration of firms and RPA allocation. Section 16 is in part as follows: "(1) As soon as practicable after receiving an application under section 15, the Board must register the firm by making the appropriate entries in the Register and- (a) must allocate the firm to the RPA nominated by the firm if satisfied that it is eligible to be a regulated practitioner of that RPA; or (b) if not satisfied that the firm is eligible to be a regulated practitioner of the nominated RPA, after consultation with the firm, must allocate it to an RPA of which it is eligible to be a regulated practitioner; or (c) if satisfied that the firm is not eligible to be a regulated practitioner of any RPA, must allocate it to the Board. (2) On the Board registering the firm, the firm and each legal practitioner who is a partner or an employee of the firm become regulated practitioners of the RPA to which the firm is allocated or, if sub‑section (1)(c) applies, of the Board."

"The Board must allocate a legal practitioner who becomes a partner or an employee of a firm to the RPA of which the firm is a regulated practitioner (or to the Board, if it is a regulated practitioner of the Board) as soon as practicable after receiving a notice under section 11(2), unless the practitioner is already a regulated practitioner of that body."

The Board is the Legal Practice Board established by s 347.

7 Division 2 of Part 5 of the Act (ss 137‑144) deals with complaints about practitioners' and firms' conduct. Section 141 empowers an RPA to which a complaint has been made to dismiss the complaint if satisfied it is frivolous, vexatious, misconceived or lacking in substance. Division 3 (ss 145‑152) deals with the investigation of practitioners' or firms' conduct. Section 146(1) provides in part that "An RPA … must investigate- (a) a complaint made to it, other than a complaint- (i) dismissed under section 141; or (ii) to be treated as a dispute in accordance with section 142 …." 8 By application filed on 16 September the applicant sought relief against the respondent pursuant to s 51AA of the Trade Practices Act 1974 for unconscionable conduct. He seeks general damages, and an injunction restraining the respondent from determining any complaint made against him or his firm by HWL, in any way "being guilty of Unconscionable Conduct" towards him, or harming him or his firm in any way whatsoever. He seeks interlocutory injunctions to that effect, and interlocutory mandatory injunctions requiring the respondent:

· to notify the Department of Justice or the Attorney‑General that the respondent was wrong in writing the letter to him

· to immediately advise the Department and/or the Attorney that it has dismissed the complaint.

9 The applicant's affidavit of 16 September discloses that the unconscionable conduct in which the respondent is alleged to have engaged consists of the writing of the letter of 11 September. The significance of the Department and the Attorney is that the applicant says he is seeking appointment to an important legal position, and if the Department were to hear of the respondent's letter, it might prejudice the making of the appointment. 10 On 1 October the respondent filed a notice of motion seeking an order that the application be set aside pursuant to Order 9 rule 7 of the Court's Rules on the ground that it does not disclose a prima facie case for relief, alternatively that it be stayed or dismissed pursuant to Order 20 rule 2 in that no reasonable cause of action is disclosed, it is frivolous or vexatious, or an abuse of the process of the Court. 11 The application for interlocutory relief and the motion came on together. It was agreed that the motion would be dealt with first, in case the relief granted pursuant to it meant that it was not necessary to deal with the application for interlocutory orders. 12 Ms Gilbert gave evidence that she is a solicitor employed by the respondent, a recognised professional association under Part II of the Legal Practice Act. She said the applicant is a regulated practitioner who was allocated to the respondent pursuant to s 17 of the Act. Ms Gilbert said that when she received HWL's complaint she found that it satisfied the requirements of s 140(1). She did not dismiss the complaint under s 141(1), nor did she treat it as a dispute under s 142(2). 13 Section 51AA of the Trade Practices Act provides that "A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories."

In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 602‑603 Mason CJ, Deane, Dawson and Gaudron JJ, speaking of s 52(1) of the Trade Practices Act, said:

"The phrase 'in trade or commerce' in s 52 has a restrictive operation. It qualifies the prohibition against engaging in conduct of the specified kind. As a matter of language, a prohibition against engaging in conduct 'in trade or commerce' can be construed as encompassing conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business. If the words 'in trade or commerce' in s 52 are construed in that sense, the provisions of the section would extend, for example, to a case where the misleading or deceptive conduct was a failure by a driver to give the correct handsignal when driving a truck in the course of a corporation's haulage business. It would also extend to a case, such as the present, where the alleged misleading or deceptive conduct consisted of the giving of inaccurate information by one employee to another in the course of carrying on the building activities of a commercial builder. Alternatively, the reference to conduct 'in trade or commerce' in s 52 can be construed as referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed … the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business."

Their Honours gave their reasons for preferring the alternative construction. Later, at page 604, they added:

"Put differently, the section was not intended to impose, by a side‑wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it … has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character." 14 In my view it is clear beyond serious argument that the despatch by the respondent of the letter of 11 September was not conduct in trade or commerce. Once the respondent had decided not to dismiss the complaint under s 141 of the Legal Practice Act, it came under a mandatory obligation, imposed by s 146, to investigate the complaint. In sending the letter it was discharging that obligation. The letter was part of the respondent's function of investigating complaints against practitioners and firms. The letter does not have a commercial or trading character. It is the letter of a body, which may be assumed to be a "corporation" as defined in s 4 of the Trade Practices Act, exercising a regulatory function imposed on it by statute in relation to the professional conduct of legal practitioners. 15 It is also clear beyond argument that the sending of the letter is not unconscionable conduct within s 51AA. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 197 ALR 153 at [5] Gleeson CJ said: Although he was concerned to make the point that ss 51AB and 51AC of the Act have a wider operation than s 51AA, senior counsel for the appellant argued the case on the basis that the relevant form of unconscionable conduct in question was 'the knowing exploitation by one party of the special disadvantage of another.' He said that, by special disadvantage, he meant 'a disabling circumstance seriously affecting the ability of the innocent party to make a judgment in [that party's] own best interests.' Applied to a case such as the present, that approach is consistent with what the Act calls the unwritten law concerning unconscionable conduct, bearing in mind that the Act also allows for development of the law from time to time. It is also consistent with the legislative history of s 51AA."

His Honour then quoted from the second reading speech when the section was introduced, part of which is as follows:

"Unconscionability is a well understood equitable doctrine, the meaning of which has been discussed by the High Court in recent times. It involves a party who suffers from some special disability or is placed in some special situation of disadvantage and an 'unconscionable' taking advantage of that disability or disadvantage by another." 16 After referring to Blomley v Ryan (1956) 99 CLR 362, Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and Bridgewater v Leahy (1998) 194 CLR 457, the Chief Justice went on at [7]" "These decisions mark out the area of discourse involved, and explain the approach of the appellant, which was accepted by the respondent. It was also the approach taken by [the primary judge], and by the Full Court. In the context of s 51AA, with its reference to the unwritten law, which is the law expounded in such cases as those mentioned above, unconscionability is a legal term, not a colloquial expression. In everyday speech, 'unconscionable' may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise."

"Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position. There may be cases where both elements are involved, but, in such cases, it is the first, not the second, element that is of legal consequence. It is neither the purpose nor the effect of s 51AA to treat people generally, when they deal with others in a stronger position, as though they were all expectant heirs in the nineteenth century, dealing with a usurer. In the present case, there was neither a special disadvantage on the part of the lessees, nor unconscientious conduct on the part of the lessors. All the people involved in the transaction were business people, concerned to advance or protect their own financial interests."

17 The applicant is under no special disadvantage. There is nothing to suggest that the respondent is exploiting its position. It is simply discharging the duty, imposed on it by s 146 of the Legal Practice Act, of investigating a complaint made to it by exercising its power under s 149 to require the applicant to provide an explanation of his conduct. 18 The application is doomed to fail. Because it is bound to fail, it is an abuse of process: Walton v Gardiner (1993) 177 CLR 378 at 392‑393. It is appropriate to terminate it at this early stage. 19 I will order that the application be dismissed under Order 20 rule 2 on the ground that it does not disclose a reasonable cause of action and is an abuse of the process of the Court. I will dismiss the application for interlocutory relief. The applicant must pay the respondent's costs of the proceeding, the motion and the application. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.

Counsel for the Respondent: JI Fajgenbaum QC and S Wartski

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