Law Society of NSW v Autore

NCAT Occupational|2017-08-16

Introduction

The Council of the Law Society of New South Wales (the Society) has filed an Application for Disciplinary Findings and Orders against Anthony Autore (the Solicitor).
The Society alleges in its Application that the Solicitor is guilty of professional misconduct because: 1. He failed to comply with his undertaking of 12 May 2014 2. He has failed to pay the complaint's fees; and 3. He has failed to communicate. The complainant is Mr Michael McHugh SC.
The Society seeks orders that the Solicitor be reprimanded and the payment of its costs. The Solicitor denies each of the allegations. The parties had agreed prior to the hearing that we adopt a two stage approach to the Application and should consider first the question of liability and these Reasons are limited to that issue.
We heard the matter on 16 August 2017. The Society's evidence consisted of the affidavits of Ms Foord, the solicitor for the Council of the Society and of Mr McHugh. The Solicitor relied on his two affidavits filed on 3 May and 17 June 2017. The Society objected to many paragraphs in the second affidavit, on the grounds of relevance or that they contained submissions rather than evidence. We did not uphold the majority of those objections, although we considered that much of this material had only limited relevance to the issues to be determined. Each deponent was also cross-examined on the contents of his or her affidavit.
At the conclusion of the hearing we directed the parties to file and serve written submissions. The Society also filed submissions in reply to the Solicitor's lengthy submissions.

The first allegation - Failure to comply with his Undertaking

The following matters were agreed by the parties as common ground in relation to the first allegation of professional misconduct: 1. On 16 December 2013 Mr McHugh provided a fee disclosure memorandum to the Solicitor in relation to an appeal to the Supreme Court in which he had been briefed to appear on behalf of the Solicitor. (Although nothing appears to turn on the distinction in this case, we note that both the Society and the Solicitor (but not Mr McHugh) describe this document as a costs agreement. In our view it was not and was not intended to be a cost agreement issued in conformity with s322(4) of the LPA. Rather, it was a fee disclosure to another law practice to comply with s310 of the LPA.) 1. On 12 May 2014 at 9:56am Mr McHugh forwarded an email to the Solicitor which said, in part: Hi Anthony, In the circumstances, I also need an undertaking from you by return that my fees will be paid promptly. Indeed an undertaking that you have the money, some $12,600 plus GST in trust for me and able to be disbursed upon hearing of the appeal. Kind regards, Michael. to which the Solicitor replied by email at 10:09 am the same day, relevantly as follows: Hi Michael I acknowledge your email, and provide my undertaking to you. I will contact you shortly. Regards Anthony Autore. 1. The appeal was heard by an Associate Justice of the Supreme Court on 21 May 2014. 2. On 11 June 2014 Mr McHugh issued his fee note to the Solicitor in the amount of $12,672. 3. On 13 June 2014 judgment was given dismissing the appeal. 4. Mr McHugh's fees remained unpaid as at the date of the hearing before us.
The Solicitor was himself the appellant in those proceedings. He had briefed Mr McHugh to appeal a local court judgment against the Solicitor for $29,571.29. The local court proceedings arose out of a claim by another barrister against the Solicitor for unpaid fees.
It was also common ground that before 2014 the Solicitor had acted for an entity 'Great Wall Resources'. The Solicitor was entitled to substantial fees for representing this entity in court proceedings, but the fees had not been paid after Great Wall Resources had been placed in liquidation and the proceedings stayed.
There were other factual issues which were either disputed, or which the Society considered not to be relevant to these disciplinary proceedings. These included whether, and when, the Solicitor might receive a payment towards his fees from the liquidator of Great Wall Resources. We will refer to these matters, where relevant, in our analysis of the Solicitor's submissions below.

The Society's Submission

The Society's position in relation to the email exchange on 12 May 2014 was straightforward. It submitted that the Solicitor had undertaken to put money in trust to cover Mr McHugh's fees and to pay the fees promptly after the hearing of the appeal in which he had been briefed. As the fees remained unpaid, the undertaking had not been honoured.

The Solicitor's Submissions

The Solicitor did not accept this analysis. In his Reply, his affidavits and in his written submissions, he put forward arguments why the email exchange on 12 May 2014 did not amount to an undertaking, or an undertaking in the terms submitted by the Society, and also other explanations as to why he should not be bound by its terms. These were: 1. The email exchange did not amount to an undertaking given by him "as a solicitor"; 2. The undertaking should not be construed in isolation. It was not a stand -alone promise that should operate independently of Mr McHugh's cost disclosure memorandum from 16 December 2013; 3. The undertaking required him to transfer his personal funds into his trust account which would constitute a breach of s260 of the LPA; 4. He was distracted when he responded to Mr McHugh's email and did not appreciate what he was committing himself to; and 5. He was pressured into giving the undertaking, because if he had not accepted the terms of Mr McHugh's email, Mr McHugh would have returned his brief only a few days before the scheduled hearing of the appeal.

The Solicitor's first Argument

The Solicitor argued that he was not giving an undertaking as a solicitor when he accepted the terms of Mr McHugh's email. He repeated this statement under cross-examination. He said that because he was the appellant in the proceedings in which Mr McHugh was briefed, his response to Mr McHugh was as a client and not as a solicitor.
Therefore, according to the Solicitor's argument, Rule 6.1 of the NSW Professional Conduct Rules (2013), (the Rules in force at the time of the relevant conduct) (the Rules) and also s498 of the LPA, were not relevant to our consideration as to whether there had been compliance with the undertaking. Rule 6.1 was in the following terms: A solicitor who has given an undertaking in the course of legal practice must honour that undertaking and ensure that the timely and effective performance of the undertaking, unless released by the recipient or by a court of competent jurisdiction.
S498 of the LPA provided that contravention of the Rules by a solicitor, was capable of being professional misconduct or unsatisfactory professional conduct.
We reject the submission that this was not a solicitor's undertaking. In our view it was given by him as a solicitor and in the course of his practice. Mr McHugh forwarded his 12 May 2014 email to the Solicitor's office email address. In the Solicitor's response, his business name AUTORE & ASSOCIATES SOLICITORS & BARRISTERS, and his address and contact details are set out immediately below the words "Regards Anthony Autore".
Further, Mr McHugh's 16 December 2013 fee disclosure memorandum, was addressed to the Solicitor and forwarded to him at his business address, and was accepted by the Solicitor in that capacity.
We should add that failure by a solicitor to honour an undertaking given in a personal capacity, may still amount to professional misconduct under s497(1)(b) of the LPA and under the general law.

The Solicitor's second Argument

In the Solicitor's written submissions he argued at great length that the undertaking should not be considered a separate contract between the parties, and should be construed in the context of the initial fee disclosure memorandum. The argument was put in a number of different ways, but the only formulation which appeared to us to have merit was the proposition that all of the terms of the fee disclosure memorandum should be implied into the undertaking. If there were any inconsistencies, the provisions in the earlier fee disclosure should prevail.
Mr McHugh, according to the argument, was obliged to provide a fee disclosure to the Solicitor under the LPA, and as consequence (although he had not done so), the Solicitor remained entitled to have Mr McHugh's fees assessed, notwithstanding the terms of the undertaking.
Further, the Solicitor said that when he first approached Mr McHugh to accept the brief, he informed him that he was awaiting payment of his fees in the Great Wall Resources proceedings and Mr McHugh responded by saying: I am not like other barristers. I am happy to give you time to pay my fees.
This statement, according to the argument, constituted an amendment to paragraph 10 of Mr McHugh's fee disclosure memorandum which provided that his fees should be paid within 30 days. In other words they had agreed that Mr McHugh's fees would only be paid when the Solicitor received a dividend towards his costs in the Great Wall Resources proceedings. This alternate repayment arrangement was, in turn, to be implied into the undertaking.
The Solicitor also submitted that in the course of the retainer, Mr McHugh had engaged a junior barrister to assist him in relation to procedural matters. Mr McHugh did not refer to this engagement in his initial fee disclosure memorandum and the Solicitor only became aware that a junior had been engaged when she contacted him directly for instructions. This, he argued, constituted a breach of the terms of Mr McHugh's retainer which in turn vitiated his obligation to comply with the undertaking.
Much of the Solicitor's cross-examination of Mr McHugh was related to this issue. The Society objected to this line of questioning, but we allowed the majority of the Solicitor's questions on the basis that they had some connection to the Solicitor's general proposition that the terms and performance of Mr McHugh's retainer were related to the construction of the undertaking.
Similarly we accepted for the purposes of this argument, that the Solicitor did inform Mr McHugh that fees were owing to him from the Great Wall Resources proceedings and that Mr McHugh had said to him that it was his practice to allow solicitors adequate time to pay his fees.
Nevertheless it is our view that the Solicitor's second argument must also fail. His undertaking, as set out in the email exchange on 12 May 2014, was an entirely separate contract to the initial retainer of Mr McHugh to which the provisions in the fee disclosure document applied.
To the extent that the provisions in the undertaking were different from the provisions in the fee disclosure document, (and this was the case in relation to the time for the payment of the fees), it is our view that the provisions in the undertaking prevail. It was always open to the Solicitor to have replied to Mr McHugh's email on 12 May along the lines that any undertaking that he might give, would not be inconsistent with the earlier fee disclosure document, but he did not do so. It follows that none of the facts and circumstances put forward by the Solicitor in support of this second argument, and which we have outlined above, are relevant to this issue.
The Solicitor also referred us to the following paragraph in Simic v New South Wales Land Housing Corporation & Ors [2016] HCA 47, where at [9] the High Court said: The construction contract was not actually incorporated in the Undertakings but that contract and the identity of the parties to it were referred to. It was therefore permissible to have regard to the construction contract to that extent in order to determine the correct construction of the Undertakings.
The issue in Simic was the proper construction of an undertaking. The High Court in this paragraph was doing no more than restating the orthodox principle of construction that it is permissible to have regard to a collateral document when the meaning of a contractual term is not clear. In the present circumstances there is no dispute about the actual words contained in the undertaking and this paragraph does not address the issue to be considered by us.
The Solicitor's third Argument
30 S260 of the LPA (now repealed) was in the following terms: INTERMIXING MONEY (1) A law practice must not, otherwise than is permitted by subsection (2), mix trust money with other money. Maximum penalty: 100 penalty units (2) A law practice is permitted to mix trust money with other money to the extent only that is authorised by the Law Society Council and in accordance with any conditions imposed by the Law Society Council in relation to the authorisation. No Law Society Council authorisations were brought to our attention by the parties.
Trust Money was relevantly defined in the LPA as: Money which is entrusted to a legal practice in the course of or in connection with the provision of legal services by the practice and includes: (a) money received by the practice on account of legal costs in advance of providing the services….
The Solicitor argued that compliance with the undertaking would have amounted to a contravention by him of s260, and for this reason he could not put the funds into his trust account. The Society did not directly contradict this argument, but submitted that the words "in trust" in Mr McHugh's email, meant no more than that his fees should be set aside and held safely for him. The undertaking did not require that money actually be deposited in the Solicitor's trust account.
We have some difficulty in accepting the Society's submission on this issue. Firstly, the words used by Mr McHugh in his email are a clear indication that he expected the money to be deposited into the Solicitor's trust account. Secondly to set aside the funds "safely", would have required the Solicitor to have made an express declaration of trust, to ensure that the funds were not available to the Solicitor's general creditors on insolvency. The concept of the Quistclose trust, as explained by the House of Lords in Barclays Bank v Quistclose Investments Limited [1970] AC 567, may in some circumstances entitle a financial institution to create a security interest by contract over the funds lent to its customer. However we are not aware of any principle which would expand that concept to the present circumstances.
The correct answer to the Solicitor's argument is that s260 did not prevent him from depositing his own funds into his trust account as long as the funds were clearly identified as trust monies and entrusted in the course of or in connection with the provision of legal services by the Solicitor. Further the definition of trust money was broad enough to encompass the situation in which the Solicitor found himself, that is when acting for himself, responding to a request to put money in trust on account of counsel's fees.
Much of the difficulty about the meaning of s260 and its antecedents, has arisen from the use of the words intermixing money in the heading. In Law Society of New South Wales v Pinto [2003] NSWADT 59, the former Administrative Decisions Tribunal (when considering the equivalent provision in the Legal Profession Act (1987) which was in substantially similar terms), identified the confusion when it noted with approval the comments of Clarke J A in Malfanti v Legal Professional Discipline Tribunal, Court of Appeal NSW 1993, (unreported) that: I fail to understand how it (a solicitor maintaining funds in his own name in his trust account), could be said that such action constituted intermingling. No doubt the credit balance of his own account would form part of the balance in the trust account but there is no intermingling involved in that. His own credit balance is part of the overall trust credit balance. The flaw in the apparent argument advanced by the Law Society can be demonstrated by pointing out that were it otherwise every solicitor would be intermingling the moneys of one client with those of another by keeping trust accounts in their
The Tribunal in Pinto then went on to find that a solicitor's conduct in placing his own funds and those of his family company in his trust account, could not on its own amount to professional misconduct.
This decision is to be contrasted with Victorian Legal Services Commissioner v Voitin (Legal Practice) [2015] VCAT 1775, where a finding of professional misconduct was made (in relation to the Victorian equivalent of s260 of the LPA, again in substantially similar terms) against a solicitor who deposited into his trust account, monies belonging to himself, his family, his companies and his business associates, which were not received in the course of or in connection with the provision of legal services by his practice.
The final answer to the Solicitor's third argument is to note that there were two limbs to the undertaking given by the Solicitor - the first was that he would pay Mr McHugh's fees promptly after the hearing of the appeal. The second was that until that time, he would hold the fees in his trust account. Even if we were to have accepted his submission in relation to s260, that does not vitiate the Solicitor's failure to comply with the first limb.

The Solicitor's fourth Argument

In paragraph 4(b) of his Reply the Solicitor said that when he responded to Mr McHugh's email on 12 May 2014: Because I was active in another matter, I had hastily read Mr McHugh SC's email dated 12 May 2014 with the understanding that I would have time to pay his fees… On this basis I hastily replied where the condition of my Undertaking was that I would discuss the matter later at another time to which my words were "I will contact you shortly".
These statements were not repeated in the Solicitor's affidavits nor were they dealt with in his written submissions, but we did not understand the Solicitor to have abandoned the argument. Nevertheless in our view it must fail as the Solicitor did not put any evidence before us as to the matter he was "active in" or his state of mind when he replied to Mr McHugh's email. There was also no evidence before us of any approach by the Solicitor to Mr McHugh to discuss the terms of the undertaking "shortly" after 12 May, or at all.

The Solicitor's fifth Argument

The undertaking was requested by Mr McHugh only ten days before the hearing of the appeal. The Solicitor's written submissions were due that day to comply with the Court's timetable. According to the Solicitor, Mr McHugh had only commenced "any meaningful legal work" in relation to the submissions and the appeal generally, a few days earlier. The Solicitor said that in these circumstances he had no option but to give the undertaking, to ensure that the submissions were filed and that Mr McHugh did not return his brief.
Mr McHugh disagreed with these assertions. His evidence was he could not complete the written submissions before then because the Solicitor had not provided him with all the information that he had requested, and in particular the appeal book which the Solicitor had undertaken to complete. In order to complete the submissions he needed to be able to refer to the page numbers of the relevant documents contained in the index to the appeal book. As a result Mr McHugh was obliged to provide his opposing counsel with a draft of the submissions later that day, and the final version was not able to be served until he had received the appeal book from the Solicitor which was only despatched to him by DX the following day.
Under cross-examination Mr McHugh added that he had sought the undertaking because by 12 May 2014, he was becoming concerned that the Solicitor seemed not to be able to brief him competently and professionally in relation to the appeal. He became concerned that he might not be paid if the appeal was unsuccessful, particularly given that the Local Court judgment, the subject of that appeal, also concerned a barrister suing the Solicitor for his fees.
Mr McHugh's explanation as to why he sought the undertaking from the Solicitor appeared to us to be rational and reasonable. Conversely the only evidence as to the Solicitor's alleged concern that he had no choice but to give the undertaking, are his statements to that effect in his second affidavit. There was no evidence of any correspondence from the Solicitor to Mr McHugh in the days immediately after the undertaking was given or at any time thereafter, in which the Solicitor raised with him the concern that he had been pressured into giving the undertaking. We therefore reject the Solicitor's fifth argument also.

Allegation 2 - Failure to Pay the Complainant's Fees

As noted above the Solicitor did not dispute that Mr McHugh's fees had not been paid and were likely to remain unpaid until he had received a payment from the liquidator of Great Wall Resources. The Solicitor's only submission in relation to this allegation was that if we were to find in his favour in relation to allegation 1, then this allegation should also be dismissed. The converse to this proposition is that if we were to find allegation 1 established as we have, then it must follow that allegation 2 is also established, and we so find.

Allegation 3 - Failure to Communicate

The Society drew our attention to emails from Mr McHugh dated 1 July 2014, 31 July 2014, and 7 September 2014 in which he reminded the Solicitor of his undertaking and noted that his fees remained outstanding. The Solicitor did not respond until the last of these emails when he said: Dear Michael, I have a settlement next week and expect your fees paid
The fees were not paid in the following week or at all, and thereafter Mr McHugh filed an application for the assessment of his fees (which were allowed in full). The only further contact by the Solicitor to Mr McHugh was an email forwarded to him on 1 May 2015 (after Mr McHugh had informed him that he was going to file the cost assessor's certificate and take out judgment) which said: Hi Michael Thanks for your email. I'm organising your fees, should be no more than 3 to 4 days. and a telephone call to Mr McHugh at the end of June 2015, in which he said that he would be able to pay him the following week.
The Solicitor drew our attention to a number of emails he had sent to Mr McHugh between 1 July 2014 and 31 July 2014. This correspondence, however, referred only to the prospects of mounting an appeal to the Associate Justice's decision. There was no mention of the undertaking or the payment of Mr McHugh's fees.
The Solicitor also contended that the use of the conjunction and in his 7 September 2014 email indicated that there was not intended to be any connection between the statement that he had a settlement the following week and that he expected the fees to be paid. We reject that construction of the email. Unless the intention was to suggest to Mr McHugh that his fees were to be paid from that settlement, there was no other purpose in informing him about it.
Finally the Solicitor argued that the promises that he made to Mr McHugh in his May 2015 email and in his telephone call the following month, to pay him within a short period of time, were made in good faith and in the belief that the Great Wall Resources proceedings were about to be resolved and that he would soon be receiving his outstanding fees.
Whatever the Solicitor's state of mind was at that time about the likelihood of his receiving this money, there was no evidence before us from the liquidator or anyone else involved in the Great Wall Resources proceedings about the likelihood and timing of the receipt of this money. It is also significant that these promises to Mr McHugh were made nearly 12 months after he had given his undertaking.
We also find allegation 3 to have been established to the extent that the Solicitor failed to communicate with Mr McHugh in relation to his undertaking and the outstanding fees.

Does the Solicitor's Conduct Constitute Professional Misconduct

Having found each of the three allegations to have been established, we now consider whether the Solicitor's conduct amounts to professional misconduct.

The Society's position

In relation to allegation 1, in its written submissions the Society invited us to make this finding under either limb of s497(1) of the LPA, being conduct which involved a substantial or consistent failure to reach or maintain a reasonable standard of competence or diligence - subsection (1)(a), or conduct which justified a finding that the practitioner was not a fit and proper person to engage in legal practice - subsection (1)(b). We were also asked to consider whether the conduct could be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency, in accordance with the common law test propounded in Allinson v General Medical Education and Registration Board [1894] 1 QB 750.
We were referred to the decision of Council of the Law Society of NSW v Kim [2012] NSWADT 45 where the former Administrative Decisions Tribunal had to consider the failure by the solicitor to honour an undertaking he had given to the Society to attend the next applicable practice management course. The Tribunal there determined that this failure warranted a finding of professional misconduct.
We were also referred to the recent decision of Council of the Law Society of NSW v Yang [2017] NSWCATOD 44 where this Tribunal found that a failure by a solicitor to honour an undertaking to the Society (to obtain professional indemnity insurance), amounted to professional misconduct under s497(1)(i) of the LPA. The Tribunal said: There is no excuse for the solicitor's failure to honour his undertaking to the Law Society, especially given his concession that he was aware that he was exposing his clients to potential risks because of his failure to secure professional indemnity insurance.
The Solicitor submitted that this decision should be distinguished from his circumstances because the undertaking he gave to Mr McHugh did not involve a member of the general public. We do not believe that this distinction has any relevance. Rule 6 required only that the undertaking be given in the course of legal practice, as it was.
The only decision to which we were referred, which concerned the failure to pay counsel's fees was Carver v The Legal Profession Disciplinary Tribunal and Anor [1991] NSWLST 5. In Carver, the Court of Appeal accepted that failure by a solicitor to pay counsel's fees amounted to professional misconduct. However that finding followed a failure by the solicitor to honour an award issued by a joint Bar and Society Committee that he pay the fees, and not following a failure to comply with an undertaking given directly to the barrister.
In relation to allegation 2, the Society submitted that consistent with the decision in Carver, the fact that Mr McHugh's fees remained outstanding after more than three years was itself capable of supporting a finding of professional misconduct, independently of the failure to honour the undertaking.
In relation to allegation 3, the Society accepted that alone, a failure to communicate would not justify a finding of professional misconduct, but it could be considered as conduct escalating the level of the overall conduct.

The Solicitor's Response

Apart from his attempt to distinguish the decision of the Tribunal in Yang, the Solicitor did not address these issues in detail in his Reply or in his written submissions, maintaining at all times that as none of the three allegations had been established, the Application should be dismissed.

Our Findings

We are satisfied that in relation to allegations 1 and 2, the Solicitor is guilty of professional misconduct. The undertaking given by the Solicitor was in our view, clear and unambiguous, and has not been honoured for over three years.
Allegation 3 alone would not support a finding of professional misconduct, but, as the Society submitted, we are entitled to take this conduct into account when considering the overall level of the conduct in relation to allegations 1 and 2.
We regard the Solicitor's conduct as showing a substantial and consistent failure to maintain a reasonable standard of competence and diligence and as such should be regarded as professional misconduct under s497(1)(i) of the LPA. Consistently since he gave the undertaking in May 2014, he has held the view that he was entitled to disregard it. As we have found, there is no basis for his not honouring the undertaking and all of his arguments to the contrary are untenable. However there was no evidence or submission put to us by the Society that he had acted dishonestly or with malice towards Mr McHugh in relation to the undertaking. In the circumstances we do not regard the conduct as "disgraceful or dishonourable" in accordance with the Allinson formulation, or that it would justify a finding that he was not a fit and proper person to engage in legal practice under s497(1)(ii) of the LPA.

Costs

In its submissions in reply, the Society requested us to make a costs order against the Solicitor if we were to find that his conduct amounted to professional misconduct. Schedule 5, clause 23(1) of the Civil and Administrative Tribunal Act [2013] obliges solicitors, against whom findings of professional misconduct have been made, to pay the costs of the proceedings, unless the Tribunal is satisfied that there are exceptional circumstances.
As we noted at the outset, these proceedings are only concerned with the question of liability, and they will now need to be listed for a further hearing on penalty. We consider it preferable to deal with the question of costs only once and at the conclusion of that further hearing. That was the approach taken by the Tribunal earlier this year in Council of the Law Society of NSW v Gallego (No1) [2017] NSWCATOD 29 and (No2) [2017] NSWCATOD 61, and we think it is the correct course to adopt.

Orders

Having found the Solicitor guilty of professional misconduct, the orders that we make at this stage are that: 1. The Solicitor, Anthony Autore, is guilty of professional misconduct. 2. The proceedings be stood over for hearing on penalty to a date to be fixed. 3. The proceedings be placed in the next Legal Services Division list for directions for the filing of further evidence and submissions and the allocation of a hearing date.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 March 2020

Legal Profession Act 1987(NSW)

(Repealed) Legal Profession Act 2004(NSW)

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