Victorian Civil and Administrative Tribunal|2010-06-24|Before: Mr J

Legal Services Commissioner v Sapountzis (Legal Practice) [2010] VCAT 1124 (24 June 2010)

Legal Practitioner, written undertaking given to another practitioner, Rule 22.1 Professional Conduct and Practice Rules 2005, failure to honour undertaking within reasonable time, professional misconduct.

The Tribunal finds the respondent guilty of professional misconduct in that she breached Rule 22.1 of the Professional Conduct and Practice Rules 2005 by failing to honour an undertaking given by her to another practitioner within a reasonable time.
The respondent is reprimanded.
The respondent is to pay the applicant's costs of this application, fixed by the Tribunal in the sum of $5,000.00, by 23 August 2010.

The respondent in this matter has been charged with professional conduct within the meaning of Section 4.4.3(1)(a) of the Legal Profession Act 2004 and/or Section 4.4.4(a) of the Act in respect of a breach of Rule 22.1 by breaching an undertaking or by failing to properly inform herself as to the strict and binding nature of an undertaking. It is alleged that this conduct involved a substantial and/or consistent failure to reach or maintain a reasonable standard of competence and diligence.
Rule 22.1 of the Professional Conduct and Practice Rules 2005 states:

A practitioner who, in the course of the practitioner's practice, communicates with another practitioner orally, or in writing, in terms which expressly, or by necessary implication, constitute an undertaking on the part of the practitioner personally to ensure the performance of some action or obligation, must honour the undertaking so given strictly in accordance with its terms, and within the time promised, or, if no precise time limit is specified, within a reasonable time.

An agreed statement of facts has been handed up to the Tribunal today. On or about 11 January 2008 the respondent sent a letter dated 11 January 2008 to another legal practitioner. The other legal practitioner had previously acted on behalf of the client which at this date was now the client of the respondent. The object of the exercise was to obtain release of documents from the former practitioner. The question of whether that practitioner held a lien over the documents has been canvassed to some extent, however the situation which is uncontroversial is that documents which were in the possession of the former practitioner were the subject of the request. Putting aside the question of whether there was a lien, there was clearly here a proposed mechanism for the handing over of those documents.
In the letter of 11 January 2008 the respondent wrote amongst other things:

In return of the documents we undertake to pay your costs and we will be sending a courier to collect the documents at 3.00 pm.

It is necessary to analyse that statement before moving onto a subsequent letter.
This is a statement which effectively means We want those documents that you have.
The next step however is of critical importance. It says we undertake to pay your costs. The letter was sent by the legal practitioner who practices under the name of Archer and Sapountzis, so we can therefore be taken to be the reference to the legal practitioner we will be sending a courier.
Returning to Rule 22.1 which refers to an undertaking on the part of the practitioner personally to ensure the performance of some action. There is no suggestion in that first statement contained in the letter of 11 January that this was a proposal or an undertaking given on behalf of the client. I am satisfied that it was made personally by the legal practitioner and that is of vital importance. The question has been raised about whether there were funds in trust to cover the payment and the Tribunal has been told that at that time the respondent did have funds in trust. That is irrelevant. There is an undertaking which is a personal undertaking to pay those costs. The question of prudence arises here where a legal practitioner potentially exposes himself or herself to liability to make a payment which may subsequently be difficult to recover from a client but that is a value judgment that the lawyer has to make along the way and it illustrates part of the difficulty in relation to the giving of undertakings. Indeed Rule 22.2 says:

A practitioner must not give to another practitioner an undertaking, compliance with which requires the co-operation of a third party who is not a party to the undertaking, and whose co-operation cannot be guaranteed by the practitioner.

That is not entirely the situation here because the undertaking here is not one which says someone else will do something. It says we will undertake to pay your costs.
A further letter was sent by the respondent to the other lawyers which says in part:

In order to protect our client's interest we are prepared to pay your costs although we reserve our rights on behalf of our client to object to the quantum of those costs and seek a detailed bill of costs once we know what the quantum of costs is that you will be claiming.

On 17 January the files were collected from the other legal practitioner's office and the Tribunal was told that a payment was offered by the client at that stage but that the former lawyer did not have the bill of costs prepared. The bill was prepared. There is a tax invoice dated 4 February 2008 which comes to $8,723.00. What follows then is a certain course of communications between the respondent and the former lawyers over various aspects of the costs and the propriety of whether there was a lien, this is also the subject of correspondence between the respondent and the Law Institute and the Commissioner. In the meantime Magistrates' Court proceedings were issued by the former lawyer against the respondent. These did not come to anything but there was another application made in the Family Court of Australia in relation to the costs and on 16 October 2008 the respondent consented to orders in the Family Court of Australia that she pay the sum of $8,500.00 to the former lawyers.
So we then have to understand whether the undertaking was qualified or not and whether it was discharged or not or whether it was met. In relation to the qualification, let us return to the letter of 15 January 2008.

My first comment there is the costs do have to be reasonable. If for instance the former lawyer had said I want $100,000 it would be completely unreasonable and that would be a very different situation to the one we are faced with. A comparison of the initial claim of $8,723.00 as set out in the tax invoice dated 4 February 2008 and the figure to which the respondent consented in the Family Court in December 2008 of $8,500.00 reveals little difference. Therefore, it would be fair to say that the costs as originally claimed are within the parameters of being reasonable.
The letter of 15 January 2008 can be seen to be a statement one way or another. One way is We are still going to pay your costs but we reserve the right on behalf of the client to object to the quantum. The opening statement is we are prepared to pay your costs and then there is a reservation that says our rights on behalf of our client. It is not our rights at all. It is the client's rights. I do not consider that the reservation of rights and the seeking or the potential seeking of a bill of costs is a condition precedent. The undertaking needs to be looked at in the light of not only the letter of 15 January but also the letter of 11 January. The 11th of January letter says we undertake to pay you costs nothing else. The next letter says we are prepared to pay your costs although we reserve rights to object. It still says we are paying and one must look at the context. The context here is that the respondent wanted to obtain possession of documents. It has not been put before the Tribunal but it is I think a reasonable implication that those documents were required for the conduct of a matter on behalf of the client. This is not an unusual situation when a client changes lawyers. There is no suggestion that there was going to be any delay in the delivery of the documents because there might be an objection to the bill of costs.
Clearly the proper action here is pay the costs and object later. The right to object was always there. It does not constitute a condition precedent.
Going back to Rule 22.1. The wording of that rule is unusual in the sense that there is particular emphasis given on the observance of the terms of an undertaking and that is by the use of the word strictly. It says:

must honour the undertaking so given strictly in accordance with the terms within the time promised or if no precise time limit is specified within a reasonable time

Strictly is there to emphasise the very serious nature of giving an undertaking. An undertaking is not something given lightly. It is a personal promise by a legal practitioner and it is a mechanism whereby practical courses of action can be taken based upon the reliance by one legal practitioner upon the undertaking of another that the contents of that undertaking will be observed, again I use the word with emphasis strictly. If there was not such a requirement there would be a breakdown in what is a very important mechanism employed by members of the legal profession. The breach of an undertaking strikes at the heart of such a system. There is however a question about whether there is any ambiguity in the undertaking given. The question is whether the undertaking as set out in some more detail in the letter of 15 January as against the letter of 11 January may be seen as being an undertaking to pay the former lawyer's costs once the quantum has been established by whatever mechanism or whether it says we are going to pay your costs and if they are over the top we have a mechanism available to get some of it back. I think the second interpretation is the correct one. I do not consider that there is any ambiguity. The statement says we are going to pay you costs and we reserve our rights. That means if they are excessive we will take action to remedy the situation and have the quantum reduced and seek repayment.
The next question is whether there has been a breach of the undertaking. The undertaking in its plain sense is we undertake to pay you costs. It seems that in the fullness of time that took place and the Tribunal was told a consent order made in the Family Court and the sum of $8,500.00 was paid. The undertaking does not say when payment is to be made and returning to the wording of Rule 22.1 it says:

must honour the undertaking so given strictly in accordance with its terms and within the time promised or if no precise time limit is specified within a reasonable time.

No precise time was stated so one now looks at the question of what is a reasonable time. The tax invoice produced by the former legal practitioner is dated 4 February 2008. The normal course of commercial events is that one allows two days for delivery and then 30 days for payment. Without going into the fine mathematics of it, sometime in March 2008 was a reasonable time and that was well and truly exceeded by roughly seven months.
It is the finding of the Tribunal that as payment was not made within a reasonable time the undertaking constituted in the letters of 11 January 2008 and 15 January 2008 was breached by the respondent.
Ms Sapountzis personally paid $8,500.00 from her own pocket and has stated to the Tribunal, that the client was an elderly lady who is in receipt of a disability pension and no recovery of the $8,500.00 paid by Ms Sapountzis will be obtained from the client. Ms Sapountzis has incurred further expense in obtaining legal advice, costs consultants and representation today. It would appear that she has either paid or has been so far liable to pay some $16,500.00 in all. Again as has been correctly submitted that the purpose of these proceedings is not punishment. The purpose is to maintain regime of protection of the public and maintenance of standards of the profession. In terms of the consequences of this matter Ms Sapountzis has suffered substantial financial loss and I intend to reprimand Ms Sapountzis but not impose a monetary fine. The reprimand it should be noted is not a slap on the wrist. The reprimand in a professional environment is a serious matter as indeed is the finding of professional misconduct and in this particular instance I am satisfied that it is appropriate and sufficient to reprimand Ms Sapountzis.

Legal Services Commissioner v Sapountzis

At a glance

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Judgment (20 paragraphs)

Legal Services Commissioner v Sapountzis (Legal Practice) [2010] VCAT 1124 (24 June 2010)

Legal Services Commissioner v Sapountzis (Legal Practice) [2010] VCAT 1124 (24 June 2010)

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