Legal Services Commissioner v Yakenian

Agreed facts

1. The Instrument of Consent attached Agreed Facts which, in essence referred to the solicitor's conduct in the course of litigation on behalf of a client, a construction company.
2. The Solicitor acted on behalf of his client in bringing proceedings in the District Court (the proceedings) against five defendants (the defendants). On or about 21 June 2016 the plaintiff served its statement of claim on the defendants.
3. On 30 June 2016 the solicitors for all the defendants in the proceedings (the defendants' solicitors), sent two letters to the Solicitor. In one letter the defendants' solicitors advised the Solicitor that the firm acted for the defendants in the proceedings and attached a Notice of Appearance. The letter sought further and better particulars of the statement of claim; stated that the defendants aimed to file their defences within a reasonable time after receipt of the further and better particulars; and invited the Solicitor to inform them if the plaintiff had any difficulty with this proposed course.
4. In the other letter the defendants' solicitors advised the Solicitor that the defendants were unable to assess the ability of the plaintiff to meet any costs order which might be made in favour of the defendants; enquired of the plaintiff's financial position; and reserved the right to approach the Court to seek an order for security for costs.
5. On 25 July 2016 the Solicitor sent a letter by email at 10:21 am to the defendants' solicitors responding to the request for further and better particulars. The same day the Solicitor filed a notice of motion for default judgment seeking judgment against the defendants in the sum of $698,557 including costs (the notice of motion), and the Solicitor's sworn but undated affidavit in support of the motion. The Solicitor took this action without notice to defendants' solicitor and without allowing a reasonable time for the defendants' solicitor to file and serve the defences following the provision of further and better particulars to the statement of claim.
6. Two days later the Court entered default judgment against the defendants. The Solicitor did not inform the defendants' solicitor that default judgment against the defendants had been entered.
7. On 29 July 2016 the defendants' solicitors sent a letter by email to the Solicitor advising that they were receiving instructions with respect to the plaintiff's further and better particulars provided in the letter dated 25 July 2016 and that they anticipated filing and serving their clients' defences no later than 8 August 2016. The defendants' solicitors requested that the Solicitor let them know if there was any difficulty with the proposed course and stated an understanding that the plaintiff would not file for default judgment until the defendants' solicitors had served the defences, and requesting that the Solicitor let them know if that was not the case. On receipt of the letter, however the Solicitor failed to inform the defendants' solicitors that default judgment had already been entered against the defendants on 27 July 2016; nor did he otherwise respond to the letter of 29 July 2016.
8. On or about 28 July 2016 the Solicitor made an application on the plaintiff's behalf to the Australian Financial Security Authority (AFSA) for the issue of a bankruptcy notice against the fifth defendant, but did not notify the defendants' solicitor or that defendant of the intention to make the application before doing so. On 29 July 2016 AFSA issued a bankruptcy notice, which was served on the fifth defendant on or about 4 August 2016. The Solicitor did not notify defendants' solicitor that a bankruptcy notice had been issued on the plaintiff's request.

Ground 1: Applying for default judgment knowing the defendants intended to file defences, and without notice to the defendants and contrary to the duty to the administration of justice.

1. The Solicitor acknowledged that in taking the action on 25 July 2016 to file a notice of motion for default judgment against the defendants, and swearing an affidavit in support of the motion he had breached his duty to the administration of justice. He agreed that in taking the action referred to above he breached his duty to the administration of justice in that he was under an obligation to:

• act with honesty and candour in his dealings with the defendants' solicitors; and/or
• respond to the matters raised by defendants' solicitors in their letter dated 30 June 2016 including that the defendants intended to file their defences within a reasonable time after receipt of particulars; and/or
• having furnished further and better particulars by letter dated 25 July 2016, provide notice to defendants' solicitor that the plaintiff intended to file a notice of motion for default judgment within a specific time or by a specified date, before making the application to the Court.

Ground 2: Misleading the defendants into believing they had until 8 August 2016 to file a defence by:

Making a representation by omission that judgment would not be entered without first warning the defendants.

Failing to respond to correspondence from the defendants' solicitor notifying the lawyer the defendants anticipated filing and serving a defence by no later than 8 August 2016.

Failing to inform the defendants that default judgment had been entered on 27 July 2016.

1. The Solicitor acknowledged that in failing to respond to the defendants' solicitors' letter of 30 June 2016 and/or failing to notify the defendants' solicitor that default judgment had already been entered against the defendants, the Solicitor made false or misleading statements to the defendants' solicitors by his silence that:

• the plaintiff had no objection to the defendants filing and serving their defences by no later than 8 August 2016; and/or
• default judgment would not be entered without first giving reasonable notice or warning to defendants' solicitor of any application by the plaintiff to file for default judgment; and/or
• default judgment had not been entered against the defendants on 27 July 2016 or at an earlier time.

1. The Solicitor acknowledged that he knew that any or each of these statements were false or misleading, or alternatively the Solicitor was recklessly careless as to whether or not any or each of the statements were false or misleading. As a consequence, the defendants' solicitors were misled as to the true state of affairs in the proceedings.

Ground 3: Misleading the Court in the affidavit in support of the application for default judgment, in that it failed to set out the complete and relevant circumstances in which default judgment was being obtained.

1. The Solicitor acknowledged that he was under an obligation as part of his duty to the Court to disclose in the affidavit supporting the notice of motion that the defendants' solicitors had sought further and better particulars of the statement of claim and proposed to file their defences within a reasonable time thereafter; and invited the Solicitor to inform them if the plaintiff had any difficulty with this proposed course. By failing to disclose in the affidavit the letters referred to in the request for further and better particulars and his response, the Solicitor made a false or misleading statement to the Court through silence that there were no communications between the parties' lawyers relating to the preparation of defences by the defendants. The Solicitor knew that the statement was false or misleading, or alternatively, was recklessly careless as to whether to the statement was false or misleading. The effect was to mislead the Court.

Ground 4: Applying for issue of a bankruptcy notice to the fifth defendant without prior notice

1. It was agreed that the Solicitor was under an obligation to notify the defendants' solicitor and the fifth defendant of the plaintiff's intention to make an application for the issue of a bankruptcy notice before doing so. In failing to do so the Solicitor breached that obligation.

Solicitor's submissions as to the conduct

1. The Solicitor initially told Mr Mackenzie that he had merely followed the Court's on line pro forma but this was clearly at odds with the detailed instructions he had received to press on to have judgment entered.
2. The Solicitor filed an affidavit sworn on 4 June 2019. There he wrote that all his actions were on the instructions of his client, and its representatives, despite legal advice which he and counsel had given. Despite his advice to the contrary, he was still instructed to proceed with applying for default judgment and filing the bankruptcy application in respect of one of the defendants. Material provided to Mr Mackenzie in the course of the investigation and supplied with his affidavit confirm that the Solicitor had advised against the course of action of entering default judgment and commencing bankruptcy proceedings.
3. In hindsight, the Solicitor wrote, it would have been more appropriate if he had told the client that he was no longer prepared to act for them. He accepted that this was not an excuse for his conduct. In his evidence he said he felt pressured by his client which was, at that time, a 'significant' part of his fledgling practice.
4. The solicitor provided 3 character references - Fatema Alam, the Solicitor's employed solicitor, a client, Rajee Narula, and Peter Doyle of Counsel, all of whom appeared to be aware, at least in general terms, of the matters giving rise to these proceedings.

Conclusion as to Grounds

1. The Tribunal has a discretion whether or not to make orders proposed in an Instrument of Consent under s 144 of the Legal Profession Uniform Law Application Act 2014. The Tribunal does not act, nor should it be seen to act, as merely a "rubber stamp". The Tribunal reviewed the relevant Conduct Rules.
2. Section 297(1) of the Uniform Law provides, relevantly, that 'professional misconduct' includes unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial failure to reach or maintain a reasonable standard of competence and diligence.
3. Section 298(1) of the Uniform Law states that conduct consisting of a contravention of the Uniform Rules is capable of constituting unsatisfactory professional conduct or professional misconduct -
4. The Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 provide, relevantly:

• A solicitor representing a client in a matter that is before the court must not act as the mere mouthpiece of the client or of the instructing solicitor (if any) and must exercise the forensic judgments called for during the case independently, after the appropriate consideration of the client's and the instructing solicitor's instructions where applicable. (Rule 17.1)
• A solicitor must not deceive or knowingly or recklessly mislead the court. (Rule 19.1)
• A solicitor must not knowingly make a false statement to an opponent in relation to the case. (Rule 22.1)

1. The Tribunal accepts that some clients can be very demanding and choose to ignore sound advice. Acquiescing to the client's demands in the circumstances of this matter, was completely inappropriate, no matter how overbearing the client. The Tribunal also accepts that the impact on a small practice of the potential loss of a significant client could be catastrophic. However, the potential loss of a client does not excuse the Solicitor's conduct. The profession relies on all of its solicitors to act with honesty and candour and solicitors have a legitimate expectation that they will not be misled by the other solicitors with whom they deal. Further, it appeared from the information the Solicitor provided to Mr Mackenzie, the Solicitor knew, even at the time, that his actions would cause him to come to attention, but he proceeded nonetheless.
2. The Tribunal considers Ground 3 to be the most serious of the Grounds. A solicitor has a fundamental obligation not to mislead the Court and the Solicitor knew that failing to inform the Court of communications between the parties' solicitors was false or misleading, or alternatively, was recklessly careless as to whether to the statement was false or misleading.
3. The Tribunal finds that the Solicitor's conduct was contrary to each of the Rules referred to, and as a consequence, was a substantial failure to reach or maintain a reasonable standard of competence and diligence. In this matter, we are comfortably satisfied as to the accuracy of the Agreed Facts and that it is appropriate to make the proposed findings. We therefore find that the Solicitor is guilty of professional misconduct in relation to Grounds 1 - 4 of the Application.

What orders should the Tribunal make?

1. We are also comfortably satisfied that the proposed Orders are broadly appropriate.

Quantum of the fine

1. Disciplinary proceedings are concerned with the protection of the public, rather than being punitive in nature: see Beazley JA in Law Society of New South Wales v Walsh [1997] NSWCA 185, at [40] and more recently, in Council of the New South Wales Bar Association v Breeze [2015] NSWCATOD 152. However, the Tribunal's orders may be used to mark the community's disapproval of lapses from the high standard of conduct that are legitimately expected of legal practitioners. They also act as a specific deterrent to the legal practitioner involved and as a general deterrent to all other practitioners with a view to maintaining proper standards of conduct within the legal profession.
2. The Solicitor consented to the imposition of a fine, but indicated that, if a fine of more than $10,000 were imposed, he would need time to pay. Although he provided no evidence as to his expenses or liabilities, the Tribunal accepts, in view of his submission, that he is not in a strong financial position.
3. On several occasions in the course of the hearing the Solicitor expressed contrition, which the Tribunal accepted as sincere. It is now nearly 3 years since his actions and since the complaint against him by Wass DCJ which gave rise to this matter. He said that, in the intervening years, he has been faced with a similar ethical problem and had simply "walked away" from the client. He has developed something of a support network, and this includes Mr Doyle, who he regards as a friend. His evidence provides us with a degree of confidence that he is not likely to fail to comply with his professional obligations in the future.
4. Having said that though, the Tribunal observes that this is not the first time the Solicitor has come to attention, although we were provided with no detailed evidence in relation to those matters. In 2010 he allegedly was cautioned for failure to appear in court on multiple occasions, although he told Mr Mackenzie that he had thought the client was going to attend in order to save costs. He said he had adopted strategies to ensure that did not happen again. In 2012 he was reprimanded by the Council of the Law Society of New South Wales for having hindered and obstructed the Trust Account Investigator and having hindered and obstructed the Supervisor of the trust money for his practice.
5. Based upon a consideration of all of the evidence, we consider that a fine of $7500 is appropriate. We observe that the Applicant has an expectation that the fine will be paid within 28 days.

Other orders

1. The Tribunal observes that the Solicitor also consented to being reprimanded, undertaking a course in legal ethics and paying the Applicant's costs as agreed or assessed. The Tribunal considers these Orders to be appropriate.

Findings and Orders

1. Consequent upon the findings of professional misconduct the Tribunal makes the following orders: 1. the Solicitor is reprimanded; 2. the Solicitor is to pay a fine in the sum of $7,500; 3. the Solicitor is to undergo education as follows: 1. the Solicitor must, at his own expense, undertake within 12 months of these Orders an appropriate course in legal ethics (Course) as approved by the Legal Services Commissioner, and therein achieve a pass mark of not less than 50% (Pass Mark); 2. within seven (7) days of receipt of notification of the result of his participation in the Course, the Solicitor must provide to the Legal Services Commissioner, the original of such notification; 3. should the Solicitor fail to achieve the Pass Mark, he must complete any further course in legal ethics as approved by the Legal Services Commissioner until such time as he achieves the Pass Mark in any further nominated course; and 4. should the Solicitor fail to achieve the Pass Mark within the time period prescribed in (a) above, any practising certificate then held by him shall be suspended (or if not holding a current practising certificate, no such certificate is to be issued to him) until such time as he achieves the Pass Mark; 1. the Solicitor is to pay the costs of the applicant as agreed or assessed.

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 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

Amendments 12 July 2019 - Spelling of Respondent's name corrected in title 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: 12 July 2019