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austlii:act/ACTSCFC/2025/3
General information, not legal advice.
ACTSCFC
2025-12-19
McCallum CJ, Mossop and McWilliam JJ
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Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY FULL COURT
Case Title: LP7 v Law Society (ACT) Citation: [2025] ACTSCFC 3 Hearing Date: 30 July 2025 Decision Date: 19 December 2025 Before: McCallum CJ, Mossop and McWilliam JJ Decision: (1) Pursuant to s 81 of the Legal Profession Act 2006 (ACT), s 20(1) of the Supreme Court Act 1933 (ACT) and r 5052(1)(d)(i) of the Court Procedures Rules 2006 (ACT): (a) the decision of the Council of the Law Society of the Australian Capital Territory on 2 December 2024 to refuse to renew the appellant’s practising certificate is set aside; and (b) the appellant’s application to renew his practising certificate dated 30 April 2024 is granted. (2) All questions of costs are reserved. (3) Subject to any further order of the court, the question of costs is to be determined on the papers, and the parties are to file and serve written submissions limited to not more than four pages (and any evidence) by 5 February 2026 and any submissions in reply limited to not more than three pages by 23 February 2026. Catchwords: LEGAL PRACTITIONERS – RENEWAL OF PRACTISING CERTIFICATE – Appeal from Law Society’s refusal to renew practising certificate – appellant acting for client in Federal Court discrimination litigation – consideration of settlement proposal involving appellant’s firm receiving significant payment – proposed settlement terms related to other clients of appellant’s firm – whether appellant breached fiduciary duties by seeking to procure financial benefit from a settlement for firm at which he was employed – where appellant (a supervised lawyer) acted with supervisor’s endorsement – where, though duties breached, persons to whom duties owed would have received favourable outcome from the settlement – circumstances unlikely to occur again – settlement was not actually reached – no evidence of Law Society taking consistent approach in relation to others involved in the matter – overall, appellant is not unfit to have practising certificate renewed LEGAL PRACTITIONERS – FIDUCIARY DUTIES – No profit and no conflict rules – where appellant received settlement offer under which appellant’s firm would agree not to bring class action against offeror – where appellant’s response, endorsed by his supervisor, included a sum payable to appellant’s firm for not bringing class action – inappropriate for solicitors to accept payments not to provide legal services Legislation Cited: Legal Profession Act 2006 (ACT) ss 11, 36(2), 37(3), 44, 81, 394, 412, 413, 423A, 425, Ch 4, Pt 4.2, Pt 4.7 Supreme Court Act 1933 (ACT), ss 11(2), 20(1) Court Procedures Rules 2006 (ACT), r 5052(1)(d)(i) Legal Profession (Solicitors) Conduct Rules 2015 (ACT), rr 4.1.1, 12.1, 33, 42.1 Criminal Code 2002 (ACT), Pt 3.5 Cases Cited: Atanaskovic Hartnell v Birketu Pty Ltd [2021] NSWCA 201; 105 NSWLR 542 Chan v Zacharia (1984) 154 CLR 178 Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Howard v Commissioner of Taxation [2014] HCA 21; 253 CLR 83 Law Society (ACT) v Bangura [2024] ACTSCFC 1; 21 ACTLR 268 Law Society of NSW v Harvey [1976] 2 NSWLR 154 Law Society of the ACT v Lardner [1998] ACTSC 187 Law Society v Ford (No 2) [2024] ACTSCFC 2 Legal Practitioner v Council of the Law Society of the ACT [2015] ACTCA 20 LP9 v Council of The Law Society of the Australian Capital Territory [2024] ACTSC 116 New South Wales Bar Association v Cummins [2001] NSWCA 284; 52 NSWLR 279 Phelan v Middle States Oil Corporation, 220 F 2d 593 (1955) Warman International Ltd v Dwyer (1995) 182 CLR 544 Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279 Texts Cited: GE Dal Pont, LexisNexis, Solicitors Manual (at Service 84) Parties: LP7 (Appellant) Council of the Law Society of the Australian Capital Territory (Respondent) Representation: Counsel O Fagir (Appellant) D Moujalli with N Olson (Respondent) Solicitors Kingston Fox Lawyers (Appellant) Thomson Geer (Respondent) File Number: SCA 65 of 2024 THE COURT: Introduction
The basis for the decision to refuse the appellant renewal of his practising certificate
These entire proceedings are a result of an unedifying dispute involving lawyers fighting amongst themselves. The Law Society was drawn into the dispute by a complaint made about the appellant (Complaint), which required investigation.
The complainant (Mr Y) was the legal representative for a law firm (Firm A). The appellant was the legal representative for a lawyer (the Client), who was formerly employed by Firm A and was suing Firm A in the Federal Court of Australia.
In the course of attempting to settle the Federal Court litigation, Mr Y sent a letter to the appellant. The correspondence included a draft statement of claim, with Firm A threatening to commence its own separate proceedings against the Client if the Federal Court proceedings were not settled on a walk away basis. Allegations of fraud were made.
In response, the Client made serious allegations of overcharging against Firm A, which in turn became concerned that it was about to face a class action for overcharging of legal fees. Firm A sought to quell that threat by seeking to negotiate a settlement of the Federal Court litigation with the Client and including within any settlement a regime which would prevent the appellant and the firm that employed him (Firm B) from subsequently acting for any former clients of Firm A who wanted to bring an action against it for overcharging of legal fees.
The appellant and the partners of Firm B contemplated agreeing to Firm A’s request, but considered that such restraint upon their services ought to be at a significant cost to Firm A. With the consent of the Client, the appellant put an offer to Firm A, inviting Firm A to resolve the Federal Court proceedings with the Client and to pay a significant sum of money to restrain Firm B and the appellant from acting for any former clients of Firm A, or in any class action against Firm A, in relation to over charging of legal fees.
The complainant, Mr Y, was not involved in any of the settlement discussions between the two firms, the appellant and the Client. When the offer came to his attention, he formed the view that this was tantamount to blackmail and that became one of the allegations contained in the Complaint to the Law Society.
Following an investigation, the Law Society formed the view that the Complaint had substance and when the appellant sought to renew his practising certificate for the 2024-2025 financial year, the application was refused. The two matters relied upon by the Law Society as indicating that the appellant was not a fit and proper person were: (a) that the offer contained a payment to Firm B for not providing legal services to a category of potential future clients; and (b) that the offer affected the interests of certain named clients in circumstances where they had not given their informed consent to being included in the offer.
The court’s task is to form a view about whether the appellant is not a fit and proper person to continue to hold a practising certificate, informed by (but not limited to) the matters that were of concern to the Law Society.
Non-publication orders and pseudonyms
In order to be consistent with the intent of s 423A of the Legal Profession Act 2006 (ACT) (the Act), a non-publication order was made at the hearing preventing the publication of certain confidential information and the names of, or information that identifies or tends to identify, any legal practitioners or law practices named in the evidence filed or relied upon, other than those retained for the purpose of these proceedings. For that reason, persons and entities are referred to in an anonymised way in these reasons, and a confidential schedule describing those anonymisations will be placed on the court file.
The persons or entities to which anonymised references are made in these reasons are as follows: (a) Firm A: The law firm that previously employed the Client. (b) Firm B: The law firm by which the appellant was employed. (c) The Client: A solicitor who had brought proceedings in the Federal Court against Firm A as his former employer, and who was represented in those proceedings by Firm B. (d) The appellant: The legal representative for the Client, employed by Firm B. (e) The Supervisor: The appellant’s supervisor. He was a partner at Firm B. (f) Mr X: A partner at Firm A. (g) Mr Y: The solicitor acting for Firm A who made the Complaint about the appellant’s conduct. (h) The Other Partner: Another partner of Firm A. (i) The Barrister: A barrister who knew both the appellant and Mr X.
Mootness
Had a practising certificate been granted by the Law Society, it would have operated from 1 July 2024 until 30 June 2025. The appeal was heard on 30 July 2025, after the practising certificate would have expired in any event. Despite this, both parties submitted that it was appropriate that the court determine the question of whether or not the practising certificate ought to have been renewed.
The parties agreed that, notwithstanding the temporal awkwardness, it was appropriate to determine the question of whether the appellant was not a fit and proper person to hold a practising certificate as at the time of judgment rather than as at the time the application to the Law Society had been submitted (or some other time).
Legal framework
The respondent to these proceedings, the Law Society, is the licensing body under the Act and has the power to grant and renew practising certificates and to refuse such grants and renewals. The power exercised by the Law Society in this case was the power under s 44(1)(b) of the Act to refuse to renew a practising certificate. Relevantly, s 44 provides: 44 Grant or renewal of unrestricted or restricted practising certificate (1) The law society council must consider an application that has been made for the grant or renewal of an unrestricted practising certificate or restricted practising certificate, and may— (a) grant or renew the practising certificate; or (b) refuse to grant or renew the practising certificate. … (3) The Iaw society council must not grant an unrestricted practising certificate or restricted practising certificate unless satisfied that the applicant— (a) was eligible to apply for the grant when the application was made; and (b) is a fit and proper person to hold the certificate. (4) The Iaw society council must not renew an unrestricted practising certificate or restricted practising certificate if satisfied that the applicant— (a) was not eligible to apply for the renewal when the application was made; or (b) is not a fit and proper person to continue to hold the certificate.
It should be noted that, for the purposes of a grant (s 44(3)(b)), the requirement is that the Law Society be positively satisfied that the person is a fit and proper person, whereas the prohibition on renewal (s 44(4)(b)) only applies if the Law Society is positively satisfied that the person is not a fit and proper person to continue to hold a practising certificate.
Section 36(2) provides that, in considering whether a person is a fit and proper person to hold a local practising certificate, the Law Society may take into account any “suitability matter”. This section is sufficiently broad to allow a “suitability matter” to be taken into account both when determining whether a person is a fit and proper person to be granted a practising certificate as well as when determining whether a person is not a fit and proper person so as to preclude the renewal of a practising certificate. “Suitability matters” are defined by s 11 to include, relevantly, “whether the person is currently of good fame and character”, “whether the person is currently subject to an unresolved complaint” under the Act, and “whether the person currently is unable to satisfactorily carry out the inherent requirements of practice as an Australian legal practitioner”.
The Law Society also has the responsibility of dealing with complaints against legal practitioners. Chapter 4 of the Act prescribes the procedure for handling complaints made to the respondent. Complaints may be made to the Law Society pursuant to s 394 of the Act. On receipt of a complaint, the Law Society must either dismiss the complaint (pursuant to s 412), summarily dispose of it (pursuant to s 413) or make an application to the ACT Civil and Administrative Tribunal (ACAT) for an order (pursuant to Pt 4.7, entitled “Disciplinary action”). The ACAT may, if it finds unsatisfactory professional conduct or professional misconduct, suspend, cancel or restrict the practitioner’s practising certificate or recommend that their name be removed from the roll (s 425).
Facts
The evidence put before the court was in the form of affidavits. By the time of the hearing, there was no dispute about the facts and, as a consequence, no witness was required for cross-examination.
Most significantly, on 25 July 2024, in response to the Complaint made about his conduct to the Law Society, the appellant submitted a detailed statement about the circumstances surrounding the Complaint (Response). The Response comprised a 69-page narrative of what had occurred as well as over 200 pages of corroborating documents. For the purposes of the present proceedings, the appellant, in his affidavit of 13 March 2025, affirmed the truth of his Response. There was no challenge by the Law Society to the appellant’s affirmation of the truth of his Response. Having regard to that fact, the detailed nature of the Response and the availability of corroborating documents, the Response provides a reliable foundation for findings of fact.
Background
The appellant signed the roll of people admitted to the legal profession in June 2016 while working as a legal officer for a trade union and held a restricted practising certificate from that date. The restricted practising certificate was renewed by the Law Society annually between 2017 and 2023. It was due for renewal for the year commencing 1 July 2024.
The appellant was employed by Firm B from August 2018. In about 2021, the appellant was promoted to the position of Associate. In 2024, he was identified as a Senior Associate. So far as the matters the subject of this appeal are concerned, the partner of the firm who was responsible for those matters was the Supervisor, with whom the appellant worked.
The Barrister
The litigation between the Client and Firm A
In May 2022, the appellant and the Supervisor met with the Client. The Client made allegations of serious professional misconduct by Firm A during his employment with Firm A. He provided further details in December 2022. The allegations related to billing practices and file management.
While represented by another solicitor, the Client commenced race discrimination proceedings in the Federal Court against Firm A in September 2022.
The Client was separately the respondent in disciplinary proceedings in the ACAT, brought by the Law Society in respect of the Client’s own conduct while employed by Firm A.
Firm B commenced acting for the Client in the Federal Court proceedings in around January 2023. Shortly thereafter, the allegations of race discrimination in the Federal Court proceedings were narrowed.
Notwithstanding opposition from Firm A, the Federal Court proceedings were set down for mediation to occur by the end of March 2023. The appellant was pessimistic that the mediation would be successful for reasons which included the antipathy between Firm A and the Client, and between the appellant and Mr Y (the solicitor acting for Firm A). The appellant thought that the prospects of resolution might be improved if the Barrister were to act as an intermediary between the parties, given his good relations with the appellant, the Client and Firm A.
An attempt at settlement
On 16 March 2023, Mr Y sent the appellant a without prejudice offer of settlement by letter. The letter enclosed an unfiled statement of claim which alleged the Client committed fraud and sought damages in excess of $200,000 and costs. The fraud was alleged to relate to the charging of Firm A’s clients. The offer proposed that the Client settle his claim against Firm A on “walk away” terms, subject to a deed of release. It indicated that, if the offer was not accepted by noon on 21 March 2023, the statement of claim would be filed. Although the settlement offer required that the parties enter a deed of release, there was no proposed deed of release provided with the letter.
On 17 March 2023, the appellant met with the Barrister. He discussed the proceedings in general terms and told the Barrister that, if the statement of claim was to be filed, Firm A’s billing and file management practices would need to be explored. He suggested the Barrister might be a good intermediary between the parties because “everybody knows and trusts you”. The Barrister indicated that he was unwilling to act as such, saying: “there’s no way I am getting involved in that”. The Barrister seemed uncomfortable with the situation and the appellant did not speak to him about that subject any further.
On 20 March 2023, the appellant wrote to Mr Y. He did not reject the offer but explained that the terms of a draft deed of release should be discussed as part of a mediation. The letter also indicated that the Client’s defence to the proposed proceedings would involve adducing evidence of professional misconduct by Firm A. In the appellant’s view, that evidence was relevant because the draft pleading alleged that the Client had certain duties which he could not have had if the professional misconduct allegations were true. For example, the pleading alleged that the Client’s duties as an employee included that he openly and honestly communicate with clients about work performed on their behalf in circumstances where the Client alleged that Firm A’s practices were different to and inconsistent with the pleaded duties.
There were communications between counsel briefed on either side of the Federal Court proceedings regarding a settlement similar to that proposed by Mr Y. Those communications led to an agreement to vacate the mediation which had been scheduled for 22 March 2023 so as to allow a draft deed of release and confidentiality clauses to be worked out. Both the appellant and Mr Y subsequently indicated to the Federal Court that an agreement in principle had been reached to settle the Federal Court proceedings.
On 30 March 2023, the appellant provided Mr Y with a draft deed of release in respect of the Federal Court proceedings and the proposed fraud proceedings against the Client and another person. The Federal Court proceedings were listed for a mention on 4 April 2023 in relation to the mediation which had been vacated, but that listing was adjourned by consent on the basis that terms were being negotiated.
Allegations of abuse of process
On 2 May 2023, Firm A obtained interim suppression orders, ex parte, in the Federal Court proceedings. No notice had been given of the intention to make the application. The orders, inter alia, prevented the publication or disclosure of the substance of some statements made in the appellant’s 20 March letter. The orders had been obtained on the basis that the allegations in that letter were an abuse of process, intended to prevent the Other Partner (a partner of Firm A) from assisting the Law Society in the ACAT proceedings. In support of the application for the orders, Firm A read an affidavit of the Other Partner, which described some of the business practices Firm A alleged it implemented.
The draft deed was not put before the Federal Court for the purposes of the ex parte application. Had notice been given of the application, the Client would have had the opportunity to explain his position as to the carve out of confidentiality obligations in open court.
On 10 October 2023, Mr Y filed submissions in the Federal Court making various allegations of impropriety against the appellant in his conduct of the proceedings on behalf of the Client. In response, on 20 November 2023, the appellant affirmed an affidavit dealing with those matters. On 24 November 2023, a further affidavit was filed by the appellant responding to aspects of the Other Partner’s affidavit.
There then followed disputes in relation to disclosure of documents relevant to the business practices the subject of the Client’s allegations. The Client issued a notice to produce. Firm A applied to set it aside, but then on 13 February 2024, immediately before the application was scheduled to be heard, withdrew the application and consented to orders for production.
Firm A then produced relevant client files on 15 February 2024, but claimed client legal privilege over them. The Client obtained authorities from two of Firm A’s clients which authorised disclosure of the files. Before the claim of privilege could be determined, Firm A withdrew its application for final suppression orders on 16 February 2024.
The appellant’s opinion was that Firm A withdrew the application because it did not wish for its allegations to be scrutinised by cross-examination of the Other Partner or disclosure of documents. The Client then made an application for his costs of dealing with the suppression orders on an indemnity basis.
On the same day that Firm A’s application for suppression orders was formally dismissed by the Federal Court, Firm A sought a suppression order in the ACAT even though it was not a party to the ACAT proceedings, which had been brought by the Law Society against the Client. Firm A sought, unsuccessfully, to be joined as a party to those ACAT proceedings. However, Firm A obtained from the ACAT the suppression orders it sought, which were similar to those which had been made by the Federal Court and included suppression of the contents of the 20 March letter. The orders included a carveout which would permit the Client to speak with clients of Firm A who were witnesses in the ACAT proceedings. Firm A’s application did not rely on the affidavit of the Other Partner which had been read in the Federal Court, but rather on an affidavit of Mr Y sworn on information and belief, avoiding the potential that the Other Partner would be cross-examined about that information. Firm A’s application also did not include or rely upon the allegations of abuse of process that had been made in the Federal Court in relation to the 20 March letter.
The potential for a claim against Firm A
The possibility of settling the claim for indemnity costs in the Federal Court
At around the same time, notwithstanding his pessimism about being able to settle the issue of the application for indemnity costs of the suppression order application in the Federal Court, the appellant discussed with the Supervisor the prospect of settling the Federal Court costs application by putting an offer to Firm A.
On 20 March 2024, some effort was made by Firm B to gather together the information relating to work in progress and counsel’s fees in the Federal Court matter so as to permit discussion of settlement in relation to those costs.
The Barrister becomes involved again
Meanwhile, on 15 March 2024, the appellant had written to the Barrister to tell him that he had passed the bar exams and to ask to speak to him. They had arranged to meet in person on 21 March. The appellant had not discussed the matters involving the Client or the Federal Court proceedings with the Barrister since the earlier conversation in which the Barrister indicated that he did not want to get involved.
On 21 March 2024, the appellant spoke with the Barrister by telephone. The appellant explained that he was involved in a bitter conflict with Firm A, and that he was explaining this so that the Barrister could consider whether he took the appellant on as a reader. The Barrister said he could not take the appellant on as a reader, but suggested that he might be able to act in a personal capacity as an intermediary between the appellant and Mr X (a partner of Firm A).
Discussion of the Client’s settlement proposal
Also on 21 March 2024, the Client forwarded to the Supervisor an email concerning the possibility of making an offer to settle the whole of the Federal Court proceedings. The offer would involve Firm A paying an amount of compensation for racism as well as an amount for legal costs. It did not involve any other dispute with Firm A. The Supervisor responded to the Client, discussing both a settlement figure for the proceedings and the timing of the making of such an offer.
The appellant and the Supervisor discussed whether or not to raise the prospect of settlement at this point but considered it more appropriate to wait to hear from the Barrister. The first settlement offer (a proposal by Firm A)
On the afternoon of 21 March 2024, the Barrister called the appellant to say that: (a) Mr X had agreed to use the Barrister as an intermediary; (b) Mr X accepted that there would need to be a payment of money and had agreed to speak to his partners so as to have their position in two to four days; (c) any settlement would need to deal with a series of matters, including the Federal Court proceedings, ACAT proceedings, the costs dispute and the “threat of a class action”; (d) Firm A would need a suppression order (said to be “really important to them”); (e) the “discrimination claim would be dismissed, and the cost dispute would be dismissed and [Firm B] would not bring any class action”; and (f) the parties to the settlement agreement would need to include the Client, another former employee of Firm A who was named, Firm A and Firm B.
The Barrister also proposed a term that, if one party were to breach the agreement, everybody would have to pay the money back.
The appellant said that he would need to discuss with the Client and the Supervisor what their settlement position would be.
The appellant considered that it was significant that the Barrister, conveying Firm A’s position, had raised the issue of the prospect of a class action. That prospect had not been mentioned in correspondence in the Federal Court proceedings.
The appellant considered two of the settlement terms to be unusual, namely the proposal that Firm B be bound and the proposal that Firm B agree not to act in a class action.
Firm B’s consideration of Firm A’s offer
The appellant discussed the offer, including its ethics, on numerous occasions with the Supervisor. They were concerned about the ethics of the proposal and whether Firm A was “attempting to use the settlement discussions as a tactic to attack our credibility to divert attention in relation to the [Firm A’s] improper billing practices, and other conduct that was unethical”.
They considered that the offer may give rise to a position of conflict with the Client and that any restriction on Firm B’s ability to pursue a class action should not allow the existing clients of Firm B to be “sold short”. The appellant identified one client for whom he acted on a personal injury matter and two other persons from whom authorities had been obtained to allow Firm B to have access to their files from Firm A for the purposes of obtaining access to them in the Federal Court proceedings. The appellant believed that the two individuals could potentially be considered to be Firm B’s clients because of the authorities which Firm B had obtained from them.
The appellant and the Supervisor considered whether or not a law firm could enter into an agreement not to pursue a class action. Neither of them had a clear answer. They decided to discuss it with either senior or junior counsel who were briefed for the Client in the Federal Court proceedings.
Firm B takes instructions from the Client
Having regard to the earlier experience with a delayed settlement proposal which had then been overtaken by Firm A’s suppression order proceedings and allegations of abuse of process, the Supervisor was anxious to get instructions and quickly either reach a settlement or not.
The Supervisor met with the Client at the Supervisor’s house on the evening of 21 March 2024 and roughly calculated the value of a class action against Firm A. They calculated the amount at $31 million and estimated Firm B’s fees charged in that regard at $3 million. It is unclear whether that estimate was profit only.
At the time the Client gave instructions on 21 March 2024 to respond to the offer, it was understood — as between the Supervisor, the Client and the appellant — that the Client would receive $1.5 million, that Firm B may expect to obtain $3 million in fees from a class action against Firm A and that Firm B would likely pay the appellant a bonus in respect of that work.
The same evening, the appellant decided that, in any settlement, he would not contemplate qualification of the cab rank rule if he was to go to the bar, and that he would require reimbursement of the costs of any current client of Firm B. So far as the former issue was concerned, at no stage did Firm A or the Client suggest that such a term should be included in the settlement agreement.
The second settlement offer (a proposal by Firm B)
On the morning of 22 March 2024, the appellant spoke to the Supervisor and said that the settlement terms must provide for reimbursement of existing clients. The Supervisor indicated that he agreed, and that the Client had given those instructions. The appellant said that the agreement of other clients of Firm B would also be required, and that counsel’s advice should be obtained on the question of whether the two people who had simply given authorities to obtain their files should be considered clients notwithstanding that they had not formally retained Firm B.
There was a difference of opinion between the Supervisor and the appellant as to whether people who had simply authorised access to their files for the purpose of advancing the Client’s case were themselves clients, such that a fiduciary duty arose in respect of those people. However, discussion at that stage was hypothetical as the terms of a possible settlement agreement had not yet been drafted.
The Supervisor then directed the appellant to convey, via the Barrister, an offer in the terms which he identified. The terms included a payment of $5 million to the Client ($150,000 to be paid annually over 10 years to the Client, and a further payment to the Client of $3.5 million to “buy out” Firm B’s ability to run the class action, which would then be paid to Firm B). The Supervisor proposed a further term of the offer, namely for $1 million of that sum to be paid to the Client by the close of business that day (22 March 2024). Although the appellant was sceptical about such a condition, the Client had previously indicated that he was confident it was a condition which could be met and the Supervisor wished to avoid “dicking around for 6 weeks while they mull it over”.
The terms were communicated in a brief telephone call at 9:11am between the appellant and the Barrister, and included: Payment of $5,000,000.00 including $150,000.00 payable annually to [the Client] for 10 years. Everything is repayable if deed is breached … [The Client] agrees to suppression orders in the Federal Court. Application is dismissed with each party to bear their own costs; Mutual non-disparagement Mutual releases [The Supervisor, other current directors or shareholders of Firm B, the Client and the appellant] would be bound by the deed jointly and severally liable if breached [Firm B] won’t seek files of former clients of [Firm A] They won’t act for any of our former clients. [Firm B] would not represent former [clients of Firm A], because it couldn’t represent them, but any current client has to be reimbursed fees. Agreement by deed and they draft it
It is notable that the payment of the $5 million was to be to the Client. As observed at [63]-[64] and [68] above, it then appears to have been the intention that the Client pay $3.5 million of that amount to Firm B for Firm B agreeing to the terms of the deed in order to settle the Client’s case. The terms of the offer were for the Client to pay a substantial sum of money to Firm B for reasons unrelated to their services as his legal representative in either the Federal Court litigation or the ACAT proceedings. If the offer had been accepted, it would have caused the solicitor to deal with the Client in a manner relevant to his fiduciary obligations and, in particular, the operation of the conflict rule.
No response to the settlement offer
The appellant applies to renew his practising certificate
Allegations of impropriety emerge
Almost two months after the March offers, on 14 May 2024, Mr Y affirmed an affidavit in the Federal Court proceedings which made various allegations of impropriety, including an allegation of blackmail, against the appellant.
On 24 May 2024, Mr Y wrote to the appellant and proposed that orders be entered in the Federal Court proceedings either to the effect that: (a) the Client’s claim be dismissed, with an order that the Client pay Firm A’s costs on an indemnity basis; or (b) that the appellant be granted leave to be separately represented in the Federal Court proceedings because the blackmail allegation made by Mr Y against the appellant would need to be heard at the same time as the Client’s application for costs.
The Client did not accept that proposal.
Complaint by Mr Y
On 28 May 2024, Mr Y, acting on behalf of Firm A, made the Complaint to the Law Society under Pt 4.2 of the Act. The Complaint was in relation to the appellant, Firm B, the three principals of Firm B (including the Supervisor), and the Client. The Complaint alleged that the appellant had, through the Barrister, made a “Demand” of Firm A for payment of an amount of $5 million. The “Demand” was said to be “improper, disgraceful and reprehensible, having the clear capacity to bring the legal profession into disrepute and undermine the course of justice”. It was alleged that the conduct associated with the “Demand” involved breach of a number of the Solicitors Conduct Rules.
The Complaint also made a wide range of other allegations including that the relevant facts described “a clear case of blackmail” on the part of the appellant, the Client, the Supervisor, two other principals of Firm B and Firm B, contrary to Pt 3.5 of the Criminal Code 2002 (ACT), and explained at some length why that was said to be so. The Complaint extended over 34 pages and included 163 pages of annexures.
The Complaint had an inflammatory and argumentative tone.
Amongst the reasons why the Complaint contended that the offer made on 21 March was “improper, disgraceful and reprehensible” was that the offer was said to demand that Firm B and Firm A “secretly agree between themselves by deed to deny legal representation to former [Firm A] clients”.
However, nowhere in the Complaint was there any disclosure of the fact that the settlement proposal that involved precluding Firm B from acting for former clients of Firm A originated from Firm A, for whom Mr Y acted, or that the proposal conveyed by the appellant about which the Complaint was made was a counter-proposal responding to Firm A’s offer.
Steps taken in response to the Complaint
On or around 27 June 2024, the Law Society decided to defer consideration of the appellant’s application to renew his practising certificate. On the same day, it sent him a copy of the Complaint and notified him of the deferral decision.
On 25 July 2024, the appellant sent the Law Society the Response, which was a response to the Complaint on his own behalf and on behalf of three of the four other subjects of the Complaint. As pointed out earlier, this is the document that the appellant affirmed was true, a statement which is not challenged by the Law Society in the present proceedings: see [22] above.
The Response described the relevant facts in detail and addressed various aspects of the Complaint. It contended, inter alia, that: (a) the settlement terms originated with Firm A; (b) the settlement terms conveyed did not prevent any former client of Firm A from bringing proceedings against Firm A, and did not prevent Firm B from referring such clients to a different firm; (c) the appellant considered that a precondition to the proposed settlement was that any former client of Firm A who was a client of Firm B would be reimbursed in full; (d) there was no conflict between the Client’s interests and Firm B’s interests; (e) counsel had provided advice, albeit in a preliminary and informal manner, that the proposed settlement was not inconsistent with the professional obligations of a solicitor; (f) the negotiation was at an early stage, and at least one principal of Firm B had not yet been consulted about the proposed settlement; and (g) no agreement would have been made without its terms being considered by counsel, and if counsel had identified any ethical concern, the terms would have been changed to deal with the issue.
The Response also accepted that, in negotiating with Firm A through the Barrister, the appellant had dealt directly with another solicitor’s client in contravention of r 33 of the Solicitors Conduct Rules. It identified some mitigating factors relevant to that breach.
On 6 August 2024, the Law Society wrote to the appellant. The letter indicated that neither the writer nor any other staff members of the Law Society had read the Response for reasons which were stated (concerning protection of the appellant’s confidential communications), and sought the appellant’s response to some 41 questions and the production of a series of documents.
On the same day, 6 August 2024, the appellant provided a further and slightly redacted copy of the Response as a reply to the request for particulars.
On 6 September 2024, Thomson Geer wrote to the appellant, indicating that it was retained to act for the Law Society and inviting him to respond again to the 6 August 2024 request for particulars on the basis that the Response did not address each of the questions posed in the request for particulars.
On 10 September 2024, the appellant wrote to Thomson Geer and provided a further response addressing each of the questions directly.
Characterisation of the facts
The issue to be determined is whether the facts that have been set out above indicate that the appellant is not a fit and proper person to continue to hold a restricted practising certificate. The Law Society relied upon the general statement of Kitto J in Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279 at 297-298: The issue is whether [the person] is shown not to be a fit and proper person … It is not capable of more precise statement. The answer must depend upon one’s conception of the minimum standards demanded by a due recognition of the peculiar position and functions of a barrister in a system which treats the Bar as in fact, whether or not it is also in law, a separate and distinct branch of the legal profession …
That was a statement directed to consideration of the fitness of a barrister, but the same principle broadly applies, in that the court is assessing the minimum standards demanded, with due recognition of the functions of solicitors within the legal profession.
The Law Society contended that to take payment not to provide legal services to a class of client fell below the minimum standards that can be accepted of solicitors as part of the legal profession.
Here, the assessment of the appellant’s conduct will be done by first considering the evolution of the settlement proposals between 21 and 23 March 2024 and then considering the two principal matters relied upon by the Law Society to demonstrate unfitness to hold a practising certificate, being payment for no services and lack of informed consent from the named former clients of Firm A who were included in the offer.
The evolution of the settlement proposal
The first settlement proposal came from Firm A (see [54] above). It sought to tie settlement of the Federal Court proceedings and the indemnity costs dispute in the Client’s matter with a restraint on Firm B acting for any former clients of Firm A in respect of claims for overcharging of fees.
The second and third settlement proposals came from Firm B (see [69] and [77] above). Each contemplated Firm B agreeing to the requested restraint (of not acting for former clients of Firm A against Firm A) but put a hefty price on any such restraint.
In the third settlement proposal, the appellant and Firm B additionally sought: (a) Protection of the position of their “existing clients” (people who had signed a file release authorisation) by ensuring those former clients of Firm A received a payout of all of the fees that they had paid to Firm A, not merely the amount by which they were allegedly overcharged. There was one such client as at the time of the offer (in addition to the Client). (b) $1 million of the settlement figure to be paid to the Client by 5pm on Monday, 25 March 2024.
Payment for no services
We do not accept that by itself, a solicitor (or firm of solicitors) agreeing to restrict their client base for a fee is conduct that renders that solicitor unfit to hold a practising certificate.
Solicitors, who are not bound by a cab rank rule, are entitled to choose the work that they do and, subject to the constraints of anti-discrimination legislation, choose the clients for whom they work (noting that anti-discrimination legislation is incorporated by r 42.1 of the Solicitors Conduct Rules). In that regard, their function within the legal profession differs from that of a barrister.
It is open to solicitors to act for one class of client and not for others if they are of the opinion that doing so will enhance their financial or other self-interest. That is routinely the case with large, medium and small firms who all make decisions as to clients that they will represent and clients that they will not. Further, payments to lawyers in the form of retainers so as to prevent them from working for opposing parties, or at least to create a right of first refusal, are not unknown. For example, a retainer may be paid on a monthly or yearly basis and yet no legal services may be requested during that period. In that example, the firm retained has accepted money knowing that a term of their being retained is that they do not act against that particular client.
Any contention about the impropriety of accepting money to not act for a particular class of client against a particular firm must be assessed in light of these accepted realities of professional practice about which the Law Society makes no complaint.
To accept that such conduct is not, of itself, improper is not to sanction mercenary behaviour. It is to recognise that solicitors performing their duties hold a position of trust in the information they receive from a client, which is not just legally privileged but also may be commercially sensitive. A client may manage the risk of inadvertent disclosure or misuse of information by excluding their solicitors from acting for the opposition.
Further, acceptance of such conduct as within the standards required of solicitors does not ignore the consequence of law firms and solicitors making decisions in their commercial interests. It was submitted by the Law Society that taking payment for not providing legal services to particular persons was inimical to the essential role of a lawyer, and would allow “the wealthy and powerful in society to limit or restrict the provision of legal services to weaker and more vulnerable members of society who are in need of legal services”.
In our view, such conduct does not, by itself, run contrary to the essential functions of a lawyer for two reasons. First, solicitors who tailor or restrict their services in various ways to serve a commercial interest or for other reasons may well provide pro bono services or take on clients of lesser means in other areas. Second, any voluntary restraint on the provision of legal services by one solicitor does not leave vulnerable litigants without access to services. It simply means that those people must seek representation from a different solicitor.
Breach of duty in relation to the named former clients of Firm A
The other point made on behalf of the Law Society was that, by making reference to the other named former clients of Firm A as part of the correspondence about the settlement offer, the appellant breached his fiduciary duty to those persons. That was said to be because, in the context of a proposal which involved a very substantial payment to Firm B, the making of that proposal had the potential to affect those persons’ interests, and they had not given their informed consent to the making of the proposal.
We have considered the appellant’s conduct in respect of both the Client and the named former clients of Firm A, being up to seven people who had given authorities for release of their files to Firm B (the named former clients).
The legal principles that apply were not in dispute. A solicitor owes a fiduciary duty to a client of “absolute and disinterested loyalty”: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 104 (Mason J), citing Hand J in Phelan v Middle States Oil Corporation, 220 F 2d 593 at 602-603 (1955).
The scope of the duty is informed by the particulars of the underlying relationship which give rise to the duty, so that it is consistent with and conforms to the scope and limits of that relationship: Howard v Commissioner of Taxation [2014] HCA 21; 253 CLR 83 at [34].
The duty of absolute and disinterested loyalty embodies two themes: the no conflict rule and the no profit rule: Atanaskovic Hartnell v Birketu Pty Ltd [2021] NSWCA 201; 105 NSWLR 542 at [43].
As to the no conflict rule: (a) A fiduciary cannot be in a position of conflict in their duties to their principal: Chan v Zacharia (1984) 154 CLR 178 at 198-9; Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 at [179]-[181]. (b) For a conflict to arise, there must be “a real or substantial possibility of a conflict” between the personal interests of the fiduciary and the interests of the company: Hospital Products at 103. (c) Full disclosure is essential, and independent advice may be required. In Law Society of NSW v Harvey [1976] 2 NSWLR 154, Street CJ, when giving the judgment of the NSW Court of Appeal in a disciplinary matter, stated at 171: A solicitor, who deals with his client while remaining his solicitor, undertakes a heavy burden. Where a solicitor discovers that continuing to act for his client will, or may, bring the interests of his client and his own interests into conflict, it will be a rare case where he should not, at least, advise his client to take independent legal advice.
As to the no profit rule: (a) A fiduciary may not use their position to gain a profit or advantage for themselves without the informed consent of the person to whom they owe the duty: Hospital Products at 67. (b) The object of the rule is to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage: Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557. (c) That stringent rule serves two purposes (Warman at 557): (i) that the fiduciary must account for what has been acquired at the expense of the trust; and (ii) to ensure that fiduciaries generally conduct themselves “at a level higher than that trodden by the crowd”.
Consequences of breaches of fiduciary duty
The breaches of duty arising from the involvement of Firm B’s commercial interests with settlement of the Client’s litigation and the involvement of the named former clients in the settlement offer are really a product of the first impropriety, seeking a substantial financial benefit from agreeing not to provide services. However, such conduct is not so significant, either by itself or in combination with other matters, as to indicate an unfitness to hold a practising certificate. The relevant circumstances include: (a) Again, the negotiations between the parties were at an early stage of contemplation, and the appellant recognised need to obtain advice before proceeding. (b) The motivation in including the named former clients in the offer was believed to be client-focused, namely to achieve a favourable outcome for them and, having benefited from their assistance in allowing access to their files, not permitting the Client or Firm B to achieve a benefit unless a satisfactory outcome was achieved for the named former clients. Had it eventuated, the named former clients would have recovered all of their fees, not merely the overcharged portions which Firm A would have been required to disgorge if the contemplated class action was successful. (c) No binding offer was made on behalf of the named former clients, and there was nothing to suggest they would not have received full disclosure, had the negotiations over the offer proceeded further. Other considerations relevant to fitness
That deals with the two substantial bases upon which it was said by the Law Society that the appellant was not a fit and proper person to hold a practising certificate. Each involves some criticism of the appellant’s conduct. Those criticisms must be assessed having regard to the following additional matters. (a) First, the appellant described the litigation as being “bitter and high-stakes”. The relationship between the appellant and Mr Y was one which was not conducive to the settlement of the dispute or the efficient and proper conduct of the litigation. The appellant regarded Mr Y as a solicitor who would inflame rather than de-escalate conflict. While the nature of the litigation does not excuse improper conduct, it is a matter of significance in considering whether the conduct in this rather unusual case is reflective of a general inability on the part of the appellant to meet appropriate ethical standards. (b) Second, related to this point is the fact that the appellant was a supervised solicitor. Once again, the fact that the appellant was a supervised solicitor with a restricted practising certificate does not provide a licence to depart from proper ethical standards. Solicitors must take responsibility for their own conduct and ensure they act with complete fidelity to their position as trusted advisers. However, in determining whether he is not a fit and proper person to have a practising certificate, it is relevant to take into account the fact that he was a supervised solicitor and that the course of conduct that he engaged in was one which was at least known to, and endorsed by, the Supervisor. (c) Third, the circumstances of this case involved an unusual combination of circumstances unlikely to occur again. They involved a discrimination claim by a former employee against a law firm, allegations of systematic overcharging of clients, claims made by Firm A against the Client, settlement offers, complaints of misconduct made by Firm A, and disciplinary proceedings against the Client occurring in parallel. While all litigation is different, it is relevant to take into account, when considering whether the appellant’s practising certificate should be renewed, that the combination of circumstances placed unique pressures upon the ethical judgment of the appellant and is unlikely to be repeated. (d) Fourth, there was no evidence as to whether the Law Society had taken a consistent approach in relation to any other lawyer involved in the dealings, all of whom were more senior than the appellant. In particular, there was no evidence about whether any action had been taken in relation to Mr X, who was the source of the proposal that Firm B bind itself not to act for other potential claimants against Firm A, or Mr Y, who made the Complaint to the Law Society without disclosing that Mr X was the source of the proposal that was part of the Complaint. To isolate one aspect of what occurred for imposition of the consequences of such severity may give rise to an implied double standard. There may indeed have been consequences for those individuals which are not before the court, but the concern is that it is not self-evident why the appellant’s conduct was singled out as being so egregious as to render him unfit to continue to hold a practising certificate while others who engaged in contemplating the same arrangement did not suffer the same consequence. (e) Fifth, the appellant cooperated with the investigation of the Complaint, made appropriate concessions and demonstrated some insight into what constitutes appropriate professional conduct, which gives confidence in his fitness to maintain a practising certificate going forward.
Conclusion
Having regard to the circumstances identified, we are not satisfied that the appellant is not a fit and proper person to continue to hold a restricted practising certificate. He was entitled to have his practising certificate renewed. The appeal must therefore be allowed.
Although the year for which the practising certificate would have been operative has passed, as the appellant has been successful, by virtue of s 37(3) of the Act, the renewal of the appellant’s practising certificate is deemed to take effect from 1 July 2024. An order granting the application to renew the said certificate thus has utility to clarify that, in the event the appellant seeks to practise as a solicitor in the Territory in the future, he is able to seek renewal of his practising certificate for the 2025-2026 financial year, rather than having to apply afresh.
Orders
I certify that the preceding one hundred and fifty-three [153] numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Date:
LP7
Law Society
(1984) 154 CLR 178
(1984) 156 CLR 41
(1995) 182 CLR 544
(1957) 97 CLR 279
(1994) 34 NSWLR 408
Decisions of the Law Society to refuse to grant or renew a practising certificate, or to amend, suspend or cancel a practising certificate, may be appealed to a Full Court of the Supreme Court: s 81 of the Act and s 11(2) of the Supreme Court Act 1933 (ACT). As pointed out by McWilliam J in LP9 v Council of The Law Society of the Australian Capital Territory [2024] ACTSC 116 at [9]-[10]: (a) The appeal is a hearing de novo, in that the court stands in the shoes of the Law Society as the original decision-maker for the purpose of determining the appeal. (b) The same statutory provisions governing the original function of the Law Society (in relation to grants, renewals and terminations) apply. (c) An appellant does not need to point to error in the decision under appeal.
The question of whether a person is or is not a fit and proper person to continue to hold a practising certificate is related to but distinct from fitness to remain a member of the legal profession. The principles applicable to the determination of the latter issue are described in Law Society (ACT) v Bangura [2024] ACTSCFC 1; 21 ACTLR 268 at [3]- [17] and Law Society v Ford (No 2) [2024] ACTSCFC 2 at [115]-[127]. However, it must be borne in mind that fitness to hold a practising certificate only relates to the year in question and hence involves less emphasis on permanence or indefinite duration of unfitness.
There is some uncertainty as to which party, if any, bears the onus of proof in proceedings of this kind: LP9 at [4], [14]. There is no need to address that issue further in the present case because the facts in this case are uncontroversial. Instead, the issue is the appropriate characterisation of those facts and whether they indicate that the appellant is not a fit and proper person to continue to hold a practising certificate.
The draft deed proposed by the Client included confidentiality provisions, but made it clear that such confidentiality provisions did not apply to proceedings brought by the Law Society in the ACAT against the Client.
On 18 April 2023, a Registrar of the Federal Court conducted a mention by telephone in relation to the adjourned mediation. The appellant appeared. Mr Y appeared and spoke to the Registrar but refused to join the call with the appellant. The appellant complained and said that Firm A’s delay in responding to the deed was inexplicable.
On 21 April 2023, the appellant commenced acting for the Client in the disciplinary proceedings in the ACAT brought by the Law Society.
So far as the application for indemnity costs in the Federal Court arising out of the suppression order application in that court was concerned, the appellant believed that there was almost no prospect of settling that issue because of his view of the manner in which Mr Y and Firm A had conducted themselves in relation to the making of the ex parte application.
The Barrister expressed the view that the matter was unlikely to settle on those terms.
The appellant followed up at about 9:20am that morning with an email to the Barrister, which included: I understand your view that there can be no deal, given our position. The terms I put to you are take it or leave it, we need their position with payment of $1.000.000.00 by close of business today to secure it. Happy to talk further if anything bears explanation or if [Mr X] wants to talk through you.
A further email was sent by the appellant to the Barrister at 11:31am which recognised that the earlier discussion needed more time and that he should have raised it with the Barrister after court (both the appellant and the Barrister had been due in court early that morning). The email included: [Firm B] is actively interrogating [Firm A’s] exposure, and [the Client’s] expertise in the process adopted by [Firm A] has been invaluable (although he is not our only source of information). Absent a cost agreement, the charges levied by [Firm A] are irrecoverable. Given [Firm A’s] failure to disclose costs, it was rarely (if ever) able to issue a bill without assessment (which would have been to scale). On the face of the materials I have seen, my rough calculation is of an average 30% overcharge. Across an average of 150 clients per year, at an average of $60,000.00 per client across 7 years, [Firm A’s] liability would be around $31,000,000.00. Our cost estimate for such a proceeding is $3,000,000.00. Those figures are conservative. I am aware of one former client being overcharged by $180,000.00. A significant issue in future proceedings will be [the Other Partner’s] affidavit. [The Other Partner] swore an affidavit in the Federal Court proceedings that is demonstrably problematic for [the Other Partner and Firm A]. Just one file shows many paragraphs of [the Other Partner’s] evidence are problematic. I am confident, on instructions, other files will also show paragraphs of [the Other Partner’s] affidavit are also problematic. The sums I proposed are valuable consideration for what is on the table. The other terms I mentioned would stand, but I would direct [Firm A’s] attention to the following direct benefits: … 5. [The Client, the Supervisor, the two other partners of Firm B] and I would be bound by the deed; 6. [Firm B] would not represent former [clients of Firm A]; … The deal I put to you is costly, but a very good one. Finally, I do trust you but as I said when you first called, I do not trust [Firm A], their solicitors or their counsel. The confidentiality attached to prior without prejudice correspondence has been breached by [Firm A’s solicitors] on [Firm A’s] instructions and was used to damage my professional reputation. I accept you have offered to act as an “intermediary”, but I do not agree to a copy of this email being provided to [Firm A]. If [Firm A] wishes for you to discuss the deal with me further (including to clarify or repeat the terms I discussed this morning), I will take the call. …
Just before 1pm on 22 March 2024, the Barrister rang the appellant to confirm that he was acting as an intermediary only in his personal capacity, and asked the appellant to email him confirming that. At the appellant’s request, the Barrister agreed not to provide a copy of the email to Firm A but indicated that, if he was subpoenaed, he would comply with the subpoena.
Although the Barrister had undertaken not to provide the email to Firm A, at about 2pm the same day, the appellant communicated to the Barrister that he could convey the contents of the email and the conversation between the appellant and the Barrister to Firm A.
Shortly after, at 2:07pm, the appellant sent an email directly to Mr X. That email indicated that Firm B was investigating a “systemic practice” by Firm A of overcharging professional fees and charging disbursements without authority. The email indicated that “the allegations are made bona fides and it is believed on reasonable grounds on available material supplied to us and can be supported”. It indicated that authorities for the release of client files had been provided in relation to two former clients and that, by the end of the week, he expected to have at least seven executed authorities. The email indicated: If, upon assessment of each file, it can be shown that there has been systematic overcharging of [Firm A’s] clients consistent with our instructions there would be a very significant class action against your firm. Overcharging by say, 30% on an average of just $60,000 settlements 150 clients per year, for just 7 years, would amount to over $31m. The third settlement offer (a proposal by Firm B)
At 3:39pm, the Barrister telephoned the appellant, indicating that he had been at Firm A’s office discussing the matter with Mr X, who was in Firm A’s boardroom with senior counsel engaged for the purposes of the Federal Court proceedings. The Barrister asked the appellant to send across a breakdown of the financial component of the settlement offer. In response, the appellant sent an email to the Barrister which included: Breakdown as follows: 1. $1,500,000.00 (made up of $150,000.00 payable annually to [the Client]); 2. $3,500,000.00 including: a. $1,000,000.00 up front; and b. $2,500,000.00 on execution of the deed; and 3. Reimbursement of fees paid to [a named former client of Firm A]. Same basis as last email.
At the time of sending this email, Firm B did not have instructions from the named former client or any other former client of Firm A to send the email. None of the people who had forwarded authorities for the release of their files were yet clients of Firm B. They had simply given permission for their files to be obtained.
Later that day, the Barrister called the appellant and said that he had passed the information on to Mr X, including a breakdown of the offer. The Barrister said: “The non-financial terms are fine. I think they will work.” He indicated that the financial component “is the difficult bit”. Having discussed the reimbursement of current clients, the Barrister said that Mr X was going to speak with his business partners next week and get back to the appellant by Thursday. That timing was confirmed in an email a short time later. The Barrister also indicated that he did not propose to take any further part in the discussions.
Later that evening, the Supervisor, who had received a copy of the Barrister’s latest email, emailed the appellant querying, in terms which indicated scepticism, about why the Barrister was exiting from the discussions and what Firm A’s approach meant. The appellant responded by email which included: I think [the Barrister] just wants to secure a pause on his involvement until [Mr X] is ready. Besides, I’m not going to speak with [Mr X]. The only way this resolves is through [the Barrister]. He knows that and so does [Firm A]. … They asked us, through him, to negotiate. He proposed terms [that] wrap everything up and bind the firm. We responded with those terms and a value on them. This is just a negotiation. I know they fucked us before, but I trust [the Barrister], and besides we have not come close to breaching the rules. We are just trying to act for [the Client], and get a deal which protects the [Client]. What’s more, he is a barrister. He can’t invite us to negotiate through him then mislead us and attempt to set us up for [Firm A]. Even if counsel could do that, he wouldn’t. As I said at the outset, he is the only person everyone trusts. Preparations for a potential class action and a further request to the Barrister to seek settlement
On 23 March 2024, the appellant received from the Client six more authorities from former clients of Firm A, authorising the release of their files.
On 23 March 2024 at 5:24pm, the appellant sent a lengthy email to the Barrister. The appellant summarised how the proposal had come about, saying: When we first spoke, you suggested terms of settlement that would bind [the Client] and my firm and the directors of my firm. The terms also included a pay back of money if the deed is breached by any of the parties. My firm and the directors of the firm are prepared to consider those terms to reach settlement. The only consideration for [Mr X] is the payment terms.
The email then referred to the following matters: (a) The fees that Firm B would forego by not bringing a class action to recover the fees which Firm A overcharged. (b) The offer was put on a “take it or leave it” basis, requiring payment of $1 million to secure the deal by close of business the day it was made, which had not been accepted. The appellant expressed his view that a deal could still be struck, but it would need to be reached much sooner than the coming Thursday. (c) The fees overcharged by Firm A which were to be reimbursed to the named former client might be a “rounding error” for Firm A, but “whatever deal is struck between [the Client] and [Firm A] … any client of ours has to be reimbursed – in full”; (d) A total of seven named former clients of Firm A were now “on the books” and each of them needed to be reimbursed by Firm A in full. (e) If the matter did not resolve, Firm B’s next step would be to contact litigation funders. (f) The appellant also asked that the Barrister confer with Mr X and advise whether settlement can be reached with payment of the first amount by 5pm on Monday, 25 March 2024.
No instructions had been obtained from any of the seven persons identified as former clients of Firm A prior to that email being sent.
Between 24 March and 9 April 2023, a number of other authorities from former clients of Firm A for Firm A to release files to Firm B were received by the appellant. Again, those releases did not constitute instructions to Firm B to act on their behalf in respect of any class action.
The Barrister replied to the appellant’s email on 25 March 2024 and confirmed that he was no longer taking part in the discussions. He indicated that if the appellant wished to communicate with Mr X or Firm A, he would need to do so directly.
Separately on 25 March 2024, the appellant phoned the Supervisor. The Supervisor told him that he had discussed Firm A’s settlement proposal with junior counsel acting for the Client in the Federal Court proceedings. The Supervisor told the appellant that junior counsel had said, informally, that “as long as clients are not sold out – there is nothing stopping [Firm B] from agreeing not to run a class action as part of a settlement”.
On 18 October 2024, the appellant wrote to Thomson Geer, making various observations about the credibility of persons whose evidence he thought would be relevant to the determination of the Complaint, being Mr Y, the Barrister and Mr X. He pointed out that many of the matters asserted in the Complaint were hearsay, suggested that the Law Society would need to obtain evidence from each of Mr Y, Mr X and the Barrister, and specifically requested that the Law Society obtain a “verified” statement from Mr Y.
On the same day, the appellant wrote again to Thomson Geer, explaining that the Law Society’s decision to defer its consideration of his application for a renewed practising certificate had rendered him unemployable.
On 29 October 2024, Thomson Geer wrote to the appellant and invited him to make submissions on five specified “suitability matters”.
On 19 November 2024, the appellant provided a response to the 29 October letter. In his letter, he acknowledged a proposition put in the 29 October letter, being that it is improper for a solicitor to be paid not to provide services to potential future clients. He also accepted that the settlement terms contemplated and proffered by him compromised the professional independence of Firm B and its employed solicitors, including the appellant.
On 2 December 2024, the Law Society refused the renewal application, and on 3 December 2024, it notified the appellant of that fact by providing an “information notice” which recorded its reasons. The letter also noted that the Law Society was continuing to investigate the Complaint by Mr Y and had not made any decision in relation to it.
In the circumstances here, what was proposed was not a retainer but simply a payment in advance to compensate Firm B for the undertaking not to act for former clients of Firm A in relation to claims of overcharging made against Firm A. As pointed out by the appellant, that would not have prevented those former clients from bringing such claims or prevented Firm B from referring any such former clients to another firm so that their rights would be protected. The practical impact on access to justice was, therefore, likely to be limited.
However, there is obviously a tension between, on the one hand, the freedom of solicitors to pursue their own self-interest, or to protect the trust and confidence reposed in them by their clients by representing or not representing whomever they wish and, on the other hand, the proposition that solicitors should not bind themselves (by receiving payments other than for services actually provided) to not represent particular classes of client.
The appellant conceded that it was “improper for a legal practitioner to accept a payment in consideration for a promise not to represent potential future clients in a potential future proceeding”.
That concession was properly made because to accept payment in such circumstances reflects solicitors using the threat of acting for particular persons or classes of persons to enrich themselves without the provision of legal services to anyone. In that way, the solicitor’s skill set and qualifications are not being used to serve in the pursuit of the law and to further the administration of justice, but instead are being employed as a commercial commodity purely for personal gain.
Such conduct does have the potential to bring the legal profession into disrepute because it creates the perception of solicitors as self-interested businesspeople rather than responsible officers of the court who provide a valuable service. For those reasons, that kind of conduct does not adhere to the highest standards of integrity expected from legal practitioners, discussed in New South Wales Bar Association v Cummins [2001] NSWCA 284; 52 NSWLR 279 at [19]-[20] and cited with approval in this jurisdiction in Legal Practitioner v Council of the Law Society of the ACT [2015] ACTCA 20 at [94] and Bangura at [10].
Accepting that it was inappropriate for the appellant to propose a payment to Firm B not to provide services to clients making a claim against Firm A, the following matters are significant when determining whether the conduct that he engaged in indicates that he is not a fit and proper person to continue to hold a practising certificate. (a) No agreement was actually entered into. Notwithstanding the assertion that the $1 million was required to be paid the same day the offer was made, the negotiation between the parties was at an early stage. The extent of the inappropriate behaviour was the contemplation of such an agreement in correspondence with a party that itself had suggested it. The attempt remained inappropriate, but the proffering of an inappropriate offer in response to a proposal that was itself arguably inappropriate was a circumstance that puts the appellant’s conduct in perspective. (b) Had the settlement proposal been pursued any further, the intention of the appellant was to obtain the advice of counsel as to the propriety of that course of conduct. (c) The situation faced by the appellant raised novel issues which were not straightforward, obvious, or the subject of any written guidance or court decision in Australia that the Law Society was able to identify.
These duties are also reflected in the Solicitors Conduct Rules (see rr 4.1.1 and 12.1).
A general statement of the position of a lawyer profiting from their position other than by way of reasonable professional fees is provided in GE Dal Pont, LexisNexis, Solicitors Manual, vol 1 (at Service 84) at [6055.5]: Inherent in the lawyer’s fiduciary position is the duty not to profit from that position without the fully informed consent of the client. It follows that a lawyer who, by reason of acting for a client in a particular matter, stands to gain a benefit directly or indirectly additional to reasonable professional fees, must either disclose the benefit or cease to represent the client on the grounds of conflicting interests.
An example of the application of this principle is the decision of the Full Court in Law Society of the ACT v Lardner [1998] ACTSC 187, in which solicitors were found to have engaged in misconduct by referring clients to a company controlled by an associate for preparing reports for which they were charged, without disclosing that association and obtaining their consent. The court held (at [22]) that the content of the duty owed by the solicitors was such that the clients should have been told of the close connection between the firm and the company, and of the interest of the members of the firm in the continuing financial viability of that company. It required “full and frank disclosure to the client of all information known to the solicitor which the client should know” (citing Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 435).
In respect of the Client, the second and third settlement proposals emanating from the appellant breached the fiduciary duty owed to the Client because, although the Client knew about the terms of the offer and gave consent to the offer being put, there is no evidence that he had been fully advised of the consequences, let alone receiving advice in that regard from an independent solicitor.
Specifically, there was nothing in the appellant’s statement to indicate that the Client was told that advice had been given by the Barrister that the inclusion of payments of the magnitude envisaged by Firm B to buy out a future class action (in which the Client was not even a potential litigant) would prevent the Client’s case from settling. He had given instructions to Firm B to seek to settle his case in the Federal Court. The appellant and Firm B became distracted by Firm A’s attempt to quell any future class action as part of any settlement deal. There was no evidence that the client was given the opportunity of seeking separate legal advice or that there was a recommendation that he do so. On the contrary, Firm B pressed for a response and a partial payment to be made by Firm A on the same day that one of the offers was made. While the Client gave consent to the terms that were put, on the evidence before the court such consent cannot be said to have been fully informed in terms of the consequences for his own litigation.
In respect of the named former clients of Firm A who had given releases, it is far from clear that they were in fact clients of Firm B at the time any proposals were proffered by the appellant. On the limited evidence provided, the provision of the releases did not establish, of itself, that any of those former clients of Firm A had become clients of Firm B at the time either of the two offers of settlement were made by the appellant. There was no relevant retainer between any of those clients and Firm B. The emails and text messages that were sent to the former clients requesting their authority to release information said nothing about Firm B proposing to act for the former clients. Indeed, the appellant’s email to former clients of Firm A referred to a claim against Firm A being made by the Client (who was not himself a former client).
However, the parties before this court proceeded on the basis that there was at least one former client of Firm A who was also a client of Firm B. The discussion below also proceeds on that basis. In respect of any such client or clients of Firm B, the offer was made without their informed consent and was thus also a breach of the fiduciary duty owed to them, for reasons now explained.
It is important to understand that the offer that was being made was an offer to settle the litigation involving the Client, not the named former clients. The involvement of the named former clients only arose as a condition of the offer to settle the litigation involving the Client. It was therefore not a case of making an offer that would, if accepted, be binding upon the named former clients.
The motivation for the Client including reference to the named former clients in the offer was to ensure that they achieved a good outcome from any settlement that he reached and were not abandoned by him in order that he achieve a settlement. Each of those named former clients had, at the Client’s or the appellant’s request, given authority to access their files which were held by Firm A in order to assess whether or not they had been overcharged and hence assist the Client’s negotiating position with Firm A. It is therefore understandable that the Client would be concerned to protect the named former clients’ interests if the Client’s proceedings were to be resolved. He did so by requiring a complete repayment of all the fees that the named former clients had paid to Firm A, not just any overcharged amount. The offer made by the Client was one which made settlement of his matter conditional upon those named former clients achieving an outcome more financially favourable than they were reasonably likely to achieve if their matter was pursued in the ordinary way.
Although the Law Society did not contend that any offer binding upon the named former clients was made, it was contended that the inclusion of their matters in a settlement involving the Client had the potential to affect their interests. This was said to arise because they had not given informed consent to the inclusion of their matters in the settlement offer and that inclusion had the potential to make the resolution of their individual matters more difficult. For example, the Law Society suggested that a named former client may have been content with a more modest resolution if that could have been achieved quickly and that inclusion in the broader, complicated proceedings involving the Client may have impeded that earlier, more modest resolution.
The difficulty with the involvement of the named former clients’ cases is the fact that, to the extent to which they were clients of Firm B, the increase in their numbers was being used as part of the negotiations on behalf of the Client so as to achieve a significant pecuniary benefit to Firm B. The fact that what was being offered was being offered on behalf of the Client and not the named former clients, and would, if accepted, achieve a very favourable outcome for the named former clients, does not avoid the fact that the offer was made without their informed consent. It involved Firm B using its position as fiduciary to achieve a financial benefit from the existence of their cases that had not been the subject of informed consent. Such conduct offends the no profit rule and was sufficient to amount to a breach of fiduciary duty.