Sadiq v Legal Services Commissioner

The application

1. By the Solicitor's application the Solicitor invokes the right granted by s 540(5) of the LP Act to apply to the Tribunal for an administrative review under the Administrative Decisions Review Act, 1997 (ADR Act) of the respondent's decision. Section 63 of the ADR Act is in the following terms: 63 Determination of administrative review by Tribunal (1) In determining an application for an administrative review under this Act of an administratively reviewable decision, the Tribunal is to decide what the correct and preferable decision is having regard to the material then before it, including the following: (a) any relevant factual material, (b) any applicable written or unwritten law. (2) For this purpose, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision. (3) In determining an application for the administrative review of an administratively reviewable decision, the Tribunal may decide: (a) to affirm the administratively reviewable decision, or (b) to vary the administratively reviewable decision, or (c) to set aside the administratively reviewable decision and make a decision in substitution for the administratively reviewable decision it set aside, or (d) to set aside the administratively reviewable decision and remit the matter for reconsideration by the administrator in accordance with any directions or recommendations of the Tribunal.
2. In summary, the function of the Tribunal in the circumstances of these proceedings is to decide in respect of the respondent's decision what the correct and preferable decision is having regard to the material then before the Tribunal and, to make appropriate orders as described in s 63 of the ADR Act.
3. In these proceedings the respondent has filed a bundle of documents as required by s 58 of the ADR Act. That bundle was marked Exhibit 1. No other evidence was received by the Tribunal but the Tribunal had the benefit of the written submissions made on behalf of both the Solicitor and of the respondent as well as the oral submissions of counsel for both parties.

Application for confidentiality

1. At the commencement of the hearing counsel for the Solicitor made an application under s 64 of the Civil and Administrative Tribunal Act 2013 (NCAT Act). That section is in these terms: 64 Tribunal may restrict disclosures concerning proceedings (1) If the Tribunal is satisfied that it is desirable to do so by reason of the confidential nature of any evidence or matter or for any other reason, it may (of its own motion or on the application of a party) make any one or more of the following orders: (a) an order prohibiting or restricting the disclosure of the name of any person (whether or not a party to proceedings in the Tribunal or a witness summoned by, or appearing before, the Tribunal), (b) an order prohibiting or restricting the publication or broadcast of any report of proceedings in the Tribunal, (c) an order prohibiting or restricting the publication of evidence given before the Tribunal, whether in public or in private, or of matters contained in documents lodged with the Tribunal or received in evidence by the Tribunal, (d) an order prohibiting or restricting the disclosure to some or all of the parties to the proceedings of evidence given before the Tribunal, or of the contents of a document lodged with the Tribunal or received in evidence by the Tribunal, in relation to the proceedings. (2) The Tribunal cannot make an order under this section that is inconsistent with section 65. (3) The Tribunal may from time to time vary or revoke an order made under subsection (1). (4) For the purposes of this section, a reference to the name of a person includes a reference to any information, picture or other material that identifies the person or is likely to lead to the identification of the person.
2. Counsel submitted that all documents in the s 58 bundle should be considered confidential and subject to an order by the Tribunal that their contents not be disclosed. The basis for the application was that the documents contained information which was confidential because the information was protected by client legal privilege.
3. After hearing from both counsel, the Tribunal rejected the application. The basis for the rejection was that it was not appropriate to make an order in the terms proposed by the Solicitor's counsel as the documents in the bundle were not all confidential or privileged. Some documents were clearly not in such a category. For example, orders of the Supreme Court were acknowledged to be public documents. In addition the communications between the respondent and the Solicitor did not necessarily contain confidential and privileged information and to the extent that such communications did, it would be possible to identify privileged information and redact it from the published decision of the Tribunal. Later at the hearing it was proposed by counsel for the respondent that the Tribunal could publish its decision to the parties and give the parties an opportunity, before wider publication, to make submissions as to whether any portion of the decision ought to be redacted by reason of the disclosure of confidential or privileged information. This course was agreed to by the Tribunal and not opposed by the Solicitor's counsel.

Relevant legislation

1. There was no disagreement between the parties that the relevant legislation to be considered in these proceedings is the LP Act. That Act has been repealed but there are transitional provisions dealing with complaints that were made under the LP Act and not disposed of before 1 July 2015 when the Legal Profession Uniform Law (NSW) 2004 Act came into effect. Pursuant to cl 26(2) of Sch 4 of that Act, this complaint is required to be dealt with in accordance with the provisions of the LP Act. We agree with the parties that the LP Act is the applicable Act in this case.

Background Chronology

1. The respondent has provided a very helpful outline of submissions which provides a chronology of the events leading up to and relevant to the respondent's decision affecting the Solicitor. The following paragraphs summarise those events.
2. The conduct of the Solicitor was referred to the respondent by the PIC as a result of the report it tabled in Parliament in October 2002 relating to "Operation Winjana". Operation Winjana initially commenced as an investigation into the conduct of an employee of the New South Wales Crime Commission (Crime Commission) who, according to the respondent was the partner of the Solicitor. Operation Winjana was subsequently extended to examine the practices and procedures of the Crime Commission in the conduct of actions under the Criminal Assets Recovery Act 1990 (CAR Act).
3. The respondent engaged Mr Greg Walsh, solicitor as an expert to assess the costs charged by the Solicitor in relation to the matters identified earlier in these reasons. Mr Walsh prepared a report referred to earlier dated 27 August 2014. He subsequently provided a supplementary report dated 2 September 2015. By letter to the Solicitor dated 20 November 2015 the respondent advised the Solicitor of his determination to dismiss the complaint of overcharging in relation to the Shan Chan matters. By a further letter to the Solicitor also dated 20 November 2015 the respondent informed the Solicitor of his preliminary view that there was a reasonable likelihood that the Tribunal will find that the Solicitor engaged in unsatisfactory professional conduct in relation to the overcharging complaint (excluding the Shan Chan matters but including the related China Link matter) and that appropriate disciplinary action was that she be reprimanded. Subsequently the respondent published its letter to the Solicitor dated 17 December 2015.
4. The events leading up to the matters referred to above are set out below.
5. On 8 July 2007 Wui Feng Cheng (Mr Chen) was arrested and charged and on 9 July 2007 the Crime Commission commenced proceedings pursuant to the CAR Act to confiscate cash seized and which Mr Chen was alleged to have concealed. The Solicitor acted for Mr Chen and a signed costs disclosure agreement was entered into and dated 22 July 2007. It provided that the fees were a lump sum of $80,000.00.
6. On 27 July 2007 the CAR Act proceedings were settled by consent with "reasonable legal expenses" of $80,000.00 to be paid to the practitioner pursuant to s 10(5)(b) of the CAR Act. In October 2007 a charge against Mr Chen was withdrawn. He entered a plea of guilty to a lesser charge, was convicted and sentenced to four months imprisonment. After serving his sentence he was deported to Canada.
7. On 1 February 2008, Mr Benjamin Yun (Mr Yun) was arrested and charged. The charge related to cash of $1,500,000.00 found in a car he was driving. The Solicitor and Mr Yun entered into a costs disclosure agreement dated 11 February 2008 where the costs were fixed at $70,000.00 inclusive of GST.
8. On or about 11 February 2008 in proceedings involving the Crime Commission and Mr Yun, consent orders were entered into in the Supreme Court by which the sum of $70,000.00 was paid to the Solicitor for reasonable legal expenses. On 18 March 2008 Mr Yun entered a plea of guilty and was subsequently sentenced to a term of imprisonment.
9. On 5 March 2008 the Australian Crime Commission arrested Mr Shan Chan, Ms Ng Man Chung and Mr Liu Guo Bin. Each was in possession of large amounts of cash and each was charged. The Solicitor acted for these three defendants.
10. China Link (a Hong Kong company) signed a costs disclosure agreement with the Solicitor dated 1 May 2008 for a lump sum of $33,000.00. On 18 June 2008 Shan Chan signed a cost disclosure agreement for a fixed sum of $55,000.00 inclusive of GST. Mr Liu and Ms Ng signed costs disclosure agreements on 7 and 8 June 2008 respectively where costs were a fixed lump sum of $50,000.00 each inclusive of GST.
11. On or about 19 June 2008 consent orders were filed in the court between the three defendants and the Crime Commission by which monies were to be paid to the Solicitor for reasonable legal expenses totalling $150,000.00 ($50,000.00 per client).
12. The Solicitor was also paid a total of $40,217.00 by China Link. Of that sum, $9,507.94 remained in trust as at 30 October 2013.

Solicitor's submissions

1. The following paragraphs summarise the submissions of the Solicitor.
2. Neither Mr Chen nor Mr Yun have made any complaint to the respondent, to the Crime Commission, to the Law Society of New South Wales and nor has the Crime Commission complained to the respondent or to the Solicitor. There has been no application by Mr Chen or Mr Yun to set aside the costs agreements.
3. China Link is a Hong Kong company. The Solicitor received the sum of $40,217.94 from that company. Some $30,000.00 of that sum was expended on legal fees or advice given by the Solicitor and a barrister in Hong Kong. There is no dispute that services were provided to China Link in Hong Kong by the Solicitor and a barrister. China Link has not complained about the Solicitor or sought to set aside the costs agreement between it and the Solicitor.
4. In respect of the Chen matter, a consent order was made on 27 July 2007 in the Supreme Court of New South Wales in proceedings between the Crime Commission (as plaintiff) and Mr Chen (as defendant). The consent order referred to the existence of a restraining order having been made under the CAR Act in respect of all of the interests in property of Mr Chen. By consent the Court ordered pursuant to s 10(5)(b) of the CAR Act that the restraining order make provision for meeting the reasonable legal expenses of the defendant agreed at $80,000.00 out of the seized cash, such sum to be paid to the Solicitor.
5. In respect of the Yun matter, a consent order was made on 11 February 2008 in the Supreme Court of New South Wales making provision for meeting the reasonable legal expenses of Mr Yun agreed at $70,000.00, such sum to be paid from property seized and such sum to be paid to the Solicitor.
6. The Solicitor's submissions refer to the fact that the respondent forwarded certain materials to Mr Walsh, the costs assessor appointed by the respondent. Mr Walsh was of the view in a report dated 27 August 2014 that the Chen costs agreement should be set aside and assessed fair and reasonable costs as being $23,375.00.
7. The respondent also sought the opinion of Mr Walsh in respect of the costs agreement concerning Mr Yun. Mr Walsh was of the opinion that that costs agreement should be set aside and assessed fair and reasonable costs as being $30,585.00.
8. In respect of the retainer concerning China Link, the Solicitor submits that the Solicitor entered into a costs agreement for the lump sum of $33,000.00 on 15 May 2008. The Solicitor submits she charged the sum of $30,710.94, being a figure less than the agreed sum in the costs agreement. The respondent forwarded materials to Mr Walsh with respect to the China Link retainer and Mr Walsh was of the view as recorded in his report dated 27 August 2014 that the China Link costs agreement should be set aside and assessed fair and reasonable costs as being nil.
9. The Solicitor submits that the effect of the respondent's letter of 17 December 2015 is that the respondent accepts that it was proper for the Solicitor to charge the clients the amount in the costs agreements. This submission is based upon par 22 of the letter of the applicant dated 17 December 2015 (which paragraph we have set out earlier in these reasons). The Solicitor submits that the respondent has not determined that the Solicitor overcharged at the time she gave the bills to her clients. Rather, the respondent has determined that some four to five years later she should have, but did not, pay surplus funds to the Consolidated Fund pursuant to s 266 of the LP Act. This submission is based upon the statements made in par 23 and 24 of the applicant's letter 17 December 2015 (those paragraphs have been set out earlier in these reasons).
10. The Solicitor submits that she could not pay the alleged surplus funds to Consolidated Funds as no funds were held by her in trust, that being a requirement of s 266 of the LP Act. The Solicitor also submits that the respondent does not make it clear whether the amount to be paid should be an amount calculated before tax or after tax.
11. The Solicitor made submissions concerning whether it was possible for her to return alleged surplus funds to either the clients or to the Crime Commission. The Solicitor referred to a decision of the New South Wales Supreme Court in State Drug and Crime Commission of New South Wales v Mus Ujka and Wai Man Sam - (BC9001552 20 December 1990 unreported) as authority for the proposition that once orders are made releasing funds for reasonable legal expenses the funds cannot be returned to the Crime Commission. The Solicitor also submitted that it was not possible to pay alleged surplus legal expenses to the clients and that she had sought an opinion from a barrister who had advised to that effect. The Solicitor submits that the respondent has not disputed either of these propositions.
12. The Solicitor submits that the respondent has not determined that the Solicitor grossly overcharged or even overcharged, but that she failed to pay, some four to six years after the event, what the respondent has decided is a surplus to the Consolidated Fund.
13. The Solicitor submits that the respondent has not applied the correct test as to whether the Solicitor engaged in unsatisfactory professional conduct. The correct test is that set out in Re Melvey (1966) 85 WN (PT1) (NSW) 289 where it was determined that the relevant enquiry is whether the lawyer charged fees grossly exceeding those that would be charged by lawyers of good repute and competence. The Solicitor submits that the respondent has not turned his mind to, nor has he sought to determine, what lawyers of good repute and competency would have charged in circumstances where: 1. There was a fixed costs agreement; 2. There was no complaint in respect of that agreement; 3. Services were provided to the client; 4. There was no complaint in respect of any services provided pursuant to that agreement; 5. There has been no compliant about any fee by the client; and 6. There has been no application to set the agreement aside.
14. The Solicitor submits that in the circumstances above, many lawyers of good repute and competency would have charged the fees as set out in the costs agreement. The requirement to consider the circumstances has been confirmed by the Court of Appeal in Veghelyi v The Law Society of NSW [1995] NSWCA 483 6 October (unreported) page 6, line 33.
15. The Solicitor made submissions concerning the report and supplementary report of Mr Walsh which the respondent has relied upon. In particular, the Solicitor submitted that the reports of Mr Walsh, which are purported to be expert reports, do not satisfy the requirements for expert reports as described in the decision of the New South Wales Court of Appeal in Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705.
16. The Solicitor submits that the reports of Mr Walsh do not set out the basis of his assumed facts and opinions.
17. The Solicitor submits that there are numerous examples of costs assessments in Mr Walsh's report that are not based on any fact or reasoning.
18. Examples specifically mentioned by the Solicitor are the following: 1. Mr Walsh decided that he would allow a reasonable hourly rate of $300.00 plus GST. He does not provide any reasoning as to why that should be a proper hourly rate. He does not, for example, set out what other practitioners charge or what he charges. He makes no reference to any other costs assessments that had been accepted by courts; 2. Mr Walsh allows a certain time for events undertaken by the Solicitor and gives no reason for why he has chosen those times. He has decided that travel should be charged at half the hourly rate but gives no reason why that is so; 3. Mr Walsh has disallowed some phone calls on the basis that he does not have sufficient particulars. The Solicitor's submission is that Mr Walsh could have made enquiries of the Solicitor; and 4. Some expenses (such as airfares and accommodation) in Hong Kong were allowed at $6,000.00 but the basis for that figure is not stated.
19. The Solicitor also submits that the requirement of the Solicitor to charge fair and reasonable costs should be a requirement which has regard to the circumstances. The Solicitor's submission is that where bills are issued in respect of a fixed priced costs agreement, the client has already agreed to the costs and the practitioner is willing to take a risk that the amount of the fixed costs will be sufficient, though not guaranteed to allow the practitioner to profit from the transaction, there is no breach by the Solicitor.
20. The Solicitor also made submissions about the reliance of the respondent upon extracts from the report of the PIC. In the letter of 17 December 2015 the respondent records that he had stated in earlier correspondence that the Crime Commission had consented to the costs orders referred to earlier without making any enquiry as to how those costs were calculated. In par 30 of the letter of 17 December 2015 the respondent recorded that the statement concerning the fact that the Crime Commission entered into costs orders without making any enquiry as to how the costs were calculated was based upon extracts from the PIC report and those extracts were set out in par 30. The Solicitor's submission is that the respondent should not rely on facts found in the PIC report. The Solicitor submits that she was not the subject of that report and only had a peripheral role. The Solicitor submits that the PIC report cannot be relied upon as a factual document and nor are its findings to be considered as facts.
21. The Solicitor submits that the respondent's adoption of the findings of Mr Walsh concerning the China Link matter should not be accepted. In par 10.3 of the letter of 17 December 2015, the respondent adopted the findings of Mr Walsh to the effect that in the China Link matter the work and attendances had been claimed and charged to other clients being Shan Chan and Ng Man Chung with the result that such work could not be charged to China Link. The Solicitor submits that Mr Walsh made arbitrary allocations of the amounts to be charged for the Hong Kong trips or how those trips should be allocated between three named clients and China Link. Accordingly, the Solicitor submits that she has not double billed but rather Mr Walsh has made arbitrary allocations of amounts as against the various clients. The Solicitor submits that it was unreasonable for the respondent to adopt the arbitrary allocations of Mr Walsh.
22. The Solicitor submits that in the absence of the clients making any complaint as to the fee charged or making any complaint as to the costs agreement or making an application to set aside the costs agreement and in the absence of fraud, the Solicitor should be able to rely upon the bargain struck with the client. The Solicitor took a risk in entering into the fixed costs agreements and there was no guarantee that any of the retainer agreements would be profitable to the Solicitor.
23. The Solicitor made submissions concerning the costs assessment process. In particular, the Solicitor submitted that she was not asked to participate in the costs assessment conducted by Mr Walsh. As stated, the Solicitor submitted that Mr Walsh made "clearly arbitrary assessments" and that he should have asked for further information from the Solicitor where he considered he was not provided with sufficient information to make an assessment of individual items. As stated, Mr Walsh gave no reasons as to why he declined to seek any information from the Solicitor.
24. At par 25.2 of the respondent's letter of 17 December 2015, the respondent stated that the Solicitor should have considered that her costs were grossly excessive once the PIC had delivered its report. The Solicitor submits that the PIC report was "not about" the Solicitor, nor about her charging practices in relation to certain clients. In any event, the PIC was of the view that the reasonable costs incurred by the Solicitor in the matter concerning Mr Chen did not exceed $11,000.00. Mr Walsh was of the view that reasonable costs in respect of the Chen matter were $23,375.00. The Solicitor submits that the disparity between these two figures is somewhat "extraordinary". The Solicitor submits that there is no evidence that the PIC had any expertise in the assessment of costs and no evidence that it had evidence from any experts in the area of costs assessments. The PIC seemed to ignore the effect of the fixed costs agreements.
25. The Solicitor made submissions concerning the respondent's statement in its letter of 17 December 2015 that upon receipt of Mr Walsh's first report, the surplus costs having been quantified, the Solicitor should have been paid the surplus costs to Consolidated Revenue. The Solicitor submits that the respondent relied upon s 266 of the LP Act which refers to a law practice holding money in a trust account and imposes certain obligations on a law practice in those circumstances. The PIC report was delivered in October 2012 and Mr Walsh's first report is dated 27 August 2014. The Solicitor submits that monies charged to the clients had left the Solicitor's trust account before those dates.
26. Section 266 of the LP Act imposes upon a law practice an obligation in circumstances where the law practice cannot find a person on whose behalf the money is held. The Solicitor submits that in the circumstances of these matters, it is not the case that the Solicitor could not find either Mr Chen or Mr Liu or China Link.
27. Accordingly, the Solicitor submits that s 266 cannot apply in the circumstances of this matter.
28. Counsel for the Solicitor made submissions at the hearing concerning the nature of the instructions given by the respondent in its letter to Mr Walsh dated 23 May 2014 and what Mr Walsh did responsive to those instructions.
29. In par 5 of the letter of the respondent of 23 May 2014 the respondent requested Mr Walsh to proceed on the assumption that the Solicitor had complied with her costs disclosure obligations and stated that the respondent did not require Mr Walsh's opinion on whether the Solicitor complied with her "observations (sic) of disclosure to each of the clients in accordance with the provisions of the Legal Profession Act, nor whether the costs assessor may have set aside each of the subject agreements". The letter stated that the only issue which the respondent required Mr Welsh's opinion on is what would be the "fair and reasonable fees for each of the matters irrespective of the provisions in the costs agreements".
30. However, Mr Walsh in his report of 27 August 2014 stated that it was "readily apparent" that the Solicitor had not complied with her obligations of disclosure (see par 42 of that report). Mr Walsh stated that the Solicitor relied upon a lump sum agreement of $80,000.00 or an hourly rate of $370.00 plus GST. In the opinion of Mr Walsh, that manner of charging would in his opinion be so uncertain as to cause a costs assessor to set aside the costs agreement and/or that particular provision of it. Mr Walsh further stated that the client "does not know as to how the costs are to be charged. Is it a lump sum of $80,000.00 or an hourly rate of $370.00 plus GST". Counsel for the Solicitor submitted that Mr Walsh was specifically asked not to express opinions concerning disclosure or the efficacy of the costs agreements.
31. Counsel for the Solicitor referred to par 49 of Mr Walsh's report in which Mr Walsh stated that the LP Act requires the "Assessor to determine the fair and reasonable costs in respect of the work to which the agreement relates". Counsel submitted that Mr Walsh was not asked to do a costs assessment. He was asked to determine what was fair and reasonable. He should have been asked what was fair and reasonable in all the circumstances. He was not asked to make an assessment on that basis and in the submissions of counsel, Mr Walsh did not have the qualifications, the experience or the learning to make that assessment and in any event has not done so.
32. Counsel for the Solicitor referred to par 75 of Mr Walsh's report, which records submissions made by the Solicitor. These submissions do not appear to have been contested either by Mr Walsh or by the respondent. In essence the Solicitor had stated (as recorded in par 75) that at the time she entered into the costs agreements she did not know precisely the extent of the work involved and whether the clients would plead guilty or not guilty. She stated that she did not then know if the representation she had agreed to undertake would be profitable to her or whether she would lose money. She stated that she was willing to take the risk and hoped that the matters would be profitable. The Solicitor's submissions include a description of the work that she understood she would undertake on behalf of the clients and that because she was acting on a fixed fee basis she did not record all aspects of the services provided to the clients. In respect of the provision in the fixed fee agreements for an alternative hourly rate, the Solicitor had submitted that that provision was to apply in the event that the client withdrew instructions prior to completion. In that event she would have some basis to charge the client for work already done.
33. Counsel for the Solicitor submitted that a fixed fee agreement is not an agreement which caps the maximum fee or imposes an upper limit on a fee. It is rather an agreement to provide the agreed services for a fixed sum of money. In this case, counsel submitted the Solicitor actually lost money on some aspects of the work undertaken and referred to pars 18 and 19 of the respondent's letter of 20 November 2015 [note: the respondent issued two letters dated 20 November 2015]. Those paragraphs record that in Mr Walsh's supplementary report he assessed the fair and reasonable costs in respect of the matter concerning Mr Chan at $64,374.33. This is to be compared with the sum of $50,000.00 which was the amount actually charged by the Solicitor. In the case of Ng Man Chung, the assessment was $52,587.83 compared with the sum of $50,000.00 actually charged. By the letter of 20 November 2015 the respondent dismissed the complaint of overcharging in relation to the matters of Shan Chan, Liu Guo Bin and Ng Man Chung.
34. Counsel submitted that where a practitioner enters into a fixed price agreement, the practitioner is taking a risk and there should be a premium for that risk, a matter which neither Mr Walsh nor the respondent has recognised but it is a matter which is part of the circumstances to be taken into account.
35. Counsel for the Solicitor traced the development of the complaint concerning China Link. In the letter from the respondent to the Solicitor dated 12 February 2015 there was a complaint concerning the Shan Chan matter. The respondent stated that the Solicitor was paid $150,000.00 out of restrained funds for reasonable legal expenses incurred on behalf of three clients. In addition the Solicitor had received payment of $41,933.38 from "private sources associated with her clients". Counsel for the Solicitor stated that the reference to "private sources" was a reference to China Link. Counsel submitted that there was no allegation or complaint that China Link had been grossly overcharged. The allegation was that Shan Chan, Ms Ng and Mr Liu were grossly overcharged. At par 8.11 of the respondent's letter of 12 February 2015 there is reference to the receipt of $40,217.94 from China Link. This paragraph records the Solicitor's submission to the respondent that that sum of $40,217.94 was, with the exception of $9,507.94, expended on legal fees prior to the release of monies for legal expenses, accommodation and living expenses of Mandy Ng (whilst on bail) and travelling expenses for Ng. The remainder of the funds was required to meet the legal fees of a person named Frankie. The Solicitor submitted that China Link also received the benefit of advice from the Solicitor and from Mr Bell, barrister. In the letter of 17 December 2015 the respondent's complaint against the Solicitor is that the Solicitor grossly overcharged in three matters, one of which was described as "Shan Chan re China Link Plus". However, counsel for the Solicitor submits that the complaint with regards to Shan Chan had been dismissed as had the complaint concerning Mr Liu and the complaint concerning Ms Ng: see the respondent's letter of 20 November 2015 - par 53.
36. Counsel for the Solicitor submitted that the fee provided by China Link was for work referable to the Legal Costs Disclosure Agreement between that company and the Solicitor. That agreement described the work to be performed as "all work to be performed in Hong Kong. Other work by your direction - civil, criminal, migration and international or litigation". The Solicitor's submission was that Mr Walsh provided no basis for concluding that the work under that agreement was not done.

Respondent's submissions

1. The respondent made the following submissions.
2. The fact that the Solicitor's clients consented to the costs charged and the fact that none of the clients or the Crime Commission have lodged complaints is not determinative of whether the costs of the Solicitor charged were fair and reasonable.
3. The Solicitor has a fiduciary duty to charge only fair and reasonable costs. A practitioner cannot charge grossly excessive costs that bear no relationship to the work carried out even if the clients agree to those amounts set out in the costs agreements. The existence of costs agreements does not mean that the costs charged can never be the subject of scrutiny. The costs will be examined when an allegation of overcharging is made. What is fair and reasonable depends on the facts of each case.
4. On the present authorities, the test for overcharging involves a comparison of two figures: the amount in fact charged and the amount which was in all the circumstances reasonable to charge, followed by an evaluation of whether the overcharging was so excessive as to be characterised as "gross": Leon Nikolaidis v Legal Services Commissioner [2007] NSWCA 130. Mr Walsh provided an expert opinion as to the amount which was, in all the circumstances reasonable to charge, based on his lengthy experience in criminal law and as a costs assessor.
5. The effect of the Solicitor's reliance on the costs agreements in these matters would be to foreclose any disciplinary consideration of the practitioner's charges. This is contrary to long standing authority regarding supervision of the conduct of legal practitioners: Veghelyi at 6.5 -.25 and 6.35 - 8.20 per Mahoney JA.
6. It is inconsistent with the separate existence of s 498(1)(b) of the LP Act. Were the argument correct, in the absence of any complaint by a client, how would any question of unresolved professional conduct or professional misconduct be raised?
7. The fiduciary obligation referred to in Bechara v Legal Services Commissioner [2010] NSWCA 369 by McClellan CJ at CL is an expression of the nature of the relationship between the solicitor and the solicitor's clients.
8. It underlies the potential for disciplinary action, for alleged gross overcharging, regarding charges asserted to be rendered in accordance with a costs agreement: Veghelyi; NSW Bar Association v Meakes [2006] NSWCA 340.
9. The courts have traditionally maintained control over excessive fees and unnecessary demands made by solicitors: Veghelyi at 6.5-.25 and 6.35-8.20 per Mahoney JA.
10. It is an incident of the general supervision of the legal profession: New South Wales Bar Association v Cummins [2001] NSWCA 284.
11. The principle expressed in the case relied upon by McClellan CJ at CL in Bechara at [140] is a long standing duty to avoid conflict between the interest of the client and those of the solicitor. The potential for conflict between the interest of the client and the solicitor was adverted to by Mahoney JA in Veghelyi.
12. There is a further factor in relation to release of funds for legal expenses from retained property, adverted to by the Court of Appeal in NSW Crime Commission v Younan [1993] 31 NSW LR 44 in the joint judgment of Kirby P, Priestley and Sheller JJA at [46] where the court referred to applications for provision of legal and living expenses out of property the subject of restraining orders and of the undesirability of allowing the depletion of a fund described as "seemingly the product of criminal activity" by reason of such exemptions.
13. The respondent submitted that it would have become clear to the Solicitor that her costs were grossly excessive: 1. Upon the conclusion of the Wui Feng Chen, Benjamin Yun and the Shan Chan matters as none of these matters involved contested hearings; 2. Once the PIC delivered its report or even earlier. It would have been clear to the Solicitor when she gave evidence at the PIC hearings that the PIC considered that her costs were grossly excessive; 3. At these two stages the extent of the overcharging had not been quantified. No payment to Consolidated Revenue could have been contemplated until the extent of the overcharge had been quantified; 4. Once the first and supplementary reports of Mr Walsh were served on the practitioner, the surplus costs had been quantified. At that stage, the respondent maintains the view that the Solicitor should have considered paying the surplus costs to Consolidated Revenue.
14. At the hearing senior counsel for the respondent amplified upon the respondent's written submissions and took the Tribunal Members to some aspects of the submissions put forward by the Solicitor.
15. With respect to the criticisms of Mr Walsh's report made by counsel for the Solicitor, senior counsel for the respondent submitted: 1. Mr Walsh's reports satisfied the criteria in the Makita (Australia) Pty Ltd v Sprowles case. He provided a sufficient basis for the expression of his opinions. The hourly rate of $300.00 (plus GST) proposed by Mr Walsh is a rate which was found in a number of other agreements which the Solicitor entered into with her clients. Accordingly, one could not reject Mr Walsh's adoption of a rate of $300.00 plus GST as unfounded given the circumstances (namely that that was a rate used by the Solicitor); 2. Given Mr Walsh's extensive experience it is the case that he could properly review the documents provided and express an opinion as to what a reasonable amount of time to be devoted to particular item of work should take and express the opinions which he has expressed in his reports. The suggestion that he simply guessed the amount of time a particular item of work would take is unsupported. He has reviewed each of the cases and dealt severally with the matters including looking at the files and information provided; 3. In relation to the matter of Shan Chan, the report of Mr Walsh makes it clear that he attributes the trips to Hong Kong to the charges against Shan Chan, Ms Ng and Mr Liu and on the basis of that attribution Mr Walsh concludes that the work done in Hong Kong was valued at $55,000.00 and that it was appropriate to make an allowance between the three clients of $18,333.00 each; 4. In relation to the work conducted for China Link, Mr Walsh examined the tax invoices submitted by the Solicitor and found that items of work referred to in those invoices had already been charged to the three clients (Shan Chan, Mr Liu and Ms Ng); 5. The costs agreements lack specificity about what the lump sum agreements cover. Mr Walsh's opinions touch on the question of how could the agreements have a fair and reasonable lump sum given the lack of specificity; 6. The fee agreed and consent orders do not foreclose disciplinary considerations. The authorities (see Bechara) make it clear that the courts of the relevant professional authority have power to engage in disciplinary proceedings even though no client has complained; 7. In the case of Mr Yun, it is clear from the costs agreement that he had already decided to plead guilty and the work proposed to be undertaken could not possibly be valued at $70,000.00; and 8. The respondent does not accept that the complaint has been dismissed entirely. The allegation of overcharging always incorporated the matter of Shan Chan re China Link. The allegation of overcharging has been dismissed in respect of the three clients but what remains is the allegation of overcharging with respect to China Link.

The Solicitor's submissions in reply

1. Counsel for the Solicitor made submissions in reply. The first of these concerned clarification of the position with respect to Mr Yun. Counsel said that the respondent's senior counsel appeared to argue that all the work had been done in respect of Mr Yun when the fee agreement was entered into. Mr Yun pleaded guilty but lodged an appeal against the severity of the sentence. That appeal was later withdrawn. Counsel submitted that the situation at the time the costs agreement was entered into was that Mr Yun was contemplating the possibility that he would appeal the sentence. Had he done so, the actual costs would have been much higher but would have fallen under the umbrella of the fixed costs agreement.
2. Counsel for the Solicitor also drew attention to material contained in Exhibit 1 and in particular a record of evidence given by officers of the Crime Commission to the PIC. One officer gave evidence to the effect that he supported the lump sum figures agreed and that his preference was for lump sum figures rather than for the Crime Commission to agree that a Solicitor should do work on a time costing basis. The reason for that was said to be that in the experience of the Commission, charging by billable hours results in the Commission paying more in legal expenses than if there is an agreed fixed fee.
3. Counsel for the Solicitor also referred to the submissions made by Mr Walsh that the retainer agreements were uncertain because they both imposed a lump sum fee but also provided for an alternate hourly rate basis. Counsel submitted that there was no evidence that the clients were confused.
4. With respect to the China Link matter, counsel referred to correspondence which was also in Exhibit 1 being correspondence from the Solicitor responding to questions made by the respondent. In that correspondence the Solicitor acknowledged that work done in Hong Kong was done for the three main clients. However, she was not asked whether work was done only for them. Counsel submitted that work was done for other parties as well.
5. Counsel for the Solicitor also made submissions concerning the alleged obligation on the Solicitor to return surplus funds to the Consolidated Revenue. This is not a requirement of s 266 of the LP Act in these circumstances for the reasons submitted and recorded earlier. The Solicitor could not return any surplus to the Crime Commission. She had legal advice to that effect and that advice has not been contested by the respondent. The Solicitor was thus in an impossible position with respect to any alleged surplus and an obligation should not be imposed upon her in those circumstances.

Decision

1. The respondent's letter of 17 December 2015 sets out the basis for the respondent's decision to reprimand the Solicitor. Specifically, the basis was that the Solicitor had grossly overcharged three clients namely, Mr Chen, Mr Yun and Mr Shan Chan re China Link.
2. The extent of the gross overcharging is set out in the letter of 17 December 2015 and is based upon the difference between the amounts the Solicitor charged the clients and the amounts the respondent's expert (Mr Walsh) assessed as the fair and reasonable costs in respect of the work performed.
3. The Solicitor entered into fixed fee agreements with the three clients. The respondent accepted that at the time the fixed fee agreements were entered into the amounts stated in those agreements "is not an issue". However, the respondent stated that when all three matters were concluded the Solicitor "knew or ought to have known that the work carried out by you could not have warranted the fixed costs set out in the costs agreements".
4. The basis for the respondent's conclusion that the fixed costs were "not warranted" was the fact that the Solicitor had a fiduciary duty to charge only fair and reasonable costs. The respondent went on to say that the Solicitor cannot charge "grossly excessive costs that bear no relationship to the work carried out".
5. Further, the respondent conceded that at the time the Solicitor gave the clients their bills, there was "no dispute as to the reasonableness of the costs charged by you". The respondent also stated that it would have become clear to the Solicitor that the costs were grossly excessive upon the "conclusion of all three matters".
6. The respondent has approached the task of assessing whether the Solicitor had overcharged and if so, by what extent, by requesting Mr Walsh to undertake an assessment of the value of the work undertaken by the Solicitor in each of the three matters.
7. The work undertaken by Mr Walsh involved considering the work undertaken by the Solicitor, assessing the amount of time that that work would have taken and applying a dollar value based upon Mr Walsh's assessment that a fair and reasonable hourly rate during the time when the work was undertaken was $300.00 per hour plus GST. The resulting estimates were, as is apparent from earlier paragraphs in these reasons, lower than the amount of the fixed fee set out in the fixed fee agreements in some cases but not all. For example, in two cases the value of the work undertaken was assessed at a higher figure than the amount of the fixed fee.
8. In respect of Mr Chen and Mr Yun, it is clear that the explanation for the amount of work actually undertaken being substantially reduced after entry into the fixed fee agreements was acknowledged by the respondent. For example, in the respondent's letter of 17 December 2015 the respondent stated that in Mr Chen's case the first indictable charge was withdrawn and he pleaded guilty to a lesser summary offence. In the case of Mr Yun, it is acknowledged that some weeks after entering into the fixed fee agreement he pleaded guilty. An appeal against the severity of sentence was proposed but then dropped.
9. It is clear that a solicitor is entitled to charge fees which are fair and reasonable in the circumstances (Veghelyi at 6.33). What is fair and reasonable must be determined following an appropriate analysis of the practice of the particular solicitor (Veghelyi par 8.16). The assessment must have regard to the fact that a solicitor has a fiduciary duty to the client, which requires the solicitor to act in the best interests of the client and to avoid conflicts of interest between the client's interest and those of the solicitor (see Bechara at 796).
10. We are of the view that the effect of the fixed fee agreements was that the Solicitor became obliged to perform as much of the work described in the fee agreements as instructed by the client and consistent with the Solicitor's duty to act in the best interest of the client. In return the Solicitor was entitled to keep the agreed fixed fee. In Quick on Costs (a loose leaf service referred to in Bechara) the author says in relation to fixed fee agreements the following: Lawyers accept the risk as to the amount of legal costs by providing fixed fees. This removes client anxiety about costs escalation and thus can have significant benefits in terms of marketing and differentiation, but outside cottage conveyancing, summary criminal proceedings, wills or other commoditised work, few firms seem willing to accept the greater risk
11. The author in Quick on Costs goes on to refer to the advantages and disadvantages of fixed fee agreements in these terms: Advantages Disadvantages • Certainty for client of amount of fee • Higher risk for lawyers • Necessitates efficiency by the lawyer • Investment costs (IT, knowledge management) necessary on part of lawyer • Aids differentiation of lawyer • Requires skills in estimating • No limit on profit margin • Needs good definition in retainer of scope of work • "Risk premium" can be charged/justified • Removes costs tensions from the lawyer-client relationship • Easy to administer

1. In the case of the Solicitor, the respondent accepted the fairness and reasonableness of the relevant fixed fees at the time the fee agreements were entered into. As stated above, the respondent's letter of 17 December 2015 states that it is "not an issue" that the Solicitor entered into fixed costs agreements for the amounts stated in those agreements (par 15 of the letter). The letter also states in par 22 that at the time the Solicitor gave the clients the bills there was no dispute as to the reasonableness of the costs charged by the Solicitor.
2. However, the respondent reached his decision that the Solicitor had overcharged based upon a comparison of the amount of the fixed fee with the amounts assessed by Mr Walsh as to the value of the work performed.
3. In our view that analysis did not take into account all the relevant circumstances as required by Veghelyi. In particular, the following circumstances were not taken into account: 1. The respondent's conclusions set out in pars 15 and 22 of the respondent's letter of 15 December 2015 - referred to above; and 2. The "advantages" and "disadvantages" described above in Quick on Costs. In particular whether "a risk premium" was justified.
4. Mr Walsh's report stated that he had carefully taken into account the Solicitor's submissions that at the time she entered into the fee agreements she did not know precisely the extent of the work to be performed and that, nevertheless, she was willing to take the risk that the fixed fee would provide to be profitable. However, the assessment made by Mr Walsh as to the value of the work undertaken does not, in our view, appear to include consideration of that circumstance (namely that at the time she entered into the fee agreements she did not know the extent of the work but that she was, nevertheless willing to take the risk that the fixed fee would be profitable).
5. Further, it is our view that the respondent has not established to our satisfaction that, in the event that the actual work required to be performed became significantly less than the scope of work identified in the fixed fee agreement, the Solicitor had a duty to return surplus funds (being the difference between the fixed fee and the value of the work actually performed). The particular circumstances of this case are that it was common ground that the funds obtained by the Solicitor were not supplied by the clients but were supplied by operation of the CAR Act. The question arose as to the identity of the appropriate recipient of surplus funds. We are not satisfied that such a duty existed in this case given the respondent's concessions in favour of the Solicitor set out in pars 15 and 22 of the respondent's letter of 17 December 2015.
6. In Bechara the court referred to factors or circumstances to be considered in assessing what in a particular case are fair and reasonable costs. These factors are extensive and the court stated: But in the end, the quantification of costs remains an exercise in judgment, upon the result of which minds may legitimately differ
7. In the respondent's letter of 17 December 2015 the respondent acknowledged that he had accepted that the Crime Commission had entered into the consent orders permitting the release of the funds to be paid to the Solicitor without making any enquiry as to how those costs were calculated. The respondent quoted an extract from the report of the PIC. That extract stated that "in each case the amount was not properly assessed and grossly exceeded the expenses actually incurred for the legal work undertaken" (see par 30 of the letter of 17 December 2015). However, there is no evidence to the effect that the Solicitor did not attempt to calculate the value of the work to be performed.
8. In our view, the approach taken by the respondent did not properly take into account all relevant circumstances. A key circumstance was the nature of a fixed fee agreement and the factors which are relevant in assessing whether overcharging has occurred in circumstances where no criticism is made of the fixed fee at the time of entry into the fixed fee agreement.
9. It is our view that the respondent did not reach the correct and preferable decision for the reasons described above and that the correct and preferable decision was that the complaint should have been dismissed.
10. It is our view that the decision of the respondent should be set aside and an order will be made accordingly.
11. The applicant indicated at the hearing that in the event she was successful, a costs order would not be sought.
12. We referred earlier to the fact that at the hearing we indicated to the parties that we would initially publish the reasons for decision to the parties only and then consider, in the light of submissions from the parties, whether any part of the reasons for decision should be redacted to preserve client legal privilege. Accordingly, our orders require the parties to advise the Tribunal whether they object to the reasons for decision being published in its current form. If they do, we will relist the matter for the purpose of only considering whether any part of the reasons for decision requires an order under s 64 of the NCAT Act.

Orders

1. The Tribunal makes the following orders: 1. The decision of the Respondent the subject of these proceedings is set aside; 2. The complaint against the Solicitor is dismissed; 3. Pursuant to section 64(1)(b) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) the Registry and the parties are prohibited from publishing or broadcasting the reasons for the orders made in these proceedings until further order; 4. Notwithstanding order 3 above, the Registry is directed to forward a copy of these reasons for decision to the parties; 5. The parties are directed to make any submissions in writing that they wish to make within 14 days as to whether the Tribunal should make any order under section 64 of the NCAT Act by which any evidence recorded in these reasons for decision is redacted or otherwise restricted from publication; 6. If neither party makes a submission contemplated by direction (5) above, the Tribunal will publish these reasons for decision and if the parties do not communicate with the Tribunal within 14 days the Tribunal will publish these reasons for decision; 7. If either party makes a submission applying for an order to be made under section 64 of the NCAT Act the Tribunal will list the proceedings for a hearing on that issue; and 8. Notwithstanding order 3 the parties may provide a copy of these reasons for decision to their respective legal advisors.

Addendum

1. Since this decision was published to the parties on 13 February 2017, the parties have responded to the Tribunal's directions by stating that neither party wishes to make a submission engaging the provisions of s 64 of the NCAT Act. Accordingly, we propose to publish the decision in its unredacted form. We make the following order: 1. The Registry is directed to publish this decision without any redaction. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 March 2017