Woods v The Legal Ombudsman [2004] VSCA 247

Woods v The Legal Ombudsman [2004] VSCA 247 - VSCA 2004 case summary — Zoe

[13]

The Tribunal was satisfied of the following matters. Before August 1998, Zhai had engaged a firm of migration agents to obtain for him a business visa known as the 457 business migration visa ("the 457 visa"). This application was unsuccessful at first instance and an appeal process had been filed. At about this time, Zhai asked Li to assist him in taking steps necessary to obtain such a visa. Li spoke only little English and read even less. Zhai could not speak or read any English - that was common ground. On 26 August 1998, Li responded to an advertisement placed in a Chinese newspaper by Law Partners through which the firm offered to provide legal advice and related services to persons seeking to obtain a visa for entry into Australia. The advertisement directed the reader to speak to Huang, which Li did. She told him that Zhai was an applicant for a 457 visa, that the application had been handled by a migration agent, but that it had been rejected by the Department and that an appeal process had commenced. She also told him that Zhai had previously entered Australia under another visa, known as a 456 visa, and had acquired a company, Herald Enterprises International Pty Ltd ("Herald"), through which he conducted the Old Beijing Restaurant in Carlton. Huang was derisive of Zhai's migration agent and advised Li to engage Law Partners to obtain the 457 visa for Zhai. He told Li that Law Partners would have to submit a new application for such a visa before the appeal on the initial application concluded. He said that unless this was done Zhai would have no hope of obtaining the visa sought. He further told her that Zhai would have to pay Law Partners, by way of fees for its services, $1,500 at the outset, $2,400 for preparation of the documents and another $2,400 when the documents were submitted to the Department. He said that the fees would be put into a fund and if the application was unsuccessful they would be refunded to Zhai. He said it would take about two months to prepare and submit the necessary documentation.

[20]

On 31 October 1998 Zhai arrived in Melbourne and on 2 November 1998 he and Li met Huang and Wu. Huang effectively pressured Zhai to purchase a business in Australia, telling him that the ownership of a business would assist him to secure the visa. He said that there were a number of "profitable" businesses available for acquisition. In the course of the next few days Huang and Wu showed Zhai and Li a number of businesses which they said were available for purchase, including a café in William Street Melbourne, known as the Paragon Café. Huang told Zhai that its takings amounted to $9,000 per week and that its annual profit was $170,000. He said that the purchase price was $250,000, reduced from the earlier price of $270,000. Huang and Wu recommended to Zhai that he purchase the business. On 5 November 1998, Zhai, Li and her son (Louie) again attended the offices of Law Partners where they were introduced to a person who was said to be Chang, but who was, in fact, Chang's brother, Webber Chang ("Webber"). (The Tribunal found that Zhai did not meet Chang until after 5 November 1998.) They were told by Huang that Chang was interested in purchasing the Paragon Café with Zhai and in conducting it with him in partnership. Huang then produced the contract of sale for the Paragon Café and sought to persuade Zhai to sign it as a purchaser. Huang told him that once the contract was signed and $180,000 paid by way of deposit, the business would be handed over to the purchasers on the following day. He said the balance of $70,000 would be raised by way of loan on the security of the business. Huang told Zhai that once the business was purchased, the 457 visa application would be ready for lodging. He emphasised that he had to sign the contract if the 457 visa application was to be successful. Zhai later told Li: "I could not but sign". In the result, the contract was signed by Zhai and Webber at the meeting of 5 November. The vendors, who were also present at Law Partners, said that before they would sign the contract they wanted to speak to their solicitors (in the absence of Zhai and Li). While Li and Zhai were out of the room the vendors apparently spoke with their solicitors about the transaction and, as a consequence, the contract was amended to show that the full purchase price of $250,000, and not just $180,000, had to be paid to them before they would surrender possession, and Zhai and Webber were required, on their return to the room, to initial the amendments. Geary claimed before the Tribunal that he had prepared the contract of sale, but this evidence was rejected, the Tribunal finding that it was Huang, and not Geary, who prepared the contract**.**

[21]

I interrupt the chronological analysis of the facts found by the Tribunal by interpolating that, as I will mention later in more detail, it was the legal practitioners' case before the Tribunal that Huang did not introduce Zhai to the Paragon Café business. Rather, they claimed, it was Zhai and Chang who found the business and negotiated the terms of its purchase and then came to Law Partners for assistance in finalising the transaction. The legal practitioners contended that when they were first consulted by Zhai and Chang they advised them that the vendors had made a material misrepresentation about the financial viability of the business and that it was likely to prove to be a financial disaster. They also contended that because Zhai and Chang were "late" in instructing them to act in the transactions, there were only a limited number of things they could do to assist them but that they would, nevertheless, be prepared to do what they could to protect their interests provided Zhai and Chang agreed not to hold them legally liable for any loss that may be suffered as a result of the acquisition. Consistently with this approach Geary produced a letter, dated 5 November 1998, for counter-signature by Zhai and Chang by which they engaged Law Partners to act for them in the acquisition of the Paragon Café. The Tribunal found that this self-serving letter, by which the legal practitioners sought to extricate themselves from potential liability to their clients in respect of their failure to investigate properly the Paragon Café business before its purchase by Zhai and Chang, contained a number of falsehoods to which I will refer later. It also found that, contrary to the claims of the appellant and Geary, no explanation or advice was given by them to Zhai and Chang at the meeting of 5 November 1998 about the terms of the contract relating to the Paragon Café. The Tribunal also found that Zhai was never told by anyone from Law Partners that he had effectively paid money to Huang, as well as Law Partners, for the visa application and that there were no migration requirements that Hua Fu be incorporated, or that Law Partners have an interest in the company. The Tribunal concluded that the setting up of Hua Fu was unnecessary for the purpose of the 457 visa application.

[42]

It is plain enough that the first of these conditions was satisfied here. In the normal course of events one would have expected the respondent, rather than the appellant, to call Zhai as a witness, given that he was a complainant and was present at a number of the meetings with the various representatives of Law Partners as I have explained. But in my view the second and third conditions were not satisfied. As to the second requirement, Zhai's evidence would have been only of marginal value in the sense that it would have added little to what Li, Chang, Webber and the documents that were tendered by the respondent disclosed. The "disputed matters" referred to earlier, and about which the appellant claims Zhai could have spoken, were established by the respondent by other evidence. Thus, on the question whether the appellant met Zhai in August 1998, as he originally claimed before the Tribunal, the respondent relied on Zhai's passport, to which I have referred, which showed that he was not in Australia after 11 August (until 31 October 1998). The respondent also relied on Li's evidence as to when she first brought Zhai's business to Law Partners and on the lack of any credible file note of Law Partners to support the appellant's case on this issue. In any event, the Tribunal simply disbelieved the appellant in his claim that he met Zhai in early August 1998. As to the "disputed matters" in paragraphs (b), (c) and (e) the key issue that they raised was whether anyone from Law Partners ever advised Zhai directly, or through Li, that he should seek independent legal advice as to the transactions in question. It is plain enough that most of the discussions with Law Partners were undertaken by Li, on Zhai's behalf, and on the few occasions when Zhai was present at Law Partners, Li was also there and her evidence, which I have already noted, was that no such advice was tendered to her or Zhai. Moreover, it was common ground, as I have said, that Zhai did not speak or read English and, to the extent that advice that independent legal advice should be sought by him was contained in the correspondence and the Shareholders Agreement, by itself, it would have had no relevant meaning to Zhai. And, as Li said, that advice was never drawn to her attention (or that of Zhai). To a large extent Li's evidence was corroborated by Chang. And as to the circumstances leading to the purchase of the Paragon Café - a "disputed matter" referred to in paragraph (d) above - again, the person essentially involved in this was Li and she gave evidence on this issue. I note for completeness that it borders on the inconceivable that Zhai would have given evidence on the so-called "disputed matters" in the appellant's favour.

[83]

In any event, I do not accept that the appellant was subjected to unfairness in the five ways put by counsel. As to the first alleged unfairness, as I later explain more fully,´ the various instances of misconduct were not "combined" in the charge but represented a course of conduct, in the sense to which I have referred, with each such instance being identified in the fifteen paragraphs which effectively particularised the misconduct charged by Charge 2. As to the second complaint, it is true that the Tribunal dealt with a number of the sub-paragraphs of Charge 2 in groups, but that was done for convenience and accorded with commonsense since the alleged acts, or failures to act, in these paragraphs had a common factual thread. For example, paragraphs (a)-(e) of Charge 2 were properly looked at together, given that they concerned the failure to supervise Huang properly. The third complaint is also without merit, since, at the relevant time, each of the appellant and Geary personified and had authority to bind Law Partners and the other partner while acting in the course of the practice. The fourth complaint, which alleges repetition in a number of paragraphs, also lacks substance, because, fairly read, each alleges a discrete instance of misconduct. In any event, to the extent that it could be said that there was some repetition in those allegations, no unfairness followed to the appellant because any repetition did not give rise to an increase in the penalties that were imposed. The Tribunal said that the penalties were imposed on the basis that misconduct was established in reliance on a course of conduct. As to the fifth complaint, it must have been apparent to the appellant that the claim in Charge 2 that all of paragraphs 1-76 of the factual particulars constituted the basis of each of the various instances of misconduct alleged, was plainly wrong. In any event, nothing turns on this deficiency given that, as I have already noted, the appellant's counsel before the Tribunal saw no difficulty in understanding the basis on which the respondent sought to make out her case.

[110]

The Tribunal delivered its findings on the factual issues and its decision on whether any and, if so, what charges had been made out, on 8 May 2002. It then adjourned the questions of penalty and costs for approximately 14 days to enable the parties to consider the findings and make submissions to it on those matters. During this period the parties filed with the Tribunal short submissions on these questions and, in due course, spoke to them. The Tribunal then handed down its considered decision on these issues on 25 June 2002. Relevantly, it ordered that the three practitioners, jointly and severally,[49] pay the respondent's costs of the hearing on an indemnity basis, the amount of which was fixed by the Tribunal after it made a reduction in the entitlement by 10 per cent to reflect the costs associated with hearing and considering Charge 3, which the Tribunal found was not proved. The appellant attacked the costs orders under cover of grounds 38 and 39 on two principal grounds. First, it was said, the Tribunal erred in determining that the Legal Ombudsman's costs be paid on an indemnity basis because the hearing involved issues of importance and complexity. Mr. Brett submitted that complexity of a matter cannot justify an order for indemnity costs. It was said that the solicitors were entitled to defend themselves against the very serious charges of misconduct and should not suffer a costs penalty in doing so merely because the Legal Ombudsman succeeded against them. It was also said that, in any event, the issues raised at the hearing were of a kind normally dealt with by the Tribunal and could not be properly characterised as "important and complex". Secondly, it was said, the order that the legal practitioners be jointly and severally liable for the legal costs of the respondent was arbitrary and involved a failure to consider the appellant's involvement in the conduct charged and whether, at least, some of the costs should be borne severally by the other practitioners. It was claimed that the Tribunal should have made separate costs orders in respect of each practitioner.

[114]

It was only after protracted evidence and cross-examination on this issue that it was established to the Tribunal's satisfaction that such a claim was false in a number of very important respects. Thus, as I have noted, in the letter of 5 November 1998 from Law Partners, written by Geary to Zhai, passages appear which are clearly aimed at conveying the following false impressions. First, that Zhai had come to Law Partners with late instructions, that is to say, after the contract in question had been negotiated and entered into by him. Secondly, because of this the firm might have difficulty in extricating him from the problems and potential losses arising from his entry into the contract and, although it would do its best for Zhai in that regard, it was not prepared to be held responsible for any losses suffered by him from the transaction. The Tribunal, however, found, as I have said, that the claims in the letter as to "late instructions" and the consequential claims, were false, and it is apparent that, in the circumstances, what was sought to be "set up" by that letter was a false defence to a possible claim by Zhai against Law Partners in negligence. Although, as I have noted, this letter was written by Geary, the appellant adopted it and pressed this falsehood as is evident from the documents that were placed before the Tribunal. Hence, the artificial minutes of the supposed meeting of 20 November 1998 to which I have referred. The so-called minutes show, for instance, that Huang told Zhai and Chang to seek independent legal advice, but the Tribunal found that this, too, was false. Mr. Lacava submitted, with some justification, I think, that these minutes are an example of the appellant creating, or taking part in the creation of, a false self-serving document for the purpose of exculpating Law Partners. And as Li and Chang said, they attended Law Partners on 20 November 1998, essentially to sign the Shareholders Agreement, but that there was no formal meeting between the parties as was contended for by the appellant.

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Judgment (152 paragraphs)

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