In Legal Services Commissioner v Wen [2016] NSWCATOD 36 (4 April 2016), file number 1520106, the Tribunal, as presently constituted, found a legal practitioner, Ya Nan Wen, guilty of professional misconduct. We made disciplinary orders, the primary one being suspension for three months.
Mr Xie is the client whose complaint to the Legal Services Commissioner led the Commissioner to take disciplinary action in the Tribunal against the respondent. Mr Xie has now applied to the Tribunal for a financial compensation order in respect of the conduct that gave rise to the finding. This decision deals with that application.
Material before the Tribunal: After the delivery of the Tribunal's disciplinary decision on 4 April 2016, the Tribunal's List Manager gave detailed directions in respect of the conduct of the compensation application (file no 1520271). Mr Xie appeared without representation. On 31 March 2016, his solicitors had filed a notice of ceasing to act. A legal representative appeared on behalf of the respondent. Mr Xie filed a Centrelink medical certificate on which he sought to rely in support of the health consequences for him of the respondent's misconduct.
The respondent was directed to file any material on which he sought to rely in opposing the compensation claim on or before 27 April 2016. He did so on 23 May 2016. After receipt of Mr Wen's affidavit on 23 May 2016, the Tribunal, as presently constituted, directed Mr Xie on 14 June 2016 to file and serve by 23 June 2016 further submissions specifying the amounts of compensation requested. Mr Wen was directed to file and serve any submissions in reply by 30 June 2016.
Governing Law: New South Wales law has provided for some time that a complainant or another person who is the client of the legal practice to which the respondent practitioner belongs may request compensation in respect of loss suffered. At the time of the conduct the subject of the disciplinary proceedings (April to June 2014), such a right was given by s 570 of the Legal Profession Act 2004 (the LPA 2004), and the Tribunal's power to order compensation was given by s 571.
Mr Xie made his complaint to the Legal Services Commissioner on 22 August 2014. He first referred to the issue of personal financial compensation in a letter to the Commissioner dated 14 December 2014 one sent to the Commissioner during the Commissioner's investigation of Mr Xie's complaint. The Commissioner made his application to the Tribunal for disciplinary findings and orders on 10 June 2015. There is no reference in that application to any request for financial compensation by or on behalf of Mr Xie.
However, such a request is found in the affidavit sworn by Mr Xie for those proceedings, filed 9 December 2015. The affidavit was prepared by Mr Matthew Huong Son, solicitor, Goodwin & Co Lawyers, 15 Castlereagh St, Sydney. The Tribunal's file in relation to the compensation claim was raised on 24 December 2015 (file no 1520271).
The LPA 2004 had been repealed on 1 July 2015 and the Uniform Law came into force on that date. The Uniform Law contains broadly similar provisions to those previously found in the LPA 2004, allowing for requests for financial compensation and giving the Tribunal to make orders. See generally, ss 306-314.
While Mr Xie raised the issue of compensation in general terms in his letter of 14 December 2014, it is not accompanied by any specific words making a request for an order. The affidavit of 9 December 2015, is framed in the terms of an application for such an order.
Our conclusion is that the request with which we are dealing is as contained in the affidavit dated 9 December 2015 (which gave rise in turn, as previously noted, to the opening of a compensation claim file by the Registry on 24 December 2015). We will therefore treat as the governing law the Uniform Law being the law in force at the time of the making of the application. The matter is of some importance due to a shift in the language used in the Uniform Law as compared to the LPA 2004 in respect of the scope of a claim, which we consider later in these reasons.
Section 307 of the Uniform Law provides that:
307 Request by complainant for compensation order
(1) A complainant may request-
(a) the designated local regulatory authority; or
(b) the designated tribunal in proceedings under Division 3 of Part 5.4-
to make a compensation order.
(2) A compensation order may be requested in respect of loss suffered by -
(a) the complainant; or
(b) another person who is a client of the respondent -
(or both) because of the conduct the subject of the complaint. The complainant, or other person, suffering the loss is referred to in this Part as an aggrieved person.
(3) A complainant who makes such a request must describe the loss suffered by the aggrieved person and the relevant circumstances.
(4) A request may be made in the complaint or to the designated local regulatory authority at any time after the complaint is made and before it is disposed of.
(5) However, a request may not be made after proceedings have been initiated in the designated tribunal with respect to the complaint unless the designated tribunal grants the complainant leave to make the request.
Leave to Proceed: As was previously the case under the LPA (s 570(4)), it will be seen that s 307(5) of the Uniform Law provides that a request for a financial compensation order may not be made after (disciplinary) proceedings have been commenced unless the Tribunal grants the complainant leave to make the request.
As we have noted, the question of compensation was raised in general terms by Mr Xie in his letter of 14 December 2014 to the Commissioner. But, as previously noted, we have concluded that the request was formally made by means of the affidavit of 9 December 2015 after the commencement of the (disciplinary) proceedings. Mr Wen's affidavit of 23 May 2016, prepared with legal assistance, did not refer to the leave question. It proceeded, as we read it, on the assumption that the claim was in order. We have decided not to invite submissions from Mr Wen on this point. We are satisfied that Mr Xie foreshadowed his intention in his letter of 14 December 2014, well before the disciplinary proceedings were initiated, and that letter was made known to the respondent as part of the Commissioner's investigation. In those circumstances we consider that the respondent had reasonable notice that a formal request might be made in due course. We grant leave for the request to proceed.
Hearing on the Papers: While the ordinary rule is that an oral hearing should be held in a matter of this kind (Civil and Administrative Tribunal Act 2013 (NCAT Act), s 50(1), the Act allows for that rule to be dispensed with in certain circumstances (s 50(2)) subject to the giving of notice to the parties of such an order and an opportunity to make submissions (s 50(3)). The Tribunal notified the parties in its letter of 14 June 2016 that it proposed to determine the matter on the basis of the written submissions without holding an oral hearing, and invited the parties to make any submissions as allowed by s 50(3) of the NCAT Act. There have been no submissions on this point.
We are satisfied that an order dispensing with a hearing, pursuant to s 50(2), is appropriate as the issues for determination can be adequately determined in the absence of the parties by considering the material lodged with the Tribunal.
Nature of Compensation Orders, and Prerequisites: Section 308 of the Uniform Law provides that:
308 Nature of compensation orders
(1) A compensation order is an order to compensate the aggrieved person for loss suffered because of conduct that is the subject of a complaint and consists of one or more of the orders referred to in subsections (2), (3) and (4).
(2) A compensation order may include an order that the respondent lawyer or law practice pay to the aggrieved person, by way of monetary compensation for the loss, a specified amount not exceeding-
(a) where the compensation order is made by the designated local regulatory authority- $25,000; or
(b) where the compensation order is made by the designated tribunal- $25,000 or a greater amount agreed to with the consent of both the complainant and the respondent lawyer or law practice.
(3) A compensation order may include an order that the respondent lawyer or law practice cannot recover or must repay the whole or a specified part of the amount charged to the aggrieved person by the lawyer or law practice in respect of specified legal services. An order under this subsection is effective-
(a) to prevent recovery of an amount even if proceedings to recover the amount (or any part of it) have been commenced by or on behalf of the lawyer or law practice; and
(b) to require repayment of an amount even if a court has ordered payment of the amount (or an amount of which it is part) in proceedings brought by or on behalf of the lawyer or law practice.
(4) A compensation order may include an order discharging a lien possessed by the lawyer or law practice in respect of a specified document or class of documents.
(5) A compensation order may specify the person to whom monetary compensation is payable, whether to the aggrieved person or to another person on behalf of the aggrieved person.
Section 309 of the Uniform Law provides relevantly:
309 Prerequisites for making of compensation orders
(1) Unless the complainant and the respondent lawyer or law practice concerned agree, a compensation order is not to be made unless the designated local regulatory authority or designated tribunal (as the case requires) is satisfied that-
(a) the aggrieved person has suffered loss because of the conduct concerned; and
(b) it is in the interests of justice that the order be made.
(2) A compensation order is not to be made in respect of any loss for which the aggrieved person has received or is entitled to receive-
(a) compensation under an order that has been made by a court; or
(b) compensation paid or payable from a fidelity fund of any jurisdiction, where a relevant claim for payment from that fund has been made or determined.
(3) Subsection (2) does not apply where a fidelity authority is seeking a compensation order under its subrogation to the rights and remedies of a claimant (see section 246).
Section 310 of the Uniform Law deals with enforcement of compensation orders. Section 311 of the Uniform Law provides that the recovery of compensation under these provisions does not affect any other remedy available to the aggrieved person, but any compensation so awarded must be taken into account, and appropriate adjustments made.
Compensation Sought: In his affidavit sworn 9 December 2015, Mr Xie listed the following claims:
1. Legal fees paid to the respondent's firm, WB Legal, for a total sum of $5,000, invoices provided, evidence of payment provided as to $4000, and explanation that as the first payment of $1000 was made in late 2013, more than 2 years prior to the date of this affidavit, 'I could not retrieve a record of payment from my online banking'.
2. Professional services fee paid to ACPA Business Consulting for preparation of an external audit report in connection with the dispute in which WB Legal had been acting for him, $3850, memorandum of fees provided, no evidence of payment.
3. Legal fees paid to Godwin & Co in relation to 'my professional negligence claim' against the respondent, $2640, invoices dated October and November 2014 provided, evidence of payment provided.
4. Legal costs that 'I agreed to pay to Mr Luo pursuant to the terms of the Notice of Discontinuance, annexed to this affidavit, for a sum of $15,000'.
In the update filed 23 June 2016, Mr Xie he gave his total as $22,000, made up of:
1. Goodwin and Co Lawyer invoices x 2 (for work done in October and November 2014), total fees and disbursements, $2640.00, resubmitting the invoices annexed to his affidavit of 9 December 2015, under claim (c).
2. Compensation that is 'just' in the case, unquantified.
3. Compensation fee to Link Lawyer, unquantified.
4. Payment to ACPA for auditing fee, a reference to his accountant, specified in his affidavit of 9 December 2015, claim (b).
The above items are connected to each other in the following way (this account is derived from the evidence before the Tribunal in the disciplinary proceedings and the evidence supplied by Mr Xie and Mr Wen in their affidavits in connection with these proceedings):
1. Late in December 2013, Mr Xie sought legal advice from WB Legal over losses he claimed to have suffered as the result of the conduct of a business partner, Mr Luo. In or around February 2014 WB Legal issued in the Burwood Local Court a civil claim on Mr Xie's behalf against Mr Luo. Mr Xie had dealt initially with the principal of WB Legal, Mr William Wang. Following receipt of Mr Luo's defence, he was advised to apply for the striking out of parts of it. Mr Xie agreed. Mr Wang delegated the handling of this matter to the respondent, Mr Wen, an employee solicitor then in his first year in practice. Our disciplinary decision gives a fuller account of the steps taken by Mr Wen to prepare the strike out motion, and to file material in support by the date given by the Court, Sunday 25 May 2014. This was not a business day, with the result that Monday 26 May 2014 was, we consider, reasonably treated by Mr Wen as the due date.
2. Mr Xie's affidavit in support of the motion had not been settled as at the evening of 25 May 2014. Mr Xie was in China. A draft had been sent to him. There had been telephone discussions between him and Mr Wen during the day as to additional information that was required. This is explained more fully in our disciplinary decision.
3. Ultimately Mr Wen did not get the further information sought, and went ahead on the morning of 26 May to insert a signature purporting to be Mr Xie's in the draft affidavit and signed as the purported witness. These forgeries, compounded by the lodgement of a forged affidavit with the Court later on 26 May 2014, gave rise to the finding of professional misconduct.
4. The Court was not aware of these falsities when it dealt with the strike out application on 22 June 2014, and dismissed it. In early July Mr Xie sought advice as to the position he now found himself from another lawyer, Mr Leung of Link Lawyers. This is the foundation of his claim for the costs incurred in respect of Link Lawyers. But no detail of those costs or whether they have been paid is found in the material filed.
5. WB Legal continued to prepare for the hearing of Mr Xie's claim. There was a dispute between Mr Xie and the firm over the preparation and filing of his evidence of financial loss and who to engage to provide that evidence. Mr Xie wished to use ACPA Business Consulting. Mr Xie's claim for costs incurred in relation to audit work done by ACPA Business Consulting refers to this aspect of the case.
6. The differences between Mr Xie and the firm over the obtaining of evidence of loss, together with Mr Xie's seeking of advice from Mr Leung, were among the reasons that led the firm to terminate its professional relationship with Mr Xie. This occurred by way of a letter dated 23 July 2014 that was signed by Mr Wen.
7. Mr Xie's claim for recovery of the professional fees paid to WB Legal derives from his dissatisfaction with their work, and the wrongfulness of Mr Wen's conduct in falsifying the affidavit and lodging false process.
Mr Xie inspected the file at the Burwood Courthouse on or about 3 August 2014. He discovered the lodgement of the false affidavit in support of the unsuccessful strike out motion, and on 22 August 2014, he lodged his complaint with the Commissioner. Mr Son of Goodwin & Co was then acting for him. On 22 September 2014, Mr Xie discontinued the proceedings and the notice of discontinuance was lodged on his behalf by Goodwin & Co. It contained consent orders under which Mr Xie agreed to pay the Mr Luo's legal costs of $15,000. The terms provided for payment by instalments, which if paid as provided would have resulted in full payment in or around February 2016. This took into account the interest element. Mr Xie's claim for the professional fees that he incurred in retaining Goodwin & Co relates to a later period, namely October and November 2014. He describes these as fees incurred in connection with obtaining advice regarding 'professional negligence'.
Tribunal Discretion: As provided by s 309(1) of the Uniform Law, the Tribunal must be satisfied as to two matters: (1) that the applicant has suffered 'loss because of the conduct concerned'; and (2) that is in the 'interests of justice' for the loss to be subject of a compensation order. The second element is expressed in the same terms as its equivalent in the LPA 2004.
Scope of Claimable Loss: Arguably, the first element is narrower than the LPA 2004 formulation, and is a reversion to a test closer to the one that is found in the Legal Profession Act 1987 (LPA 1987).
In Council of the Law Society of New South Wales v Vaughan (No. 2) [2011] NSWADT 260, the Tribunal said:
38 As just indicated, sections 570(1) and 571(1) [of the LPA 2004] describe the 'loss' for which a complainant may claim compensation under the former provision as the loss suffered by the complainant, or by another 'aggrieved person', because of 'conduct that is the subject of the complaint'. In addition, the phrase 'conduct the subject of the complaint' appears in section 504(3)(c).
39 According its natural interpretation, this phrase identifies the scope of the loss for which a complainant may seek compensation as any loss caused by the conduct of the relevant legal practitioner about which the complainant has complained in his or her complaint, made under section 503(1). This conduct may differ materially from such conduct of the practitioner that the Tribunal subsequently finds to have been alleged in the disciplinary application and established by the evidence, and to amount to professional misconduct and/or unsatisfactory professional conduct. Typically, as in this case, the conduct of a practitioner about which a complainant complains covers a wider range of acts and/or omissions than the conduct that is ultimately alleged, proved and held to constitute either or both of these forms of improper conduct.
40 In section 171D of the Legal Profession Act 1987 ('the LP Act 1987'), which contained provisions similar in general terms to sections 571 and 573(1)(a) of the LP Act 2004, the conduct of the respondent practitioner in relation to which a compensation could be made was defined in a significantly different way. The relevant parts of section 171D stated: -
(1) If, after it has completed a hearing relating to a complaint against a legal practitioner, the Tribunal is satisfied that the legal practitioner is guilty of unsatisfactory professional conduct or professional misconduct and that the complainant has suffered loss because of the conduct concerned (emphasis added), the Tribunal may do any one or more of the following to compensate the complainant: ...
(d) order that the legal practitioner pay to the complainant by way of monetary compensation for the loss the amount specified in the order.
In Council of the Law Society of NSW v Doherty (No. 3) [2011] NSWADT 284, the Tribunal also addressed the interpretation to be given to the words used in the LPA 2004, and agreed with the above interpretation. It said:
43 As far as we are aware, none of the comparatively few decisions that have been given on compensation orders under the LP Act 2004 has examined the implications of this change in the statutory definition of the 'loss' for which a complainant may compensation. We see no reason to doubt the Tribunal's ruling, in paragraph [90] of its decision in Hill [Law Society of New South Wales v Hill [2002] NSWADT 190], that the 'loss' for which a complainant could obtain compensation under section 171D (1) of the LP Act 1987 was confined to his or her loss caused by 'conduct that is both particularised in the complaint and found to constitute unsatisfactory professional conduct or professional misconduct by the Tribunal'. But the phrase used to define compensable 'loss' in the LP Act 2004 - namely, the loss suffered by the complainant (or another 'aggrieved person') 'because of the conduct the subject of the complaint' - has in our opinion the different, and normally wider, connotation that we have endeavoured to formulate above at [39]. It is, as we said there, 'any loss caused by the conduct of the relevant legal practitioner about which the complainant has complained in his or her complaint'.
In our view, the Tribunal should now adopt an interpretation that is closer to that which was applied under the LPA 1987. The scope of a claim under the Uniform Law is confined to 'loss because of the conduct concerned' as distinct from loss because of 'conduct that is the subject of the complaint' (the LPA 2004). Our view is that the expression 'conduct concerned' does not embrace the entirety of the matters traversed in the original letters of complaint, but is to be construed as the conduct that was the subject of adverse findings in the disciplinary proceedings. There needs to be a reasonable causative link between the proven unsatisfactory professional conduct or the proven professional misconduct and the awards of compensation made in the compensation orders.
While an expansive interpretation was seen as open in Doherty (having regard to the broader wording of the LPA 2004), we think its ultimate approach to the claims for compensation before it was along the lines we prefer. In that case the Tribunal considered seven items of claim, misappropriation being the key misconduct (the principal amount misappropriated had been paid out already). The Tribunal granted the client the following compensation: (1) interest in respect of the misappropriated sum; (2) costs charged to the complainant for certain commercial advice (which gave rise to an application for assessment and a review that led to adverse findings); (3) the applicant's costs of preparation of the compensation application; and (4) costs of the proceedings.
However, the Tribunal did not grant the client compensation for the following items: (5) costs for related Equity proceedings in the Supreme Court (the complainant's solicitors had agreed to meet those costs, so any order by the Tribunal became unnecessary); (6) costs in respect of interlocutory matters (summonses); and (7) costs relating to the incorporation and maintenance of the complainant's company (seen as beyond jurisdiction).
In Council of the New South Wales Bar Association v Fitzgibbon (No. 4) [2012] NSWADT 145, the Tribunal ruled (contrary to the respondent's submissions) that the professional costs charged by a practitioner could be the subject of a financial compensation order. In that case the barrister was found guilty of unsatisfactory professional conduct in relation to his conduct of an appeal.
[2]
Consideration
In this case, it is plain that Mr Xie considers that he should be compensated to the extent of: (1) all fees charged by WB Legal; (2) the amount he paid in settlement of the proceedings that he brought against Mr Luo; (3) associated costs (such as the expert accounting report he obtained); (4) the fees incurred in obtaining a second opinion in July 2014 from Mr Leung; and (5) fees incurred in relation to work done by Goodwin & Co.
Item (1): The respondent's conduct in falsifying the affidavit, lodging it and thereby misleading the court, involved grave errors of judgment, as explained in our disciplinary decision. There is a dispute between Mr Xie and Mr Wen as to whether Mr Wen lodged the falsified affidavit at Mr Xie's request (Mr Wen's version) or did so contrary to the express indication of Mr Xie (Mr Xie's version). We did not seek to resolve that dispute in our disciplinary decision, and will not seek to do so now.
In our view, it is not reasonable to attribute the final outcome of Mr Xie's claim to the misconduct of Mr Wen, grave as it was. The issue at the point of Mr Wen's misconduct was the striking out of parts of the defence. Had no material been filed, and no application for an extension of time been made and granted, the motion would undoubtedly have been dismissed. This is not a case of indolence on Mr Wen's part. There was clear evidence in the disciplinary proceedings that Mr Wen had been in regular contact with Mr Xie well before the weekend of 24-25 May 2014 in relation to gathering material for the strike out application. Mr Wen made a grave error of judgment on the morning of 26 May 2014, but that error of judgment was unknown to the Court when it refused the strike out application.
On the other hand, once the falsifications were discovered, Mr Xie had an understandable sense of outrage that his standing was weakened in the eyes of others as a result of Mr Wen's conduct. He had trusted the firm to handle the matter competently and ethically and the firm had failed him in a fundamental way. While the misconduct was not, we consider, legally determinative of the proceedings, we think the fees can properly be regarded as fees wasted and a 'loss because of the conduct concerned'. Further, in our view, it is in the interests of justice that he be recompensed in respect of the full amount proven to have been paid to WB Legal, i.e. $4,000.
The material before us is unclear as to whether there has been any compensation already received in that respect by Mr Xie. We are aware from the material filed that he also made complaints against the principal of WB Legal in relation to the conduct of his case, and it may be that some resolution has occurred in that regard. Because of this uncertainty, we have expressed our final order in terms that relieves the respondent from liability for reimbursing the fees it that has already occurred.
Item (2): We are not satisfied that the ultimate decision to discontinue the legal proceedings can be attributed to Mr Wen's misconduct. We have no material before us that explains the basis of either Mr Xie's thinking in that regard or that of his legal advisers. Mr Xie continued to pursue the case during July after the motion to strike out part of the defence had been lost. Mr Luo's full defence remained on foot and that defence had to be met.
Item (3): Mr Xie's procurement of an expert report from APCA Business Consulting is dealt with in Mr Wen's affidavit filed 23 May 2016. There was no reply to it by Mr Xie in the material filed by him on 23 June 2016. Mr Wen's evidence is that there was a difference of opinion between him and Mr Xie over who to obtain an expert's report from regarding business losses and the content of that report. In our view, this was a cost of a kind that is often incurred in the conduct of litigation and it cannot be attributed to the misconduct that was the subject of our disciplinary findings. Moreover, we have no evidence of payment of the amount billed.
Item (4): Mr Xie went to Mr Leung (Link Lawyers) for another opinion after he had lost the strike out motion. There were discussions between he and Mr Wen over complying with the requirement to file expert evidence of losses. We have no evidence of the fees charged by Mr Leung or their payment.
Item (5): The final matter is the fees billed by Goodwin & Co for work done in October and November 2014. We are satisfied on the evidence that these have been paid in full by Mr Xie (see Mr Xie's (affidavit sworn 9 December 2014). The invoices refer to work done in respect of his 'professional negligence claim'. This is supported by the items of work described in the invoices. While these are costs that might be linked in part to Mr Wen's misconduct, it is apparent from the body of correspondence filed as part of the disciplinary proceedings that Mr Xie's complaints of unsatisfactory performance were wide ranging and were directed at both the principal of the firm, Mr Wang, and Mr Wen.
We have not been provided with any explanation as to whether professional negligence proceedings were pursued, and, if so, their outcome. In our view these fees in their totality cannot be attributed to Mr Wen's misconduct. However, in the interests of justice, a proportion should be allowed, as our findings do support such a case on Mr Xie's behalf as it relates to the misleading of the court and the filing of forged process. We will allow half the amount claimed under this heading.
Other Matters. We note that there is no claim for any costs that may have been incurred in connection with Goodwin & Co's preparation of the affidavit filed 9 December 2015. There is also no claim for the costs of these proceedings up to the time that Goodwin & Co ceased to represent Mr Xie. Accordingly, our orders do not deal with those matters.
Consequently, the order which follows allows two heads of claim to the following extent: $4,000 in respect of the fees incurred in respect of the work done by WB Legal, less the amount of any fees already refunded by WB Legal to the applicant prior to the date of this decision; and $1,320, being half the fees incurred in respect of the work done by Goodwin & Co.
[3]
Order
That the respondent pay compensation to the applicant in the amount of $5,320, less the amount of any fees already refunded by WB Legal to the applicant prior to the date of this decision.
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: 17 August 2016