Confirmed: your client can privately prosecute you for misconduct

Acting President Bowman handed down a decision on Friday in Cedric Naylor’s Case [2007] VCAT 958 approving the existing practice of VCAT, and before it the Legal Profession Tribunal, of entertaining professional misconduct allegations against lawyers by their clients as part of applications to set aside costs agreements. Entertaining them, that is, outside the disciplinary investigation and prosecution procedures in Part 5 of the old Legal Practice Act, 1996, and regardless of whether those who otherwise prosecute disciplinary charges would have brought a charge.  Under the old Act, a costs agreement could be set aside upon proof by the client of (i) dishonesty in the solicitor, or (ii) misconduct or unprofessional conduct in the retainer, or (iii) a want of fairness and reasonableness of the agreement. Judge Bowman  ruled that it was not necessary for the solicitor to be found guilty of misconduct or unsatisfactory conduct in the ordinary way, by a prosecution by a legal regulator under the disciplinary provisionso of the Act before the client could rely on the second ground, but he did say that if misconduct is made out in an old Act case, then no disciplinary consequences such as a suspension of a practising certificate can follow in that hearing.  But, armed with the result in the s. 103 application, there seems to be nothing to stop the client sending the reasons in to the regulator and requesting investigation of the conduct already determined to be misconduct by the body which would hear any charge flowing from the investigation. And so, of course, there seems to be nothing to stop the client from threatening to do so in little spats over fees.

Generally speaking, under the old Act, only a regulator could lay a charge of misconduct. No matter how badly a client may have wanted a lawyer disciplined, the question of whether to lay a charge was one for the Law Institute, or the Bar, or the Legal Ombudsman, who would then act as prosecutor, the complainant client relegated to the role of witness. As might be expected in a quasi-criminal class of case, prosecutions were carried out with strict procedural safeguards for the accused.

The controversial question has always been whether a client may allege against his former solicitor that the solicitor had engaged in misconduct or unprofessional conduct and prosecute such an allegation in the course of applying to set aside a costs agreement without any involvement of the regulator. If the answer is yes, it means that a client may effectively privately prosecute a lawyer for misconduct, by the vehicle of an application to set aside a costs agreement. The answer is yes, according to VCAT, but (i) if misconduct is established, the only result that may follow is the setting aside of the costs agreement, not, for example a fine or the suspension of a practising certificate, which may occur only upon proof of charge laid by a prosecutor, and (ii) the finding of misconduct (or a finding of no misconduct) does not bind the same tribunal if a charge is subsequently laid.

It seems open to a client under the old Act to privately prosecute for misconduct, then make a complaint in respect of the same conduct by forwarding a copy of the reasons to a regulator who would then be obliged to investigate, and would find it very difficult to avoid prosecuting. How could a regulator find that the Tribunal was not reasonably likely to find misconduct on the hearing of a charge in the face of the Tribunal’s reasons for finding misconduct on a private prosecution?

The key passage in the judgment is probably this one:

’51. … [the solicitor’s] submission was that, if the Tribunal found misconduct or unsatisfactory conduct for the purposes of s.103(1)(b), this would create an issue estoppel in relation to any complaint subsequently brought against the same practitioner. As argued by [the client’s counsel], the prosecution of a claim pursuant to s.103(1)(b) is a matter for the client. The client is the applicant. By way of contrast, pursuant to Part 5 of the LPA, and particularly ss.151 and 157, the party bringing the charge of misconduct or unsatisfactory conduct is the Legal Ombudsman, an RPA or the Board. There does not seem to be the required identity of parties for the purposes of issue estoppel.

52 Be that as it may, the principal difficulty faced by [the solicitors] seems to me to be one of statutory interpretation. As conceded by [the solicitors’ counsel] as part of his argument, I am required to read into s.103(1)(b) an important word that is simply not there. That is something which I am reluctant to do.

53 Nor am I satisfied that not so to do would in some way prejudice [the solicitors]. No complaint has been lodged against it. No investigation pursuant to Part 5 of the LPA has been conducted into it. I agree with [the client’s counsel] that, if a finding was made to cancel a costs agreement on the basis of misconduct or unsatisfactory conduct, no penalty pursuant to Part 5 could be imposed. The procedures pursuant to that Part are specified. They might traverse different or additional grounds compared with those covered in an argument concerning the cancelling of a costs agreement and involving the same general circumstances. If a charge is laid, arguments might be advanced that the standard of proof required is different from any requirement pursuant to s.103. As already stated, the parties would be different.’

But by virtue of a change in the language of the relevant provision in the new and current legislation, the Legal Profession Act, 2004, such private prosecutions may become a thing of the past. The new and old provisions are reproduced below. Compare the bolded text in each.

Section 103 of the Legal Practice Act, 1996 said:

“(1) On application by a client, the Tribunal … may order that a costs agreement be cancelled if satisfied –

(a) that the client was induced to enter into the agreement by the fraud or misrepresentation of the legal practitioner or firm; or

(b) that the legal practitioner or firm has been guilty of misconduct or unsatisfactory conduct in relation to the provision of legal services to which the agreement relates; or

(c) that the agreement is not fair and reasonable.

(2) The Tribunal may adjourn the hearing of an application under this section pending the completion of any investigation or charge in relation to the conduct of the legal practitioner or firm.”

The equivalent provision in the Legal Profession Act, 2004 is s. 3.4.32:

‘3.4.32 Setting aside costs agreements

(1) On application by a client, the Tribunal may order that a costs agreement be set aside if satisfied that the agreement is not fair or reasonable.

(2) In determining whether or not a costs agreement is fair or reasonable, the Tribunal may have regard to any or all of the following matters—

(a) whether the client was induced to enter into the agreement by the fraud or misrepresentation of the law practice or of any representative of the law practice;

(b) whether any Australian legal practitioner … has been found guilty of unsatisfactory professional conduct or professional misconduct in relation to the provision of legal services to which the agreement relates;

(c) whether the law practice failed to make any of the disclosures required under Division 3;

(d) the circumstances and conduct of the parties before and when the agreement was made;

(e) the circumstances and the conduct of the parties in the matters after the agreement was made;

(f) whether and how the agreement addresses the effect on costs of matters and changed circumstances that might foreseeably arise and affect the extent and nature of legal services provided under the agreement;

(g) whether and how billing under the agreement addresses changed circumstances affecting the extent and nature of legal services provided under the agreement.

(3) The Tribunal may adjourn the hearing of an application under this section pending the completion of any investigation or determination of any charge in relation to the conduct of any Australian legal practitioner or Australian-registered foreign lawyer.

(10) In this section— Client means a person to whom or for whom legal services are or have been provided.

Note: See also section 3.4.26(6) which extends the application of this section to associated third party payers.’

Section 3.4.26(6) says:

‘(6) A reference in section 3.4.32 … to a client is, in relation to a costs agreement that is entered into between a law practice and an associated third party payer as referred to in subsection (1)(d) and to which a client of the law practice is not a party, a reference to the associated third party payer.’

An associated third party payer is someone who is not the client but has a contractual or statutory obligation to pay the lawyer, as where a wife retains a lawyer to act for her imprisoned husband, but it not someone who has an obligation to someone other than the lawyer to pay the lawyer’s fees, for example an insurer who has promised its insured to pay defence costs in any suit for liability, or a lessee who promises under a lease to reimburse the lessor’s legal costs associated with any application to transfer the benefit of the lease.

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