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Commissioner’s obligation to charge dishonesty if he intends to allege it

December 4th, 2009 · No Comments

Relatively recently, I posted on the question of whether a Bureau de Spank desiring to rely on a practitioner’s dishonesty or other form of conscious wrongdoing must expressly allege it in the charge, and discussed Walter v Council of Queensland Law Society Incorporated (1988) 77 ALR 228 at 234; [1988] HCA 8.  Now, in Legal Services Commissioner v Madden (No 2) [2008] QCA 301 the Queensland Court of Appeal has had a go, and reversed a decision of the Court’s Chief Justice sitting on the Legal Practice Tribunal.  The solicitor had previously been disciplined in relation to his trust account.  He was charged with gross delay in litigation which resulted in applications by the other side to compel the achievement of various interlocutory steps.  He dealt with those applications without advising his client, agreed on his client’s behalf to pay costs, withdrew money to pay those costs from monies held in trust on account of fees and disbursements, and then charged the client fees for his work in fixing up his own mistake.  He also acted for both husband and wife in the preparation of a pre-nup, apparently stuffing it up, and then later acted in a matrimonial dispute for the husband alone, described as a particularly obvious conflict of duties.

The Chief Justice made findings of dishonesty in the absence of any allegation of dishonesty in the charge.  One might say, in fact, that he went out of his way to do so.  First he sought comment in relation to whether on the agreed facts, the Tribunal was free to draw inferences that dishonesty actuated the solicitor’s conduct, and invited the Commissioner to amend the charge so as to allow exploration of that issue.  His Honour adjourned the hearing to give the Commissioner time to think about that. On the return of the hearing, the Commissioner declined the invitation to amend.  So the Tribunal put out a document specifying, as a matter of procedural fairness, the inferences it was considering drawing, and invited argument.  The solicitor swore an affidavit responding to the Tribunal’s document.  The Commissioner’s counsel cross-examined the solicitor, but did not put it to him that he had acted dishonestly. The Tribunal then concluded that the solicitor had acted dishonestly, and decided to strike him off rather than go with the fine and reprimand recommended by the Commissioner.  Ooffa!

‘Wrong way. Go back!’ said the Court of Appeal.  It started with a general proposition:

’54 It is … a well recognised rule of practice in civil proceedings that, although the word “dishonesty” is not necessarily required, any charge of dishonesty must be made in clear terms.  In a well known passage in Belmont Finance Corporation Ltd v Williams Furniture Ltd & Ors [1979] Ch 250 at 268  Buckley LJ said:

“An allegation of dishonesty must be pleaded clearly and with particularity. That is laid down by the rules and it is a well-recognised rule of practice. This does not import that the word “fraud” or the word “dishonesty” must necessarily be used:  see Davy v Garrett, 7 Ch. D. 473, 489, per Thesiger L.J. The facts alleged may sufficiently demonstrate that dishonesty is allegedly involved, but where the facts are complicated this may not be so clear, and in such a case it is incumbent upon the pleader to make it clear when dishonesty is alleged. If he uses language which is equivocal, rendering it doubtful whether he is in fact relying on the alleged dishonesty of the transaction, this will be fatal; the allegation of its dishonest nature will not have been pleaded with sufficient clarity.”

Many similar statements concerning allegations involving dishonesty may be found in the authorities and in many different contexts: See, eg, Krakowski & Anor v Eurolynx Properties Ltd & Anor (1995) 183 CLR 563 at 573; [1995] HCA 68; Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 295; [1990] HCA 11.’

But what does all this actually mean? Helpfully, the case provides its own illustration.  Charge 4 alleged:

‘4. On or about 14 January 2004, the respondent charged the client legal fees which he knew, or ought to have known, were not properly chargeable.

Particulars

4.1 The applicant repeats and relies upon the particulars in charges 1 to 3 above.

4.2 On or about 14 January 2004, the respondent rendered an invoice in the amount of $23,107.20 for his professional fees to his client, which invoice included charges for legal services performed by the respondent relating to the first and second applications.

4.3 The respondent’s account was rendered to the client in circumstances where:

(a) the respondent did not first obtain instructions from his client to provide legal services relating to the first and second applications;

(b) the respondent knew, or ought to have known, he was not entitled to receive payment for those
services from his client;

(c) the respondent did not obtain his client’s authority to deduct his fees for those services from the settlement sum.

4.4 On 14 May 2004, the respondent transferred the sum of $23,107.20 from his trust account to his general account in payment of the invoice dated 14 January 2004.’

The Court said:

‘The Commissioner does not now contend that the discipline application charged dishonesty, except possibly in relation to charge four.

[53] Charge four did not in terms allege dishonest conduct, but such a characterisation is arguably available in the allegation that the respondent charged legal fees which he “knew, or ought to have known were not properly chargeable” and in the particular of that allegation that the appellant “knew, or ought to have known” that he was not entitled to receive payment for the particular services.’

But it found at [56] that this was not a sufficiently clear allegation of dishonesty as to be a safe basis for a finding of dishonesty, affirming Walter v Council of Queensland Law Society Incorporated (1988) 77 ALR 228 at 234; [1988] HCA 8, the subject of my earlier post.

At [74], after going through the statutory scheme (relevantly similar to Victoria’s), the Court observed that:

‘The scheme of the 2007 Act is that the Commissioner investigates possible misconduct, decides whether to bring a charge, and decides what to charge.  The Tribunal’s role is adjudicative.  Section 455 is consistent with that scheme, in that any amendment of the discipline application may be made only upon the Commissioner’s application; the Tribunal then exercises a judicial discretion in deciding whether the amendment sought by the Commissioner is to be allowed.’

The Chief Justice had thought that he had a power to consider what his Honour wanted to consider by virtue of s. 602 which said that ‘The tribunal may do all things necessary or convenient to be done for exercising its jurisdiction.’  In the context of a statutory provision which allowed for amendments on the application of the Commissioner, and after extensive reliance on Walsh v Law Society of New South Wales (1999) 198 CLR 73; [1999] HCA 33 at [59]ff, the Court held that it should not

‘be implied that the Tribunal possesses any unconditional power to vary discipline applications.  The disciplinary processes are not criminal in nature: see McCarthy v Law Society of New South Wales (1997) 43 NSWLR 42 at 58 and the cases cited therein.  But the 2007 Act does adopt the familiar adversarial procedure under which it is no part of the judicial function to determine what charges are to be brought or pursued: under this Act the decision to institute proceedings is the province of the executive and decisions directed to ensuring a fair trial and prevention of abuse of the Tribunal’s processes are the province of the Tribunal: cf Ayles v The Queen (2008) 232 CLR 410; [2008] HCA 6 per Kiefel J, Gleeson CJ and Hayden J agreeing, at [70]-[72].’

The Court then held that though the Chief Justice was a Supreme Court judge, and though the Supreme Court has an inherent jurisdiction to discipline practitioners, he did not hear the case in his capacity as a Supreme Court judge, but in his capacity as Chairman of the Legal Practice Tribunal, so that his decision could not be justified by reference to the inherent jurisdiction.

The Court rejected the Commissioner’s argument that it had done all that was necessary: alleged facts the admissions in respect of which everyone agreed made out professional misconduct.  Evidence of dishonesty, and inferences naturally available from the agreed facts as to dishonesty were relevant not to the charge, but to the penalty.  The Court said the legislation does:

‘not envisage the two step process contemplated by the argument.  It contemplates a hearing followed by both the findings of any proved misconduct and the imposition of the appropriate penalty for that misconduct.  Further, as was pointed out in the joint judgment in Walsh …, the statutory requirements of particularity in legislation of this character, and the safeguards introduced by those requirements for the practitioner concerned, should not be construed narrowly.  That statutory objective of ensuring fairness by the means provided in the Act is as relevant to the penalty as it is to the findings of fact.’

So, the Court concluded, the Tribunal acted without jurisdiction in enquiring into the solicitor’s possible dishonesty.  The solicitor had had the good sense to go off and do some higher education in relation to professional standards, and had passed a one-day exam at the end of it. The Court substituted for the Tribunal’s orders a $10,000 fine and 12 months’ supervised practice.  It ordered that the Commissioner pay the solicitor’s costs of the appeal.

See also:

Tags: amendment · appeals · concurrent duties · conflicts · current client and past client · Discipline · duty and duty · Ethics · jurisdiction · Legal Profession Act · Legal Services Commissioner · Misconduct · natural justice · Practising certificates · procedure · Professional regulation · Striking off · Trust money · trust monies · wilful disregard for rules