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What, exactly, is a reckless contravention of a conduct rule?

Under the Legal Practice Act, 1996, the distinction between what was then called ‘misconduct’ and what was then called ‘unsatisfactory conduct’ of the kind constituted by a breach of a conduct rule or of a provision of the Act, depended on whether the breach was wilful or reckless, in which case it was misconduct, or not, in which case it might amount to unsatisfactory conduct.  That distinction was abandoned in the Legal Profession Act, 2004, but continues to be used by VCAT’s Legal Practice List as a guide to determining whether a breach of the rules or the Act amounts to the more or less serious of the categories of disciplinary wrongdoing, now known as ‘professional misconduct’ and ‘unsatisfactory professional conduct’.  The meaning of ‘reckless’ in this context has long been governed by an unreported decision of JD Phillips J, Zaitman and Law Institute of Victoria, Supreme Court of Victoria, 9 December 2004.

It was summarised in the biggest Victorian lawyers’ discipline case in recent years, Victorian Bar Inc v CEM QC [2006] VCAT 1417, and the relevant passage is a much easier way to work out what ‘reckless’ means in this context than a consideration of Zaitman’s Case which does not give up its essence easily.  The whole passage is set out below, but the take home point is that:

‘in order to establish recklessness, it is necessary to show that [the lawyer] appreciated the risk that their conduct in a particular instance might possibly amount to a breach of the rule, and knowing that risk, proceeded, intending to take that risk. In circumstances where [the lawyer] holds a bona fide belief that their conduct does not amount to a contravention of the rule, it cannot be reckless for [him or her] to proceed.’

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WA soli disciplined for recklessly misleading Family Court

Update, 22 September 2011:  Here is the penalty decision.  The Complaints Committee argued for a report to the Supreme Court recommending striking off, but the Tribunal found that was not necessary and imposed a $20,000 on top of a costs order of about $18,000. But for the fact that the former solicitor was, at the time of the decision, a Registrar of the Family Court, the Tribunal would have considered a suspension, but as the job did not require a practising certificate, such an order would have no practical effect.

Original post: Western Australia’s State Administrative Tribunal has put out a substantial decision about misleading the court by silence: Legal Profession Complaints Committee and SMV [2011] WASAT 118.  Something tells me I won’t get around to blogging it properly any time soon, so here is the link and the Tribunal’s own summary:

‘The Legal Profession Complaints Committee made a number of allegations against a legal practitioner, Ms Sally Vanderfeen, of professional misconduct in connection with obtaining and attempting to implement consent orders in the family court for the purposes of defeating a claim to specific performance by a third party in relation to one of the properties the subject of the consent orders.

The conduct essentially concerned failure to notify the Court or the third party of the orders and of the practitioner’s client’s interest in the property pursuant to those orders. The Complaints Committee also made an allegation that the practitioner had misled the Committee in the context of the Committee’s enquires into the relevant events.

Ms Vanderfeen acknowledged that aspects of her conduct involved ‘serious errors of judgment’, but denied that her conduct was designed to defeat the third party’s claims. The Tribunal reviewed the documentary records of relevant events and concluded that they established that Ms Vanderfeen’s actions were motivated by an intention to improve the prospects that the third party would not pursue a claim for specific performance, and that the Complaints Committee’s allegations in relation to those matters were established.’

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Lawyer haters: some schadenfreude

Martinez v Morris [2011] FMCA 478 will be enjoyed by those who take pleasure in the suffering of lawyers.  A well known national law firm with over 500 staff acted for a man.  They had a low opinion of him, and so required that his wife promise to pay his fees.  Since her promise was made directly to the law firm, she was an ‘associated third party payer’ to whom disclosure obligations in relation to costs estimates and the manner of charging and so on were owed.  The obligations were not satisfied though.  Sure enough, the husband did not pay the firm’s fees.  So they sued his wife.  She did not defend, ignorant of s. 317(1) of the Legal Profession Act, 2004 (NSW) which said that by virtue of the disclosure defaults, she need not pay the fees until there had been what used to be known as a solicitor-client taxation at the solicitors’ expense.  Default judgment was obtained and no attempt was made to set it aside.  And then the firm set out to bankrupt her.  A creditor’s petition resulted in a sequestration order.  It was the end of the road; they’d got their pound of flesh and could move a trustee in bankruptcy in to scoop up her worldly possessions, and take away any income she might earn, to restore the hole in their profits.

Then some bright spark alerted the wife to the solicitors’ problem.  ‘Too late!’ you might say to yourself diving for a statement of res judicata, if you have not been reading my blog properly (see this post and this one about Quaresmini v Crouch & Lindon (a firm) [2010] FMCA 750 and Chadwick Lawyers v McMullen [2009] FMCA 992, both Queensland cases to which no reference was made in the NSW case at hand).  But no, not too late: Federal Magistrate Driver set aside the sequestration order — that is he unbankrupted the wife — and completely sicked the solicitors on costs for good measure.  In the process, he looked beyond the default judgment, rendering it worthless for the purposes of bankrupting the wife without it having been set aside.  And now, no doubt, the wife has a right to set aside the default judgment ex debito justitiae (as of right), so the firm cannot substitute the Sheriff for the trustee in bankruptcy.  The wife may still have to pay her husband’s legal fees; whether she does or not will depend on whether the firm can be bothered having the NSW equivalent of a taxation at which the taxed bills may be reduced on account of the wholesale costs disclosure defaults. Whatever the case, she won’t have to pay them for some time, and there must be a real issue about whether the lawyers are entitled to interest since the bills were originally given.

The costs order was that the law firm pay the costs of the creditors’ petition in which they were successful as well as in the application to set aside the sequestration order in which they were unsuccessful.  His Honour reasoned as follows at [16] to [17]:

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