Disciplinary prosecution halted because Law Society’s reasons for deciding to prosecute were inadequate

The NSW Supreme Court has quashed decisions of the NSW Law Society to commence disciplinary proceedings against a Sydney solicitor following complaints that the solicitor advanced allegations of negligence in a costs assessment against two barristers without an adequate factual foundation: SAL v Council of the Law Society of NSW [2017] NSWSC 834, a decision of Wilson J. The Court restrained the Council from continuing the disciplinary prosecution which had been stayed pending the application for judicial review. The Council’s reasons were inadequate in not dealing with exculpatory material advanced by the practitioner during the investigation, and in not disclosing the Council’s path of reasoning in relation to why the conduct was professional misconduct rather than unsatisfactory professional conduct or why it was appropriate to prosecute rather than make an in-house determination such as a reprimand and a compensation order.

The implications of this decision are profound, for many a set of reasons at the conclusion of a disciplinary investigation are likely no better than those which were examined in this case, for the simple reason that no one has ever really sought to take the adequacy of these kinds of reasons to task.  First, those who are subject to current prosecutions might seek prohibition to stop them in their tracks: if you are involved in a disciplinary prosecution, careful study of this decision is advised. Secondly, with the rise in the quality of reasons at the conclusion of a disciplinary prosecution which one presumes the decision will generate, it may be hoped that better decisions about what to prosecute will be made. 

This decision was under the Legal Profession Act 2004 (NSW), the relevant provisions of which were slightly different from those in its Victorian counterpart.  Though the Legal Profession Acts of 2004 have been repealed in NSW and Victoria by the Legal Profession Uniform Law, many a prosecution in the system, and many a prosecution yet to come will be governed by the 2004 Acts, by virtue of transitional provisions.

Following a disciplinary investigation, the Council was obliged to make a prediction about whether a disciplinary tribunal would be reasonably likely to make a finding of conduct warranting discipline. If so, it was obliged to prosecute. If not, it could reprimand or caution the practitioner, etc. Or it could take no further action which would also obviously be the proper course if it did not consider there to be a reasonable likelihood that the tribunal would make a finding of unsatisfactory professional conduct.

Section 537(2) of the NSW Act provided:

‘Unless section 540 (Summary conclusion of complaint procedure by caution, reprimand, compensation order or imposition of conditions) applies, the Council or the Commissioner must commence proceedings in the Tribunal with respect to a complaint against an Australian legal practitioner if satisfied that there is a reasonable likelihood that the practitioner will be found by the Tribunal to have engaged in unsatisfactory professional conduct or professional misconduct.’

Section 4.4.13 of the Victorian Legal Profession Act 2004 was differently drafted, but essentially produced the same result, with one relevant exception: the Legal Services Commissioner in Victoria did not have a discretion not to prosecute if he formed the view there was a reasonable likelihood of VCAT making a finding of professional misconduct. That would make more acute the Victorian Commissioner’s obligation to give proper reasons for a decision that the conduct in question would or would not be reasonably be likely to be found to be professional misconduct by VCAT.

Wilson J reasoned:

‘A decision by the Council to commence proceedings in the Tribunal pursuant to s 537(2) can only be properly made after consideration is given to the operation and potential application of s 540.

To consider the potential application of s 540 it is necessary for the Council to consider all relevant information, including any exculpatory matters raised by the legal practitioner, or matters raised in mitigation. That is so because of the requirements of s 509(3), and also because of the nature of the decision to be made under s 537(2). The latter involves consideration of the seriousness of the conduct, and a prediction as to how the conduct might be viewed by the Tribunal. That can only be properly done by considering matters raised by the legal practitioner in defense or mitigation of the complaints.

The Council must be satisfied of the reasonable likelihood that the legal practitioner will be found by the Tribunal to have engaged in professional misconduct, unsatisfactory professional conduct (but not professional misconduct) or neither. This is a predictive task and one that must have regard to both the complaint, and any defence to it, and also matters relevant to the sanction that may be imposed.

In Murray v Legal Services Commissioner [1999] NSWCA 70;  (1999) 46 NSWLR 224the Court of Appeal considered the nature of the decision required to be made by the Council under section 155 of the Legal Profession Act 1987 (NSW), (a provision in similar terms to ss 537 – 540 of the 2004 Act). Sheller JA (with whom Priestley and Stein JJA agreed) said (at [88]):

“I find it hard to imagine that the Council or the Commissioner would reach the level of satisfaction required without taking account of the legal practitioner’s response to the complaint if the legal practitioner, under compulsion pursuant to s 152, or voluntarily, gave it. The duty of the Council or the Commissioner to act either by instituting proceedings in the tribunal or in some other way does not arise on a satisfaction or opinion that a prima facie case had been made out, so that any material favouring the legal practitioner may be ignored: compare Wentworth v Rogers [1984] 2 NSWLR 422 at 429 and 436. The duty of the Council or the Commissioner involves an attempt to predict the outcome of a hearing in the tribunal: compare Saffron v Director of Public Prosecutions (1989) 16 NSWLR 397 at 400, 402, 411. Ordinarily, a factor in this prediction would be the legal practitioner’s answer to the complaint, if the legal practitioner gives one, or the failure to answer the complaint, if the legal practitioner gives none. These matters lead me to conclude that a council or the Commissioner cannot and does not reach the required satisfaction without providing the legal practitioner with a copy of the complaint and calling upon the legal practitioner to respond to it. Proper performance of the Commissioner’s duty preserves, in the words of Lord Slynn of Hadley, the legal practitioner’s ‘right to know and to reply’.”

Here, the Council’s reasons (in the 2 June 2016 letter relevant to the Jacobs complaint, and the 3 June 2016 letter relevant to the Garlick complaint) do not refer to s 540 and the consideration of the seriousness of the conduct which must necessarily have been made. Since consideration of s 540 is a condition precedent to the proper exercise of the power provided by s 537(2) of the 2004 Act, the absence of reference to it in the reasons points to the failure of the Council to have regard to it. In turn there is a clear basis upon which to conclude that there has been jurisdictional error or, alternatively, error on the face of the record.

Whilst the defendant does not dispute that the Council was required to turn its mind to s 540 of the 2004 Act, and specifically to consider those matters in s 540(1)(b) before arriving at a state of satisfaction as to the matters set out in s 537(2), it argues that s 540 only applies if the Council formed the state of mind referred to in s 540(1)(b)(i), (ii) and (iii). If the Council did not form that state of mind, it is submitted that the section did not apply, including for the purposes of the operation of s 537(2). The Council contends that it was not required to give reasons for not having made a different decision (that is, a decision to proceed by way of summary disposition), and it was unnecessary to give express reasons as to the matters referred to in s 540(1)(b).

The Council relies in part upon a decision of Fagan J in Menon v Council of the Law Society of New South Wales [2016] NSWSC 1322, wherein his Honour said, at [45]:

“The reasons need not also identify items of evidence which the Council discounts or facts which it considers insignificant or the basis upon which it expects arguments exculpatory of the solicitor will not be accepted.”

So much may be accepted, but in this case, the absence of reference is not to marginal facts, or insignificant pieces of evidence, it is to matters which are conditions precedent to the exercise of the Council’s power pursuant to s 537(2). Some account of the consideration given by the Council to the application of s 540 was necessary, both to permit the plaintiff to understand the Council’s path of reasoning, and also to permit any court asked to review the decision to do so.

The standard of reasons necessary was set out (with reference to a different statutory scheme) in Wingfoot Australia Partners Pty Ltd v Kocak [2013] HCA 43;  (2013) 252 CLR 480at 501  [55] as follows:

“The standard required of a written statement of reasons given by a medical panel under s 68(2) of the Act can therefore be stated as follows. The statement of reasons must explain the actual path of reasoning by which the medical panel in fact arrived at the opinion the medical panel in fact formed on the medical question referred to it. The statement of reasons must explain that actual path of reasoning in sufficient detail to enable a court to see whether the opinion does or does not involve any error of law. If a statement of reasons meeting that standard discloses an error of law in the way the medical panel formed its opinion, the legal effect of the opinion can be removed by an order in the nature of certiorari for that error of law on the face of the record of the opinion. If a statement of reasons fails to meet that standard, that failure is itself an error of law on the face of the record of the opinion, on the basis of which an order in the nature of certiorari can be made removing the legal effect of the opinion.”

Part of the function of reasons is to allow those affected by a decision to understand the decision maker’s determination. It is not possible to understand the basis upon which the Council concluded that s 540 did not apply, thus enlivening s 537(2), because it is not adverted to in the Council’s reasons of 2 June 2016 and 3 June 2016.

The Council, upon having made factual findings adverse to the plaintiff, failed to consider or to explain whether and why, on those facts, there was a reasonable likelihood that the plaintiff would be found by the Tribunal to have engaged in professional misconduct. The statement of reasons need not have been lengthy, or have referred to every piece of evidence, but it was necessary to set out sufficient detail as to allow the plaintiff to understand why the defendant had determined that s 540 did not apply. This the Council did not do. Jurisdictional error in the exercise of the Council’s functions occurred with respect to each of the ten decisions, and they must be set aside.’

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