Snapping on judgment and misleading by silence

Legal Services Commissioner v Yakenian [2019] NSWCATOD [98] is about a solicitor of Fairfield in western Sydney, neighbour of Cabramatta and Villawood. He was referred to the NSW Legal Services Commissioner by District Court Judge, her Honour Wass DCJ.

The defendants’ solicitor requested particulars of Mr Yakenian’s builder client’s statement of claim and said the defendants would provide defences within a reasonable time after the particulars were given. They invited the solicitor to advise them if he had any difficulty with this course. He did not do so. There was also talk of a security for costs application.

The same day as the particulars were given, the solicitor snapped on default judgment for more than $750,000, filing a formal affidavit required by NSW’s procedural rules which did not mention the correspondence referred to, and then issued a bankruptcy notice against one of the defendants 3 days later, all while the defendants remained unaware they were judgment debtors and were presumably leisurely scraping together their defences. The day after the bankruptcy notice, the defendants’ solicitors wrote expressing their understanding ‘that the plaintiff would not file for default judgment until the defendants’ solicitors had served the defences, and requesting that the Solicitor let them know if that was not the case.’ He did not do so. The defendant’s solicitors said they anticipated being able to file the defence by 8 August 2016.

Even though he explained that he and counsel both advised his client not to snap on judgment and he only reluctantly followed his client’s informed instructions to do so (the solicitor said he felt pressured to comply with the instructions because the client was a significant part of the solicitor’s then fledgling practice) the Legal Services Commissioner charged him with professional misconduct constituted by snapping on judgment; by misleading the defendants’ solicitors by silence; by misleading the court by silence in his affidavit in support of default judgment; and (most puzzlingly to my mind) by issuing a bankruptcy notice without notice to the defendants.

The decision is the result of a guilty plea in a case where the solicitor represented himself, but the NCAT waved it through without much apparent anxiety about the implications of their findings and whacked him with a fine of $7,500, plus costs.

On the basis of admissions made by the practitioner, the Tribunal of three members found that the solicitor had breached each of the following rules:

  • A solicitor representing a client in a matter that is before the court must not act as the mere mouthpiece of the client or of the instructing solicitor (if any) and must exercise the forensic judgments called for during the case independently, after the appropriate consideration of the client’s and the instructing solicitor’s instructions where applicable. (Rule 17.1)
  • A solicitor must not deceive or knowingly or recklessly mislead the court. (Rule 19.1)
  • A solicitor must not knowingly make a false statement to an opponent in relation to the case. (Rule 22.1)

The Tribunal found that the solicitor dishonestly (as in intentionally or recklessly: Derry v Peek (1889) LR 14 App Cas 337) represented to the defendants’ lawyers that:

  • the plaintiff had no objection to the defendants filing and serving their defences by no later than 8 August 2016; and/or
  • default judgment would not be entered without first giving reasonable notice or warning to defendants’ solicitor of any application by the plaintiff to file for default judgment; and/or
  • default judgment had not been entered against the defendants on 27 July 2016 or at an earlier time.

Oddly, the Tribunal made its findings on the ‘and/or’ basis without specifying which it found to have been established. Then the Tribunal found that the solicitor had dishonestly ‘made a false or misleading statement to the Court through silence that there were no communications between the parties’ lawyers relating to the preparation of defences by the defendants’. Though it did not say so, the Tribunal effectively found the solicitor to have perjured himself.

Now all this interests me for four reasons.

Waving through pleas and the law

First, it just has all the hallmarks of bad law being made in the context of a Goliath v David battle in which David, a relatively fledgling suburban practitioner, had, or perceived that he had, little choice but to acquiesce in the outcome, perhaps to avoid the crushing financial consequences of contesting the charge whether successfully or unsuccessfully and to avoid the risk of being struck off in the event that the penalty for the effective allegation of perjury was left to the Tribunal after a contest on a not guilty plea. I tell you, danger lurks for the development of professional norms in the incremental creep represented by pleas of convenience being waved through by disciplinary tribunals.

Snapping on judgment as professional misconduct?

Secondly, I have been banging on about the undesirability of snapping on judgment for a long time, so you might think I’d be thrilled to see disciplinary consequences for a judgment snapper onner, but I’m strangely nonplussed. Why haven’t the millions of other snappings on of judgments resulted in discipline? Will they now? Why did her Honour Wass DCJ make a complaint to NSW’s Legal Services Commissioner, rather than deal summarily with any perceived misconduct in the proceedings through, e.g., a personal costs order? Why on earth is this case the one which results in discipline, given its facts?

I’m not sure what the state of the authorities was in NSW on the date judgment was entered, because NCAT’s decision doesn’t say anything about the relevant law at all, but if the solicitor had looked up Ritchie’s (NSW’s equivalent of Williams), he would presumably have found something akin to what it now says at [16.3.10]:

A plaintiff who applies for default judgment under this Part is not explicitly required to give the defaulting defendant notice (other than that contained in the Statement of Claim itself) of the intended application for judgment: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274BC200104963 at [89] citing Witten v Lombard Australia Ltd [1968] 2 NSWR 529; (1968) 88 WN (Pt 1) (NSW) 405 at 410  (cases rejecting the requirement for prior notice of an intention to apply for dismissal for want of prosecution). However, the absence of any specific requirement for explicit prior notice does not detract from the prudence of attempting to enquire of a defendant, before applying for default judgment, whether it intends to defend the action, and putting it on notice of a specific intention to apply for default judgment if a defence is not filed in a timely manner: Bushby v MacKenzie (1919) 19 SR (NSW) 104 ; Redditch Benefit Building Society v Roberts [1940] Ch 415[1940] 1 All ER 342 ; Reid v Taylor (1929) 46 WN(NSW) 171. The prudence of this practice is related to minimising both the prospects of, and costs risk that may be associated with, any subsequent application by the defendant to set aside the judgment (under rr 36.15 and 36.16): Emibarb Pty Ltd v Commonwealth Bank of Australia (NSWSC, Greenwood M, 2 March 1992, BC9203275); Northumbrian Ice Cream Co Ltd v Breakaway Vending Pty Ltd [2006] NSWSC 1216BC200609566 at [16]  per Brereton J.

There is a difference between cautions directed to litigants framed within the rubric of costs, exhortations to solicitors to be sensible in their exploitation of the rules of procedure, and declarations of a legal norm apparently inconsistent with the ordinary meaning of the rules of procedure breach of which will sound in professional misconduct even when done on the basis of informed instructions by the client. A suburban practitioner consulting this text might not unreasonably consider that the course he was instructed to follow was imprudent, but permissible, and that his client having determined to take what the solicitor advised to be an imprudent course (perhaps in recognition that the client knew the other side and the strength of its defence better than he) the solicitor was obliged by r. 8.1 to follow his client’s instructions which must, in the circumstances, be taken to be ‘lawful, proper and competent’, even if imprudent.

And of course the decision tells us nothing about the strength of the defendant’s defence, or whether time was critical in the sense that others might get judgment before the practitioner’s client if too leisurely an approach to the litigation was taken, or whether the defendants were trading while insolvent, or there was an anxiety that the delay in filing a defence was a cover for putting assets out of the jurisdiction. Perhaps summary judgment would have been available, and default judgment was a quicker, cheaper, simpler and available alternative. More likely, perhaps the defendants would not in an application to set aside default judgment be able to establish by affidavit that they had an arguable defence, as would be necessary in the event that the judgment snapped on were not regarded as irregular.

There is no principle that a defendant need not give a defence until further and better particulars are provided. The defendants could have insisted on a response from the plaintiff to their request for more time and made an application for an extension of time and applied for an order permitting more time if they could establish by evidence that they needed it, or filed a holding defence.

In the context of a tension between r. 8 and r. 17, it was a surprise to me to find a suburban practitioner pinged for professional misconduct without any analysis reduced to writing by the Tribunal of whether he was aware of whatever norms might be present in NSW jurisprudence or of precisely what those norms were.

You would think that if the State desired to make illegal a solicitor involving himself in a client’s snapping on of judgment (as opposed merely to seeking to dissuade litigants from inappropriate snappings on), that principle might be made into a rule of procedure, a rule of conduct, or at least be written down in the leading text.

In my 20 odd years in the law, things have changed radically. One of the blokes who trained me was a genius with a chambers summons (i.e. a procedural interlocutory application returnable before a Master or, as we would say today, an Associate Justice or Registrar). He’d just tell his secretary: chambers summons — [matter] — 30 May orders — default of para 8(b) and she could have a summons, supporting affidavit, and covering letter filed and served within an hour or two of a rules-determined procedural deadline or such a deadline in an order. The other side would comply pretty pronto and we would withdraw the application on condition that the scale costs of the application were paid by the other side. If they were tardy they would even be up for the brief fee of counsel briefed to appear the day before. Similarly, default in defence would often result in default judgment. If the other side swore up to an arguable defence, you’d consent to set aside the default judgment, take the costs of the application, and gloat about having forced them to go on oath about their defence. If the opportunity to achieve that forensic advantage for the client arose, the thinking back then would have been that you would have to be careful to get your client’s informed consent not to press that advantage (see Johnson v Emerson (1871) LR 6 Ex 329).

The thinking would also have been that it would have been potentially improper to let any notion of professional courtesy prevail over a client’s statutory entitlement to an advantage which might even result in the saving of all of the costs of contested litigation.

There were blokes who specialised in chambers summonses, and decision makers whose entire careers were characterised by hearing them: Master Patkin in the County Court, Masters Wheeler and Evans in the Supremes. In one famous story, a former member of the Victorian Bar had so many briefs in one of the Master’s Courts one day that it wasn’t until he was announcing his appearance in one matter that he realised he also had the other side’s brief as well.

It wasn’t all bad: an early chambers summons tended to keep things moving according to the timetable in a way that the fuzziness of the Civil Procedure Act 2010 and the idea that interlocutory costs orders will not be made otherwise than in exceptional circumstances does not always succeed in achieving. You’d get a hearing date immediately upon filing, as of right, for your application a couple of days after you issued it, sometimes the next day. You were supposed to serve the summons by 2 p.m. on the day before it would be heard at 10.30 a.m.

Snapping on chambers summonses and snapping on default judgment were, in other words, simply aspects of litigation which were generally regarded by most practitioners as completely kosher (even if minds differed about their desirability) until, at least, about 5-10 years ago (consider, for example, G.D.K. Electrical Services Pty Ltd v Taylor [2016] WADC 165 at [46]).

Misleading by silence

The third thing that interests me arises from my increasing alarm at the willingness of disciplinary tribunals to make casual findings of solicitors misleading courts on oath by omitting things from affidavits, either on the basis that a positive misrepresentation was made by silence, or, much more insidiously, on the basis that a court was misled in that the whole truth was not put before it.

In particular, there seems to be an elision of the concepts of making a statement which is misleading unless another fact is volunteered, and ‘not telling the whole truth’ in an affidavit. The elision seems to disregard the essentially adversarial nature of the presentation of evidence in chief by persons other than prosecutors and applicants for ex parte injunctions, and (in a judicial review context) applicants for warrants (see Aronson et al, Judicial Review of Administrative Action and Government Liability (6th ed, Lawbook, 2017) at [5.610]).

I expect most litigators today would say, if they thought about it properly, that our system of justice makes it permissible not to tell the whole truth, so long as that which is omitted does not render that which is volunteered misleading.

Advocacy texts, for example, commonly discuss a litigator’s strategy of not treating relevant evidence in evidence in chief so as to give greater significance to topics helpful to the party calling the witness when it is stumbled into by the cross-examiner, as is the intention of the strategy.

In Saif Ali v Sydney Mitchell & Co [1980] AC 198 Lord Diplock said at 220:

A barrister must not wilfully mislead the court as to the law nor may he actively mislead the court as to the facts; although, consistently with the rule that the prosecution must prove its case, he may passively stand by and watch the court being misled by reason of its failure to ascertain facts that are within the barrister’s knowledge.

To similar effect are conduct rules like rule 14.3 of the Victorian Professional Conduct and Practice Rules 2005 which qualified r. 14.1’s obligation not knowingly to make misleading statements to a court. Sub-rule (3) said: ‘A practitioner will not have made a misleading statement to a court simply by failing to correct an error in a statement made to the court by the opponent or any other person.’ To like effect is r. 19.3 of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015.

John Dixon J in Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 8) [2014] VSC 567at [172], recorded without criticism an argument of one of the parties which cited Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289, 297:

In a civil case, neither the litigant nor his lawyers were bound to call witnesses who did not support their case. Similarly a party’s lawyers were entitled to put such matters in evidence or omit other matters to their client’s advantage.

Many of the authorities for this proposition are gathered together in Burragubba v State of Queensland [2016] FCA 984 at [228].

In Chamberlain v Law Society of the ACT (1993) 43 FCR 148 at 154, Black CJ observed that ‘it may … be quite acceptable to take advantage of an opponent’s mistake’. See also Barton v Wright Hassall LLP [2018] UKSC 12 and Woodward & Anor v Phoenix Healthcare Distribution Ltd [2019] EWCA Civ 985, discussed here.

Part of the problem is that the language of the authorities about the dividing line between the permissible omission of unhelpful material and the rendering of a positive statement into a misrepresentation by only setting out half the truth, and the circumstances in which a litigant is under a duty to disclose matters to a court in a bog ordinary civil case, is vague and highly undeveloped given how important it is to all civil litigation.

And some authorities and commentaries of high standing state the law of disclosure against a client’s interests in remarkably broad terms. I have extracted, as an example, at the end of this blog post the relevant section of an old but important journal article by Justice Ipp which draws principally on English law: ‘Lawyers’ Duties to the Court’ (1998) 114 LQR 63 at 67 et seq. And Justice Ross spoke, in obiter, of ‘a general duty of lawyers not to … conceal facts which ought to be drawn to the attention of the court’ in Legal Services Commissioner v Piva [2009] VCAT 1200 at [103].

Spencer Bower & Turner treat the tradition of the common law succinctly in The Law Relating to Estoppel by Representation (Butterworths, 1966) at [66], p. 58:

It is firmly established that reticence and passivity in relation to matters which give rise to no legal duty to speak or act, whether censurable in foro conscientiae or not, is not a representation of anything, and accordingly creates no estoppel, any more than it is actionable; and the courts have on the whole steadily repelled the invitations, again and again addressed to them, to pronounce that silence and inaction, in the absence of such duty, is other than justifiable in law, or subjects the party to any liability or disability whatsoever.

According to Lockhart, The Law of Misleading or Deceptive Conduct (3rd ed, 2011) at [5.5], the recognised exceptions to that principle, outside insurance contracts and the sale of land, are:

  •  Where a true representation has been rendered false by changed circumstances (as in Vernon v Bosley (No 2));
  • where what was expressly said amounts to a half-truth (as, perhaps, in the case of the answers as to the prisoner-witness’s address in Tombling v Universal Bulb Company Pty Ltd); and 
  • where there has been active concealment (as in Meek v Fleming).

Lockhart says at [5.6] that the Courts have never been particularly clear about what statements or actions embody a ‘half-truth’.

Justice Almond adopted another text writer’s formulation in relation to ‘half-truths’ in the context of the tort of deceit: ‘what is left unsaid gives a deceptive meaning to that which is uttered’: Balkin & Davis’s Law of Torts, cited in Horesh v The Sephardi Association of Victoria [2011] VSC 26 at [108].

What Mr Yakenian’s affidavit said is, oddly, not recorded in the NCAT’s reasons, but one imagines it to have been a predictable, formal affidavit. This was not a half-truth case to my mind: no positive statement was likely rendered misleading by failing to point out that the defendants had advised their intention to lodge a defence. No, the Tribunal must have found that there was a duty on the defendant to advise the court of all that the plaintiff might say against the application for default judgment. Why, if there was such a duty, would not the solicitor have to point out the weaknesses in his own case before getting default judgment? Where does the duty start, and where does it stop?

After all, the plaintiff in this case had an apparent statutory right to enter default judgment upon the failure to lodge a defence within the required period. Since judgment was entered in a specific sum, the claim was presumably for a debt or liquidated demand, pursuant to r. 16.6 of NSW’s Uniform Civil Procedure Rules 2005. The affidavit in support had specific statutory requirements: r. 16.6(2). According to Ritchie, Its purpose was to provide an evidentiary basis for service of the originating process and for the quantification of the judgment. I have never before heard it suggested that an application for default judgment is an ex parte application of the kind which would require the applicant to put the defendant’s case as well as possible, or to disclose all relevant matters.

The prosecution’s best point in this case was that the solicitor did not respond to the invitations to advise if his client had any problem with the defendants’ proposals. No doubt a basis for disciplining the solicitor might have been carefully formulated. By formulating the nature of the disciplinary wrong in the way that the prosecution did, however, and in the Tribunal finding that the solicitor had told lies, including what amounted to perjury, practitioners will naturally be anxious about what they do not say going forward.

Penalty

The fourth unusual aspect of this decision is that, having found the practitioner guilty of professional misconduct by dishonestly misleading another lawyer, and the District Court of NSW on oath, the Tribunal imposed a fine without apparently troubling to consider why, in this case, a departure was warranted from the general principle that a finding of dishonesty (a fortiori what might be said to amount to perjury) would ordinarily warrant the practitioner’s striking off (Bolton v. Law Society [1994] 1 WLR 512 at [14] per the Master of the Rolls).

Lying to fellow lawyers and to the court in the course of practice, indeed in the course of litigation, is amongst the most serious of professional misconduct. I have acted for two practitioners who have been barred from practice for not presenting the whole truth in affidavits sworn by them.

That the Tribunal in this case rendered a modest fine without discussion of the appropriateness of doing so makes me wonder whether, despite the language of the charges and the admissions, and therefore of its findings, the Tribunal really saw this as a case about telling lies to a court or whether it really saw it as a case of inappropriate use of a statutory power in circumstances where the profession would frown upon such use, but not because it involved telling lies on oath.

Extract from Ipp, Lawyers’ Duties to the Court:

As promised above, here is the extract from Justice Ipp’s article, with footnotes incorporated by me into the text for convenience.

(a) Duty to disclose the law and not mislead as to the facts

Irrespective of the nature of the case, counsel is required to make a full disclosure to the court of the relevant law: Glebe Sugar Refining Co Ltd v. Trustees of the Port & Harbour of Greenock [1921] W.N. 85 at p. 86, H.L. Further, it is the general duty of lawyers not to mislead the court by stating facts which are untrue, or mislead the judge as to the true facts, or conceal from the court facts which ought to be drawn to the judge’s attention, or knowingly permit a client to attempt to deceive the court: Rondel v. Worsley [1969] 1 A.C. 191 at p. 227. Relevant evidence that is before the court should be drawn to the judge’s attention notwithstanding that it might be adverse to counsel’s case: In re G Mayor Cooke (1889) 5 T.L.R. 407 at p. 408 … These duties of disclosure may conflict with the lawyer’s duty of confidentiality to the client. When this occurs, the duty to the court is paramount: Rondel v. Worsley [1969] 1 A.C. 191 at p. 227.

(b) The duty of disclosure within the context of the adversarial system

The general duty of disclosure is, however, subject to qualifications brought about principally by the essential characteristics of the adversarial system. Thus, while lawyers are obliged to act honestly in all positive statements they make in the court room, they are not ordinarily required to disclose the identity of an adverse witness to the other side: In re G Mayor Cooke (1889) 5 T.L.R. 407 at p. 408. Nor is counsel ordinarily obliged to call every available witness who is able to give relevant testimony: Clayton Robard Management Ltd v. Siu (1987) 6 A.C.L.C. 57.

Ordinarily a distinction is made between fabricating evidence (which is forbidden) and not disclosing evidence (which is allowed). Recently, however, a trend towards a more stringent duty of disclosure has become discernible. In Vernon v. Bosley (No. 2) … counsel for the plaintiff failed to disclose to the trial judge and the Court of Appeal inconsistent evidence given by the plaintiff in other proceedings to which the defendant was not a party. Stuart-Smith and Thorpe L.JJ. held that the plaintiff’s counsel had a duty to disclose that evidence to the court; his failure to do so had led to the court being seriously misled. Stuart-Smith L.J. said that “where the case has been conducted on the basis of certain material facts which are an essential part of the party’s case”, that party’s lawyers have a duty to correct the court’s understanding when, before judgment, the facts are discovered by them to be different. Thorpe L.J. pointed out that the balance between counsel’s duties to the client and the court “must reflect evolutionary change within the civil justice system”. Reforms in civil justice require “strengthening the duty to the court”. He stressed the value of an “instinctive and intuitive judgment” in this regard. He said that “the course that feels wrong is unlikely to be the safe course to follow”: See pp. 699 (Stuart-Smith L.J.), 723 (Thorpe L.J.). Stuart-Smith L.J. considered that counsel should advise the client to make disclosure. If the client refused, counsel should withdraw from the case. Thorpe L.J. was of the view that if the client refused to agree to the disclosure, counsel should reveal the new facts to the other side. On this reasoning, it is arguable by analogy that counsel is not entitled to conceal from the court statements from expert witnesses which are inconsistent with the positive case presented by them.

Vernon v. Bosley (No. 2) is an instance of the growing trend of courts to require cases to be determined in accordance with the objective “truth” rather than on evidence adduced solely for reasons of perceived tactical advantage: Ipp, “Reforms to the Adversarial Process in Civil Litigation” (1995) 69 A.L.J. 705 at pp. 712-716. As was said by the former Chief Justice of Australia, Sir Anthony Mason [“The Role of the Courts at the Turn of the Century” (1993) 3 J.J.A. 156 at p. 165.]:

“I have left to last two developments which have already had or may have an impact on the role of the judge. The first is the rediscovery of the fundamental truth–or truism–that the courts are concerned with the administration of justice. There was a time when it was thought that the courts administered the law as distinct from justice. That is not the position today. And judicial concern with the ideal of justice is at bottom one of the reasons why the courts have refined some of the principles of substantive law as well as procedural law.”

Ex parte applications, by their nature are not adversarial, and the court in those circumstances does not have the benefit of representation of all parties involved in the litigation. Accordingly, it is then the lawyer’s unqualified duty to make full disclosure to the court so that the court’s decision is made on a fully informed basis: Shushma Lal v. Secretary of State for the Home Department [1992] Imm A.R. 303; Brink’s Mat Ltd v. Elcombe [1988] 1 W.L.R. 1350. …

[Special cases are then discussed: applications for Anton Piller orders, family law matters, children matters.]

Accordingly, courts in family disputes and disputes involving children impose a duty of frankness and disclosure, stemming from public interest, that overrides the usual rules relating to the conduct of trials. It remains to be seen whether this principle will be extended, in appropriate cases, to other areas. Efforts to do so in the U.S.A. have met with strenuous resistance, being described as “the attempt to convert the lawyer routinely into an informer against his client”: Rifkind, “The Lawyer’s Role and Responsibility in Modern Society’ 30 The Record 534 at 535. On the other hand, the evolutionary trend exemplified by Vernon v. Bosley (No. 2) suggests that tactical concealment of the truth will become more and more difficult to justify.’

See also:

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