VCAT rolled for finding solicitor guilty of a charge not levelled against him

Justice Karin Emerton seems to be emerging as one of the Supreme Court’s specialists in what I call the law about lawyers, much of which is found in the Legal Profession Act 2004.  Early on in her judicial career, her Honour was assigned to the hearing of the extraordinary suite of matters between the Legal Services Board and David Forster.  Her Honour’s latest characteristically clear and concise judgment in this area of the law (PS v Legal Services Commissioner [2014] VSC 185) was delivered yesterday, in which she allowed an appeal from a disciplinary decision of VCAT’s Legal Practice List. The Victorian solicitor who was the appellant was represented by another  specialist in the law relating to lawyers, Martin Randall, whom I expect was a leading expert in the area before I was born, and a gentleman to boot.  Her Honour set aside VCAT’s decision because it found the solicitor guilty of conduct he was not charged with.  The Commissioner urged her Honour instead to substitute a more appropriate decision, namely that the solicitor was guilty of the charge as drawn, but her Honour said: Wrong way! Go back.The solicitor referred two clients to money lenders and they borrowed money from them.  The loans were unsecured and were made in the expectation that they would be repaid from settlement monies to be received by the clients from Workcover settlements.  The solicitor signed a document which said:

‘We … hereby acknowledge the irrevocable authority dated Tuesday, July 15, 2008, and signed by [name of client] our client and will account to you for the monies being $8500.00.

Total amount owing is for Loan Number 261 for $4250.00 and Loan Number 273 for a further $4250.00.

Payment will be made by 30th September 2008 via cheque.’

The settlement did not go ahead and neither the clients nor the solicitor repaid the loans.

The Commissioner charged him with professional misconduct of the kind described in s. 4.4.3(1)(a) (‘unsatisfactory professional conduct … where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence’).  The charge was that the solicitor engaged in misconduct when he:

‘gave an undertaking to JP CreditLine by letter dated 15 July 2008 regarding the repayment of monies loaned by JP CreditLine to his client, compliance with which required the action of a third party (WorkCover) where this third party was not a party to the undertaking and whose action the Respondent could not guarantee.’

VCAT found the solicitor guilty of professional misconduct by failing to honour his undertaking in breach of conduct rule 27.1 which says:

‘The practitioner who, in the course of providing legal services to a client, and for the purposes of the client’s matter communicates with a third party orally, or in writing, in terms which, expressly, or by necessary implication, constitute an undertaking on the part of the practitioner to ensure the performance of some action or obligation, must honour the undertaking given strictly in accordance with its terms, and within the time promised (if any) or within a reasonable time.’

I observe that misconduct of that kind might more naturally be charged as misconduct in the sense specified in s. 4.4.4(a) (‘conduct consisting of a contravention of this Act, the regulations or the legal profession rules’).

Her Honour found by reference to Craig v The State of South Australia [1995] HCA 58; (1995) 184 CLR 163 that VCAT’s decision was characterised by jurisdictional error such that it exceeded its powers and that the error vitiated the decision and invalidated it.  By reference to XYZ v State Trustees [2006] VSC 444; (2006) 25 VAR 402 her Honour found that the course urged on her by the Commissioner was inappropriate:

’25 The Commissioner concedes that the Tribunal’s order should not have been ‘worded’ inconsistently with the charges that were brought. However, he submits that the signing of the Responses can be ‘equated in seriousness’ with a breach of undertaking and that the Court should simply vary the Tribunal’s order ‘so as to be consistent with the charges that are found proven’.

26 This, as I understand it, would involve the Court varying the Tribunal’s order so that the applicant is found guilty of charges of professional misconduct by reason of having given undertakings that should not have been given, rather than by reason of failing to honour the undertakings.

27 I reject the Commissioner’s submission and the proposed ‘fix’. The Tribunal’s error cannot be remedied by the Court varying the Tribunal’s order under s 148(7)(a) of the VCAT Act to reflect a finding of guilt that the Tribunal did not in fact make. Such a variation of the Tribunal’s order is not permissible having regard to the way in which the Tribunal approached its task. Nor, in my view, should the Court exercise its power under s 148(7)(b) to make an order that the Tribunal could have made in the proceeding and find the applicant guilty of the charges on the basis of the factual findings made by the Tribunal. In XYZ v State Trustees Ltd Cavanough J observed that, generally speaking, it would not be appropriate to substitute a new decision for the Tribunal’s decision unless it were the only decision open to the Tribunal as a matter of law. I am not persuaded that this is the case.

28 The Tribunal’s reasoning was based on the promises in the Responses constituting undertakings that were not honoured by the applicant. The form of professional misconduct found by the Tribunal involved a breach of r 27.1 of the Rules, which deals with the need for practitioners to honour undertakings strictly in accordance with their terms. The Tribunal reviewed at length the authorities on the subject of broken undertakings and concluded that ‘breach by a solicitor of an undertaking is “a matter of the greatest concern”’. It based its decision that the applicant’s conduct constituted professional misconduct on the finding that, although the applicant’s breaches were not trifling, ‘[the solicitor]’s failure is not the worst type of breach undertaking.’

29 Whether signing the Responses is as serious as a breach of an undertaking and whether it constituted professional misconduct is a matter for the Tribunal, not the Court on appeal under s 148 of the VCAT Act. It was for the Tribunal to determine what was given by the applicant and whether the giving in the circumstances alleged constituted professional misconduct. The Tribunal has not considered this question.

30 Leave to appeal is granted, the appeal is treated as having been instituted and heard instanter and the appeal is allowed. The Tribunal’s order must be set aside and the proceeding remitted to the Tribunal to be heard and determined according to law.

31 The Tribunal considering the charges afresh should be differently constituted, given the (unnecessary but damaging) findings made by the learned member concerning breaches of undertakings.’ (footnotes omitted)

It will be interesting to see whether the Commissioner persists in characterising the practitioner’s statement as a personal undertaking and whether VCAT finds, the second time around, that they were.  The practitioner’s contention that he made no undertaking was a ground of appeal which Justice Emerton found it unnecessary to consider.

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