CITATION: Law Society of New South Wales v Hinde [2005] NSWADT 199 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Jeffrey James Hinde FILE NUMBER: 052007 HEARING DATES: 23/06/2005 SUBMISSIONS CLOSED: 06/23/2005 DATE OF DECISION: 08/24/2005 BEFORE: Brennan JWF - Judicial Member; Riordan M - Judicial Member; Bennett C - Non Judicial Member APPLICATION: Professional Misconduct - fail to honour undertaking MATTER FOR DECISION: Principal Matter LEGISLATION CITED : Legal Practitioners Act 1898 Legal Profession Act 1987 Allinson v General Council of Medical Education and Registration 1894 QBD 750 In re Hodgekiss [1962] SR (NSW) 340Kennedy v The Council of the Incorporated Law Institute of NSW 1940 13 ALJ 563 CASES CITED: Law Society of NSW v Bannister [1993] NSW LST 6 Law Society of NSW v Berry [2005] NSWADT 46 Law Society of NSW v Ciampa [1999] NSW ADT 13 Myers v Elman [1940 ] AC 282 APPLICANT REPRESENTATION: P Boyd, Solicitor RESPONDENT R McDougall, Solicitor ORDERS: 1. That the practitioner be publicly reprimanded ; 2. That the practitioner pay a fine of $3,000 within two (2) months of the date of these orders provided that in the event of such payment not being made within that period then the practising certificate of the practitioner shall be cancelled until payment in full is made ; 3. That the practitioner pay the costs of the Law Society of and incidental to these proceedings as agreed or assessed pursuant to Division 6 Part 11 of the Legal Profession Act 1987 such payment to be made within two (2) months of agreement or assessment. REASONS FOR DECISION 1 By an Information filed in the Tribunal on 11 March 2005 the Council of the Law Society of New South Wales ("the Society") informed the Tribunal that as a result of the Council's investigation of a complaint made under Part 10 of the Legal Profession Act 1987 against Jeffrey James Hinde ("the practitioner") a legal practitioner within the meaning of Section 128 of the Act, the Society claimed that the practitioner while practising as a solicitor was guilty of professional misconduct. 2 The ground of complaint was that: "The legal practitioner failed to honour an undertaking". 3 In the Information notice of a claim for an order for compensation was detailed but this has been withdrawn. The payment sought by way of compensation had already been made by the practitioner to that claimant prior to the hearing. 4 The practitioner acted for a company, Foxhold Pty Limited ("Foxhold") which company entered into a put and call option agreement with Damray Pty Limited ("Damray") for a purchase of nine home units at Lidcombe. By Deed between Foxhold and Damray provision was made in certain circumstances for Damray to sell these units. 5 Foxhold entered into an agency agreement with a real estate agent, Homelink Realty ("Homelink"), which entitled Homelink to a commission of 2½% of the sale price for each unit it sold for Foxhold. 6 One of these units ("Unit 21") was sold for Foxhold by Homelink and Homelink received a deposit of $15,750.00. In terms of the put and call option contract the deposit was required to be paid to the solicitors for Damray. 7 By letter dated 18 March 2002 the practitioner wrote to Homelink in relation to the sale of Unit 21 in the following terms (omitting formal parts): "We confirm that we are authorized to effect exchange on the Contract and act for the parties involved. Please send the Contract signed by the purchaser to us, together with a deposit cheque in favour of O'Hara & Company Pty. Ltd. We undertake and confirm your commission to be 2.5% plus GST will be paid on settlement." 8 Subsequently after receipt of that undertaking Homelink released the deposit to the practitioner who in turn forwarded it to the solicitors for Damray, Messrs O'Hara & Company, and the matter proceeded to completion on 13 May 2002. The evidence is quite clear that the solicitor did not comply with his undertaking to pay Homelink's commission at settlement in terms of his undertaking. The time "at settlement" is clear and not disputed nor open to dispute. 9 The actual commission of $8662.50 was ultimately paid by the practitioner to Homelink by three instalments as follows: 25 January 2005 $3,500.00 23 February 2005 $3,500.00 7 April 2005 $1,662.50 $8,662.50 10 The Affidavit of Raymond John Collins sworn 10 March 2005 was tendered and admitted without objection. The Affidavit detailed the processes followed by the Society in investigation of the complaint and annexed the relevant documentation including the crucial letter from the solicitor dated 18 March 2002 in which he gave the undertaking which his failure to honour became the subject of the complaint. 11 The documentation contains some ineffectual efforts by the practitioner to explain his behaviour. He told the Legal Services Commission it was improper for the agent to retain the deposit when the Contract for Sale prepared by one of the solicitors in the transaction provided for the firm of solicitors to hold the deposit. The Tribunal finds it hard to believe that a practitioner of almost twenty years' experience could make such a naïve proposition in response to a complaint. The commercial realities are that, in the normal case, the agent has as a term of his agency agreement authority to collect and retain the deposit pending completion which is his protection to ensure his commission is paid if the matter is completed. 12 The practitioner told the Legal Services Commission in his letter of 2 October 2003 of the circumstances which led him to give the undertaking and the assurances that he received before he gave the undertaking. It is clear from those beginnings that the practitioner was aware of the seriousness of the undertaking. 13 The practitioner further sought to excuse himself by maintaining the estate agent should have sued the vendor and complained that he had made no attempt to do this. He expressed his embarrassment somewhat indignantly at the complaint having been made and of a resultant investigation of his practice and an audit of his Trust account which he found "an humiliation." The practitioner sought to go behind his undertaking and indicated his disinclination to pay in the circumstances where the agent refused to accept a condition of the Contract and would not accept an undertaking from the practitioner's client. The practitioner's solution was simply that the agent should pursue the vendor and the vendor's solicitors to whom the deposit was paid. As a result of his having given evidence and been cross-examined in this matter the practitioner, who admitted the matters alleged, may now have a better understanding of the solemnity of a solicitor's undertaking. It is axiomatic that the standards of an honourable profession must continue to require that an undertaking in clear terms must be honoured and, indeed, the undertaking should be satisfied on the date and in the manner (if any) which the undertaking specifies. 14 When the undertaking was not complied with, the agent made a complaint to the Legal Services Commissioner which was referred to the Society. In the course of the investigation, mediation was proposed and the practitioner and the agent attended the Society for mediation. In the short term, that mediation was successful and by letter of 16 April 2004 the Society advised the practitioner as follows: "I have confirmed with Mr Elriche that his complaint is withdrawn and I have closed my file accordingly and notified the Legal Services Commissioner. Mr Elriche has indicated that he has issued the required Notice to your client and that he will renew his request that you honour your undertaking in the event that the Notice does not result in payment. I must urge you, in the event that Mr Elriche again calls on you to honour your undertaking, to do so without delay." 15 It may have been that the practitioner thought that the notice referred to in the letter to be issued by the agent was a Statement of Claim, while the agent appears to have simply issued a standard notice to the practitioner's client requesting payment of commission. The notice was given to the client but the client did not pay the agent's commission and the agent then made a complaint to the Society on 16 June 2004. This was addressed by the practitioner in a letter to Professional Standards on 24 November 2004 and in that letter the practitioner said: "I accept the fact, however, that an Undertaking from a Legal Practitioner is a serious commitment and I know that a Practitioner's breach of Undertaking amounts to professional misconduct but, as outlined previously, there were (3) issues that I consider appropriate: 1. The fact that the agent improperly held the deposit and he had no right to do so. 2. The fact that the agent refused to release the deposit correctly as he should have done. 3. The fact that the agent failed to approach Marsha Foxman for the debt which he should have done." 16 The practitioner indicated then that as the agent had been unsuccessful in obtaining payment from the client and as he had given the undertaking he had agreed to honour it. He sought time to pay by instalments and he expressed the view "it would be more convenient to pay the debt by instalments and I believe in all the circumstances it is not inappropriate that I pursue this". 17 The Tribunal finds the practitioner's attitude rather extraordinary in the context where he is referring to an undertaking to make a payment at settlement which had occurred some 2½ years earlier on 13 May 2002. Notwithstanding the complaints to the Society by the practitioner, it is clear that the agent did nothing whatever that was improper and was unconditionally the payment covered by the undertaking on 13 May 2002. 18 On 1 December 2004 the Society informed the practitioner that a report would be prepared and submitted for the Conduct Committee meeting on 20 January 2005. The Society's letter indicated an expectation that prior to the meeting the practitioner would inform the Society that the agent had been paid or an agreement had been reached for payment. 19 On 18 January 2005 the Society again wrote to the practitioner to draw his attention to the fact that no payment had been made and no arrangement entered into for the discharge of the undertaking. He was then, as he was in the letter of 1 December, urged to honour the undertaking prior to the next Conduct Committee meeting on 3 February 2005. 20 The practitioner responded by sending a cheque for $3,500.00 part payment to the complainant by letter of 25 January 2005 in which he indicated that a further two payments over two months would be made to conclude the matter. The practitioner's letter continues: "For the record, I wish it recorded that your agency improperly held the original deposit in your trust account, as the Contract provided for the deposit to be held by the vendor's solicitor. You insisted on me giving you an undertaking to pay this commission, which I made, as your firm refused improperly to release the deposit to the vendor's solicitor without this undertaking." I have conceded however an undertaking by a solicitor must be honoured and I am doing this." 21 In his Reply filed 6 May 2005 the practitioner admitted the undertaking and "that in failing to honour it in a timely manner when called upon to do so once the complaint of Mr Elriche was referred to him by the Law Society on 24 September amounts to professional misconduct." The Reply provided further background information including the fact that he had by that date paid the moneys owing by instalments the last of which was made on 7 April 2005 and he repeated the issues which he appeared to think justified his conduct in the following terms: "(c) Pursuant to the contract for sale of the subject property, the deposit was to be held by the vendor's solicitors and not Homelink although the purchaser had paid the deposit to Homelink. (d) The only circumstances in which Homelink would agree to paying the deposit to the vendor's solicitor was upon receipt by the solicitor of his undertaking to pay to Homelink its commission. (e) If the solicitor had not provided the undertaking as requested, the subject sale could not have proceeded and the solicitor's vendor clients would have suffered significant financial losses. (f) Homelink, notwithstanding being asked to do so has not produced to the solicitor a copy of a sales agreement evidencing his entitlement to be paid although reference is made to this document in paragraph 5 of the Information. (g) The solicitor mistakenly understood that the solicitors for the vendor who ultimately held the deposit would have accounted to the agent for the commission. (h) The solicitor had been given assurances from his purchaser client, upon which he relied, that the agent's commission would be paid by her if that became necessary." 22 The Tribunal finds it is quite inappropriate to suggest that the practitioner's conduct became professional misconduct at some time subsequent to 24 September 2004 when the complaint was referred to him. The conduct which is the subject of the complaint was complete at the time of settlement on 13 May 2002 when the payment promised was not made. Clearly, the failure to honour the undertaking became a matter of increasing gravity as time passed. Again, the Tribunal makes it clear that it does not see any merit in the practitioner raising once more the issues which he appeared to believe gave some justification for his misconduct. The raising of those matters is, however, of assistance to the Tribunal in assessing the attitude of the practitioner towards his obligations in honouring an undertaking and that attitude is one of real concern. 23 The practitioner's Affidavit, sworn and filed on 6 May 2005, set out the facts which were not in dispute but contained an assertion that "having regard to the circumstances in which I gave the undertaking in this case, I felt that I was being unjustly treated" and made it clear that there was no agreement for the moneys outstanding to be paid by instalments. Payment by instalments was a course undertaken by the practitioner without the consent of the complainant whom the practitioner indicated required payment in full without delay. 24 The practitioner swore and filed two Affidavits, one of which dealt with the substantive issues and to which reference has been made. The second Affidavit sworn 20 May 2005 related to some administrative matters in relation to the preparation for the hearing which in the opinion of the Tribunal do not go to the merits of the complaint. 25 In addition, an Affidavit sworn on 20 June 2005 by David John Crapp, a Solicitor in sole practice at West Ryde was filed and admitted without objection. Mr Crapp was not required for cross-examination. 26 Mr Crapp has been in sole practice since 1971 and has had an involvement in the Law as a Solicitor or clerk for 49 years. He had read copies of the Information and Reply and had been involved in the Foxhold matter, giving separate advice to one of the two directors of that company. Mr Crapp referred to the losses the practitioner incurred in relation to the Foxhold matter generally and the incredible hours of work he put into it and the distress, distaste and abhorrence he suffered in the context of his retainer. He offered those emotions as prompting the practitioner's procrastination in honouring his undertaking. 27 A letter from a barrister, Peter King, dated 20 June 2005 was also tendered on behalf of the practitioner and admitted into evidence. Mr King stated that he knew the practitioner from his professional contacts at the Bar representing the practitioner's clients and the opponents of the practitioner's clients from time to time, as well as through Mr King's activities as a local Federal Parliamentarian and for a time as Mayor of Woollahra. 28 Mr King advised that he had read the pleadings and the current complaint and he referred to the practitioner as having a reputation as an effective and reputable lawyer who devotes "considerable energy to the genuine interests of his clients". The letter stated that the practitioner is respected as a person of integrity who is fair-minded and, in effect, frank. Mr King regarded the practitioner as an exemplary citizen and referred to his pro bono efforts and his willingness to assist people in need generally. 29 Mr King was not called for cross-examination and the Tribunal has taken into account the matters he has referred to, as well as those raised by Mr Crapp. In this context, the Tribunal also notes the contributions of the practitioner to the community and to the practise of law by his pro bono work referred to him by the Society and his involvement in the Law Society's mock trial competition over a period of some fifteen years. 30 A further letter from a solicitor in the Eastern Suburbs was tendered at the hearing. This solicitor was not available for cross-examination and that letter was withdrawn. 31 The practitioner was cross-examined and in relation to the undertaking he said: "It was a foolish undertaking, I don't deny that. I did, however, have assurances from one of my clients that commission would definitely be paid." The cross-examination also dealt with the practitioner's letter to Mr Fairburn, Trust Account Inspector at the Law Society of 11 March 2003. In that letter he acknowledged the foolishness of his giving the undertaking. He continued: "I advise further that I was under the impression that the commission would be paid by O'Hara and Co on settlement and I am at something of a loss as to why it was not paid and I will pursue this aspect. I accept the fact that probably from an ethics view point I am expected to pay this commission but the gutter treatment I have received from this alleged Solicitor, Peter McGee and the rudeness and hostility from Homelink Realty has caused me some disinclination to pay this commission. Prior to paying it I intend to further discuss the matter with O'Hara & Co. and my client. If, after I have executed what I consider reasonable efforts to resolve the matter-and I may still be obliged to pay, I will give serious consideration to paying the sum but I need to resolve some queries prior to taking this extreme step. I should mention that I have faxed the agent and have requested advice as to whether they had an agency agreement and whether they were entitled to commission, because I do not understand why the commission was unpaid and perhaps they were not entitled to commission. At this point, I have (had) not had the courtesy of a reply." 32 The practitioner also wrote on 11 March 2003 to the complainant. That letter is important in the Tribunal's assessment of the practitioner's conduct. It is consistent with a clear trend in the practitioner's approach to this matter, an approach which in the view of the Tribunal reflects poorly on the practitioner and could fairly be described as bringing an honourable profession potentially into disrepute. The practitioner with his accusations, threats and failure until shortly before the hearing of this matter to honour his undertaking has in the Tribunal's view effectively sought to portray himself as "the victim". The problem is, and has been, the undertaking by the Solicitor and his failure to promptly honour it. Rather than be acknowledged as the "victim" the practitioner is clearly by his conduct the "villain " because of his failure to honour the undertaking at settlement which default was a continuing one from 13 May 2002 to 7 April 2005. Forensically attack may have advantages over defence but the Law Society, The Bar Council and the Commissioner for Legal Services are not adversaries but bodies with statutory duties to fulfil on behalf of the profession. Omitting formal parts, the letter of 11 March to the agent/complainant reads: "We refer to your fax of 21 February 2003. We were under the impression that you had received a fax in response from us but we note your advice that this fax has not been received. In our fax we requested from you certain specific information and we would appreciate your assistance in responding to our enquiries. Firstly, did yo have an Agency Agreement to sell the property and that you would be paid commission in this matter? Could you please fax us this agency agreement (if in existence) as our undertaking was on the basis that you had an agency agreement to sell this property. We wish to advise that we did not at any stage during a conversation with Mr Peter McGee, represent that we had paid the commission. What was said was that I was of the opinion that as the matter had settled some months ago, that the commission amounting to $8,662.50 had been paid as required by the Vendor. This was based on an advice I received from a third party and I wish to put you on notice that I resent your comments that I represented falsely that I paid the commission, as this is not the case. Could you please advise, as this matter was settled back on 13 May 2002, as to why it has it taken you so long to bring this matter to our attention? We note your advice that you have lodged a complaint about our misleading and deceptive practice to the Legal Services Commissioner and we are seeking Counsel's opinion as to a possible action against you for defamation. We suggest in the immediate future you should lodge a formal apology to us, and we will then seek Counsel's advice as to whether it would be appropriate to pressure a suit for defamation. In the circumstances, it is our interest and hope that this matter can be resolved amicably and I may prompt further enquiries and will keep you informed." 33 The practitioner's approach while inappropriate was certainly very positive. He sought a formal apology from Homelink, threatened defamation proceedings on which he indicated he would seek Counsel's advice and then expressed the wish that the matter might be resolved amicably. 34 At the conclusion of cross-examination the practitioner was requested by the Tribunal to look at the letter of undertaking of 18 March 2002 and he was then asked the following questions: "Q: As at the 18 March 2002 were you the sole proprietor of Jeffrey Hinde & Associates? A: Yes, Sir. Q. In the final paragraph of that letter you gave an undertaking to which you've been referred previously?" A: Yes, Sir. Q: Were you, at the time you gave that undertaking, in a financial position to honour the undertaking? A: Yes, Sir. Q: Did you appreciate that it was by reason of your giving that undertaking that Homelink Realty followed a particular course of action? A: Yes, Sir. Q: That was in reliance on your undertaking? A: Yes, Sir. Q: You appreciate the seriousness of a Solicitor giving an undertaking? A: Yes, Sir. Q: And you accept that the undertaking was in terms that it was unconditional, apart from the fact that it did not operate until settlement? A: Yes, Sir." 35 No questions were asked by either Counsel arising out of those matters raised by the Tribunal. 36 In submissions on behalf of the practitioner it was asserted correctly that the practitioner gave this undertaking to assist his client in a commercial transaction. The evidence was not in dispute that, had the undertaking not been given, his client would have faced a financial disaster and this was corroborated by the evidence of Mr Crapp. The Tribunal accepts that those matters were part of the background to the undertaking being given and, indeed, that these matters led to the practitioner's subsequent financial detriment. The practitioner admitted the foolishness of giving an undertaking but once it was given in unconditional terms his obligation was to honour the undertaking at settlement of the sale. He gave the undertaking; he should have ensured it was satisfied by himself or one of the parties at the settlement of the conveyancing matter. Findings: 37 The undertaking was given by the practitioner, it became operative and should have been honoured at settlement of the sale on 13 March 2002. These matters are not in dispute. The undertaking was serious and caused the agent who effected the sale to follow a different course so that the agent became dependent on the practitioner for payment of the commission which it would no doubt deducted at settlement from the deposit held in the normal manner. 38 The information claims the practitioner is guilty of professional misconduct. There is a mass of decisions on what constitutes professional misconduct. The Legal Profession Act gives a non exhaustive definition but failure to honour an undertaking falls within the common law concepts of professional misconduct. These have been around for a long time. In Allinson v General Council of Medical Education and Registration 1894 QBD 750 at 768 Lopes LJ approached the definition of the term "infamous conduct" as follows terms: "Then I come to the question of 'infamous conduct in a professional respect,' and, in my opinion, if there was any evidence on which the council could reasonably have come to the conclusion to which they did come, their decision is final. If, on the other hand, there was no evidence upon which they could reasonably arrive at that conclusion, then their decision can be reviewed by this Court. It is important to consider what is meant by 'infamous conduct in a professional respect.' The Master of the Rolls has adopted a definition which, with his assistance and that of my brother Davey, I prepared. I will read it again: 'If it is shewn that a medical man, in the pursuit of his profession, has done something with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency,' then it is open to the General Medical Council to say that he has been guilty of 'infamous conduct in a professional respect.'" 39 In re Hodgekiss [1962] SR (NSW) 340 at 351 Hardie J said: "No definition of the phrase 'professional misconduct' is contained in the Act; its meaning accordingly has to be ascertained from case law. In Myers v Elman [1940] AC 282 Viscount Maugham adverted, briefly and by way of obiter dictum, to the jurisdiction to strike off the rolls or to suspend a solicitor 'on the ground of professional misconduct, words which have been properly defined as conduct which would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency.'" His Honour was, of course, dealing with the 1898 At but the comments are equally applicable to the 1987 Act when both is a non-exclusive definition. 40 In Kennedy v The Council of the Incorporated Law Institute of NSW 1940 13 ALJ 563 Rich J. said: "That a charge of misconduct as relating to a solicitor need not fall within any legal definition of wrong doing. It need not amount to an offence under the law. It was enough that it amounted to grave impropriety affecting his professional character and was indicative of a failure either to understand or to practise the precepts of honesty or fair dealing in relation to the courts, his clients or the public. The particular transaction the subject of the charge must be judged as a whole and the conclusion whether it betokened unfitness to be held out by the court as a member of a profession in whom confidence could be placed, or on the other hand, although a lapse from propriety, was not inconsistent with general professional fitness and habitual adherence to moral standards were to be reached by a general survey of the whole transaction." 41 The failure of the practitioner to honour the undertaking promptly fits comfortably within these descriptions of professional misconduct and, indeed the practitioner has admitted that his conduct may be so described. The Tribunal is comfortable satisfied that the complaint of professional misconduct is established. The misconduct is serious but in the view of the Tribunal it is a one-off transgression and, on its own, does not call into question the fitness to practise issue. 42 The Society sought in the information and at the hearing that the practitioner be publicly reprimanded and pay the Society's costs. The Tribunal holds that such orders would not satisfy its obligations under s171C of the Act and proposes to impose a fine together with a public reprimand and also to make a costs order. 43 In Law Society of NSW v Bannister [1993] NSW LST6 the Court of Appeal allowed an appeal against a decision of the Tribunal's predecessor where the Tribunal had fined the practitioner. The Society before the Tribunal sought a fine and "such other order" as the Tribunal thought fit. The Court of Appeal was clear in the view that the Tribunal should have made a strike-off order and itself made that order. 44 In Law Society of NSW v Ciampa [1999] NSW ADT 13 the complainant sought a reprimand and a fine. The Tribunal held that orders sought were inadequate and made the orders sought plus an order that no practising certificate be issued to the practitioner for 3 years. 45 Finally, in Law Society of NSW v Berry [2005] NSW ADT 46 the complainant sought a fine and/or a reprimand plus a costs order while the Tribunal ordered that the practitioner be struck off. The Tribunal clearly has the duty where it considers it appropriate to make orders beyond those sought by the complainant and it will adopt that course now. 46 The public reprimand is important as it marks the disgrace of a member of an honourable profession inherent in his misconduct but the reprimand is not a sufficient disciplinary act in itself in this matter unless coupled with an appropriate fine. 47 The fine to be imposed must take into account the other orders made. The Tribunal having considered the gravity of the misconduct, the practitioner's and the other matters referred to above, has concluded that the appropriate fine is the sum of Three thousand dollars ($3,000) and that sum is ordered to be paid within two (2) months of the date of these orders. 48 In relation to costs there can in the Tribunal's view be no issue here. The practitioner was given a number of opportunities to belatedly honour his undertaking to avoid these proceedings but chose ultimately to do so only by instalments completed after these proceedings had been commenced. The practitioner is ordered to pay the complainant's costs of and incidental to these proceedings as agreed or assessed in terms of the formal order. Publication of order and reasons : 49 s171C(3) of the Legal Profession Act requires the Tribunal where it makes an order publicly reprimanding a legal practitioner to publish the order and a statement of its reason for making the order. Under subsection (5) this obligation to publish is satisfied if the Tribunal provides the Commissioner sufficient information to enable the Commissioner to exercise the Commission's function in respect of the register of disciplinary action required to be kept under Division 9A. The Registrar of the Tribunal is accordingly requested to provide the required information to the Commission as expeditiously as possible. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.