CITATION: Council of the Law Society of New South Wales v Knudsen [2004] NSWADT 272 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Peter Stanley Knudsen FILE NUMBER: 012043; 022019; 022021; 032003 HEARING DATES: 14 & 15/08/2002, 21/03/2003, 31/05/2004 SUBMISSIONS CLOSED: 05/31/2004 DATE OF DECISION: 11/26/2004 BEFORE: Mattila J - Judicial Member; Vass CB -Judicial Member; Costigan M - Non Judicial Member APPLICATION: Professional Misconduct - Attempting to influence the evidence of a material witness - Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - fail to comply with s. 152 Notice - Professional Misconduct - make false statement - Professional Misconduct - misappropriate trust moneys/moneys - Unsatisfactory Professional Conduct - fail to comply with undertaking to Practitioner MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 CASES CITED: Kennedy v Law Institute of NSW (1940) 13 ALJR APPLICANT REPRESENTATION: R R Stitt QC, barrister RESPONDENT R Weber, barrister ORDERS: 1. In relation to Matter No. 022021 the breach of section 61 of the Legal Profession Act 1987 - professional misconduct fined $10,000; 2. In relation to Matter No. 012043 failing to comply with an undertaking - unsatisfactory professional conduct. The Solicitor is publicly reprimanded for failure to comply with a Solicitor's undertaking; 3. In relation to Matter No. 022021 attempting to induce a witness not to give evidence in the disciplinary proceedings - professional misconduct. The Solicitor to be publicly reprimanded; 4. In relation to Matter No. 032003 in that the Solicitor made a statutory declaration knowing it to be false and misleading - professional misconduct. The Solicitor is fined $10,000 ; 5. In relation to Matter No. 022019 the failure to comply with section 152 notice of the Legal Profession Act 1987- professional misconduct. The Solicitor is fined $1,000 ; 6. The Solicitor to have six months to pay from the date of this decision and that at the expiration of the six month period if the fines have not been paid in full the Solicitors practicing certificate be suspended until the fine is paid; 7. The Solicitor is to pay the Law Society's costs, costs to be assessed on a Solicitor client basis as if taxed in the Supreme Court of New South Wales. If agreement cannot be reached between the parties either party may seek leave to appeal under section 208M of the Legal Professional Act 1987. REASONS FOR DECISION FACTS 1 There are four separate Applications before the Tribunal relating to two different clients covering five complaints. The Marshall Complaints 2 The Marshall Complaints arose out of the personal injury claim that was commenced by Mrs Marshall and her four children in Bathurst. The claim was made out of time and the Solicitors for these plaintiffs, McIntosh McPhillamy, applied to the District Court for an extension of time. The matter was heard in June 1997 before His Honour Christie J, in the District Court. The Application for extension of time by the barrister for the Plaintiffs, Mr Stirling Hammond, was successful. On 18 June 1997 Christie J granted the Application but ordered the plaintiffs to pay the Defendant's costs of the motion in each Application. 3 It should be noted at this point that McIntosh McPhillamy had agreed that in relation to this matter no fees would be rendered unless the matter was successful. An additional factor was that this was a children's case and no legal fees could be paid from the judgment or settlement. Costs could only be paid by the defendant. The late application and the order to pay the costs of the defendants started the chain of events in the Marshall Complaints. 4 On 20 June 1997 the then Solicitors for the Plaintiffs, McIntosh McPhillamy & Co, advised the Plaintiffs by letter of the terms of the Order. On the same day, 20 June 1997, Mrs Marshall on behalf of the children contacted Mr Knudsen by telephone and asked him to take over the conduct of the matter. 5 On 11 August 1997 Mr Knudsen wrote to Mr Nichols of McIntosh McPhillamy & Co asking that the files be handed over to his firm. Mr Nichols had a lien over the files. Mr Nichols in his response sought an undertaking from Mr Knudsen that McIntosh McPhillamy's costs to that date be paid on settlement or on the order of the court. On 20 August Mr Knudsen wrote to Mr Nichols and stated that he would give an undertaking to pay the costs involved – the professional costs. 6 On 25 August 1997 the Plaintiff's barrister Mr Stirling Hammond rendered four memoranda of fees in respect of his costs for acting on the Application for extension of time. The total fees amounted to $11,860. 7 On 26 August 1997 Mr Nichols replied: "We are happy to recover our professional costs on a party and party basis, either on an assessment to 11 August, or by agreement with the defendant and yourselves." 8 Mr Nichols forwarded the memoranda of fees from Mr Hammond to Mr Knudsen. On 23 October 1997 Mr Knudsen again wrote to Mr Nichols saying that he would pay the outstanding disbursements on settlement or within three months. On 29 October 1997 Mr Nichols agreed to hand over the files; however, in the covering letter Mr Nichols sought to recover Stirling Hammond's fees. The files were delivered on 30 October 1997. At the date the files were handed over to Mr Knudsen, Mr Nichols had not informed Mr Knudsen of the decision in relation to costs in the matter and that at that moment in time it would not be possible to recover Stirling Hammond's fees from the defendant because of the earlier costs order. 9 Mr Nichols did not in his covering letter to Mr Knudsen refer to the costs order; however, a letter advising the plaintiffs of the terms of the Order was included in the file. Mr Knudsen in evidence stated that he did not review the contents of the file prior to contacting Mr Nichols again on 6 November 1997. Matter No. 012043 10 On that date Mr Knudson gave a further undertaking in relation to counsel's fees. It is this letter of Mr Knudsen's that forms the basis of the Law Society's complaint in relation to the undertaking in matter No. 012043. 11 On 11 November 1997 a copy of the judgment of Christie J was sent to Mr Knudsen. Mr Knudsen's evidence was that this was the first time he became aware of the adverse costs order. Mr Knudsen's evidence is accepted, as it seems highly unlikely that Mr Knudsen would personally have agreed to pay Mr Hammond's fees otherwise. 12 Mr Knudsen then proceeded with the case and sought to recover costs, including the costs of McIntosh McPhillamy and those of Mr Hammond. 13 On 2 April 1998 Solicitors for the insurer, Holman Webb, wrote to Mr Knudsen and drew his attention to the order for costs and noted that the bulk of Mr Hammond's costs were affected by the order. Holman Webb indicated these costs should be taken into account on negotiating settlement. On 9 April 1998, Mr Knudsen sent to McIntosh McPhillamy a copy of the letter from Holman Webb, a file note of a conversation to which Mr Knudsen deposes: "Chris Nichols re costs; he will talk to Stirling Hammond about costs order against them." 14 Holman Webb wrote again to Mr Knudsen on 12 May 1998: "We have previously indicated that MacIntosh McPhilaimy are not entitled to charge work in relation to the notice of motion. Our client is prepared to offer $1,750 – you will recall that Macintosh McPhillamy wanted $2,500 for that." "Our client is prepared to allow $5,000, making the sum of $6,750 for professional costs. Disbursements: with the exception of counsel's fees, all items appear reasonable, except the notice of motion transcript and the claim for litigation lending. In relation to counsel's fees of $2,965 - our client is prepared to allow $450 for the two conferences on 22 October on liability, quantum and evidence. Our client is not prepared to allow the third conference, nor is it necessary for Counsel to have drafted the statement of claim and the part 12 notice. The balance of the items appear to relate to the notice of motion." 15 Mr Knudsen settled on a global figure of $13,000 for each child. 16 The total amount of $52,000 was paid into the trust account, however Stirling Hammond's fees amounted to $11,860 and McIntosh McPhillamy's fees were $2,500 per child. 17 On 15 July 1998 Mr Knudsen paid $17,163.16 being $4,290.79 in costs and disbursements for each child, to McIntosh McPhillamy, made up of $2,500 professional costs, plus $1,790.79 for disbursements, but nothing for Stirling Hammond's fees. 18 At that stage Mr Knudsen believed Mr Nichols was speaking to Mr Hammond about his costs. Matter No. 022021 Failure to account for Trust Moneys 19 However, Mr Knudsen directed that the remaining funds held in trust be paid to his firm – this included the three amounts of $450 paid by Holman Webb in relation to Mr Hammond's fees. This action gave rise to the allegations set out in matter No. 022021. 20 Mr Knudsen said the transfer from trust was made because the firm and/or Mr Knudsen was responsible for the payment of Mr Hammond's fees to the sum of $1,350. Mr Knudsen did not pay this amount to Mr Nichols on Mr Hammond's behalf. Matter No. 022021 Attempting to influence the Evidence of a Material Witness 21 In March 2001, McIntosh McPhillamy commenced action in the Local Court to recover Mr Hammond's fees of $11,860 plus interest, plus costs and lodged a complaint with the Law Society. 22 Mr Raphael settled the matter on behalf of Mr Knudsen but part of the settlement was on the following terms: Clause 6(a) – that you will not swear any further affidavit, nor will you offer to give evidence against Mr Knudsen in the proceedings instituted by the Law Society against him and numbered 012043/01 Clause 6(b) – that you will write to the Law Society within seven days after payment of the said sum of $13,000, informing the Law Society that the undertaking has now been honoured, and that you specifically decline to give evidence in those proceedings, and will send a copy of that letter to Mr Knudsen of even date with that to the Law Society. 23 The settlement appears to have involved an attempt by Mr Raphael on behalf of Mr Knudsen to affect the evidence of a witness in a disciplinary matter. This lead to the allegations further set out in matter No 022021. There is no evidence before us that Mr Knudsen's instructions included anything other to settle the matter on the terms that Mr Raphael thought appropriate. Mr Knudsen did however admit the complaint. Matter No. 032003 False or Misleading Statutory Declaration 24 The complaint to the Law Society was referred for investigation. Mr Knudsen subsequently provided a Statutory Declaration to the Law Society where he stated at paragraph 10: "10. In the event the Solicitors for the Victorian Transport Commission, Holman Webb, as a result of our submissions, waved their own fees and these of Counsel on the interlocutory proceedings notwithstanding the order in their favour, but understandably were not able to obtain instructions to pay Mr Hamman's fees." Summary 25 The Law Society, in summary, alleged that Mr Knudsen in the Marshall Complaints: (a) Breached section 61 of the Legal Profession Act (b) Misappropriated trust money (c) Attempted to induce a witness not to give evidence in disciplinary proceedings by payment of moneys; and (d) Made a false or misleading Statutory Declaration. 26 The Respondent, Mr Knudsen admitted the complaints in each of the matters 022021, 012043 and 032003. In relation to these matters he argued that there were mitigating circumstances. 27 Counsel for the Respondent argued that Mr Knudsen had been induced to give the undertaking as a result of Mr Nichols' failing to inform him of Christie J's orders. Mr Nichols' behaviour is not a credit to him. 28 Unfortunately, the matter should have been referred to the Law Society when Mr Knudsen became aware of the costs order and an attempt should have been made to resolve the matter by seeking a release from the undertaking based on Mr Nichols' conduct. 29 Mr Knudsen did not seek to be released from the undertaking, nor did he pay the fees attributable to Mr Hammond until he was sued in the Local Court. 30 The settlement sought by Mr Raphael caused the situation to deteriorate further. The settlement resulted in the Law Society including an additional ground of interfering with witnesses. 31 Mr Knudsen also swore a false or misleading Statutory Declaration claiming he had no instruction to pay counsel. The evidence in relation to this matter indicates there was negotiation in relation to Mr Hammon's fees prior to settlement. However the settlement figure was a global sum – it was not itemised. Holman Webb had earlier allowed an amount of $450.00 per child. 32 The Law Society referred the Tribunal to Kennedy v Council of the Law Institute of NSW, in relation to a Solicitor attempting to persuade a witness not to give evidence in a criminal matter. 33 In making the orders against Mr Knudsen the Tribunal takes into account the mitigating circumstances in this matter and that the case against Mr Knudsen in a large part arose because of the behaviour of Mr Nichols and Mr Raphael. Mr Knudsen is a Solicitor of many years standing and we do not believe in the circumstances that the protective role of the Tribunal would require him to be struck off. We do however believe that Mr Knudsen failed to stop the situation from deteriorating and in this he showed poor judgment. We are therefore of the view that a significant fine, a costs order and a public reprimand are appropriate in the Marshall Complaints. The Roser Complaints Matter No. 022019 34 Mr Knudsen admitted the charges in matter No. 022019. The Law Society also alleges that Mr Knudsen failed to comply with a Section 152 notice relating to a complaint by Mrs Margaret Roser. The Respondent was served with a notice on 6 March 2002, pursuant to section 152 of the Legal Profession Act 1987, and the Solicitor did not comply with the notice. Findings (1) The Tribunal finds the complaints as admitted by the Solicitor, proven and the charges in matters 022021, 022019 and 032003 constitute professional misconduct (2) The Tribunal finds the Solicitor guilty of professional misconduct (3) The Tribunal finds the complaint admitted by the Solicitor in Matter No 012043 proven and that charge constituted unsatisfactory professional conduct (4) The Tribunal finds the Solicitor guilty of unsatisfactory professional conduct. 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