New South Wales Supreme Court CITATION : Gridiger v Council of the Law Society of NSW [1999] NSWSC 904 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 12871/98 HEARING DATE(S) : 26 August 1999 JUDGMENT DATE : 8 September 1999 Roland Errol Gridiger (Plaintiff) PARTIES : The Council of the Law Society of New South Wales (First Defendant) The Law Society of New South Wales (Second Defendant) JUDGMENT OF : Master Harrison Mr P R Garling SC with Ms E A Collins (Plaintiffs) COUNSEL : Mr John Griffiths (Defendants) Ms Rosemary MacDougal Eakin McCaffery Cox SOLICITORS : (Plaintiff) Mr Louis Pierotti Law Society of New South Wales CATCHWORDS : Set aside notice pursuant to s 152 - LPA 1987 ACTS CITED : Legal Profession Act 1987 (NSW (as amended) Touzell v Cawthorn (NSWSC unreported 6 October 1995) CASES CITED : Veghelyi v The Law Society of New South Wales (NSWCA, unreported 6 October 1995) Minister for Natural Resources v New South Wales Aboriginal Land Council & Anor (1987) 9 NSWLR 154 DECISION : See para 33 21 THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON WEDNESDAY, 8 SEPTEMBER 1999 12871/98 - ROLAND ERROL GRIDIGER v THE COUNCIL OF THE LAW SOCIETY OF NEW SOUTH WALES & ANOR JUDGMENT (Set aside notice pursuant to s 152 of the) Legal Profession Act 1987) 1 MASTER: The plaintiff by summons filed 24 November 1998 seeks a declaration that the notice issued by the defendants to the plaintiff under s 152 of the Legal Profession Act 1987 (NSW) (as amended) is invalid. Alternatively the plaintiff seeks a declaration that the notice constitutes an abuse of process; a declaration that the plaintiff has a reasonable excuse for failing to comply with the notice and a declaration that the notice is invalid to the extent that it requires the plaintiff to produce documents or provide information which are subject to client legal privilege or which are otherwise confidential. 2 The second defendant filed a notice of motion returnable instanter seeking that it be removed as a party to the proceedings. This order was opposed by the plaintiff. The plaintiff relied on the affidavit of Rosemary MacDougal sworn 23 November 1998. The defendants did not rely upon any affidavit evidence. 3 For the purposes of this application I find the following facts. (1) The plaintiff is the principal solicitor practising with the firm of Gridiger & Co in Sydney. He is also a director of Obelisk Securities Pty Limited (Obelisk). Obelisk carried on business as a trustee company and one of its main activities was arranging commercial loans. Clients of Gridiger & Co contributed funds to Obelisk. In these loan transactions the plaintiff acted for Obelisk. These loans were usually secured by mortgages. (2) In July 1995 Mr Cardakaris in conjunction with Cardakaris Bros Pty Limited, Gregory John Sealby, Dennis Caris and Emanuel Caris (collectively described as "the borrowers") approached the plaintiff through a mortgage broker in relation to securing a loan to repay a debt to Westpac Banking Corporation. A deed of facility agreement dated 19 July 1995 was executed between Obelisk and the borrowers pursuant to which Obelisk agreed to loan to the borrower the sum of $2,000,036 for a period of 12 months in return for a number of first mortgages over properties held by the borrowers (the refinancing transaction). (3) At the time the deed of facility agreement was signed, all of the borrowers signed documents which acknowledged that they had received legal advice about the nature of the documents they were signing and that they understood the extent of their obligations contained in the documents. Mr Cardakaris signed such an acknowledgment in the presence of the solicitor he retained to act on his behalf in the refinancing transaction. Mr Cassim the solicitor signed a document headed "Solicitor's Certification" acknowledging that he had explained to them the contents and effect of the deed of facility agreement. (4) The relevant portion of the Acceptance document stated that the mortgagors agreed "4. Should this Mortgage not proceed for any reason whatsoever other than your default, the Mortgagors shall pay your proper legal costs which shall be assessed at [$60,000] (and we waive our right to have the bill taxed) and disbursements, insurance premium, stamp duty (if any) and any other costs properly incurred by you to the date of your receipt of notice in writing that the Mortgage is not proceeding. 6. Agrees to pay Gridiger &Co, Solicitors (a) an administration fee on the date of settlement calculated at the rate of 0.75% on the principal sum; and (b) a collection fee calculated at the rate of 0.75% on any interest or other payment under the mortgage such collection fee to be paid at the time of and in addition to the making of instalments of interest as provided herein." (5) On 24 July 1995 Gridiger & Co forwarded a memorandum of costs and disbursements to Mr Cardakaris . The memorandum of costs and disbursements was expressed to be for professional costs and disbursements for acting on mortgage advance by Obelisk and also for an administration fee which also included disbursements. Professional costs were $60,000, the administration fee of $15,225 and disbursements amounted to $2,281.54. The total of the bill was $77,506.54. (6) Soon after 20 July 1995 the borrowers defaulted on the terms of the loan provided by Obelisk. The properties were eventually sold at auction. (7) Proceedings were commenced by Mr Sealby in the Equity division of the Supreme Court on 20 June 1996 against Obelisk, the plaintiff and Nicholas Cassim (the Equity proceedings). The further amended statement of claim alleged that the securities taken by Obelisk in 1995 had been obtained by the plaintiff in breach of his fiduciary duty to the borrowers as their solicitor and were unenforceable. The plaintiff cross claimed against Sealby and sought an order that the costs agreement be rectified so as to make it clear that it was an agreement between a solicitor and mortgagors. Judgment was handed by Santow J in the Equity proceedings on 5 November 1997. His Honour held that the plaintiff did not act as a solicitor for Mr Sealby in relation to the refinancing transaction and as such no fiduciary duty could arise. He also held that the plaintiff should succeed in his amended cross claim and the costs agreement be rectified and ordered accordingly. (8) On or about 27 May 1997 Mr Cardakaris made a complaint to the office of the Legal Services Commissioner concerning the plaintiff's conduct. He complained and alleged that firstly he was not advised well at the initial interview with the plaintiff; secondly, that the plaintiff did not disclose his personal interest in Obelisk; thirdly, he did not comply with an undertaking in a financial matter; fourthly, dishonesty; fifthly, that the plaintiff did not act in Mr Cardakaris's best interests and sixthly, that he was made to pay the very high bill under extreme pressure. (9) The Professional Standards Committee by delegation of the Council of the Law Society is currently investigating Mr Cardakaris's complaint. (10) On 5 November 1998 a notice under s 152 of the Act was issued on Law Society letterhead to the plaintiff. The relevant parts read as follows: "On the 29th October 1998 the Professional Conduct Committee of the Law Society of New South Wales in exercise of the powers delegated to it by the Council of the Law Society of New South Wales: RESOLVED to rescind resolution made by the Professional Conduct Committee on 9 July 1998 pursuant to Section 152 of the Legal Profession Act 1987. FURTHER RESOLVED that pursuant to Section 152 of the Legal Profession Act, 1987, the legal practitioner is required: (a) To provide, verified by statutory declaration, the information set out in Schedule 1 hereto to the Manager of the Professional Standards Department, Law Society of New South Wales by the 4th December 1998; (b) To produce, by 10am on the 4 December 1998, the documents specified in Schedule 2 hereto to the Manager of the Professional Standards Department at the office of the Department, 7th Floor, Law Society Building, 170 Phillip Street, Sydney; SCHEDULE 1 1. The following particulars in chronological order and numbered sequentially: (a) short details of each item of work whether by letter, telephone attendance, perusal, drafting, conference and so on, for which Mr Cardakaris or "the Cardakaris interests" have been charged fees or are responsible pursuant to the terms and conditions of the security documents; (b) the date each item of work was done; (c) the time (in minutes) engaged in doing each item of work (or an estimate) and where possible, the commencing and concluding times of such engagement; (d) who did each item of work; (e) the amount charged for doing each item of work; (f) the basis for calculating the amounts charged for doing each item of work; 2. Confirmation that a collection fee of .75% was charged to the mortgagors by Mr Gridiger on interest or other payments under the mortgage in addition to an administration fee of .75% of the total amount advanced at settlement (ie $15,225); and 3. In the Epitome of Mortgage dated 19 July 1995, page 2 a payment of $180.80 is required to be paid to Gridiger & Co. To what does this amount relate. SCHEDULE 2 1. The solicitor's files relating to Forrest Knoll Pty Limited or Obelisk Pty Limited and Mr Cardakaris or the Cardakaris interests; 2. A complete copy of each document prepared by Mr Gridiger for the mortgage transaction including (but not limited to) documents he prepared in respect of the mortgagee, mortgagors, guarantors and contributors/lenders; 3. A copy of all bills for costs and disbursements in respect of Forrest Knoll Pty Limited or Obelisk Pty Limited and Mr Cardakaris for which Mr Cardakaris or "the Cardakaris interests" are responsible pursuant to the terms and conditions of the security documents; 4. A copy of all trust and office account ledgers or journals relating to or recording financial transactions in respect of work conducted on behalf of Forrest Knoll Pty Limited or Obelisk Pty Limited or Mr Cardakaris or "the Cardakaris interests" relating to monies advanced by those companies to Mr Cardakaris or the Cardakaris interests. 5. All times sheets (if any) referring to attendances in respect of work conducted on behalf of Forrest Knoll Pty Limited or Obelisk Pty Limited or Mr Cardakaris for which Mr Cardakaris or "the Cardakaris interests" are responsible pursuant to the terms and conditions of the security documents or for which they have been charged fees by Mr Gridiger; 6. A copy of each lending authority from the contributors/lenders of the funds loaned by the nominee mortgagee company; 7. A copy of all documents/deeds/memoranda between Mr Gridiger and Forrest Knoll Pty Limited or Obelisk Pty Limited relating to the matter. FURTHER RESOLVED that if the legal practitioner is unable to comply with the preceding resolution, he must provide a statutory declaration to the Manager of the Professional Standards Department, Law Society of New South Wales by the 4th December 1998 stating the reasons for the inability to comply with this resolution. Dated this 5th November 1998 For the Council of the Law Society of New South Wales (signed) ..………………………… Manager, Professional Standards Department Law Society of New South Wales …" 4 It is common ground between the parties that there is no solicitor/client relationship, fiduciary relationship or contractual relationship between Mr Gridiger and Mr Cardakaris. 5 In relation as to whether the second defendant should be removed from the proceedings, the summons names Roland Errol Gridiger as plaintiff, the Council of the Law Society of New South Wales as first defendant and the Law Society of New South Wales as second defendant. Section 157 of the Act refers to the delegation by Council. "Delegation by Council (1) A Council may delegate to any of its committees the exercise of any or all of its functions under this Division, other than this power of delegation. (2) Such a delegation may be made only to a committee whose presiding member is a member of the Council." 6 The notice issued refers to the Professional Conduct Committee of the Law Society of New South Wales and the powers delegated to it by the Council of the Law Society. It also refers to resolutions of the Professional Conduct Committee. The plaintiff says that the Council is the correct defendant whereas the plaintiff submitted that the Council comprised of individuals who are elected each year and if the plaintiff wishes to enforce a costs order then it would have to join the individuals who were Council members at that particular time. If the plaintiff is successful in obtaining a costs order in his favour the second defendant would not be an inappropriate defendant and on that basis the second defendant should not be removed as a party to the proceedings. 7 The plaintiff submitted that the notice is invalid on six grounds namely, firstly, there is no complaint of the kind that Part 10 of the Act contemplates; secondly, a complaint of overcharging is not authorised under Parts 10 or 11; thirdly, s 152 only requires the plaintiff to provide information or produce documents and does not extend to the creation of documents; fourthly, the information sought in the notice amounts to a fishing expedition; fifthly, the notice does not comply with s 152 and sixthly, the notice requires the disclosure of confidential information and of documents subject to legal professional privilege. 8 The defendants submitted that firstly, Part 10 allows persons to make complaints; secondly both Parts 10 and 11 are applicable; thirdly, the creation of a new document is authorised; fourthly, the documents and information sought are relevant; fifthly, the notice complies with s 152 and sixthly, if some of the information requested is the subject of confidentiality or legal professional privilege, the plaintiff can decline to provide the information on that basis but it does not mean that the whole notice is invalid. 9 The relevant portions of s 152 of the Legal Profession Act 1987 (NSW) (as amended) provides: "Powers of Council or Commissioner when investigating complaint (1) For the purpose of investigating a complaint, a Council or the Commissioner may, by notice in writing served on any legal practitioner or interstate legal practitioner, require the legal practitioner or interstate legal practitioner to do any one or more of the following: (a) to provide written information, by a date specified in the notice, and to verify the information by statutory declaration, (b) to produce, at a time and place specified in the notice, any document (or a copy of any document) specified in the notice, (c) to otherwise assist in, or cooperate with, the investigation of the complaint in a specified manner. (1A) … (2) … (3) A requirement under this section is to be notified in writing to the legal practitioner or interstate legal practitioner and is to specify a reasonable time for compliance. (4) A legal practitioner or interstate legal practitioner who, without reasonable excuse, fails to comply with such a requirement is guilty of professional misconduct. (5) A legal practitioner or interstate legal practitioner must not mislead or obstruct a Council or the Commissioner in the exercise of any function under this Division. The wilful contravention of this subsection is capable of being professional misconduct." 10 I turn to the plaintiff's first submission that there is no complaint of the kind contemplated by Part 10 of the Legal Profession Act 1987 (the Act) that can be the basis of investigation and that the issue of a s 152 notice constitutes an abuse of process. This was referred to as "the no jurisdiction argument". The defendants submitted that to find that there was no complaint in accordance with Part 10 involves a reading down of s 124(a) and in various places the Act draws numerous distinctions between persons and users of legal services. The defendants say that s 124(a) should be given its literal meaning. The defendants submit that parliament intended that subsections (a) and (b) have different meanings and that s 124(a) was intended to cast a very wide net. According to the defendants Part 10 contemplates that any person can complain about legal practitioners and that there are safeguards such as s 141 of the Act where it empowers the commissioner to summarily dismiss a complaint. 11 Part 10 is entitled "Complaints and Discipline". The general object of Part 10 is set out in s 123 and includes as one of the objects to maintain at a sufficiently high level the ethical and practice standards of the legal profession as a whole. 12 Section 124 sets out the objects of the part relating to users of legal services. It relevantly reads: "(a) to give every person the right to complaint about the conduct of legal practitioners and interstate legal practitioners, and (b) to give users of legal services access to sufficient advice and assistance in order to make and pursue complaints in accordance with this Part and to understand their rights and responsibilities under this Part." 13 Section 125 sets out the objects of the part relating to providers of legal services. 14 Sections 123, 124 and 125 are sections which set out the objects of Part 10. While the words in the objects clause namely ss 123, 124 and 125 of the Act assist in the interpretation of any ambiguities in the legislation they cannot prevail over the words plainly expressed - see Searle Australia Pty Limited v Public Interest Advocacy Centre (1992) 32 FCR 111 at pp 114-115. 15 Section 134 is a specific provision and is contained in Division 3 of Part 10. Division 3 is headed complaints about legal practitioners. "Right to make complaint to Commissioner (1) Any person may make a complaint to the Commissioner about the conduct of a legal practitioner or interstate legal practitioner. (2) Any such complaint that is duly made is to be dealt with in accordance with this Part. (3) This section does not affect any other right of a person to complain about the conduct of a legal practitioner or interstate legal practitioner." 16 The words of s 134 are plainly expressed. Section 134 states that any person may make a complaint. That person does not have to be a user of legal services. It is my view that s 137 is not ambiguous and there is no need to refer to the objects clauses namely ss 123, 124 and 125 of the Act. In any event, Part 10 makes references to both persons and users of legal services. They are intended to have different meanings. Any person can lodge a complaint under Part 10 of the Act. He or she does not have to be a user of legal services. The complaint is one contemplated by Part 10 of the Act. 17 Secondly the plaintiff submitted that if there be a complaint in accordance with Part 10, the part of the complaint dealing with overcharging is not a valid complaint which is authorised either under Part 10 or Part 11. According to the plaintiff it is not a proper complaint under Part 11 because that part refers to costs payable as between solicitor and client and Mr Cardakaris was not a client of the plaintiff. The defendants do not concede that Part 11 is necessarily inapplicable to the complaint. According to the second defendant s 199(4) of the Act which falls in Part 11 is an inclusive definition of client not an exhaustive one. It is arguable that the definition of client is intended to cover the person who is ultimately responsible to pay the fees. The defendant submitted that even if Part 11 does not apply it does not mean that the complaint cannot be investigated under Part 10 and that the Professional Conduct Committee can engage an independent costs expert to assist their investigation. After such an investigation the Committee of the Law Society may approach the Supreme Court in their inherent jurisdiction. 18 Division 5 in Part 10 is headed Investigations of Complaints. Section 148 deals with the investigation of complaints by Council. Section 148 (i) states that the Council must conduct an investigation into each complaint referred to it by the Commissioner or initiated by the Council. Part 10 and in particular s 134 define a complaint in wide terms. As previously stated the nature of a complaint is not limited. The complaint may be about the conduct of a legal practitioner which may include such subject matter as overcharging. 19 It is my view that the scope of the investigation by the Council includes the complaints of the type raised by Mr Cardakaris. 20 It is not necessary to determine whether Part 11 is applicable to Mr Cardakaris's complaints regarding the excessive amount of the bill. However, s 184 defines a costs agreement as between a solicitor who is retained by the client to provide the legal services and it would seem that as Mr Cardakaris was not a client he cannot be said to have a costs agreement. 21 The defendant referred to Touzell v Cawthorn (NSWSC unreported 6 October 1995) where Young J said: "…Even though there have been amendments to the Legal Profession Act which seem to remove some rights of those who pay the bills rendered by solicitors, the Court still retains its inherent power, and for the reasons I have explained in Parramatta River Lodge Pty Ltd v Sunman (1991) 5 BPR 12,038, at least on terms of payment of the costs of the bill, the Court will compel a solicitor to give details of his or her charges to any person who has actually to pay the bill." 22 The court has inherent power to compel a solicitor to give details of his or her charges to pay the bill. Mr Cardakaris could approach the court and seek an order that the plaintiff give details of his charges to him. Whether the court would exercise that inherent power in relation to the Law Society involves different considerations. It is an option to be taken into account by the Professional Standards Committee when they investigate the complaint. 23 The plaintiff also submitted that this was not a case of overcharging because Mr Gridiger did not place his trust in the plaintiff. He had the benefit of separate independent legal advice. The rationale in relation to overcharging was explained by Kirby P in Veghelyi v The Law Society of New South Wales (NSWCA, unreported 6 October 1995) at page 7 where he said: "Clients are, or may frequently be, in a vulnerable position vis-a-vis their solicitors; the presumption of undue influence is, I think, based at least in part upon the fact that when making decisions clients ordinarily or at least frequently place trust in their solicitors. They ordinarily are not in a position to know without investigation what work must be done and what charges are fair and reasonable; they ordinarily assume that the solicitor will make only such charges. Solicitors are, on the other hand, informed, or in a position to inform themselves, of what work may be required and what are fair and reasonable charges. They are, in that sense, in a position of advantage and trust is placed in them. Clients are entitled to be protected against the abuse of such an advantage. It is, I am inclined to think, the fact that that advantage has been misused which may, in a particular case, warrant what the solicitor does being categorised as professional misconduct." 24 As previously stated, the defendants are entitled to investigate Mr Cardakaris's complaint under Part 10 of the Act. This submission concerning overcharging may be one that the plaintiff wishes to place before the Committee. 25 Thirdly, the plaintiff submitted that s 152 only permits the committee to require information or the production of documents and that duty does not encompass a requirement to create a document such as a bill of costs. The defendants submitted that the compiling of information may involve the plaintiff putting pen to paper and compiling a document. It is my view that s 152(1)(a) requires the legal practitioner to provide written information. To provide such information may require the plaintiff to compile information and commit that information to writing. 26 Fourthly, the plaintiff submitted the information and documents that are required to be produced constitute a fishing expedition. The defendant says that the plaintiff has embarked on a fishing expedition. The documents sought are specifically identified and are relevant to the issues of the nature of the work for which Mr Cardakaris was liable to pay whether the amount charged was excessive. They are relevant to the issues raised in the complaint. It is my view the defendants are not embarking on a fishing expedition. 27 Fifthly, the plaintiff submitted the form of the notice did not comply with s 152 of the Act as there is a purported exercise of powers of the Professional Conduct Committee as part of the Law Society and not the Council. The plaintiff submitted that it is unclear on the form of the notice who has issued it as the letterhead refers to the Law Society New South Wales and that the resolution cannot be signed by an individual but has to be signed under the seal of the Committee or by the Chairman of the Committee. The defendants say that s 152 does not prescribe a form. All that s 152 requires is a notice in writing. However the defendant concedes that the reference to the Professional Committee of the Law Society is incorrect. However according to the defendants this is not of overall significance because on page 3 of the documents the correct position is stated. According to the defendant it does not matter who signed it as it can be signed by anyone. In any event it is clear on the face of the first page of the document that the Law Society Council has delegated its power of law to the Professional Conduct Committee. 28 The plaintiff referred to the Minister for Natural Resources v New South Wales Aboriginal Land Council & Anor (1987) 9 NSWLR 154 at 164 where McHugh JA referred to the fundamental maxim of the law is the maxim 'omnia praesumuntur rite esse acta'. It has many applications…The wheels of business will not go smoothly round unless it may be assumed that that is in order which appears to be in order. 29 The notice could have been drafted in clearer terms. The notice refers to the Professional Conduct Committee of the Law Society exercising the powers delegated to it by the Council of the Law Society of New South Wales. However, upon a reading of the document it is plain that the Professional Conduct Committee is investigating a complaint under the delegated powers by the Council of the Law Society of New South Wales. While the resolutions themselves may have to be made under seal and signed by the Chairperson, s 152 specifically refers to a requirement that the notice be in writing. It does not specify that it must be signed under seal. It is my view that the notice provided to the plaintiff complies with s 152. 30 The plaintiff's final submission was that the notice should be set aside because it requires the plaintiff to disclose either confidential information or the documents are subject to legal professional privilege. The plaintiff conceded that it perhaps does not make the whole of the notice invalid but the issue of the notice puts the plaintiff in jeopardy of falling foul of s 152(4) and can be found guilty of professional misconduct. However the defendants submitted that the notice is not invalid but the plaintiff can decline to provide certain documents on the grounds that they are the subject of confidentiality or legal professional privilege. It was agreed between the parties that Obelisk had not consented to the provision of this information. The defendants referred to s 171(S)(2) of the Act which provides that the plaintiff can disclose a matter to the Council in breach of a duty of confidentiality if the Council is satisfied that it is necessary for the practitioner to do so in order to rebut an allegation in the complaint. Of course, it may not be in the plaintiff's interest to avail himself of the provisions of s 171(S)(2). 31 The documents sought in schedule 2, such as copies of the mortgage transaction document, trust and office account ledgers, a copy of the bill of costs which Mr Cardakaris was liable to pay would not necessarily be the subject of confidentiality nor legal professional privilege. The whole notice cannot be said to be invalid because it seeks some documents which may be of a confidential nature or subject to legal professional privilege. The plaintiff may decline to provide other documents on the basis that the documents are subject to confidentiality or legal professional privilege and may or may not decide to avail himself of the provisions of s 171 (s)(2). 32 The plaintiff has not established that the s 152 notice should be set aside. Nor has he established that it is an abuse of process. I dismiss the second defendant's notice of motion. I dismiss the summons. Costs should follow the events. In the event these costs are the subject of a costs assessment application it should be noted that the defendants' notice of motion took a minimal time to argue. 33 The orders I make are: (1) The second defendant's notice of motion is dismissed. (2) The summons is dismissed. (3) The second defendant is to pay the plaintiff's costs of the notice of motion. (4) The plaintiff is to pay the defendants' costs of the summons. ********** Last Modified: 09/08/1999 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.