Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of New South Wales v Prosilis [2013] NSWADT 151 Hearing dates: 5 April, 2013 Decision date: 05 July 2013 Jurisdiction: Legal Services Division Before: S Hale,Judicial Member M. Riordan,Judicial Member C. Bennett, Non-judicial Member Decision: 1.The Solicitor is guilty of professional misconduct. 2.The Complainant is to file and serve a proper Application for Compensation and any evidence upon which she intends to rely by 23 August, 2013. 3.The Respondent is to file and serve a proper Reply to the Application for Compensation and any further evidence to be relied upon in relation to that claim and the issue of consequential orders within a period of 14 days thereafter, with the compensation matter to be re-listed for directions on a date to be fixed. 4.The proceedings to be listed for directions at 9.30 am on 29 July, 2013 to fix a date for hearing on penalty and costs before the Panel. Catchwords: Solicitor - disciplinary application - professional misconduct - refusing to transfer file Legislation Cited: Legal Profession Act 2004 Cases Cited: Allinson v General Council of Medical Education and Registration Category: Principal judgment Parties: Law Society of New South Wales (Applicant) Ovid Prosilis (Respondent) Representation: Counsel PC Webster SC (Applicant) Solicitor in person File Number(s): 122022 Reasons for decision INTRODUCTION 1In an Application filed 30 August, 2012 the Council of the Law Society of New South Wales ('the Law Society') alleged that the Respondent, Ovid Prosilis, ('the Solicitor') was guilty of professional misconduct in that he had failed to transfer a complainant's file. 2The Law Society sought orders that the Solicitor be reprimanded, that he be fined, and that he pay the Law Society's costs as agreed or assessed. 3In an Amended Reply filed 14 February, 2013 the Solicitor sought orders that the Application be dismissed and that the Applicant pay his costs as agreed or assessed, his case being that he was entitled to claim a lien over the file by virtue of certain clauses contained in his Costs Agreement on which he relied to assert that his costs had not been paid. 4The Solicitor's Amended Reply contained limited admissions. THE GROUNDS OF THE APPLICATION 5The solicitor was retained to act for the Complainant in a property settlement relating to the conclusion of a de facto domestic relationship. 6The complainant and the solicitor initially met to discuss the matter in April, 2007 (the Solicitor asserts it was March, 2007). A costs agreement was subsequently prepared by the solicitor and signed by the Complainant on 9 May, 2007. 7On 9 May 2007 the Complainant paid $5,000 to the Solicitor and a further $15,000 on 15 May 2007, which funds were placed into the Solicitor's trust account on account of costs and disbursements. 8By letter dated 5 July, 2007 the Complainant instructed the solicitor to cease acting for her. She requested the return to her of the work performed to date, a bill for such work and refund of the balance of funds held in the Solicitor's trust account. 9By letter dated 27 December, 2007 to the Solicitor, the Complainant requested that he provide to her a Trust Account statement, or documents in her file together with any work he had produced as at 5 July, 2007 and an itemised bill for the services performed until 5 July 2007. The Solicitor denies receiving this letter before the complaint was made. 10The Complainant made a complaint to the Legal Services Commissioner on 19 December, 2007. 11In the course of the investigation of the complaint by the Commissioner, the Solicitor in a letter dated 11 February 2008 to the Commissioner provided a list containing 226 individually numbered paragraphs describing the work he said he performed for the Complainant. The Solicitor identified accounts dated and sent: (i)30 April, 2007 $3,000 (ii)7 May, 2007 $2,000 (iii)11 May, 2007 $5,000 (iv)14 May, 2007 $5,000 (v)17 May, 2007 $5,000 12The Complainant denied receiving any invoices or accounts from the Solicitor. 13On the Solicitor's account of the work performed and costs charged in the identified invoices, a refund was stated to be due to the complainant 14By letter dated 8 May, 2008 the Legal Services Commissioner referred the complaint to the Society for investigation. 15Other complaints made against the Solicitor were also investigated by the Society and ultimately dismissed. 16James Sofiak of the Trust Account Department of the Society undertook an investigation of a number of matters including complaints made by other persons against the Solicitor and the complaint made by the Complainant to the Commissioner. 17The Solicitor continued to refuse to transfer the Complainant's file to her. 18The Solicitor relied on Clause 25 of his costs agreement to continue to retain the file. 19Clause 25 of the Solicitor's costs agreement provides that the complainant: ....shall jointly and severally indemnify Prosilis Lawyers in relation to any loss or damage or claim made by or on behalf of any person as a result of Prosilis Lawyers entry into and acceptance of instructions pursuant to this agreement and performance of every express or implied term in this agreement. 20Clause 18 of the costs agreement provides for a lien until 'all fees', disbursements, interest and 'other money due' to the firm have been paid'. 21By letter dated 21 September, 2011 from the Society to the Solicitor, the Solicitor was informed of the Committee's resolution of 15 September, 2011 requesting that he provide certain undertakings in relation to undertaking a course in Trust and Office accounting and providing the complainant' files to the Society, for on forwarding to the complainant. Other complaints made against the Solicitor investigated by the Society were dismissed. 22The Solicitor declined to provide the undertakings sought. 23The Solicitor has further stated that he 'will be seeking to be indemnified for that proportion of the costs charged by the Law Society of NSW for its investigation.' 24Pursuant to S. 271 of the Legal Profession Act 2004 by letter dated 20 October, 2008 the Law Society sought from the Solicitor payment of the fees of the investigation totalling $8,154.75. THE HEARING 25The matter came before us for hearing on 5 April, 2013. Ms. Webster SC appeared for the Law Society and the Solicitor represented himself. 26Ms. Webster tendered an Affidavit sworn on 11 October, 2012 by Ms. Anne-Marie Foord, Solicitor for the Law Society. 27The Solicitor tendered two Affidavits both sworn by himself on 5 February, and 26 March, 2013. Objections were taken by the Law Society to much of the material contained in the Solicitor's Affidavits. The Tribunal upheld those objections. However, the objected to content was considered as written submissions, where relevant. 28In opening, the Law Society submitted that the Solicitor had no proper grounds to claim a lien over the complainant's file and pointed out that the first request for the transfer of the file from the Complainant having occurred in July, 2007. 29Throughout the hearing the Solicitor continued to assert a right to a lien over the file, his view being that the Law Society's position was based on a narrow construction of Clauses 18, 25 and 26 of his Costs Agreement and that it was open to the Tribunal to adopt a wider view that the relevant clauses included any consequential or future costs that he had incurred or would incur in relation to the complaint that had been made against him. 30The Costs Agreement comprised 14 pages and considerable detail. For the purposes of the current proceedings the relevant provisions are as follows: "Lien 18.1Without affecting any lien to which the Firm is otherwise entitled at law over funds, the Client's file, papers and other property of the Client in the Firm's possession: AThe Firm will be entitled to retain by way of lien any funds, the Client's file, papers and all property of the Client which are from time to time in its possession or under its control until all fees, disbursements, interest and other moneys due to the Firm have been paid; and BThe Firm's lien will continue notwithstanding that the Firm ceases to act for the Client in accordance with Clauses 12 or 13 of this Agreement." Indemnity Glenice Freya McGuire shall jointly and severally indemnify Prosilis Lawyers in relation to any loss or damage or claim made by or on behalf of any person as a result of Prosilis Lawyers entry into and acceptance of instructions pursuant to this agreement and performance of every express or implied term in this Agreement. Guarantee In addition to any right of recovery which Prosilis Lawyers may have against a 'Client', Glenice Freya McGuire, Guarantees the payment of all accounts of Prosilis Lawyers in relation to all work performed and disbursements incurred under this agreement and shall indemnify and shall keep indemnified 'Prosilis Lawyers' against any and all claims and charges or costs orders made against 'Prosilis Lawyers' by or on behalf of any person(s) as a result or arising out of this express or implied terms of this Costs Agreement." 31In summary the Solicitor submitted: 31.1That he had incurred legal fees in preparing replies to the complaint and in having to prepare his case to meet these proceedings and that he is entitled to be paid those fees pursuant to the clauses referred to above. 31.2That in the event that the Complainant filed an application for costs assessment of his tax invoices (which she had indicated she would do), he would incur further legal costs in relation to which he was entitled to an indemnity. He also asserted that when the costs were assessed, the determination would result in there being no refund payable to the complainant and the complainant would likely owe him further monies. He therefore argued that the issue of his costs was still "open" (in other words, a live issue). In response to a question from the Tribunal that he could have filed an Application for assessment of his costs following the challenge by the Complainant, he responded 'I am not required to'. 31.3That as the Complainant had made allegations against him to the Office of Legal Services Commissioner, he was not required "under general law" to assist her case by providing any documents to her or to any other person, which included the Law Society. In short, he asserted a claim of 'professional privilege' in relation to the whole of his file. 31.4That paragraphs 25 and 26 of the Costs Agreement entitled him to an indemnity from the Complainant for the costs incurred by him for "the false claims" that he asserted that the Complainant had made against him and that this included future legal costs - particularly in relation to further complaints that the Complainant's son - Ben McGuire - had made against him to the Office of Legal Services Commissioner. He maintained that unless and until the Complainant indemnifies him in relation to those costs he was entitled to maintain a lien over all files, papers and other property of the Complainant that was in his possession. 32The Law Society submissions can be summarised as follows: That clause 18 of the Costs Agreement can only be interpreted as meaning the 'work undertaken' by the Solicitor in relation to the retainer that was the subject of the Agreement and it does not include 'work to be performed'. In other words, the complainant's liability to the Solicitor for costs can only arise once work has been undertaken in accordance with the retainer. By his own admission, the Solicitor conceded a letter to the Office of the Legal Services Commissioner dated 11 February, 2008 (Annexure 'E' to Ms. Foord's Affidavit) that a refund was due to the Complainant, as follows: 'We have enclosed an itemised bill as requested. Counsel's fees have been discounted so that the sum of $16,748.05 is payable by the client on an itemised basis and a refund of $3,251.95 would be payable in circumstances where we have discounted Counsel's fees in settling the documentation to zero. Please advise to whom the refund should be sent to.' 32.2That Clauses 25 and 26 of the Costs Agreement do not contemplate the granting of a lien by the Complainant to the Solicitor and those clauses cannot be construed in such a manner. 32.3In her letter to the Solicitor dated 23 June, 2011, Ms. Foord pointed out that the Solicitor had stated in writing that there was 'no money due to the firm' (by the Complainant) and she invited the Solicitor to make submissions "with supporting legal authority" regarding the grounds upon which he asserted that he was entitled to maintain a lien. 32.4In response, the Solicitor sent a letter to Ms Foord dated 15 July, 2011, which comprised 11 pages. He stated (relevantly): 'Issue - supporting legal authority the grounds upon which a lien can be maintained. (i)The solicitor is not required to place himself in circumstances where he will: (a) Take a positive step in aiding and abetting the complainant in asserting a right she does not have (b) Aid and abet the complainant in committing or attempting to commit actual fraud on the other party and in the face of the court in the costs assessment process in the Australian Capital Territory. (c)Aid and abet Mrs. McGuire in providing her documents to assist her in committing or attempting to commit actual fraud on the other party and in the face of the court in the costs assessment process in the Federal Court. (d)It is the solicitor's submission the approach taken by the complainant is an abuse of process. (e)The solicitor submits the complaint is barred by the legislative time limits in the assessment process in the NSW Supreme Court and the time frames forming part of the costs agreement which the complainant agreed to; (f)The solicitor submits the case law and equitable principles grounding 'laches' now attach to the lateness of the complainant in commencing any assessment process and assessing the solicitor's costs which is supported by the advice that was given to the complainant by letter from the Legal Services Commissioner dated 28 May, 2008 to commence action now over 3 years ago.' 32.5Ms Webster submitted that the Solicitor's response did not identify any proper legal basis for his decision to continue to assert a right to a lien over the relevant file and that this was particularly so in circumstances where no money was owed by the Complainant for work that the solicitor had undertaken in respect of the retainer. THE LAW REGARDING LIENS. 33The Law Society relied upon the decisions in White v Bini [2003] FCA 669 and Strikis v. Legal Services Commissioner [2012] NSWADT 68. 34Ms Webster submitted that the facts in this matter are analogous to those in White v Bini, in which Finkelstein J was required to consider whether a solicitor's lien extended to costs incurred by the solicitor in seeking to maintain the lien. His Honour said (at paragraph 6): 'It is convenient to begin with a brief description regarding the nature of a solicitor's lien. A solicitor's lien is the right to withhold possession of documents or other personal property until the client pays his costs. 35His Honour referred to Barrett v. Gough-Thomas [1951] Ch 242, at 250, in which Evershed MR said: 'It is a right at common law depending (it has been said) upon implied agreement. It has not the character of an encumbrance or equitable charge. It is merely passive and possessory: that is to say, the solicitor has no right of enforcing his demand. It confers upon him merely the right to withhold possession of the documents or other personal property of his client or former client - in the words of Sir E. Sugden, L.C. 'to lock them up in his box, and to put the key in his pocket, until his client satisfies the amount of the demand. (Citations Omitted).' 36Finklestein J held that the asserted lien did not extend to costs incurred by a solicitor in seeking to maintain a lien and that the lien extended only to debts owed to him 'in the character of attorney' and not to costs that the solicitor claimed for his own benefit 'as an adverse party to his client'. His Honour also said: 'There is another basis for rejecting Mr. Bini's lien. It is trite law that a lien will be lost if it is claimed for the wrong cause or the wrong amount; [Automobile & General Finance Co. Ltd. v. Cowley-Cooper (1948) 49 SR (NSW) 31.] A lien will also be lost if a person claims it for two debts (one due and one not due) and intimates that he will not part with possession unless both debts are satisfied: Jones v. Tarleton (1842) 152 ER 285; Kerford v. Mondel (1859) 28 LJ (Ex) 303'. 37Finkelstein J then proceeded to quote the words of Scrutton LJ (see above) and observed: 'the evidence in this case indicates that the trustees were always willing to pay Mr. Bini's costs of the conveyancing transaction. Mr. Bini insisted, however, that he would only release the file if both his conveyancing costs and the costs incurred by him following the order substituting the trustees were paid. Mr. Bini's refusal to release the file by claiming a lien for a wrong cause (the costs incurred following the removal of the trustee) is sufficient to extinguish his lien.' 38In Strikis v. Legal Services Commissioner, the Tribunal had to consider whether Mr. Strikis was entitled to maintain a lien over a certificate of title in a situation where he had prepared a will for one Villis Gulbis (who subsequently died). The will appointed Mr. Strikis as executor, but it did not make any provision entitling Mr. Strikis to charge for legal or executorial services. In the absence of such a provision, the principle that fiduciaries may not derive any profit or advantage from their office unless expressly authorised by the trust instrument prevented Mr. Strikis from receiving any remuneration other than as provided by S. 86 of the Probate and Administration Act, 1898. 39Mr. Strikis prepared and arranged a Notice of Death in respect of the joint home of Mr. Gulbis and his wife who survived him and he advised her to contact the bank regarding the joint bank account. Mr. Strikis maintained that he performed this work on the instructions of Mrs. Gulbis and that she had instructed him to 'fix everything up.' Following registration of the Notice of Death, a new Certificate of Title issued in the name of Mrs. Gulbis and this Certificate of Title was retained by the Applicant and became the subject of an asserted lien. 40On 9 July, 2010, a solicitor Mr. J P O'Neill wrote to Mr. Strikis advising that he had been instructed to act for Mrs. Gulbis and enclosed her signed authority for release of the documents held by Mr. Strikis on behalf of Mrs. Gulbis. However, on 28 July, 2010 Mr. Strikis wrote to Mr. O'Neill stating that he 'claimed a possessory lien over the documents which you seek. I will release to you the documents which I hold........................... once I receive payment of the following (GST inclusive) sums: Costs $1,650.00 Registration fee on TA $95.00 Espreon fee for attending to registration $27.50 $1,772.50 41There followed an exchange of correspondence between the two Solicitors, Mrs. Gulbis' position being that as there had been no disclosure, either an assessment would have to be undertaken or the Solicitor should provide details of actual work undertaken to enable her to make a proper assessment as to the reasonableness of costs claimed. Mrs Gulbis subsequently offered to pay the Solicitor $400.00 in full satisfaction of the costs claimed by the Solicitor, but the Solicitor rejected that offer. He maintained that he had performed the work 'in the capacity of executor of the estate of Mr. Gulbis' and not as the solicitor for Mrs. Gulbis, although we note that at one stage he suggested that he not acted in either capacity. 42The Tribunal concluded from the evidence that: '(Mr) Strikis was retained by Mrs. Gulbis 'to fix it', meaning to do or assist her in doing what needed to be done in order to transfer into her name the jointly held assets, which apparently (apart from clothing and personal effects) were the only assets owned by Mr. Gulbis. In other words, he was to act as her solicitor in these matters. That being the case, he had an obligation to comply with disclosure provisions of ss 309 and 311 of the Act which, as is common ground, he failed to do. In the absence of such compliance no sum is recoverable by the Applicant from Mrs. Gulbis even if, contrary to its form and the Applicant's own assertions, the email of 28 July, 2010 is regarded as an account or tax invoice rendered by the Applicant to Mrs. Gulbis.' 43The Tribunal went on to consider the entitlement or otherwise of the Solicitor to maintain a lien over the Certificate of Title. The property referred to in the Certificate of Title was not an asset in Mr. Gulbis' estate as the deceased's interest passed to his widow by right of survivorship immediately upon his death. Accordingly, he did not at any time hold the Certificate of Title in his capacity as Executor. Accordingly, the Tribunal found there was no basis upon which he could assert entitlement to a lien in respect of monies due to him for the performance of his executorial duties. 44The Tribunal also considered the decision in White v. Bini and particularly the statements made by Finkelstein J. It found that they accorded with well-established authority and that as the circumstances of that case were indistinguishable from the current matter, it was bound to follow it. It therefore held that any lien that Mr Strikis was entitled to in relation to the Certificate of Title was lost when he sought to maintain it improperly, in respect of costs and expenses due to him in his capacity as executor. 45The NSW Solicitors Rules provide at 8.3: "8.3 Upon completion or termination of a practitioner's retainer, a practitioner must, when requested so to do by the practitioner's client, give to the client ,or another person authorised by the client, any documents related to the retainer to which the client is entitled, unless: 8.3.1the practitioner has completed the retainer, or 8.3.2 the client has terminated the practitioner's retainer, or 8.3.3 the practitioner has terminated the retainer for just cause and on reasonable notice; And the practitioner claims a lien over the documents for costs due to the practitioner by the client." FINDINGS 46Throughout the hearing, the Solicitor remained steadfast in his opinion that his Costs Agreement entitled him to maintain the asserted lien over the Complainant's file, despite the fact that he had previously been requested by the Law Society to make submissions as to the legal authority that supported his opinion. He failed to cite any such authority to the Law Society during its lengthy investigation and he failed to cite any such authority to the Tribunal during the course of the hearing. 47We note that the Solicitor remained recalcitrant even after the Law Society notified him by way of a letter dated 21 September, 2011 that the Tribunal could determine that his refusal to transfer the Complainant's file could amount to unsatisfactory professional conduct and he was invited to make submissions in relation to the undertakings sought by the Law Society. He subsequently responded with respect to the requested undertakings. 48By letter dated 2 December, 2011, the Law Society notified the Solicitor that the Professional Conduct Committee had again considered the matter and had formed the view that his conduct could be found by this Tribunal to be 'professional misconduct' and that consideration would be given to commence proceedings in this Tribunal. 49By letter dated 7 March, 2012 from the Law Society to the Solicitor, he was informed that proceedings were to be instituted against him in this Tribunal, the reason for the decision being: "'Reason for Decision The solicitor believes that he may maintain his lien over his file on the basis that he is entitled to recover costs associated with the complainant's complaint to the Legal Services Commissioner. The Committee considers that in the circumstances where the complainant has satisfied all accounts rendered in association with the file the solicitor's claim to be entitled to a lien is spurious. The Committee does not consider that the costs associated with responding to a complaint can justify the maintenance of a lien over the file. " 50In the light of this evidence, it is incomprehensible to this Tribunal as to why the Solicitor continued to advance his opinion, particularly where he failed to adduce any additional evidence or cite any legal authority that supported its validity. In our view, there is no proper basis for interpreting the relevant terms of the Costs Agreement in a broad manner so as to support the Solicitor's position and he therefore had no reasonable basis for asserting the claimed lien. We further find that his position that the question of his costs remains 'open' as there has been no assessment of his costs is untenable. The evidence before us indicates that he had performed work for the Complainant in accordance with the terms of his retainer and that he issued tax invoices and that these were paid in full from monies held in his trust account for that purpose. He acknowledged this in his letter to the Office of Legal Services Commissioner. That was the end of the matter and in our view, any subsequent assessment process would not change the facts that his tax invoices were fully satisfied. 51The common law test of whether a legal practitioner has been guilty of professional misconduct is that promulgated in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, namely whether the practitioner had engaged in conduct which 'would be reasonably regarded as disgraceful or dishonourable' by 'professional brethren of good repute and competency.' 52The onus of proving misconduct lies with the Law Society: Stanoevski v Council of the Law Society of New South Wales [2008] NSWCA 93, while the standard of proof to be applied by the Tribunal is the civil standard, on the balance of probabilities. The degree of satisfaction for which the civil standard of proof calls in professional discipline matters may vary according to the gravity of the fact to be proved: see Briginshaw v. Briginshaw (1938) 60 CLR 368 and Rejfek v McElroy (1965) 112 CLR 517 at 521. See also Riley Solicitor's Manual at 34,145.10. 53It is arguable that the Solicitor's failure to release the file (and its contents) to the Complainant and to maintain a lien for costs not incurred in respect of the retainer could constitute unsatisfactory professional conduct for the purposes of the Legal Profession Act 2004. However, in our view, the appropriate finding is that the Solicitor is guilty of professional misconduct given the duration of the offending conduct (which has continued for a period of approximately 6 years). In our view, the offending conduct satisfies the 'Allinson' test. FUTURE MANAGEMENT 54The Law Society sought an Order that the Solicitor pay its costs as agreed or as assessed. The Tribunal has yet to hear submissions in relation to any costs order. It therefore seems appropriate that any decision on this issue be reserved. However, in view of our findings regarding the construction of the Costs Agreement, we are satisfied that there is no proper basis for making any order against the Complainant in respect of either the costs that the Solicitor will ultimately be ordered to pay to the Law Society. 55In our view, it is also appropriate that the Solicitor should pay a fine, as sought in the Application for Original Decision. However, there is insufficient evidence before us to enable the assessment on an appropriate fine. 56We further note that the Tribunal's file indicates that the Complainant intends to pursue a compensation claim against the Solicitor. However, there is currently no proper Application for Compensation or evidence in support of an Application for Compensation on file. 57The Tribunal makes the following orders : 1. The Solicitor is guilty of professional misconduct. 2. The Complainant is to file and serve a proper Application for Compensation and any evidence upon which she intends to rely by 23 August, 2013. 3.The Respondent is to file and serve a proper Reply to the Application for Compensation and any further evidence to be relied upon in relation to that claim and the issue of consequential orders within a period of 14 days thereafter, with the compensation matter to be re-listed for directions on a date to be fixed. 4. The proceedings to be listed for directions at 9.30 am. on 29 July, 2013 to fix a date for hearing on penalty and costs before the Panel. ********** 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. Decision last updated: 05 July 2013