Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of New South Wales v Viney [2014] NSWCATOD 8 Hearing dates: 17 February 2014 Decision date: 03 March 2014 Jurisdiction: Occupational Division Before: M Chesterman, Principal Member N Isenberg, Senior Member C Bennett, General Member Decision: 1.The Respondent is guilty of unsatisfactory professional conduct. 2.The Respondent is reprimanded. 3.The Respondent is to pay the Applicant's costs as agreed or assessed. Catchwords: Solicitor - disciplinary application - failure to comply with obligation to hold document in escrow - penalty Legislation Cited: Administrative Decisions Tribunal Act 1997 Civil and Administrative Tribunal Act 2013 Civil and Administrative Legislation (Repeal and Amendment) Act 2013 Legal Profession Act 2004 Cases Cited: Law Society of New South Wales v Martin [2002] NSWADT 27 Law Society of New South Wales v Waterhouse [2002] NSWADT 204 Waterhouse v Law Society of New South Wales (LSD) [2003] NSWADTAP 20 Texts Cited: Riley's Solicitors Manual Category: Principal judgment Parties: Council of the Law Society of New South Wales (Applicant) David Alan Viney (Respondent) Representation: C Groenewegen (Applicant) In person (Respondent in person) File Number(s): 132019 reasons for decision Introduction 1On 21 October 2013, the Council of the Law Society of New South Wales ('the Law Society') filed in the Administrative Decisions Tribunal ('the ADT') an Application seeking orders under Part 4.8 of the Legal Profession Act 2004 ('the Act') against the Respondent, David Alexander Viney ('the Solicitor'). 2The orders sought were as follows:- (1)The Solicitor be reprimanded (2)The Solicitor pay the costs of the Law Society (3)Any other orders as the Tribunal deems appropriate. 3The Ground of the Application was formulated as follows:- David Viney ['the Solicitor'], while practising as a solicitor, was guilty of unsatisfactory professional conduct on the basis that he delivered to the bank a Transfer as security for an advance to his client in circumstances where he held that Transfer in escrow pending settlement. 4The Particulars of this Ground are set out below. 5On 21 October 2013, the Law Society also filed an affidavit sworn on 9 September 2013 by its solicitor, Anne-Marie Foord. 6On 5 November 2013, the Solicitor filed a Reply in which he admitted to the matters pleaded by the Law Society, but stated that he required 'further time to file an affidavit explaining the periphery circumstances surrounding the matter'. He did not, however, file any affidavit. 7On 1 January 2014, before the hearing of this matter took place, the ADT was abolished and its functions were taken over by the Civil and Administrative Tribunal of New South Wales ('NCAT'). The present proceedings are therefore 'unheard proceedings' as defined in clause 6(1) of Schedule 1 of the Civil and Administrative Tribunal Act 2013. By virtue of clauses 7 and 13 of this Schedule, they are taken to have been duly commenced in NCAT and are to be heard in the Occupational Division of NCAT. They are to be determined, however, as if that Act had not been enacted. 8The hearing took place before us on 17 February 2014. Ms Groenwegen appeared for the Law Society and the Solicitor appeared in person. Ms Groenewegen tendered Ms Foord's affidavit, which we admitted into evidence, and made submissions in support of the orders sought by the Law Society. The Solicitor did not tender any evidence, but made submissions directed chiefly to the order or orders that we should make by way of penalty. The Particulars 9As amended by leave at the hearing, the Particulars set out in the Application were as follows:- Definitions The Solicitor is the Respondent, David Alan Viney, who: was born on 28 December 1961 and is aged approximately 52 years was admitted as a solicitor of the Supreme Court of NSW on 26 June 1992 held a practising certificate from 1 July 1992 to the present at all material times was the principal of the law practice Viney Williams, situated at 111 William Street PORT MACQUARIE NSW 2444 1. 1. In about October 2007 the Solicitor was retained by Mr David Latham to act for him in relation to a family law property settlement with his ex-wife Mrs Tracey Latham. 2. Ms Julia Gillard, solicitor of Thomas Mitchell Solicitors acted for Mrs Tracey Latham. 3. The matter proceeded to an Application in the Family Court of Australia but was resolved by negotiation between the parties. Consent Orders dated 20 April 2010 were made by the Family Court of Australia at Newcastle ['the Consent Orders']. 4. The Consent Orders included orders to the effect that: a.. within sixty (60) days of the date of the orders the husband pay to the wife $100,000 and cause the Bonny Hills property to be transferred to the wife unencumbered; and b. simultaneously with compliance with that order the wife transfer to the husband her interest in the Lake Cathie property. 5. By letter dated 17 June 2010 the wife's solicitor wrote that: a. 'Our client will be attending your office to execute the Transfers in relation to the Lake Cathie and Bonny Hills properties. Would you please attend to stamping of same in preparation of settlement...' b. 'Would you also confirm that the executed Transfers will be held by you in escrow pending settlement on 21 June 2010.' c.. 'We note that we require on settlement [a] Bank cheque payable to Thomas Mitchell Solicitors in the sum of $100,000 ..." d. 'You are not authorised to settle the matter unless all of the above requirements are met...' 6. In anticipation of settlement the wife attended upon the Solicitor's offices and signed the Transfer to each property being the Bonny Hills property and the Lake Cathie property [Transfer No AF587574S]. 7. On or about 21 June 2010 the Solicitor released the executed Transfer to the Lake Cathie property to the bank as security for an advance to the husband. 8. Settlement did not occur on 21 June 2010. 9. On 22 June 2010 the Solicitor advised the wife's solicitor that: 'there should be an adjustment in the settlement figures ... We are instructed not to proceed further with the settlement of the matter until your client has addressed these issues.' 10. By letter dated 24 June 10 the wife's solicitor wrote to the Solicitor: 'We hereby revoke your authority to act as our unpaid agent on settlement ... Please deliver to our agent [the] Transfer of the property at Lake Cathie ... presently held by you in escrow pending settlement...' 11. On 28 June 2010 the Transfer to the Lake Cathie property was registered. 12. On 30 June 2010 the wife's solicitor wrote to the Solicitor outlining requirements for settlement. On the same day the wife's solicitor wrote to Priest McCarron Lawyers & Conveyancers, her agent on settlement: 'Do not settle if all our requirements are not met' 13. By letter dated 30 June 2010 the Solicitor purported to settle the matter. 14. The settlement of the matter by the Solicitor on 30 June 2010 was on terms unacceptable to the wife. The evidence 10Copies of correspondence annexed to Ms Foord's affidavit confirmed the contents of the Particulars and revealed the following further matters of relevance. In outlining these matters, we will use the shorthand of 'P' followed by the relevant number when referring to paragraphs of the Particulars. 11The letter of 17 June 2010 referred to in P5 was sent by fax. It contained the following statement by Ms Gillard, the wife's solicitor: 'We confirm your earlier advices to us by telephone that you have agreed to act as our unpaid agent at settlement.' 12In a letter to Ms Gillard's firm (Thomas Mitchell Solicitors) dated 17 June 2010 and also sent by fax, the Solicitor confirmed that the date of settlement was to be 21 June 2010 and that he would attend as their unpaid agent. His letter also included the following statements: (a) on settlement, the Bonny Hills property would be transferred unencumbered to the wife; (b) on settlement, the sum of $100,000 ordered by the Family Court to be paid by the husband to the wife would be transferred, less an amount of $8,653.10 representing half of certain fees paid for valuations and a registration fee of $114; (c) after settlement, certain documents, including the certificate of title and a transfer relating to the Bonny Hills property, would be forwarded to Thomas Mitchell Solicitors; (d) as shown in copies of receipts accompanying the letter, council rates on this property were paid up to date; (e) the wife should make her own inquiries regarding land tax on this property; and (f) the Lake Cathie property 'will be transferred from your client to our client', together with certain goods listed in the Family Court's orders. 13A file copy of a letter faxed by Ms Gillard to the Solicitor later on 17 June 2010 contained the following statement: 'We hereby revoke your authority to act as our agent on settlement.' In it she stated also, implicitly by way of justification for this revocation of authority, that the receipts for the council rates claimed to have been paid were illegible and that under the Family Court's orders the husband was obliged to pay all rates and taxes up to the date of settlement. She asked the Solicitor to advise when he had a 'clear land tax certificate' and to send a confirmation that the rates had been paid, adding 'that is, when you are in a position to settle this matter'. 14At the hearing, the Solicitor, in response to a question from the Bench, indicated that he 'would have seen' this letter faxed to his office on 17 June 2010. 15On 18 June 2010, the Solicitor faxed to Ms Gillard, in accordance with a request faxed by her to him earlier that day, copies of (a) a signed transfer of the Bonny Hills property from the husband and the husband's mother (who was a co-owner) to the wife, (b) receipts for the valuations and (c) a clear land tax certificate. 16The Solicitor's letter of 22 June 2010 referred to in P9 also contained statements to the effect that, according to his instructions, the wife, on vacating the Lake Cathie property, had left it in an unsatisfactory state, that rectification would be required and that she had removed certain goods to which she was not entitled. It was on this basis that he claimed that there should be 'an adjustment in the settlement figures'. 17The letter of 30 June 2010 from Ms Gillard to the Solicitor referred to in P12 commenced as follows:- We confirm that you do not have authority to act as our agent on settlement. We have appointed Messrs Priest McCarron to do so. 18This letter also stated that the documents required on settlement included a bank cheque payable to Thomas Mitchell Solicitors in the sum of $90,481.59 and a further cheque covering registration and agency fees of $114 for each document to be registered. 19In his letter of 30 June 2010 to Ms Gillard referred to in P13, the Solicitor enclosed four documents relating to the Bonny Hills property (namely, the certificate of title, a discharge of mortgage, a transfer signed by the husband and the husband's mother and a clear land tax certificate) and a bank cheque in favour of Thomas Mitchell Solicitors in the amount of $87,709.59. He wrote that in calculating this amount he had deducted $228 for registration fees and that he had been instructed to 'withhold the amount of $3,000 from the settlement sum to attend to the replacement of items and reparation of items discussed in our earlier correspondence'. 20In a letter faxed to the Solicitor on 2 July 2010, Ms Gillard wrote:- This matter is not settled. We are holding the cheque and documents you forwarded us in escrow pending settlement. We required you to deliver the Transfer of Lake Cathie signed by our client to our agents, Priest McCarron. You instead delivered the Transfer for Bonny Hills. We require you to deliver the Lake Cathie transfer to our agents forthwith. 21The dispute over these matters between the husband and the wife was resolved within a relatively short time thereafter without significant harm to either of them. 22The complaint giving rise to these proceedings was made by Ms Gillard to the Legal Services Commissioner in a letter dated 12 July 2010. On 16 July 2010, the Commissioner referred it to the Law Society for investigation. 23A letter dated 10 September 2010 from the Solicitor to the Law Society, written as a response to the complaint, contained the following passages:- Settlement took place on the 21st June 2010 at [a specified bank]... I was contacted on the 21st of June 2010 by my client with various complaints about the state of the property at Lake Cathie... My client then instructed me to withhold the sum of $3,000.00 to remedy the various complaints made by client. That sum is held in my trust account... All transfers and discharges had been sent for registration... Ms Gillard contended that settlement could not have taken place... With regard to the conduct issues that appear to arise from Ms Gillard's complaint, being the delivering to the bank, the Transfer to the Lake Cathie property as security for an advice (sic) to my client in circumstances where the solicitor held the Transfer in escrow pending settlement, I say that settlement had taken place and that at the time of settlement Ms Gillard's various instructions as to our status as agent were to act as her agent. Ms Gillard was or should have been aware that the Lake Cathie property was required as security for the funds that my client was borrowing to pay out [the wife] in accordance with the Court Orders. 24In a further letter to the Law Society dated 18 December 2012, the Solicitor stated that according to his recollection the transfer of the Lake Cathie property was 'made available for the purposes of funds being raised to pay out the wife on settlement'. He also maintained that his action in withholding part of the amount due to be paid was justifiable because 'the alternative for the clients was to return to the Family Court of Australia for the purposes of arguing about the damage' and this would have cost them 'well in advance of the $5,000 (sic) which was the amount withheld'. 25In a further letter to the Law Society written on 26 February 2013, the Solicitor stated that after consulting more senior solicitors about this matter he had come to appreciate fully the seriousness and inappropriateness of his conduct and the importance of undertakings and escrow obligations in relationships between solicitors. He added that he had been in practice for more than twenty years (including practice as a principal for many years) and that he had never been found to have acted in an unsatisfactory manner. 26Neither in his Reply nor at the hearing did the Solicitor seek to contest any of the matters alleged in the Application or set out in the correspondence annexed to Ms Foord's affidavit. 27With one significant exception, we accordingly find these matters to have been established. The exception is that we do not accept the Solicitor's allegation that Ms Gillard was or should have been aware that the Lake Cathie property was required as security for the funds that the husband was borrowing to pay to the wife the sum stipulated in the orders of the Family Court. The Solicitor did not make this allegation in an affidavit or in the witness box; he did not suggest any reason why Ms Gillard 'should have been' aware that this was the case; and it is at odds both with the tenor of her letters to him and with the terms of the Family Court's orders. 28In reaching our conclusions as to how the Solicitor's conduct should be characterised, we should only take account, however, of the matters that set out in the Application. The Law Society's submissions 29In arguing that the Solicitor's conduct amounted to unsatisfactory professional conduct and that the appropriate penalty was a reprimand as sought in the Application, Ms Groenewegen drew particular attention to the following specific aspects of this conduct. 30In releasing the transfer of the Lake Cathie property to the bank as security for a loan to the husband before either the transfer of the Bonny Hills property or the husband's payment of $100,000 (less agreed deductions) had been delivered to the wife, the Solicitor acted in contravention of the requirement in the Family Court's orders (see P4) that these transactions should take place simultaneously. 31The Solicitor did not advise Ms Gillard that this premature release of the transfer of the Lake Cathie property to the husband was being contemplated, in order to ascertain whether the wife would consent to it. Similarly, he did not advise Ms Gillard after the event that this release had taken place. 32A consequence of the transfer being released prematurely was that both Ms Gillard and the wife believed that the wife's bargaining power in her continuing dispute with the husband was significantly weakened. 33The Solicitor claimed in correspondence with Ms Gillard and with the Law Society that settlement occurred on 21 June 2010. But this was patently not the case, because in purported reliance on instructions from the husband he had retained the sum of $3,000 out of the amount of $100,000 (less agreed deductions) that the husband was required on settlement to pay to the wife, without obtaining her consent. 34There was no evidence to support the Solicitor's claim that Ms Gillard knew or should have known that the husband required release of the transfer of the Lake Cathie property in order to be able to make the required payment to the wife. The Solicitor's conduct in making this claim was 'disappointing and disingenuous'. 35Ms Groenewegen argued that although the Solicitor's conduct did not inflict any significant harm on the husband or the wife and did not involve misappropriation, the public remedy of reprimand, as opposed to a private caution, was required nonetheless. It was important, she said, to alert members of the legal profession to the dangers of such conduct. 36In response to a question from the Bench, Ms Groenewegen indicated that she was not aware of any case under the Act or its predecessors dealing with conduct such as that of the Solicitor. 37She confirmed that the Law Society sought an order for costs in its favour. The Solicitor's submissions 38In written and oral submissions, the Solicitor conceded that when a dispute as to the condition of the Lake Cathie property arose between the husband and the wife, he should have returned all the documents to them and cancelled the settlement. The consequence, he believed, would have been that they would have had to go back to the Family Court and seek revised orders. The fact that this would have been expensive for them did not amount to an excuse for his failure to respect the 'sanctity of escrow and undertakings'. 39He also advanced the following arguments: (a) because the wife received all but $3,000 of the amount due to her from the husband, it could not be said that her bargaining power was significantly weakened; (b) no significant harm was caused to either of the parties; and (c) as Ms Groenewegen acknowledged, his conduct did not involve misappropriation. 40Specifically on the question of penalty, he submitted that his breach of his professional duties was 'at the less serious end of the range'; that he had practised for more than 20 years, both as a principal and as an employed solicitor,; that he had never been the subject of a complaint until now; and that a caution would be sufficient because a reprimand, which involved publicity, would be 'on the heavy side'. 41The Solicitor did not address the question of costs. Discussion and conclusions 42In the Macquarie Dictionary, the term 'escrow' is defined as follows:- 1. a contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee on the fulfilment of some condition. 2. the state of remaining ineffective until certain conditions are met. 43As stated in P5, the conditions on which the Solicitor, in his capacity as 'unpaid agent on settlement' for Thomas Mitchell Solicitors, held the executed transfer of the Lake Cathie property 'in escrow' included a condition that he would not release this transfer to his client, the husband, as part of the foreshadowed settlement unless the documents that he received, in his capacity as agent, included a bank cheque for $100,000 made payable to Thomas Mitchell Solicitors. 44At the time when he released the transfer to the husband on or about 21 June 2010, this condition was not fulfilled. We have found that on the balance of probabilities he was already aware of the revocation of his authority to act as agent on settlement. But whether or not this was actually the case, he breached - as he himself admitted - one of the conditions on which the executed transfer had been delivered into his possession. 45Although it would appear, as Ms Groenewegen indicated, that no decisions under the Act or similar legislation in Australia appear to have dealt specifically with the disciplinary consequences of this form of conduct by a solicitor, we consider that a number of decisions on breaches of undertakings by solicitors provide important guidance. 46A summary of some of these decisions is to be found in Riley's Solicitors' Manual at [28,035]. This paragraph reveals that frequently a breach by an undertaking given by a solicitor to another solicitor in the course of legal practice is held to amount to professional misconduct, not merely to unsatisfactory professional conduct (as is alleged against the Solicitor in these proceedings). 47An example is provided by the ADT's decision in Law Society of New South Wales v Martin [2002] NSWADT 27. That decision was based in part on a finding that the respondent solicitor had failed to comply with rule 26 of the Revised Professional Conduct and Practice Rules 1995 (NSW). At the time of that decision and of the relevant conduct in the present case, that rule was in the following terms:- 26 - Undertakings A practitioner who, in the course of the practitioner's practice, communicates with another practitioner orally, or in writing, in terms which expressly, or by necessary implication, constitute an undertaking on the part of the practitioner, to ensure the performance of some action or obligation, in circumstances where it might reasonably be expected that the other practitioner will rely on it, must honour the undertaking so given strictly in accordance with its terms, and within the time promised, or, if no precise time limit is specified, within a reasonable time. 48By contrast, in Law Society of New South Wales v Waterhouse [2002] NSWADT 204 (an authority also cited in Riley), a solicitor who failed to comply with an undertaking to deliver certain documents and who claimed as a reason for non-compliance that he had been deceived into giving the undertaking was found guilty of unsatisfactory professional conduct only. That decision was upheld on appeal: see Waterhouse v Law Society of New South Wales (LSD) [2003] NSWADTAP 20. 49We emphasise that no formal undertaking was involved in the present case. But the broad principle underlying these decisions on solicitors' undertakings is nonetheless relevant. The Solicitor himself implicitly acknowledged as much in his submissions, both to the Law Society and to the Tribunal. This principle (as the ADT said at first instance in Waterhouse at [24], quoting from Riley) is that 'it is of fundamental importance to the administration of justice, and to the orderly transaction of their clients' business affairs, that legal practitioners can trust one another and that they can be relied upon to do what they say they will do'. 50By appointing the Solicitor as an 'unpaid agent on settlement' and stipulating the conditions under which he was to hold the executed transfer of the Lake Cathie property 'in escrow', Ms Gillard indicated implicitly that she trusted him and relied on him to abide by these conditions. Without giving her any prior notice, he contravened them by making the transfer available to his client as security for a loan. As stated earlier, we do not accept his assertion that she was or should have been aware that his client needed this to occur in order to settle the outstanding transactions between the parties in accordance with their stated intentions and the orders of the Family Court. 51If the Solicitor had in fact given a formal undertaking to Ms Gillard, we would have been inclined to the view that his conduct was professional misconduct. In the actual circumstances of this case, we agree with the Law Society's characterisation of it as unsatisfactory professional conduct only. But it was not, as the Solicitor contended, 'at the less serious end of the range'. Its consequences, so far as the parties were concerned, could have been (but fortunately were not) very serious indeed. 52For this reason, at least, we agree with Ms Groenewegen that the penalty should not be a caution (which we believe to be within our powers by virtue of the terms of subsection (1) of section 562 of the Act even though it is not expressly mentioned in this section). This private sanction would not operate to remind the profession of the dangers of conduct such as the Solicitor committed. A reprimand, which must be published in accordance with subsection (8), is the appropriate penalty, even after due allowance is made for the Solicitor's record of practice over more than twenty years without any prior complaint having been made against him. 53The order that we make by way of penalty is accordingly that the Solicitor be reprimanded. 54For the reasons set out above at [7], the question of costs must be determined in accordance with section 566 of the Act, even though that section was repealed by paragraph [24] of clause 2.88 of Schedule 2 of the Civil and Administrative Legislation (Repeal and Amendment) Act 2013. Pursuant to section 566(1), we order the Solicitor to pay the Law Society's costs as agreed or assessed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 03 March 2014