Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Law Society of New South Wales v Ferry [2018] NSWCATOD 74 Hearing dates: 22 March 2018 Date of orders: 21 May 2018 Decision date: 21 May 2018 Jurisdiction: Occupational Division Before: The Hon F Marks (Principal Member) P Moran (Senior Member) M Von Kolpakow (General Member) Decision: The Tribunal having found that Robert Leslie Ferry (the Respondent) has engaged in unsatisfactory professional conduct orders that: 1. The Solicitor be reprimanded; 2. The Solicitor is fined the sum of $6,000; 3. The Solicitor is to pay the costs of the Council of the Law Society of New South Wales as agreed or assessed. Catchwords: PROFESSIONS AND TRADES - solicitor - professional disciplinary proceedings - findings of unsatisfactory professional misconduct - breach of section 479 of the Legal Profession Act 2004 - practicing in a situation involving a conflict of interest - orders for reprimand, fine and payment of costs Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Legal Profession Act 2004 (NSW) Legal profession Uniform Law (NSW) Real Property Act (NSW) 1900 (NSW) Cases Cited: Law Society of New South Wales v McCartney [2017] NSWCATOD 130 Law Society of New South Wales v Shehadie [2016] NSWCATOD 46 Marron v J Chatham Daunt Pty Ltd [1998] VSC 110 Category: Principal judgment Parties: The Council of the Law Society of New South Wales (Applicant) Robert Leslie Ferry (Respondent) Representation: Counsel: D Petrushenko (Respondent) Solicitors: C Flax (Applicant) R Ferry (Respondent) File Number(s): 2017/00187118 REASONS FOR DECISION What these Reasons for Decision deal with 1. In these proceedings the Applicant, the Law Society of New South Wales (hereafter referred to as "the Law Society"), seeks disciplinary orders against the Respondent, Robert Leslie Ferry (hereafter referred to as "the Solicitor"). There are four grounds pleaded: 1. Breaching s479 of the Legal Profession Act 2004 (hereafter referred to as "the 2004 Act") - prohibiting solicitors negotiating the making of, or acting in respect of, a regulated mortgage; 2. Creating and practicing in a situation involving a conflict of interest; 3. Failure to comply with a requirement under s371 of the Legal Profession Uniform Law (NSW) (hereafter referred to as "the Uniform Law"); 4. Failure to assist the investigator in the investigation of a complaint. 1. The Law Society contends that grounds 1 and 2 above constitute unsatisfactory professional conduct and that grounds 3 and 4 constitute professional misconduct. It seeks orders that the Solicitor be reprimanded, fined a sum of $6,000 and, at his own expense, undertake a course in Legal Ethics approved by the Director of the Professional Standards Department. It also seeks an order that the Solicitor pay its costs as agreed or assessed together with any further or other order as the Tribunal deems fit. 2. Having received the evidence of the parties on 22 March 2018, and considered the submissions of both sides, we are satisfied that the Solicitor has engaged in unsatisfactory professional conduct in respect of grounds 1 and 2, but that he has not engaged in professional misconduct in respect of grounds 3 and 4. We do find however that on those grounds the Solicitor has engaged in unsatisfactory professional conduct. The disciplinary orders that we make are that the Solicitor be reprimanded, and fined the sum of $6,000. 3. We also order, pursuant to schedule 5, clause 23(1) of the Civil and Administrative Tribunal Act 2013 that - being satisfied that no exceptional circumstances exist - the Solicitor pay the Law Society's costs. Particulars of the Law Society's Application and how the Solicitor responds Ground 1 - Breach of section 479 of the 2004 Act 1. The Law Society contends that the Solicitor had been retained by and acted for RGA and his partner MSL (names suppressed) in a number of matters and significantly for the purposes of these proceedings, acted for them in arranging a loan from another existing client, TH, in the sum of $85,000. 2. The Law Society pleads that in July 2014, RGA approached the Solicitor and asked his assistance in arranging a loan; that the Solicitor was aware that TH wanted to invest money; thereafter, RGA and MSL and the Solicitor commenced discussions regarding a possible loan advance to them from TH. 3. The Law Society further pleads that on 21 July 2014, the Solicitor telephoned TH advising him that other clients of his practice wished to borrow money; thereafter, that a meeting took place between the Solicitor and TH in early August 2014 to discuss this proposed loan. The Law Society says that in these circumstances, TH was a client of the law practice within the meaning of s477(1) of the 2004 Act because he received the Solicitor's advice regarding investment in a regulated mortgage and gave the Solicitor instructions to use money for that purpose. Because he was a person who proposed to lend money secured by a mortgage he was also a lender within the meaning of the same section. 4. The Law Society contends that the Solicitor opened a file and drafted a loan agreement in which TH was named as the lender and mortgagee; MSL was named borrower and mortgagor; and RGA guarantor. The agreement provided for a sum of $85,000.00 to be advanced, with repayment within 12 months and interest at 14% per annum reducible to 11% if repayments were made before the due date. The advance was to be secured by a first registered mortgage over MSL's land in Wyoming, NSW. 5. TH caused the $85,000.00 referred to above to be deposited into the Solicitor's trust account on 18 September 2014. On 23 September 2014, a loan agreement was executed by the parties and a mortgage was subsequently registered. 6. The Law Society pleads that the mortgage was a regulated mortgage within the meaning of s477(1) of the 2004 Act and that in breach of s479 of that Act the Solicitor in his capacity as solicitor for the lender negotiated the making of, and acted in respect of, that regulated mortgage. 7. By his Reply (filed 27 July 2017), the Solicitor admits breach of s479. Ground 2 - Creating and practicing in a situation involving a conflict of interest 1. The Application raises three issues. Firstly, the Solicitor acted for both parties on the loan. Secondly, the use of some of the loan monies to pay monies owed to the Solicitor's practice by MSL and RGA for costs on other matters. Thirdly, the Solicitor later provided legal services to TH to enforce the loan against MSL and RGA, the borrowers. 2. The Law Society contends: 1. The Solicitor acted for all named parties to the mortgage; 2. His duty to TH as the lender was to obtain for him the highest rate of interest yet his duty to MSL as borrower and RGA as guarantor was to obtain for them the lowest rate of interest payable; 3. Given (2) above, the Solicitor, in acting for all parties, created a situation involving a conflict of interest; 4. On 17 December 2014, an irrevocable authority was signed by MSL and RGA to make payments on a number of the Solicitor's outstanding tax invoices from the $85,000.00 advance; 5. On 18 September 2014, the Solicitor debited from his trust ledger the sums of $4,043.90; $2,120.96; and $2,330.08 in payment of the tax invoices referred to at (4) above. In doing so he preferred his own interest to those of his lender client, TH, because the monies were disbursed from the loan advance five days prior to the loan agreement being executed; 6. By writing letters dated 1 December 2014, 6 May 2015, and 29 May 2015 the Solicitor continued to practice whilst in a situation involving a conflict of interest. The letters either advised that interest payment had not been received or (on 6 May 2015), served a notice pursuant to s57(2)(b) of the Real Property Act, or otherwise demanded, on behalf of his lender client, repayment of the loan. 1. By his Reply, the Solicitor does not plead to each of the Law Society's allegation; rather says "…that there were circumstances relating to the breach giving rise to investigation which [he] seeks that the Tribunal consider in imposing any penalty". Ground 3 - Failure to Comply with a requirement under s371 of the Legal Profession Uniform Law 1. The Law Society pleads that it served a notice under section 371 (dated 15 June 2016) on 22 June 2016, the terms of which required the solicitor - on or before the 21st day after service of the notice - to provide to the Law Society the information and documentation set out in its schedule. It pleads that the Solicitor failed to comply. 2. In reality, the Solicitor does not dispute ground 3 as particularised but he takes a similar position as he takes in relation to grounds 2 and 4 in his Reply, namely, that he does not dispute the facts but says that there were circumstances relating to the breach which he says the Tribunal should consider in imposing protective orders. Ground 4 - Failure to assist the investigator in an investigation of a complaint 1. The Law Society in particularising this ground relies on a series of letters passing between it and the Solicitor. There is no dispute as to the content of the letters. The majority of the facts and letters are mutually agreed. 2. The Solicitor by his Reply does not refute the Law Society's particulars of ground 4, but again says that there were circumstances relating to the breach that he seeks that the Tribunal consider in imposing any protective order. Relevant legislative background 1. It was not in dispute that these proceedings are governed by the Legal Profession Uniform Law (NSW). Mutual Agreed Facts 1. The parties filed an Agreed Statement of Facts which reflected the factual summary set out above. 2. We reproduce the agreed facts as they pertain to ground 2. 1. By letter dated 1 December 2014, the Solicitor wrote to MSL and RGA stating: "We have been advised that the interest payments due 24 October 2014 and 24 November 2014 have not been received by TH. As these payments were not made on time, the interest payable for these months are now payable at 14%. Accordingly, we are instructed to request your immediate payment of $1,983.24" 1. Throughout the period December 2014 to May 2015 the Solicitor continued to act for TH in enforcing the loan. 2. By email and registered post on 6 May 2015 the Solicitor acting for TH forwarded to MSL and RGA a notice dated 4 May 2015 pursuant to section 57(2)(b) of the Real Property Act 1900. 3. By letter dated 29 May 2015 to MSL and RGA, the Solicitor acknowledged that repayments had been made and that an arrangement was being made by the borrower to pay out the loan. 4. In the circumstances described in paragraphs (1) to (5) inclusive above, the Solicitor continued to practice in a situation involving a conflict of interest. A factual matter in dispute 1. The Solicitor denied that he had preferred his own interests to those of his client TH in disbursing a portion of the advanced funds to the Law Practice some five days before the loan agreement was executed. Evidence of the Law Society 1. The Law Society tendered an affidavit of Anne-Marie Foord sworn 19 June 2017 together with Exhibit AMF1 to that affidavit, as well as an affidavit of Ronald Frederick Dunlop, trust account investigator, sworn 19 June 2017. Both were admitted without objection. The Solicitor's Evidence 1. The Solicitor relied on his affidavit sworn 31 August 2017 and a letter of reference from Mr Ken Stewart (barrister) dated 4 September 2017. Both were admitted without objection. 2. Although the Solicitor had not sought to serve an affidavit of his wife Gail Frances Ferry, she gave oral evidence at the hearing in support of his case. 3. The Solicitor also gave oral evidence and was cross-examined. Consideration and Findings A. What issues require determination 1. Disposal of the application requires us to determine the following issues: 1. Does the Solicitor's conduct in breaching s479 of the 2004 Act, or in creating and practicing in a situation involving a conflict of interest, amount to unsatisfactory professional conduct. 2. In debiting his trust account the amounts of $4,043.90, $2,120.96 and $2,330.08 on 18 September 2014 in payment of tax invoices owed to the practice by MSL and RGA, was the Solicitor preferring his own interest to those of the lender client TH. 3. Did the Solicitor fail to comply with the Law Society's s371 notice, or fail to assist the Law Society investigator. If so, did such conduct amount to professional misconduct; and 4. If so, what protective orders ought be made. B. Section 479 breach; conflict of interest 1. Section 479 - relevantly - is in the following terms: "Conduct of mortgage practices (1) A solicitor must not, in the solicitor's capacity as solicitor for a lender or contributor, negotiate the making of or act in respect of a regulated mortgage unless: (a) the mortgage is a State regulated mortgage, or (b) the mortgage is a run out mortgage, or (c) the mortgage forms part of a managed investment scheme that is operated by a responsible entity. (2) A solicitor must not, in the solicitor's capacity as solicitor for a lender or contributor, negotiate the making of or act in respect of a regulated mortgage except in accordance with: (a) the Corporations Act 2001 of the Commonwealth, or that Act as modified by any ASIC exemption or the Regulations under that Act, and (b) this Act, the Regulations and the Legal Professional Rules." 1. None of the exceptions referred to in any of sub-sections (1) or (2) of s479 apply here. 2. There is a file note from the Solicitor which records details for a new file to be opened on 23 July 2014 with the client being recorded in the name of TH and the matter description: 'loan advice'. The Solicitor said that the client was a friend of he and his wife and who was anxious to invest money on first mortgage at "a reasonable interest rate". 3. MSL had, to the Solicitor's knowledge, acquired property in [address supressed] following the death of her former husband. At all material times to the events referred to in the Law Society's application, RGA was MSL's partner, and they were both anxious to borrow funds in order to carry out repairs, maintenance and improvements for a proposed sale of that property. 4. The Solicitor noted that the amount that MSL and RGA sought to borrow was the same amount that TH wished to "invest". The Solicitor said that the proposed loan by TH to MSL and RGA represented a "good investment" for the lender and provided MSL with "necessary funds to do work needed to be done on the property". He said that the loan would also enable the borrowers to repay outstanding debts; and that they "could easily afford" the repayments. 5. Neither the Solicitor's affidavit nor his oral evidence deal with the factual basis upon which the Law Society contends that s479 of the 2004 Act has been breached. He admits breach of that section in his Reply. 6. Sub-section (6) of s479 of the 2004 Act provides that a contravention of the section is capable of being professional misconduct. The Law Society cites Law Society of New South Wales v Shehadie [2016] NSWCATOD 46 as an occasion where the Tribunal found a solicitor guilty of professional misconduct in - amongst other things - breaching s479, the Tribunal saying in respect of the breach that the solicitor's conduct was: "…[U]nsatisfactory in that it fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner. A member of the public is entitled to expect that a practitioner who undertakes work in mortgage lending or conveyancing will have a proper understanding of the special rules that apply to these areas of practice, and in particular rules, the breach of which, may expose the clients to risk of loss." 1. Although both sub-section (6) of s479, and the Tribunal in Shehadie, speak of professional misconduct as opposed to unsatisfactory professional conduct the facts here establish - and the Solicitor concedes - that in his capacity as Solicitor for the lender TH he negotiated the making of, and acted in respect of, a regulated mortgage; that conduct being prohibited by the section. In our view, this conduct falls within s296 of the Uniform Law, namely, conduct occurring in connection with the practice of law which falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer. 2. There are two aspects of potential conflict of interest. Firstly, acting for both parties on the loan then - whilst continuing to act for the lender, borrower and guarantor - acting for the lender in communicating with the borrower and guarantor asserting loan default and later serving a s57(2)(b) notice. The second conflict was said to involve his duty to his lender client, and his personal interests in making payments from the loan monies towards three outstanding tax invoices owed to his practice by the borrowers or associated parties. 3. The file recording TH as the client referred to the "other party" as MSL. The Solicitor sought a valuation of the security property. 4. At the same time as acting for the lender the Solicitor was also acting for the borrower (MSL) and guarantor (RGA) as his costs agreement with them makes clear: "the work we have been instructed to do is act on your behalf in your loan advance of $85,000 from TH which is to be secured by … [the property]" 1. A file note records a personal attendance on RGA and possibly also MSL. The note further appears to record that during the course of the conference a mortgage document and authority were signed. Included in his file is a form of loan agreement appearing to bear the signatures of the parties and the date 23 September 2014. The same date appears on a Real Property Act mortgage that also appears to bear the signature of MSL as mortgagor. 2. We are comfortably satisfied that the Solicitor, in acting on the loan advance, acted for all named parties, something that the Solicitor himself admits. 3. Sub-rules 2 and 3 of Rule 11 of the NSW Professional Conduct and Practice Rules 2013 ("2013 Rules") are relevant. They provide: "11.2 If a solicitor or a law practice seeks to act for two or more clients in the same or related matters where the client's interests are adverse and there is a conflict or potential conflict of the duties to act in the best interests of each client, the solicitor or law practice must not act, except where permitted by Rule 11.3. 11.3 Where a solicitor or a law practice seeks to act in the circumstances specified in Rule 11.2, the solicitor may, subject always to each solicitor discharging their duty to act in the best interests of their client, only act if each client: 11.3.1 is aware that the solicitor or law practice is also acting for the other client; and 11.3.2 has given informed consent to the solicitor or law practice so acting." 1. For our purposes the relevant aspect of Rule 11 is potential (as opposed to actual) conflict. 2. When giving evidence at the hearing the Solicitor said that all parties to the loan transaction knew that he was acting for each of the other parties, but that none of the parties raised objection. There are no written records of these discussions recording any expressions of consent or awareness. His evidence was that he did not believe it necessary to record the consent of each of the parties but conceded that with the benefit of hindsight he should have kept such a record. 3. He also conceded that acting for each party in the transaction raised the potential for conflict but gave evidence that if an actual conflict arose he would have at that point withdrawn. 4. At the time of documenting the loan advance there was at the very least a potential for conflict between the interests of the lender on the one hand and the interests of the borrower and guarantor on the other; further, the evidence as to the Solicitor advising each of his clients that he was acting for each other party to the transaction is confined to his recollection, and was not recorded in any way. 5. The conflict issue became more sharply focussed subsequent to the loan advance being made. The Solicitor was taken in cross-examination to his letter to MSL and RGA of 1 December 2014, which opens with a recording of their instructions to pay the loan funds as shown in a trust account statement attached to the letter, went on to confirm the purpose of the loan, confirmed the primary provisions of the loan agreement and the monthly repayment, but then ends with the words: "We have been advised that the interest payments due 24 October 2014 and 24 November 2014 have not been received by [TH]. As these payments were not made on time the interest payable for these months are now payable at 14%. Accordingly, we are instructed to request your immediate payment of $1,983.34. We thank you for your prompt attention to this matter." 1. In the one letter, the Solicitor is recording instructions from one set of clients (MSL and RGA) but at the end is requesting payment of arrears of interest on the instructions of his other client (the Lender). 2. Despite the content of this letter the Solicitor said in evidence that he did not consider there was conflict at that point, rather only a potential for conflict. 3. He was then taken to the s57(2)(b) notice and the covering letter of 6 May 2015. In discussing whether forwarding this letter and serving the notice constituted acting in a position of conflict the Solicitor's response was that he would not have gone further if he had been instructed by the lender to take steps to exercise a power of sale. He did not think that serving the notice itself put him in a position of conflict. He conceded that there would have been a position of conflict if proceedings had commenced; sending the s57(2)(b) notice was "bordering on" a conflict situation and he should not have done it, stating that at the time when he was instructed to serve the notice he had informed TH that if he, as lender, wished to enforce the mortgage he would have to seek alternate legal representation. 4. The s57(2)(b) notice refers to a figure of $1,100.00 for "legal costs and recovery". The Solicitor said in evidence that he had "no idea" what the $1,100.00 was but eventually suggested that it was an estimate only. 5. There were further letters forwarded by the Solicitor to RGA and MSL on 29 May 2015 and 19 June 2015 that further emphasised the position of conflict that the Solicitor was clearly in at that stage. Whilst prima facie continuing to act for the borrower and guarantor the letters were in the form of demands for repayment made on the instructions of the lender client. The letter of 19 June 2015 refers to a telephone conversation that the solicitor had with RGA on 16 June 2015, then records in the third paragraph information given to the Solicitor by RGA regarding loan applications. The Solicitor in the letter asks RGA to keep him informed of progress in relation to that application. He then sends a copy of that letter to the lender client without evidence of the borrower/guarantor clients consenting to the Solicitor so doing. In continuing to act for all parties after the loan advance was documented and the monies paid [the ongoing retainer being in the form of demands for payment of interest on behalf of the lender and (also on his behalf) service of a s57(2)(b) notice] the Solicitor was in breach of rule 11.2. There was at that point actual conflict between the interests of the lender in demanding his contractual entitlement to interest payments and, in the event of non-compliance with such demands, taking possession; as opposed to the interests of the borrower and guarantor in seeking to deflect those demands whilst - it seems - they were attempting to refinance. 6. The solicitor sought to argue that he had only been retained by the borrowers to negotiate a loan and act on it, and that his retainer did not extend to anything which occurred after completion of the loan transaction. We disagree. If this were the case the Solicitor would not have continued to deal with the borrowers in connection with any arrangements to pay out the loan, and at the least he should have clarified that he was no longer representing them. 7. We adopt the comments of Byrne J in Marron v J Chatham Daunt Pty Limited [1998] VSC 110: "The difficulty… which must be acknowledged is that where a party is contemplating retaining a solicitor who acts for another… the party will often not recognise a conflict which is possible, pending or even then existing. It is the solicitor who should in the normal course be the first to apprehend this. So the parties rely upon the solicitor, not only to have the integrity to withdraw when conflict arises, but also the perception to sense its pendency before it arises in fact. The solicitor, then, must be constantly vigilant and alert to perceive the possible emergence of a conflict of interest… what is involved here is that the solicitor is entrusted by the client with the task of acting as a look out for and then as an arbiter of this conflict and, where this does or is likely to arise, perhaps to act in a way which may be contrary to the solicitor's own interest… this is a trust which not every client would be content to confer upon another person, even a solicitor. It is one which a client should not be expected to give without a proper understanding of its implications" 1. The consent of each of the clients to the solicitor acting for both parties must be fully informed consent. As Byrne J explained in Marron: "This requires the solicitor to disclose to the client who is in full command of their faculties, not only the circumstances which do or may give rise to the conflict, also the fact that the existing conflict or the risk of future conflict and the implications of and the risks to which these circumstances may give rise… Where the parties to a transaction are, nevertheless, content to proceed on this basis, the solicitor may properly act." 1. Because of the necessity for a solicitor to withdraw from representing a client when a conflict arises in circumstances where he or she has decided to represent more than one party in a transaction, it is necessary to be alert to the possibility of conflict arising at the outset of a transaction. A prudent solicitor, at the commencement of a transaction such as the one that we are concerned with, ought carefully consider - before deciding to agree to act for both parties - the potential for conflict and the consequences to each of the clients if a conflict does arise and the necessity for each of the clients to, at that point, look to retain separate lawyers. There is a heightened obligation continuing throughout such a retainer to be alert to the potential for conflict. A solicitor in these circumstances is always in a better position than either of the clients to discern the presence of potential conflict both at the outset and during the course of a transaction. 2. There was, we find, a breach of the 2013 Rules and, on that basis alone, unsatisfactory professional conduct. Aside from the Solicitor's failure to comply with the conduct rules referred to above, in continuing to act for all parties following the loan advance being made, and in circumstances where there was in our view at that point clear conflict between the positions of the lender on the one hand and the borrower/guarantor on the other this constituted conduct in connection with the practice of law that fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer (Uniform Law s296). 3. The third area of complaint is the Law Society's contention of conflict between the duty owed to the lender client and the Solicitor's own interests in the utilisation of monies due to his practice by RGA or his company in the amounts of $4,043.90; $2,120.96; and $2,330.08. 4. There is in evidence a table that compares, in summary form, the amounts recorded in the loan ledger, the amounts recorded in the Solicitor's trust account statement, and the amounts that were authorised in the irrevocable authority of the borrower dated 17 September 2014. The table shows receipt from the lender of the loan advance of $85,000.00 on 18 September 2014 and, on the same day, journal transfers to matters 213242; 213230 and 214217 in payment of the costs and disbursements for the three tax invoices referred to above. The same table does not show the payment of the balance of the loan funds $30,405.98 to the borrower until 23 September 2014. Also debited from the loan amount were sums of $24,826.38 and $20,324.73 to discharge car loans of the borrower or guarantor. 5. In the 23 September 2014 loan agreement (described as "Secured Loan Advance") under the heading "purpose of loan", there is a reference to repayment of the two car loans and the carrying out of repairs, maintenance and renovations to the security property. There is, however, no mention of payment of the three tax invoices owing by RGA or his company to the Solicitor and summarised above, although that does appear to be recorded in the Solicitor's letter to MSL and RGA of 1 December 2014, and from the trust account statement There is also the irrevocable authority document which appears to bear the signatures of MSL and RGA and which authorises the Solicitor to make the three tax invoice payments from the $85,000.00 advanced by the lender. In those circumstances, and in the absence of any evidence of MSL or RGA to the contrary, we find that they had authorised the Solicitor to deduct from the loan advance payment the three tax invoices owing to his firm by RGA or the company. 6. The Law Society alleges the solicitor preferred his own personal interests to those of the lender client because a portion of the advanced funds was disbursed to the Solicitor's law practice five days prior to the loan agreement being executed. The Solicitor's oral evidence was that the $85,000.00 paid by TH was credited to the trust account on 18 September 2014 and that the monies in satisfaction of the three tax invoices were withdrawn - the Solicitor says pursuant to the irrevocable authority that he had been given by the borrower and the guarantor - on the same day namely 18 September 2014. 7. The Solicitor was questioned as to the Secured Loan Advance and the mortgage both being dated 23 September 2014. His evidence is that the loan agreement had already been executed by the parties prior to the insertion of the date 23 September 2014; further, that loan monies had been provided prior to that date, namely on 18 September 2014. He conceded that he could not recall when the agreement was signed prior to the insertion of the date 23 September. He recognised the signature of the witness to the signatures of MSL and RGA as that of his receptionist. He witnessed the signature of the lender. 8. There being no evidence from any of the parties as to the date when they signed the Secured Loan Advance and mortgage, and there being no file note of the solicitor as to when that document was signed by the parties, it is our view that the document should prima facie be taken to have come into effect on the date which it bears, namely 23 September 2014. It is arguable that the Solicitor was in breach of his trust account obligations by paying to himself monies in satisfaction of the three outstanding tax invoices on the same day as the Solicitor had received the $85,000.00 in loan monies. This smacks more of a breach of trust account regulations than a preference of interests, although this clearly follows. To this extent that the Solicitor did prefer his own interests over the interests of his lender client, as particularised in the application. For completeness we note that we are not dealing with any matter relating to the status of the solicitor's trust account in these proceedings. 9. We find the Solicitor guilty of unsatisfactory professional conduct in breaching s479 of the 2004 Act and in both acting in the loan advance and in the post loan enforcement stage whilst in a position of conflict. C. Section 371 Notice; Failure to Assist 1. The Law Society informed the Solicitor by letter dated 23 December 2015 of the initiation of a complaint against him under s266 of the Uniform Law, in respect of the s479 breach and in acting when in a position of conflict. After setting out the details of both complaints and providing a copy of Solicitor's Practice Rule 11 the Society sought the Solicitor's written submissions by 15 February 2016. Given no doubt the Christmas holiday period, it was not until 22 January 2016 that the Solicitor responded to the Society. He referred to its letter dated 23 December 2015, indicated that he had been on leave, and said that he would provide his response within 14 days. That did not occur and there were further letters forwarded to him by Professional Standards on 29 February 2016 and 7 April 2016. The Solicitor eventually forwarded a three page response on 15 April 2016. In that response, he set out the history of his relationship with TH, the circumstances surrounding MSL acquiring the property, and made certain submissions. The Law Society responded by letter of 18 May 2016, indicating that his response did not provide the specific information initially requested on 23 December 2015. Those specific matters were then repeated and a request made that the information be supplied by 8 June. When that did not occur, the Law Society served a notice under s371 of the Uniform Law on the Solicitor by letter of 15 June 2016. 2. The notice sought details of the communications that the Solicitor had with each of his clients concerning their awareness of, and consent to, him acting for the other parties to the transaction, as well as documentation in the form of file notes, written communications, tax invoices and matter transaction reports. The notice required that the information be provided by way of Statutory Declaration within 21 days after the date of service of the notice and, within the same time frame, production of the documents. 3. When there was no compliance by 13 July 2016 the Law Society sent a further letter to the Solicitor on 19 July 2016 advising him of a further complaint namely failure to comply with a requirement under s371 of the Uniform Law, and failing to assist the investigator in the investigation of a complaint. 4. The Solicitor responded by letter of 2 August 2016. He acknowledged that his response had been unusually delayed, and raised family health issues which had limited his available time. He then referred to being admitted for day surgery on three occasions, to his wife suffering an injury requiring her to be dependent on the Solicitor; and further, to the fact that he was caring for two elderly dependents both in their 90s. He concluded by indicating that he had recovered the documents sought and had drafted a response. The Statutory Declaration sought by the Law Society in its s371 notice was eventually provided to Professional Standards by the Solicitor by letter of 4 August 2016 along with what the Solicitor described as supporting annexures. In it the Solicitor dealt with each of the points raised in schedule 1 of the s371 notice and provided documentation in response to schedule 2 of the notice. 5. On 11 August 2016, the Law Society wrote again to the Solicitor, referring to his 4 August 2016 Statutory Declaration, and seeking further information. By way of response the Solicitor signed a further Statutory Declaration on (it appears) 26 August 2016 and provided that by letter of the same date. 6. Despite the content of the further Statutory Declaration the Law Society again wrote to the Solicitor on 1 September 2016, referred to the 26 August 2016 Statutory Declaration but sought further information and documentation: 1. as to the Solicitor's meeting with TH in August 2014; 2. as to an amount of $2,230.08 paid to the Solicitor from the loan monies; 3. as to a $20,000.00 loan to Mr Anderson in December 2013; 4. as to a recording of the "outstanding account" in matter number 213105. It asked for further submissions and further information by 26 September 2016. The Solicitor endeavoured to provide the further information and documentation sought by letter dated 29 September 2016. 1. The Law Society then forwarded three further letters to the Solicitor dated 9 November 2016; 16 November 2016 and 6 December 2016; the first of these noting a number of matters raised in the Solicitor's 29 September 2016 letter and inviting further submissions; the second advising of a resolution of the Professional Conduct Committee that the Solicitor be informed of issues of unsatisfactory professional conduct relating to the section 479 breach and acting in a position of conflict. The Solicitor responded by letter of 22 December 2016, essentially saying that there was not much that he could offer in relation to the matter, that he was endeavouring to assist two existing clients, but conceding that he should have been aware of the potential problems and conflict. 2. As recorded in the Agreed Statement of Facts referred to earlier, the Solicitor concedes failure to comply with the requirements of s371 of the Uniform Law and failure to assist the investigator in the investigation of the complaint (in the period 15 February 2016 to 3 August 2016). His Reply says that there were circumstances that he asks the Tribunal to consider. Those circumstances are set out in the Solicitor's affidavit, supplemented by his oral evidence and the evidence of his wife. 3. The Solicitor's affidavit deposes to his firm experiencing financial difficulty during the course of 2016, and to suffering badly with issues relating to business worries and financial issues. He became depressed and was taking medication. He annexed a letter from a general practitioner dated 29 February 2016 which expressed concern that the Solicitor was very depressed. The letter described him feeling overwhelmed by his stress and needing support and strategies. 4. The Solicitor said that dealing with the matters raised by the Law Society was a matter of considerable concern to him but that he found it difficult, given his medical state and other issues involving his wife and the elderly dependents referred to above, to deal with the Law Society promptly. He relied on his staff to provide him with assistance. 5. In cross-examination the Solicitor was taken to his letter of 2 August 2016. That letter outlined the reasons why he was unable to fully comply with the Law Society's requests and the s371 notice at that point. When giving oral evidence, he also said that he had made telephone calls to the Law Society at about this time, but could not recall whether he divulged relevant information as to his medical condition. He also agreed that he should have called earlier, and that his 2 August 2016 letter made no mention of depression. He was unable to give a reason why that medical condition was not stated. 6. He also said that in early 2015 he telephoned the Law Society's counselling service and that the person to whom he spoke recommended that he contact his general practitioner. 7. The Solicitor's wife (Gail Frances Ferry) gave evidence. She and the Solicitor had been married for a period of 12 years. 8. In late 2015, she received a telephone call from one of the Solicitor's employees saying that something was wrong with him and that he was not coping. Ms Ferry asked the employee to keep an eye on her husband. 9. She also gave evidence of an occasion - which appears to have been in late February 2016 - when her husband broke down, said that he was in trouble and had difficulty coping. Ms Ferry talked to him, said that he needed to get help from the Law Society, and understood that he did so. The Solicitor informed his wife that he had phoned the Law Society and was told that he should see his GP. 10. Ms Ferry gave evidence of doing what she could to help her husband and that she had asked staff at his office to check him. She recalled one occasion where he had heart pains, and another occasion where she had a fall resulting in her husband having to care for her. In Ms Ferry's words, he had "a lot going on"; was trying to look after his legal practice and also take responsibility for looking after their son. Her assessment was that her husband was not coping but that he did not like to admit to that fact. He put his job before everything else. His staff members had been asked to check on him and Ms Ferry had contacted them regularly. 11. Given: 1. attempts by the Solicitor to satisfy the Law Society's various requests for information and documentation as quickly as reasonably possible; 2. the Solicitor's attempts to comply with the section 371 notice as quickly as reasonably possible; 3. the fact that the Solicitor is an experienced member of the legal profession, and 4. the medical and other personal issues that were in 2016 impacting on the Solicitor's practice and hence his ability to respond to the Law Society and to the s371 notice in as timely a manner as he would otherwise have wished to; we are not persuaded, and hence decline to find, that by reason of grounds 3 and 4 that professional misconduct has been established. The following represents our reasons for so concluding. 1. The Law Society in its submissions refers to s466 of the Uniform Law. Relevant to the application before us that section provides, in part: "Provisions relating to certain requirements under this law 466(1) This section applies to a requirement under: ... (d) section 371 to produce documents, provide information or otherwise assist in, or co-operate with, an investigation, or (6) A failure of an Australian lawyer or an Australian registered lawyer to comply with the requirement is capable of constituting unsatisfactory professional conduct or professional misconduct;" 1. Under s297 of the Uniform Law, professional misconduct includes unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; and conduct of a lawyer whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding for the lawyer is not a fit and proper person to engage in legal practice. 2. The Law Society's submissions points to the various letters that are referred to in the evidence of seeking information and documentation from the Solicitor and the fact that this Tribunal, and its predecessor, have previously held that a Solicitor's failure to assist with an investigation constitutes professional misconduct. In determining whether failure to assist an investigator constitutes such conduct the Law Society submits that the Tribunal ought take into account: 1. The length of time during which the Respondent practitioner failed to comply with directions or requests to assist the investigation, including, but not limited to, the statutory notices issued; 2. Whether for any significant period or periods of time the investigator appeared not to be pursuing the investigation; 3. The number of occasions on which such directions or requests were addressed to the practitioner without generating any response; 4. The number of occasions, if any, when the practitioner, having promised that assistance would be forthcoming, failed to abide by this promise; 5. Whether the practitioner ever complied in part with the direction or request to assist the investigation and, if so, the extent to which he or she actually provided assistance; 6. The importance of the responses sought from the practitioner for the progress of the investigation; and 7. Whether any mitigating factor falling short of a "reasonable excuse" under s676(4) of the 2004 Act was present. 1. Whilst the Solicitor did not provide the information and documentation sought by the Law Society in the letters that we have referred to earlier, nor comply with the s371 notice upon the various dates that the letters and the notice prescribed, nevertheless we find that the Solicitor was not deliberately attempting to mislead the investigator or obstruct or stifle the investigation. He took reasonable steps to comply with the s371 notice by providing the Statutory Declaration sought by the notice, and the documents referred to in schedule 2 of the notice, on 4 August 2016. This despite the notice requiring compliance on or before the 21st day after service of the notice upon him, ie on or before 13 July 2016 - a delay beyond the date specified in the notice of approximately 3 weeks. 2. The Law Society did acknowledge receipt of the Solicitor's Statutory Declaration on 5 August 2016 and, in doing so, sought further information in a paragraph commencing with the words "I would appreciate your assisting providing details of….". There is no further s371 notice served in respect of this request for further details. 3. As discussed earlier in these reasons, there was another letter forwarded to the Solicitor on 11 August in which the Solicitor was asked to "…kindly provide the following further information…". Again, there was no further s371 notice served. The Solicitor provided the further information requested in the form of another Statutory Declaration, on 26 August 2016. Despite him having done so the Law Society again sought further information on 1 September 2016 (after acknowledging receipt of the 26 August further Statutory Declaration). The Solicitor again responded. He dealt with each of the Law Society's points by further letter of 29 September, which also provided additional documentation sought. 4. It is of course of the utmost importance that legal practitioners the subject of investigation respond to requests for information and documentation that may be made upon them in respect of a complaint, and take diligent, prudent and careful steps to ensure complete and timely compliance with any notice served under s371 of the Uniform Law. 5. Section 466(6) of the same Act, which we have referred to earlier in these Reasons, is not to the effect that failure on the part of a legal practitioner to comply with s371 constitutes unsatisfactory professional conduct or professional misconduct; rather, it provides that a failure to comply "is capable of" constituting such conduct. 6. We are not satisfied that the Solicitor's failure to provide the information and documentation sought by the Law Society and by the s371 notice within the timeframes set out in the letters and the notice was conduct involving a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence nor conduct that would justify a finding that the Solicitor is not a fit and proper person to engage in legal practice. Having regard to his medical condition and his family situation we are satisfied that the Solicitor acted with reasonable diligence in complying with the notice and with the Law Society's various requests for information and documentation; was not endeavouring to mislead the investigator or the Professional Standards Committee, and treated the Law Society's requests, and its investigation of the complaints with a degree of seriousness. He was forthcoming in his responses. 7. Whilst there is reference to his own health issues in his 2 August 2016 letter he did not, in that letter or otherwise, inform the Law Society that he was suffering from depression. That, in our assessment, is understandable albeit regrettable. We found the Solicitor to be disarmingly frank when giving evidence. It is to his credit that he had contacted a person at the Law Society on the urging of his wife and has sought medical assistance. 8. However, although we find that the Solicitor is not guilty of professional misconduct, it is also necessary to consider whether he is guilty of the lesser unsatisfactory professional conduct by reason of s302(3) of the Uniform Law. 9. That section provides: "Determination by designated Tribunal - disciplinary matters … 302 (3) The designated Tribunal may find a person guilty of unsatisfactory professional conduct even though the complaint or charge alleged professional misconduct" 1. The Solicitor's failure to provide the information and documentation sought by the Law Society and by the s371 notice within the timeframes set out in the letters and in the Notice was not conduct involving a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence. It was however conduct in the practice of law that fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer (s296 of the Uniform Law). Whilst the Solicitor did act with reasonable diligence and was not endeavouring to mislead the investigator or the Professional Standards Committee, it is important that legal practitioners the subject of investigation respond to requests for information and documentation that may be made upon them. If they are unable to comply within the timeframes imposed they should promptly inform an investigator or the Law Society of the reasons. There is no evidence before us that the Solicitor was incapable of complying with the Law Society's timeframes. Consideration of Disciplinary Orders 1. Having found the Solicitor guilty of unsatisfactory professional conduct in respect of grounds 1, 2, 3 and 4 of the application we now turn to the protective orders that should be made. 2. The Law Society seeks orders that the Solicitor be reprimanded, fined and ordered to undertake, at his own expense, a course in legal ethics approved by the Director of the Professional Standards Department and achieve a pass mark of not less than 50%. It also seeks an order that the Solicitor pay its costs. 3. By his Reply the Solicitor contends that the orders sought by the Law Society are excessive given his previous good character, community involvement and record over a period of 42 years of legal practice. 4. He conceded that he made a mistake in acting for both the lender and the borrower in the loan transaction but had, since that time, re-familiarised himself with the Solicitors' Practice Rules concerning acting for more than one party in a transaction. He said in evidence that he is now more aware of his ethical obligations. 5. The Solicitor said that he did not consider that an ethics course would educate him further. He also commented that there was not a lot of detail provided by the Law Society as to the proposed ethics course, and that as a sole practitioner on the Central Coast it would be difficult for him to leave his business and travel to Sydney to participate in the course. 6. In submissions the Law Society pointed to much of the complaints of misconduct being admitted by the Solicitor, and contended that in cross-examination he did not show insight into his wrongdoing, especially in his evidence that a conflict would only have arisen, in his mind, if enforcement proceedings had been taken by the lender against the borrower. 7. We are cognizant of the authorities that have held that the primary consideration of the Tribunal, in considering what disciplinary orders ought be made against a legal practitioner, is protection of the public in deterring the practitioner the subject of disciplinary proceedings from re-offending; to deter any other practitioner who may be minded to behave in a similar manner; and to record the Tribunal's disapproval of the conduct in question and uphold the respect and dignity of the profession in the eyes of the public. 8. In Law Society of New South Wales v McCartney [2017] NSWCATOD 130 the Tribunal said: "It is generally accepted that in making orders of the kind proposed (namely a reprimand and a fine) and other types of orders in proceedings of this kind, the role of the Tribunal is protective rather than punitive". "…any penalty should contain an element of general deterrence for the purpose of publicly marking the seriousness of the conduct in question. It is relevant to take into account the effect that the order will have upon the understanding of the profession and amongst the public of the standard of behaviour required of solicitors." 1. We have found the Solicitor guilty of unsatisfactory professional conduct in respect of grounds 1, 2, 3 and 4 of the application. Having regard to all of these matters we propose to impose a reprimand on the Solicitor and a fine of $6,000. However, we are not persuaded that the undertaking of the unspecified ethics course that the Law Society proposed is necessary or warranted. We observe that the Solicitor will be subjected to a substantial costs order which, of itself, will provide a significant burden on him and contribute to the overall deterrent effect of our orders. Costs 1. This is a costs jurisdiction and the Law Society is entitled to its costs in the absence of exceptional circumstances, of which none exist. We shall make a costs order accordingly. ORDERS 1. The Tribunal, having found the Solicitor guilty of unsatisfactory professional conduct, orders that: 1. The Solicitor be reprimanded; 2. The Solicitor is fined the sum of $6,000; 3. The Solicitor is to pay the costs of the Council of the Law Society of New South Wales 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: 21 May 2018