Blog 70. Solicitor disciplined concerning caveat – is lodgment of improper and baseless caveats by legal practitioners endemic?

Legal Services Commissioner v Souki [2022] VCAT 663 (17 June 2022)

This case was a proceeding by the Legal Services Commissioner against a solicitor including for drafting baseless caveats.  The solicitor pleaded guilty to a number of charges.  The form of Senior Member E. Wentworth’s decision was first to set out the Findings, second the Orders, third the Senior Member’s Reasons (27 paragraphs), and finally, occupying most of the decision, an “Appendix: Relevant Extracts from the Parties’ Submissions”.  The Appendix included agreed proposed penalties and the solicitor’s explanations.  The Senior Member stated (paragraph 20) –

“The Commissioner’s submissions noted that the lodging of such [improper or baseless] caveats by legal practitioners is ‘endemic’.  If that is so, it is a shameful matter for the legal profession.”

Last October I gave a paper on caveats at the Commercial Law Discussion Group Conference (being a Discussion Group of Victorian solicitors) and at least one experienced solicitor, without demur from the other solicitors present, disputed the word ‘endemic’, regarding it as unjustified.

The solicitor acted for three clients in a Supreme Court proceeding in which they were seeking to recover their investment in a gold bullion firm.  The facts related to the caveat charge (including the solicitor’s explanations) were –

  • The solicitor was a young practitioner who was in her early years of practice as a principal of her own law practice.
  • Her clients requested her to caveat over a property owned by a defendant in the Supreme Court proceeding.  They had no estate or interest in the property and were at most prospective judgment creditors.
  • The solicitor informed her clients that caveating was not possible as they had no caveatable interest, the clients were reluctant to accept that advice, the solicitor sought advice from counsel in conference with the clients, and counsel also told the clients that they had no caveatable interest.
  • The property was listed for sale and again the clients insisted on caveating.  The solicitor had a number of discussions with the clients about the issue, reiterating that no caveatable interest existed.
  • The clients then asked the solicitor to provide them with a pro forma caveat form.  Accordingly on 24 May 2017 the solicitor provided them with caveat forms she had prepared which: claimed that the clients had an ‘interest as chargee’ based on an agreement with the registered proprietor of that date; sought an absolute prohibition on dealings with the property; and erroneously listed the address for notices under the caveat as the property itself not the address of the clients (this error was attributable to the LEAP system and occurred without the foreknowledge of the solicitor).
  • The solicitor continued to reiterate to the clients that there was no basis for the caveats.
  • In July 2017 the clients lodged the caveats.

The solicitor was charged with professional misconduct in that she prepared and facilitated the lodgment of erroneous and defective caveats in the knowledge that the caveators had no estate or interest in the property capable of supporting a caveat.  She admitted that she facilitated this lodgment and that her conduct involved a substantial failure to reach or maintain a reasonable standard of competence and diligence which amounted to professional misconduct.  (The solicitor’s explanation included that, although she acknowledged that the provision of the pro forma caveat form was improper, changes to the LEAP and caveat process now meant that a pro forma caveat form could no longer be provided to clients).

The parties agreed that a reprimand, and an order that the solicitor complete an additional three CPD units on substantive property law and ethics, was an appropriate remedy.  The Tribunal imposed this penalty and also suspended the solicitor’s practising certificate for a month to be served concurrently with a suspension ordered in respect of another charge.  The Tribunal stated ([10]) that this suspension was in the interests of general deterrence and to signal the seriousness of the conduct.  It added ([22]) that if the matter had involved a more experienced practitioner or a higher degree of culpability, a more substantial interference with the right to practise would be have been warranted.

Philip Barton

Owen Dixon Chambers West

Tuesday, March 28, 2023

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