Victorian Legal Services Commissioner v Fong [2024] VCAT 103; [2024] VCAT 469, Senior Member E. Wentworth

In this matter Senior Member Wentworth explores the meaning of the following words or concepts, and their relevance in disciplinary proceedings: “unsatisfactory professional conduct”, “professional misconduct”, “substantial”, “gross negligence (occasionally coupled with incompetence)”, “deliberate (or wilful) or reckless conduct”, and “a state of mind allegation” . The Senior Member also analyses and comments on the drafting of Applications to the Tribunal by the Commissioner.

The facts were –

• The respondent was a solicitor whose client was in dispute with his neighbours about the location of a fence.  His client wanted the fence rebuilt in the belief that it was partly not on the boundary line but encroached onto his land.  The neighbours maintained that it was on the boundary line.
• In 2016 the solicitor lodged a caveat on behalf of his client over the neighbours’ title on the ground of “adverse possession by exclusive occupation”.  The neighbours’ lawyer wrote expressing surprise that the caveator was claiming adverse possession given that the respondent’s client was claiming that the writer’s clients had encroached onto his land.  The letter asserted that there was no caveatable interest.  Subsequently, on the application of the neighbours the Registrar of Titles issued a lapsing notice under s. 89A of the Transfer of Land Act.  No notice was given to the Registrar that a proceeding to substantiate the claim of the caveator was on foot (there being no such proceeding) and accordingly the caveat lapsed under s. 89A(5).  After this lapse the neighbours’ lawyer sent a more detailed letter stating that the existing fence had been in place for more than 15 years and if (which was denied) it was on the incorrect line the neighbours would have a claim in adverse possession.
• On 1 September 2017 the solicitor lodged another caveat on behalf of his client over the neighbours’ title on the ground of “registered proprietor(s) being entitled to possession of the certificate of title for the land and to prevent improper dealings”.   This caveat was withdrawn on 3 November 2017.
• In 2019 the solicitor lodged another caveat on the same ground as in 2017.  The s. 89A process then occurred with the same outcome as in 2016.

The Legal Profession Uniform Law (Victoria) provided –

“296 Unsatisfactory professional conduct

For the purposes of this Law, unsatisfactory professional conduct includes conduct of a lawyer occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer.

Section 297 provided that for the purposes of this Law professional misconduct included “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”.

After the third caveat the neighbours’ lawyer made a complaint to the Victorian Legal Services Com­mission­er. The Commissioner carried out an investigation in the course of which it was not put to the solicitor that his conduct was wilful or reckless. And neither this allegation nor that of gross negligence was referred to in the “Murray” letter sent by the Commissioner before this proceeding.

The Commissioner laid three charges against the solicitor alleging that he engaged in professional misconduct under s. 297(1)(a).  The Commissioner did not bring a “rolled up” charge in the alternative, eg a charge in the alternative to charges 1, 2 and 3 alleging professional misconduct by reason of repeated lodging of caveats without a proper basis, and did not plead professional misconduct on the ground that the solicitor’s conduct represented a “consistent” failure to meet the required standard under s 297(1)(a).  Rather, each charge was limited to the conduct in lodging a single caveat and its particulars did not refer to factual allegations in respect of the previous caveat(s).  In the charges the Commissioner alleged that in lodging the first caveat the solicitor had acted in “reckless disregard of known facts or law” and that in lodging the later caveats he had acted in “wilful [ie knowing there was no proper basis for the caveat, deliberately] or reckless disregard of known facts or law”.  However, the Application was amended to delete the words “reckless” and “wilful”.  As Amended each charge was –

“Professional misconduct within the meaning of s 297(1)(a) of the Uniform Law, in that the Respondent caused the [first, second or third] caveat to be lodged, and maintained, over the [neighbours’] land without a proper basis, without regard to known facts and law, which involved a substantial failure to reach or maintain a reasonable standard of competence and diligence”.

The format of the Commissioner’s pleadings was a series of numbered paragraphs setting out factual allegations in a narrative form, followed by the formal charges, which under the heading “Particulars” then referred back to paragraph numbers in the preceding narrative.

At a directions hearing counsel for the Commissioner stated that the charges did not allege any state of mind, whatever state of mind previously alleged having been removed.  The Tribunal Member replied: “Yes, but it’s not reckless and it’s not wilful?”.  Counsel replied: “Exactly right … it is in the nature of gross incompetence or gross negligence”.

Although the Commissioner had not pleaded gross negligence, the Commissioner’s written submissions stated that the amendments to the charges made it clear that the Commissioner did not allege that the solicitor wilfully or recklessly lodged and maintained the caveats, but rather that he acted with gross negligence and incompetence.  The Commissioner did not allege that the solicitor knew that the caveats lacked any basis.

At the hearing the Tribunal raised, in light of there being no allegation that the solicitor acted wilfully or recklessly, what “without regard to known facts or law” meant and known by whom?  Counsel stated that: the Commissioner made no “state of mind” allegation, had withdrawn the allegation of wilful or reckless conduct, and instead alleged that the solicitor acted with “gross negligence and incompetence”, warranting a finding of professional misconduct under s 297(1)(a): ie unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial failure to reach or maintain a reasonable standard of competence and diligence (omitting “or consistent” where appearing before the word “failure”).  As to “known facts or law” counsel also stated that the facts referred to were those known by the solicitor and that it was not alleged that the solicitor knew the law and disregarded it.

Counsel for the Commissioner also argued that the Tribunal should make adverse inferences about the solicitor’s purpose in lodging the caveats.

In Victorian Legal Services Commissioner v Fong [2024] VCAT 103 the Tribunal found as to each charge that the solicitor engaged in unsatisfactory professional conduct, holding –

1. The solicitor’s client had no caveatable interest but had a right to claim under the Fences Act 1968. [10]-[11], [113], [139], [168]
2. To find professional misconduct under s. 297(1)(a) the Tribunal must be comfortably satisfied, under the principles enunciated in Briginshaw v Briginshaw (1938) 60 CLR 336, that the solicitor’s conduct involved a substantial failure to reach and maintain a reasonable standard of competence and diligence. [45]
   The Tribunal discussed the meaning of “substantial”. [46]-[47]
3. Gross negligence could found statutory professional misconduct as it raised unfitness to practise law. [49]
4. While deliberate or reckless conduct was not a necessary ingredient of professional misconduct it was often a component of the conduct found to meet the statutory definition. [51]
5. Something beyond a minor or moderate departure from the standard was required to meet the definition of professional misconduct.  Accordingly, this usually required something above a single instance of mistaken understanding.  Otherwise every instance of incompetence or lack of diligence would be professional misconduct. [52]
6. Because each charge was limited to the conduct in lodging a single caveat it was not open to the Tribunal to consider whether the solicitor’s negligent conduct in lodging three caveats might constitute professional misconduct. [55]
7. It was also not open to the Tribunal to take into account the solicitor’s repetition of the same error (lodging a caveat without a proper basis) in deciding whether his conduct in relation to the later caveats constituted professional misconduct.  But in assessing the solicitor’s conduct in lodging the later caveats the Tribunal could take into account the information and arguments provided by the neighbours’ lawyers after the first caveat was lodged. [56]
8. Notwithstanding counsel’s statement that the Commissioner made no “state of mind allegation” and had abandoned the allegation of recklessness, counsel’s other statement that the facts referred to were those known to the solicitor appeared to be a “state of mind allegation” and close to that abandoned allegation. [65]
9. As counsel for the Commissioner had stated that it was not alleged that the solicitor knew the law and disregarded it, that allegation should have been removed from the charges. [65]
10. Contrary to the Commissioner’s written submissions, the amendments to the charges did not make it clear that the Commissioner did not allege that the solicitor wilfully or recklessly lodged and maintained the caveats, but rather that he acted with gross negligence and incompetence.  The pleadings, including the factual allegations relied on as particulars (and the “Murray letter”), made no such allegation.  They ought to have been included if a finding of gross negligence was to be sought or made, for fairness reasons.  While the phrase “gross negligence” did not have a settled meaning in the common law, it was a known concept and, depending on how it was is defined or used, could be more than a pejorative or a label to criticise the degree of negligence.  It could found  misconduct at common law.  It was not interchangeable with “a substantial failure to reach the required standard”.  It was not an allegation that should be made for the first time in submissions.  [50], [66], [67], [69], [70], [71], [72]
11. This did not, however, prevent a finding that the negligence or incompetence in this case met the requirements of s. 297(1)(a) as pleaded.   But the negligence in this case did not meet those requirements and was not, in any event, conduct warranting the label “gross negligence and incompetence” or amounting to that species of negligence. [50], [72], [73]
12. For reasons of procedural fairness it was not open to the Tribunal to draw adverse inferences about the solicitor’s purpose in lodging the caveats.  These did not appear in the Amended Application as conclusions to be drawn from specified facts, and to draw them would also have been contrary to the assurance that the Commissioner made no allegations about the solicitor’s state of mind.   [75]
13. The importance of clear and properly particularised charges in professional disciplinary cases, and the impermissibility of the Tribunal going beyond (or being asked to go beyond) the allegations made, were well-established. As a matter of procedural fairness, a practitioner should not be left in any doubt as to the extent of the allegations against them. [76]-[77]
14. As to the way disciplinary Applications were pleaded at VCAT –
    1. the problem of a lack of clarity in the precise nature of the allegations and the facts relied on, could be compounded when, as in this case, the charges and the particulars relied were not set out sequentially in the Application, namely each charge followed by the factual allegations forming the particulars to that charge; [79]
    2. The format of pleadings commonly used by the Commissioner in Applications was to first set out all the allegedly relevant facts in a series of numbered paragraphs (including background, facts, references to annexed documents, and facts about the course of the investigation) followed by the charges, under each of which was a heading “Particulars”, under which was a list of paragraph numbers from the preceding narrative, rather than setting out the facts themselves under the charges.  That format meant that the reader was required to keep reverting to the narrative to identify the facts relied on as particulars for each charge.  Depending on the number of charges and the length of the narrative, this may not be a straightforward task; [80]-[82]
    3. Where (as was not the case here) a selection of paragraph numbers across the narrative was listed, it was necessary to “piece together” the facts referred to.  This: was unnecessarily time-consuming and inefficient; could create unnecessary lack of clarity, and; could obscure an overlap in charges, or that the particulars did not include a fact required to prove a charge, or that a submission went beyond the factual allegations. [83]-[85]
15. As to the phrase used in each of the charges “without regard to known facts and law”, despite the abandonment of any allegation that the conduct was wilful or reckless: this was unclear and close to the abandoned allegation of recklessness, and; the paragraphs referred to as particulars, when read, set out a series of facts but did not spell out what were the facts and law it was alleged the solicitor did not have regard to, or make it clear (if that was the allegation) that he knew both the facts and the law and acted regardless. [86]-[87]
16. The solicitor acted negligently in lodging and maintaining the first caveat, but he did not act knowing it did not have a proper basis or recklessly. [114], 115], [119], [120]
17. While “mere” negligence may or may not attract disciplinary findings, such findings were warranted on Charge 1 as the solicitor’s negligence had resulted in him lodging a caveat without a proper basis and then maintaining it (until it lapsed) despite the letter from the neighbours’ solicitor. [123]-[126]
18. Lodging the first caveat was at the lower end of unsatisfactory professional conduct.  Although the solicitor should not have maintained the caveat it did not remain on the title beyond the lapsing notice period.  There was, at least, no proceeding commenced in support of an unmeritorious caveat, nor did the solicitor know that the client had no caveatable interest, nor falsely tell the Titles Office that proceedings were on foot, nor repeatedly refuse to withdraw the caveat despite requests, nor lodge the caveat in support of a personal claim as opposed to protecting the interest of a client.  But, in support of this being unsatisfactory professional conduct, this conduct was more serious than the case of a solicitor not calling for a document that the solicitor understood existed but which in fact did not exist whereby a caveat lacked a proper basis, and the respondent had used a ground unavailable in law to his client. [19]-[20], [121], [123], [127]-[131], [133]
19. In lodging and maintaining the second caveat the solicitor acted negligently and his conduct amounted to unsatisfactory professional conduct.  His conduct attained the higher end of unsatisfactory professional conduct because he lodged this caveat without prior advice yet with notice of the arguments raised by the neighbours’ lawyer.  However, the caveat did not attract a direct judicial warning and it was withdrawn two months after lodgment without a lapsing notice. [19]-[20], [139], [146], [151], [154], [156]
20. In lodging and maintaining the third caveat the solicitor acted negligently and his conduct amounted to unsatisfactory professional conduct.  His conduct attained the higher end of unsatisfactory professional conduct because he lodged this caveat without prior advice yet with notice of the arguments raised by the neighbours’ lawyer.  However, the caveat did not attract a direct judicial warning, and although it lapsed after the lapsing notice it was relatively short-lived, and the solicitor he did not maintain in this proceeding that the caveat had a proper basis [19]-[20], [164], [168], [172]

In Victorian Legal Services Commissioner v Fong [2024] VCAT 469 the Tribunal reprimanded the solicitor, fined him $3,000, and ordered that he pay the Commissioner’s costs of $5,000.

Philip H. Barton

Owen Dixon Chambers West

Wednesday, November 13, 2024

 

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