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NCAT decisions in discliplinary matters: June to September 2022

The NSW Civil and Administrative Decisions Tribunal hears and determines disciplinary applications in relation to solicitors referred to it under section 300 of the Uniform Law by the Legal Services Commissioner and (under delegation) the Council of the Law Society of NSW.  These applications deal with allegations that conduct may amount to professional misconduct, or unsatisfactory professional conduct more appropriately dealt with by NCAT.

It also reviews, on application by a solicitor, findings by the Commissioner or the Council (or its delegates) of unsatisfactory professional conduct and associated orders made against solicitors.

The following decisions were reported by NCAT between June and September 2022.

Council of the Law Society of New South Wales v Aaron Noel Kernaghan (No 2) [2022] NSWCATOD 64

Decision date: 20 June 2022 

On 6 August 2021, the Tribunal published its decision in Stage 1 (Findings) of disciplinary proceedings that the Council of the Law Society of New South Wales commenced against Mr Aaron Noel Kernaghan. The Tribunal found that Mr Kernaghan had engaged in professional misconduct on the basis he:

  • breached an undertaking to the Office of the Legal Services Commissioner;
  • breached various sections of the Legal Profession Uniform Law (NSW);
  • caused a trust account deficiency;
  • failed to comply with fiscal obligations and failed to comply with a notice issued to him under
    s370 of the Legal Profession Uniform Law (NSW); and

unsatisfactory professional conduct on the basis he failed to:

  • comply with cost disclosure obligations under s174 of the Legal Profession Uniform Law (NSW); and
  • pay an invoice issued by an expert witness.

On 20 June 2022, in Stage 2 (Orders) of the proceedings the Tribunal made orders:  

  • issuing Mr Kernaghan with a reprimand;  
  • requiring Mr Kernaghan to complete an ethics tutorial with the Applicant’s Ethics Unit and to complete a Practice Management Course before he can be authorised to engage in legal practice as a principal of a law practice;  
  • imposing conditions on Mr Kernaghan’s practising certificates for a specified period:   
  • requiring him to practise only as a supervised employee; 
  • prohibiting him from supervising any other legal practitioner and from handling trust money; and 
  • requiring him to comply with various medical and medical reporting conditions; and 
  • requiring Mr Kernaghan to pay the Council of the Law Society of New South Wales’ costs of the proceedings.  

The Court held (at [70] – [72]):  

“The Solicitor’s misconduct was extremely serious. As he concedes, it was and is a significant departure from expected professional standards. The misconduct occurred over an extended period, and affected not only the Solicitor’s clients, but his employed solicitor, and the expert retained to provide an expert report. The Solicitor failed to honour his obligations to the OLSC and to the Law Society, and he failed to comply with his fiscal obligations. 

Without diminishing the seriousness of the Solicitor’s misconduct, or detracting from the findings of professional misconduct and unsatisfactory professional conduct, the Tribunal accepts that the Solicitor is genuinely remorseful for his failings. It is to his credit that he informed his clients of the Stage 1 findings, and that he has now repaid Ms Watson. The conduct the subject of the complaint and the Tribunal’s findings occurred some five to seven years ago. There has been one established complaint since then, relating to a failure to provide an itemised account requested in June 2017, which resulted in a finding of unsatisfactory professional conduct and a reprimand. The Solicitor has, in his evidence in the Stage 2 hearing, demonstrated a genuine personal and professional change in the intervening period since 2017, including his acknowledgement that he made a mistake in engaging in sole practice without the necessary experience and skills. 

The Tribunal is satisfied that the Solicitor could not now be regarded as unfit to engage in legal practice,  

of either permanent or indefinite duration, such that the protection of the public requires that his name be removed from the roll. The Tribunal is satisfied that the Solicitor is a person who may properly be held out to the public as a fit and proper person to be entrusted with the duties and responsibilities of a Solicitor, while recognising that the protection of the public requires measures including: 

  1. Rectification of any deficiencies in the Solicitor’s knowledge concerning the issues arising in the proceedings, namely the giving of undertakings, dealing with trust money, compliance with costs disclosure obligations, compliance with the regulatory authority’s requirements under s 370 of the Uniform Law, compliance with fiscal obligations, and obligations to third parties; and 
  2. Taking preventive measures in light of the Solicitor’s vulnerability to decompensate emotionally and psychologically if subject to extreme stress, including that he practise as an employed solicitor only, and be under supervision and following the advice of his treating psychologist or psychiatrist together with the continuation of antidepressant medication.” 

Hagan v Council of the Law Society of New South Wales [2022] NSWCATOD 76 

Decision date: 7 July 2022 

Mr Hagan sought administrative review of the Professional Conduct Committee’s (PCC) decision, dated 25 June 2021, to find that Mr Hagan had engaged in unsatisfactory professional conduct and to issue him with a caution and require him to give a written apology to the complainant. 

The Tribunal made the following orders: 

  • The decision of the Council of the Law Society of New South Wales dated 25 June 2021 be varied as follows: 
  • Anthony Mark Hagan has engaged in unsatisfactory professional conduct in respect of the conduct described in these reasons for decision as the “Correspondence Conduct” only. 
  • Anthony Mark Hagan is cautioned pursuant to s299(1)(a) of the Uniform Law; and 
  • Anthony Mark Hagan is required to provide a written apology to complainant in a form that is approved by the Director, Legal Regulation, Council of the Law Society of New South Wales, within 21 days of the date of these orders, pursuant to s 299 (1)(c) of the Uniform Law. In the event that the parties cannot agree upon the terms of that apology, the parties have liberty to apply.  
  • Pursuant to s 64(1)(c) of the Civil and Administrative Tribunal Act 2013 (NSW), publication of evidence given in the proceeding and documents lodged with the Tribunal which identify the executrix, the complainant, her siblings or her deceased father (the testator) is prohibited. 

With respect to the subject correspondence conduct, the Tribunal held (at [68] – [72]): 

“There is nothing in respect of this conduct, notwithstanding any inability of the Solicitor to divulge the nature of his instructions from or advice to the executrix, which leads to a conclusion that the Solicitor’s conduct was anything other than that which falls well short of the high standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer. We are satisfied that the conduct amounted to unsatisfactory professional conduct. 

The Solicitor did not indicate in his letter to the complainant that he ‘was instructed’ that the policies had specified beneficiaries other than the testator (if authorised by his client to do so). Nor did he simply question the basis for the complaint’s assertion that the proceeds were estate property. 

Rather, he made a positive assertion that each of the policies “nominated a beneficiary other than the deceased”. He was not entitled to do so without personally satisfying himself as to the truth of that assertion. That he may have been instructed that the policy named a beneficiary other than the testator but is prevented from raising that in his own case if he was, is not to the point. His positive assertion was made without knowledge of the statement’s veracity. The assertion could, and should, have been independently verified before being made. If he was unable to make such independent verification for any reason, the assertion simply should not have been made. 

There was a significant risk of a mischievous consequence of the conduct. The complainant may have relied upon the assertion by the Solicitor, given his position and obligations as an officer of the court, to cease enquiries as to why the policy proceeds were not applied to the testator’s estate. On the evidence before us it appears likely that, if it had occurred, the testator’s estate may not have been properly administered. 

Furthermore, all persons engaged in dealings with a solicitor should be entitled to accept that a solicitor will not make positive assertions without first satisfying themselves of the truth of that which is asserted. Trustworthiness, in that respect, is a fundamental aspect of membership of the profession. Failure to meet that standard undermines the due administration of the legal process. It may, if allowed, cause significant extra delay and expense to parties seeking redress for their legal rights due to the need for independent verification of all statements made by a legal practitioner. 

With respect to the Trust Distribution Conduct, the Tribunal held (at [75] – [91]): 

“In our view, the Council quite properly acknowledged that AMP’s letter of 8 September 2015 is ambiguous. The mere fact that it may have made reference to the “esta[te]” of the testator or referred to the account as being held in his name does not assist us to form any concluded view consistent with the Decision. Nor does it allow a reasonable inference to be drawn against the Solicitor, particularly given the seriousness of the complaint.  

With the benefit of hindsight, it is clear that the moneys were not paid to the executrix as beneficiary of the policy. However, we cannot be satisfied that should have been apparent to the Solicitor, or sufficiently clear as to put him on guard that he should make independent enquiry to verify his apparent instructions. 

The expression in the AMP letter of its “… hope this will be of assistance to your client at this difficult time”, is consistent with an intent that the moneys were being released to the executrix for her benefit, not forming part of the estate and provided simply to assist in the prompt administration of the estate.  

Whilst not required to do so (Lucatonio v Kleinert [2009] NSWSC 853), it was open to the Council to lead evidence of an expert nature as to why a reasonably competent solicitor would have been alerted from the correspondence to the likelihood of the payment being made under Life Insurance Act, s 211. The Council did not lead any such evidence. 

We agree with the Solicitor’s submission that s 211 does not create a presumption that funds received by a spouse of the testator in these circumstances are to be taken as having been paid under that section. In our view, the fact that the payment was made without reference to any obligation on the recipient under Life Insurance Act, s 211(4) and the letter referred to a hope that it would “… be of assistance to [the executrix] at this difficult time”, made the Solicitor’s acceptance that it was the proceeds of a policy to which the executrix was a beneficiary a reasonable one. 

The Council seemed to be alive to this deficiency in its case before the Tribunal. In the event that we reached the conclusion we have on this issue, the Council invited us to set aside the Decision and remit the matter to it for further consideration. The Council also suggested that we recommend that it give the Solicitor a direction utilising Uniform Law, ss 371(1) and 466, which would require and allow him to disclose his instructions despite any issue of privilege or confidentiality, so that further information could be gathered. Quite why the Council had not taken that step of its own volition in the years during which these complaints were investigated was not explained. We do not agree that we should remit the matter for further consideration. There are several reasons for this including: 

  • The fact that the investigation of the complaints has already taken several years; 
  • That the Council could have utilised the provisions of ss 371(1) and 466 Uniform Law to compel responses from the Solicitor during its investigation but did not do so, despite knowing since 28 June 2019 that the Solicitor alleged that he was constrained in his response to the complaints due to client legal privilege (or legal professional privilege) that the executrix declined to waive; 
  • In our view, even if the Council could establish that the Solicitor should have looked behind his client’s instructions and ascertained that the first AMP Policy proceeds were paid to the executrix under the terms of Life Insurance Act, s 211, the executrix was still the “person on whose behalf” the payment was received into trust, to use the terms of the Uniform Law, s 138(1)(a). This would be so notwithstanding her subsequent obligation under Life Insurance Act, s 211(4), or the fact that she may have directed that it be deposited to the trust account in the name of the estate as a step toward compliance with that obligation; 
  • On that basis, the Solicitor was entitled, and indeed required, to “disburse the trust money only in accordance with a direction given by” the executrix, as set out in Uniform Law, s 138(1)(b);  
  • There is no allegation that he disbursed the moneys other than in accordance with a direction of the executrix;  
  • Even if the Council could, after further investigation, establish that the Solicitor should have investigated the nature of the payment to the executrix of the first AMP policy proceeds, that is not the complaint. 

Furthermore, as best we can ascertain from a document contained at page 106 of the parties’ agreed bundle, on an interpretation of the will agreed to by all beneficiaries the executrix was entitled to a distribution of $19,865.78 from the estate in accordance with cl 7 of the will. (The actual distribution appears to have been reduced by the value of the second AMP policy, but the retention of that policy’s proceeds forms no part of the matters we are asked to review). 

This is to be contrasted with the $19,887.78 initially derived by the executrix from the first AMP Policy. 

On the basis of what had, until recently, seemed settled law, the combined effect of the Probate and Administration Act 1898 (NSW), ss 44, 61 and 92 was that the executrix had no title to a chose in action belonging to the testator until probate is granted, and could not administer the estate. However, on grant of probate, the effect of s 44 was to retrospectively validate dealings with the estate property by the executrix before that grant: Byers v Overton Investments Pty Limited (2001) 186 ALR 280; [2001] FCA 760 at [23] – [24]. 

However, in Carolyn Deigan as executrix for the estate of the late James Boyd Lockrey v Barnard James Fussell [2019] NSWCA 299, White JA (noting that Bathurst CJ (as his Honour was) and Macfarlan JA did not decide the issue) expressed a different view, saying, of the proper construction of the relevant sections: 

[173] In my view, the nettle should be grasped. Is it the case that before a grant of probate a bank cannot transfer moneys standing to the credit of a deceased’s account into an estate account in the name of the executor? Can an executor, before or without the grant of probate, not use those moneys to pay debts, funeral or testamentary expenses? Can an executor, before or without grant of probate, not transfer chattels to those entitled under the will? In my view on a purposive construction of ss 44 and 61 of the Probate and Administration Act, considering the background of those provisions, the executor does have such powers. 

If the executrix did have those powers, there may have been nothing unlawful in the executrix making a distribution to herself by way of payment of her legal expenses in an amount less than her entitlement under the estate, or improper in the Solicitor facilitating it. The executrix risked not being indemnified if the distribution exceeded her lawful entitlement but, again, a failure of the Solicitor to advise her in that regard is not the complaint.  

Even if the executrix was not entitled to make the distribution at the time, the effect of Probate and Administration Act, s 44 may have retrospectively validated her dealing when probate was granted. It also appears to us that if the executrix had received the money specifically as executrix of the estate, she was not required to retain it in the Solicitor’s trust account. She was free to hold it in an account elsewhere. As a result, she was entitled to require the Solicitor to return the balance of the first AMP policy proceeds, in the sum of $14,245.28, to her. We cannot identify a lawful right or obligation allowing the Solicitor to prevent her from doing so. Again, he had an obligation to advise her as to her obligations to the estate, but a failure to do so is not the complaint. 

Finally on this point, in our view, the protective orders made by the Council in the Decision in respect of both the Correspondence Conduct and the Trust Disbursement Conduct are appropriate in respect of the Correspondence Conduct taken in isolation, for reasons we will come to.” 

Buckley v Council of the Law Society of New South Wales (No 2) [2022] NSWCATOD 94 

Decision date: 25 August 2022 

On 25 August 2022 the Tribunal published its decision regarding the Law Society’s application for its costs of an application to set aside a Summons issued to it at the request of Mr Nathan Buckley. The Summons was issued to the Law Society in administrative review proceedings which Mr Buckley commenced (and subsequently discontinued) against the Law Society in the Tribunal.   

The Tribunal accepted that it was open to it to make an order for costs in the Law Society’s favour because there were “special circumstances” for the purposes of s60(2) of the Civil and Administrative Tribunal Act 2013 (NSW) 

(CAT Act). Special circumstances existed because the Summons sought documents beyond those relevant to the NCAT proceedings. 

The Tribunal acknowledged that:  

  • Mr Buckley did not seek to narrow the scope of the Summons; and 
  • the way that Mr Buckley dealt with the Law Society’s requests to narrow the scope of the Summons was inconsistent with the guiding principle to be applied to practice and procedure set out in section 36 of the CAT Act. 

Despite the above, the Tribunal determined, on balance, not to exercise its discretion to make a costs order in the Law Society’s favour. The key reasons for this were as follows: 

  • It was only when the Law Society filed and served its affidavit evidence in the NCAT proceedings that it was apparent that the Law Society had not inspected all files for relevance to the proceedings (Reason 1).  
  • The solicitor sought a reasonable period of time to respond to the Law Society’s request regarding the scope of the Summons in the lockdown circumstances (Reason 2). 
  • The Tribunal afforded little weight to the Law Society’s submission that Mr Buckley’s application for an order requiring the Law Society to review additional documents was made late in the day (Reason 3). 
  • While the Law Society’s Summons set aside application was successful, Mr Buckley also had some success in relation to his application for an order requiring the Law Society to review further documents for the purposes of complying with s58 of the Administrative Decisions Review Act 1997 (NSW). 

Weller v NSW Legal Services Commissioner [2022] NSWCATOD 67 

Judgment date: 24 June 2022 

Mr Weller unsuccessfully sought an administrative review of the NSW Legal Services Commissioner’s decision, dated 25 November 2020, to find that Mr Weller had engaged in unsatisfactory professional conduct and to issue him with a reprimand, fine, and require him to waive certain fees for work done on the basis:  

  • Mr Weller took instructions from Mr CD when he knew or ought to have known Mr CD lacked capacity to understand the effect of an Enduring Power of Attorney or to provide instructions to commence proceedings. Following the commencement of the proceedings, Mr Weller failed to provide advice to Mr CD regarding offers made by the defendants to compromise indemnity costs orders made in the Defendant’s favour.  
  • Mr Weller failed to make written contemporaneous file notes of his attendance on Mr CD and steps he took to satisfy himself of Mr CD’s capacity and, as such, failed to act competently and diligently in proceedings.  
  • Mr Weller failed to obtain an expert medical opinion regarding Mrs AB’s capacity after Mr Weller was put on notice about concerns regarding her capacity. Mr Weller then had Mrs AB execute documents (which included revocation of an Enduring Power of Attorney and the appointment of guardians) prepared by himself. 
  • Mr Weller failed to act competently and diligently regarding the preparation of the above-mentioned documents when he knew or ought to have known about Mrs AB’s lack of capacity, failed to seek an expert medical opinion regarding Mrs AB’s capacity and failed to make written contemporaneous file notes of steps taken to assess Mrs AB’s capacity on the date of her execution of documents.  

The Tribunal held (at [258]-[265]): 

“The solicitor did not seek or obtain any medical evidence about Mr CD’s capacity to understand the role of an attorney, or how he could fulfil that role, nor did he take any appropriate steps to ensure Mr CD had capacity to instruct him to commence the Supreme Court proceedings. Further, there is no suggestion in the solicitor’s material or submissions that he took steps to ensure Mr CD understood the costs implications of the Supreme Court proceedings as required by s 174 (3) of the Uniform Law. A solicitor exercising an appropriate level of competence and diligence would have made proper enquiries to satisfy himself of Mr CD’s capacity to give instructions.  

Significantly in respect of Mrs AB’s capacity, the solicitor relied on his own observations. He did not test her understanding by asking open ended questions, rather he recited to her the effect of the documents. He made no contemporaneous file note other than recording his attendance at the aged care facility. In summary, he did not observe any of the guidelines promulgated by the Law Society and conceded he was unaware of those guidelines. The solicitor relied on his observations of Mrs AB’s demeanour and understanding.  It is relevant to refer to what was said in the Tribunal in HLT about reliance on a client’s demeanour as follows: 

Notwithstanding Mr DOX’s careful explanation of what an attorney can and cannot do, his evidence did not satisfy us that his interview elicited from Mrs HLT evidence of her understanding. Rather, it indicated she acquiesced in what he said and asked few questions. The Tribunal finds both Mr DOX and Ms MMR relied heavily on Mrs HLT’s appearance and learned social skills without critical examination of her cognition, or more particularly without the benefit of any medical opinion. The Tribunal notes at the three occasions we had the benefit of Mrs HLT’s presence at the hearing she was immaculately groomed, exchanged pleasantries with the Tribunal members and maintained a high level of what may be broadly described as “social skills” despite her obvious lack of cognitive capacity. 

While the solicitor places emphasis on the observations and comments of Mr CD and Ms DE those persons were not, as the Commissioner found, appropriately qualified to opine on the issue of capacity.  

The solicitor did not take into account that Mrs AB was transferred from hospital to a secure dementia ward at her aged care facility or the advice given by the aged care facility about her diagnosis. 

Before or shortly after he commenced proceedings in the Supreme Court, the solicitor was put on notice by the aged care facility that he should make an application to the Guardianship Division on behalf of Mrs AB to revoke Mr EF’s appointment and when advised proceedings had been commenced in the Tribunal did not appear for the hearing [sic] or apparently advise Mrs AB, Mr CD or Mrs DE of the importance of them appearing at the hearing if they wished to be heard. 

It is not in doubt, as noted by Kunc J the Supreme Court can, in appropriate circumstances, issue a Writ of Habeas Corpus. It is not suggested in these disciplinary proceedings that remedy was unavailable. What is raised is the appropriateness of that remedy in circumstances identified by the Commissioner as red flags. There is no dispute that the solicitor did not confer with counsel retained to act in the Supreme Court proceedings and little weight can be placed on counsel’s advice to the solicitor in these circumstances. It is, however, telling that counsel recommended accepting one offer of compromise made in respect of costs, a recommendation that the solicitor did not pursue.  

The solicitor’s action in commencing proceedings prior to the “deadline” he imposed on the aged care facility to release Mrs AB resulted in the award of indemnity costs when the proceedings were discontinued. It is also relevant that, as the Commissioner found, the solicitor had been provided with a copy of Dr Rock’s report either prior to or shortly after the Supreme Court proceedings were commenced. Given the solicitor’s staunchly held view that the success of the Supreme Court proceedings was reliant on Mrs AB explaining her concerns to the judge, for the judge to act upon them in issuing a writ, the solicitor should have not commenced, or should then have discontinued or adjourned the proceedings to get an expert medical report. This was important in the face of the evidence available to him that Mrs AB may not have capacity to retain and process the information necessary to hold an informed view as to what would best promote her welfare and interests. 

The solicitor offers no explanation about his failure to respond to correspondence from the defendants to seek to compromise costs. This lack of action and obtaining and documenting of instructions from Mr CD, or his attorney, was inexcusable.” 

Other decisions of the NCAT not reported in the Ethics and Standards Quarterly:

Council of the Law Society of New South Wales v Judah [2022] NSWCATOD 89