Removal from the roll for professional misconduct: a uniform law?

Does the application of uniform legislation in two different jurisdictions obtain uniform outcomes between the two jurisdictions? In a system under legislation starting with the word “Uniform”, in the one common law of Australia, this would be expected. But for lawyers who engage in professional misconduct, it might just be better (for them) to engage in that misconduct in Victoria.

What’s the framework for professional discipline of lawyers?

The main legislation governing lawyers in Victoria and that state to the north (NSW) is the Legal Profession Uniform Law (Uniform Law). In many respects, it carries on the system that existed under the model legal profession legislation, which in Victoria was called the Legal Profession Act 2004. Relevantly for this post, the concepts of professional misconduct and unsatisfactory professional conduct were the same in both jurisdictions and have been carried over into the Uniform Law.

In Victoria, regulatory prosecution of lawyers is carried out in the Legal Practice List of the Victorian Civil and Administrative Tribunal (VCAT). In NSW, it is the Occupation Division of the NSW Civil and Administrative Tribunal (NCAT) (which obtains on AustLII the unwieldy medium-neutral citation abbreviation of NSWCATOD – but that’s a gripe for another day).

Section 299(1) of the Uniform Law gives the designated local regulatory authority (DLRA) (eg the Victorian Legal Services Commissioner), if it finds that a lawyer has engaged in unsatisfactory professional conduct, the power to make a raft of orders. If the matter proceeds to a hearing before the designated tribunal (eg VCAT), section 302 gives the tribunal the power to order, in cases of unsatisfactory professional conduct or professional misconduct, the same things that the DLRA could order as well as a host of other things.

Section 302(1)(f) provides for “an order recommending that the name of the lawyer be removed from a roll kept by a Supreme Court, a register of lawyers kept under jurisdictional legislation or the Australian Legal Profession Register”.

Until the Uniform Law took effect on 1 July 2015, NCAT had the power under the Legal Profession Act 2004 (NSW) to remove practitioners from the roll. Some prosecutions arising from the old legislation are still working their way through NCAT, so on occasion it continues to exercise that power.

By contrast, Victoria reserved the power of removal of names from the roll of practitioners in the same judicial body that has the power to admit names to the roll, namely the Supreme Court. Whereas NCAT had the power of removal, VCAT had the power to recommend to the Supreme Court that a lawyer’s name should be removed from the roll. The Supreme Court must then be persuaded to accept that recommendation.

This difference between NSW and Victoria has now been harmonised under the Uniform Law, with the Victorian model adopted.

It appears that VCAT and NCAT have deployed their powers in rather different ways. To understand what’s going on and why I think NCAT is, in some cases, exercising the power too easily, it is necessary to understand:

  1. Professional misconduct
  2. The nature of penalties for professional misconduct
  3. The nature and purpose of the power to remove a lawyer from the roll
  4. Revenue cases of professional misconduct

What is professional misconduct?

Professional misconduct is defined in section 297 of the Uniform Law as follows:

(1) For the purposes of this Law, professional misconduct includes—

(a) 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

(b) 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 that the lawyer is not a fit and proper person to engage in legal practice.

(2) For the purpose of deciding whether a lawyer is or is not a fit and proper person to engage in legal practice as referred to in subsection (1)(b), regard may be had to the matters that would be considered if the lawyer were an applicant for admission to the Australian legal profession or for the grant or renewal of an Australian practising certificate and any other relevant matters.

The common law has long had a working definition of professional misconduct. In Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, one of the issues was the meaning of “infamous conduct in a professional respect” in the Medical Act, under which the plaintiff/appellant was struck off from the register maintained by the General Council of Medical Education and Registration. Lopes LJ, with whom Lord Esher MR and Davey LJ in that respect agreed, said at 763:

It is important to consider what is meant by “infamous conduct in a professional respect.” The Master of the Rolls has adopted a definition which, with his assistance and that of my brother Davey, I prepared. I will read it again: “If it is shewn that a medical man, in the pursuit of his profession, has done something with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency,” then it is open to the General Medical Council to say that he has been guilty of “infamous conduct in a professional respect.” That is at any rate evidence of “infamous conduct” within the meaning of s. 29. I do not propound it as an exhaustive definition; but I think it is strictly and properly applicable to the present case.

It is uncontroversial that the relevant authorities under the Uniform Law have the power to prosecute for what it is routinely described in charges as “professional misconduct at common law”. The expression “professional misconduct” in the Uniform Law is as defined, and because it is defined in a non-exhaustive manner, it includes the well worn Allinson definition of professional misconduct (which Lopes LJ said was also not to be regarded as exhaustive).

As the definition of “professional misconduct” makes clear, unsatisfactory professional conduct may in certain circumstances amount to professional misconduct. That concept is defined in section 296 as follows:

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.

Solicitors should also be aware of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (ASCR). The ASCR contain the following under the heading “Preliminary rules” in Part 1:

3.1          The objective of these Rules is to assist solicitors to act ethically and in accordance with the principles of professional conduct established by the common law and these Rules.

Under the heading “Operational rules” in Part 2, the following rules appear:

2.            PURPOSE AND EFFECT OF THE RULES

2.1          The purpose of these Rules is to assist solicitors to act ethically and in accordance with the principles of professional conduct established by the common law and these Rules.

2.2          In considering whether a solicitor has engaged in unsatisfactory professional conduct or professional misconduct, the Rules apply in addition to the common law.

2.3          A breach of these Rules is capable of constituting unsatisfactory professional conduct or professional misconduct, and may give rise to disciplinary action by the relevant regulatory authority, but cannot be enforced by a third party.

The interesting point to take from these rules in the ASCR the proposition that they are, of their nature, guidelines. They are not an exhaustive code. Conduct not caught by the ASCR may still be conduct warranting a disciplinary response. Conversely, a contravention of the ASCR does not necessarily mean that there has been conduct warranting a disciplinary response. An illustration of this proposition is the case of Stephen Keim SC in 2008, where the Queensland Legal Services Commission decided not to prosecute a complaint relating to a contravention of the Bar Rules because, in the extraordinary circumstances of that case (leaks and counter-leaks during the criminal prosecution of Dr Mohammed Haneef), there was no reasonable likelihood of a the relevant tribunal would conclude that this amounted unsatisfactory professional conduct or professional misconduct (a threshold test under the old model legislation).

How is professional misconduct penalised?

The imposition of penalties for regulatory misconduct bears a strong relationship with sentencing for criminal offences. The Victorian Court of Appeal in Stirling v Legal Services Commissioner [2013] VSCA 374 (Warren CJ, Neave JA and Dixon AJA) discussed the relationship at [63]-[67], having discussed the principles of sanctions in disciplinary proceedings at [57]-[62]. Briefly put, like in sentencing, the final sanction is the product of “instinctive synthesis” of the relevant circumstances, but the difference is that the contravention is proved on the civil standard and the purpose of a disciplinary sanction is both punitive of the practitioner and protective of the public.

In a related context, the High Court discussed the nature of civil penalties. In Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482, French CJ, Kiefel, Bell, Nettle and Gordon JJ said:

In essence, civil penalty provisions are included as part of a statutory regime involving a specialist industry or activity regulator or a department or Minister of State of the Commonwealth (the regulator) with the statutory function of securing compliance with provisions of the regime that have the statutory purpose of protecting or advancing particular aspects of the public interest. Typically, the legislation provides for a range of enforcement mechanisms, including injunctions, compensation orders, disqualification orders and civil penalties, with or, as in the [Building and Construction Industry Improvement Act 2005], without criminal offences. That necessitates the regulator choosing the enforcement mechanism or mechanisms which the regulator considers to be most conducive to securing compliance with the regulatory regime. In turn, that requires the regulator to balance the competing considerations of compensation, prevention and deterrence. And, finally, it requires the regulator, having made those choices, to pursue the chosen option or options as a civil litigant in civil proceedings.

The upshot of that case was that, unlike in criminal proceedings, it is open to the parties in a civil penalty proceeding to agree to terms of a penalty, although it remains within the discretion of the court to accept that agreement.

When will a lawyer be struck off?

In order to be admitted to practice and to sign the roll of practitioners, it is necessary for an applicant to persuade the Supreme Court that he or she is a fit and proper person to practise law. It follows, then, that if a practitioner is not a fit and proper person to practise law, then he or she is liable to be removed from the roll.

In Ziems v Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279, Kitto J said at 297-8:

The issue is whether the appellant is shown not to be a fit and proper person to be a member of the Bar of New South Wales. It is not capable of more precise statement. The answer must depend upon one’s conception of the minimum standards demanded by a due recognition of the peculiar position and functions of a barrister in a system which treats the Bar as in fact, whether or not it is also in law, a separate and distinct branch of the legal profession. It has been said before, and in this case the Chief Justice of the Supreme Court has said again, that the Bar is no ordinary profession or occupation. These are not empty words, nor is it their purpose to express or encourage professional pretensions. They should be understood as a reminder that a barrister is more than his client’s confidant, adviser and advocate, and must therefore possess more than honesty, learning and forensic ability. He is, by virtue of a long tradition, in a relationship of intimate collaboration with the judges, as well as with his fellow-members of the Bar, in the high task of endeavouring to make successful the service of the law to the community. That is a delicate relationship, and it carries exceptional privileges and exceptional obligations. If a barrister is found to be, for any reason, an unsuitable person to share in the enjoyment of those privileges and in the effective discharge of those responsibilities, he is not a fit and proper person to remain at the Bar.

Yet it cannot be that every proof which he may give of human frailty so disqualifies him. The ends which he has to serve are lofty indeed, but it is with men and not with paragons that he is required to pursue them. It is not difficult to see in some forms of conduct, or in convictions of some kinds of offences, instant demonstration of unfitness for the Bar. Conduct may show a defect of character incompatible with membership of a self-respecting profession; or, short of that, it may show unfitness to be joined with the Bench and the Bar in the daily co-operation which the satisfactory working of the courts demands. A conviction may of its own force carry such a stigma that judges and members of the profession may be expected to find it too much for their self-respect to share with the person convicted the kind and degree of association which membership of the Bar entails. But it will be generally agreed that there are many kinds of conduct deserving of disapproval, and many kinds of convictions of breaches of the law, which do not spell unfitness for the Bar; and to draw the dividing line is by no means always an easy task.

In Clyne v NSW Bar Association (1960) 104 CLR 186, the High Court (Dixon CJ, McTiernan, Fullagar, Menzies and Windeyer JJ) dismissed an appeal by a barrister whose name the NSW Supreme Court had removed from the roll. Mr Clyne’s conduct was extreme, and the High Court considered that the facts inevitably led to the conclusion that Mr Clyne was not a fit and proper person to practise as a barrister: 199. (I highly recommend reading the recitation of the facts of Clyne: 189-198. The facts involved “an orgy of litigation”: 190. The Court then said, “We have thought it desirable to state fully the facts and circumstances of the case. Having been stated, they speak for themselves”)

In Frugtniet v Board of Examiners [2005] VSC 332, [27]-[35] Gillard J explained the centrality of honesty in the assessment of fitness and propriety and the connection between that concept and the concept of “character” in the law, which is based on a person’s past.

What’s so special about tax cases?

Then there was Cummins: the barrister who spent his career not paying his taxes and, despite an otherwise fantastic career, ended up with the ire of Spiegelman CJ, who said (Mason P and Handley JA agreeing): “Throughout the four decades he engaged in the rank hypocrisy of advocating that other people should perform their legal obligations, while systematically refusing to perform his own”: NSW Bar Association v Cummins (2001) 52 NSWLR 279, 286.

It turned out that Mr Cummins was not alone. A number of (NSW) barristers had engaged in the practice of not paying tax until retirement, only to bankrupt themselves. Rules were introduced to deal explicitly with revenue obligations.

In Council of the Law Society of NSW v Webhe [2018] NSWCATOD 14 (discussed below), after a survey of a line of authority stemming from Cummins, NCAT said at [133]:

The authorities to which we have referred have determined that legal practitioners carrying out legal practice on their own account or in partnership or as legal practitioner directors of an ILP are under an obligation to ensure that certain statutory fiscal liabilities of a practice including the payment of GST, PAYG, income tax and staff superannuation contributions are met. It is plain from the authorities that such an obligation exists alongside and is to be distinguished from any legal liability for debt although in the case of sole practitioners or partnerships the practitioners are subject to both. This obligation is referred to variously as a “civic responsibility” (contrasted with a legal obligation) in Vosnakis (referring to Cummins), “fiscal responsibility” in Bouzanis, “legal and civic duty” in Adams, “fiscal/revenue responsibilities” in Koffel, “financial responsibilities” in Delpopolo and “civic duty” in Andreone (No.1) [2014]. The Tribunal’s decision in Gillroy and referred to in Dalla accepted the characterisation of such an obligation as a “professional obligation” although its ultimate determination in terms referred to breach of a statutory obligation. The Tribunal in McHugh also recognised the existence of an obligation upon a legal practitioner director to ensure that an ILP satisfied its revenue obligations.

How do Victoria and NSW treat these cases?

Victoria

Perhaps the leading modern authority in Victoria on sanctions for cases of professional misconduct arising from a failure to meet revenue obligations is Stirling.

By the time Stirling reported himself to the Bar’s Ethics Committee in 2008, he had been convicted in 2004 of failing to lodge an income tax return for the year ending 30 June 2001 and entered into a personal insolvency agreement under the Bankruptcy Act 1966 owing the Tax Office over $700,000.00. In 2009, he entered into another personal insolvency agreement. By the time of the hearing before the Tribunal in March 2012, he owed the Tax Office almost $450,000.00, although he had already paid more than $700,000.00 under the two personal insolvency agreements. By the time of his appeal, he had apparently repaid more than $1.1 million to the Tax Office for taxes, penalties and interest and still owed about $600,000.00.

In March 2011, the Commissioner alleged professional misconduct against Stirling “for engaging in conduct that justifies a finding that [he] is not a fit and proper person to engage in legal practice” because of his failure to lodge tax returns and BASs and pay his tax liability, which led to his conviction and his personal insolvency agreement (which was presumably a reference to the first one), and for misleading the Bar in relation to his disclosures to the Ethics Committee.

The Court of Appeal considered a number of submissions, considered under the headings of “double penalty”, “remorse”, “rehabilitation”, “delay”, “character”, “financial ruin and family”, “aggravating factors”, “range”, among others. Under “range” ([95]-[113]), the Court considered other cases of (mostly) barristers failing to pay tax (including Cummins).

At [104], the Court summarised the relevant considerations:

In the above analysis there are a number of issues identified in the authorities as important in evaluating an appropriate penalty.  These include:

– term of non-payment/lodgement;

– declaration of bankruptcy;

– the amount of the debt;

– the amount of the repayment;

– disclosure and communication with the Bar and the regulator;

– mental health issues;

– family issues;

– whether the respondent lived a lavish lifestyle;

– intention to work to repay creditors; and

– whether the failure was a deliberate one to defraud the Commonwealth or simply ignoring one’s obligations.

The Court also said at [107]: “In a time of national practices it is desirable for there to be consistency in penalties between jurisdictions.”

The consideration of the penalty was complex, as were the final orders. In principle, they involved an order that Stirling be suspended from practice for 30 months, with 24 months thereof suspended for 5 years, together with a number of conditions involving a high degree of supervision to ensure that he met his obligations to lodge tax returns and BASs and actually pay his tax liabilities.

NSW

An example of revenue-related professional misconduct in NSW is Council of the Law Society of New South Wales v Wehbe [2018] NSWCATOD 14. Warning: the following discussion is lengthy – but bear with me! There’s a lot to unpack. (Feel free to skip to the next heading to see what I make of it.)

Wehbe (pronounced “way-bee”) was a solicitor. He was the sole director of an incorporated legal practice (ILP). Between 199 and 2007 he traded as a sole trader and was the sole principal of his own legal practice. In 2007, the ILP took over the practice. In 2012, Mr Wehbe resigned as sole director, and 4 days later, a liquidator was appointed to the ILP. In 2014, Wehbe became a bankrupt upon the presentation of a debtor’s petition.

The ILP was in debt to the Tax Office for GST and PAYG between November 2009 until the appointment of the liquidator in April 2012. The Tax Office lodged a proof of debt in May 2012 for a little over $200,000.00.

Between February 2010 and April 2012, the ILP owed almost $100,000.00 in superannuation entitlements.

One of the issues Wehbe took in the hearing before NCAT was whether he owed a duty, as a legal practitioner director/principal of the ILP, to ensure that the ILP met its taxation and superannuation obligations. That debate is beyond the scope of this blog post. Suffice it to say for present purposes that NCAT held that he did owe that duty, the professional obligation being separate to and distinct from the personal liability to pay the debt: [138]. Wehbe also had an obligation to ensure the maintenance of appropriate management systems: [185]. The accountant’s evidence was that the ILP paid some creditors ahead of others, including staff, but that this was “a vicissitude attributable to liquidity difficulties, not to any deficiency in management systems”: [191]. The charge relating to management systems was not made out: [198].

There was a lot of evidence in Wehbe, and there was extensive analysis of the law. The decision is 115 pages long, spread across 402 paragraphs. Like Stirling, it was a complex and difficult matter. My own crude summary of the facts as found by NCAT is as follows. The ILP had, since 2008, liquidity difficulties because of poor billing and debt-collection practices and was from 2008 trading at a loss. The financial affairs of both his business and personal affairs became increasingly distressed. He stopped paying tax and superannuation. He negotiated payment arrangements with the Tax Office. In 2011, he received professional advice on his financial difficulties, with strong advice to take immediate action on his debtors and WIP. There was no evidence of implementation of the recommendations.

On the law, the chain of NCAT’s reasoning appears to be as follows (see generally [301]-[334]:

  1. “Professional misconduct” includes “conduct that would … justify a finding that the practitioner is not a fit and proper person to engage in legal practice”, and regard may be had to “suitability matters” for admission to practice or the renewal of a practising certificate.
  2. “Conduct justifying a finding that a practitioner is not a ‘fit and proper person’ to engage in legal practice” is to be understood as:
    1. the classification of conduct according to the importance of the standard and the seriousness of the breach rather than a prediction as to the actual order the Tribunal would be likely to make; and
    1. misconduct that would justify a particular finding if established regardless of subsequent rehabilitation or reformation of character.
  3. A “suitability matter” includes “whether the person is currently of good fame and character”.
  4. A finding in respect of whether a practitioner is of good fame and character is a suitability matter to which regard might be had in considering whether conduct would justify a finding that the practitioner is not fit and proper to engage in legal practice.
  5. “[T]here are no fixed categories of professional misconduct. Mich depends on whether the conduct falls outside ‘generally accepted standard[s] of common decency and common fairness”: Bechara v Legal Services Commissioner [2010] NSWCA 369, [44] (McCellan CJ at CL).
  6. Conduct might amount to professional misconduct even though it does not involve deliberate dishonesty.
  7. As to “fit and proper”, see Kitto J in Ziems, 298: “[not] every proof … of human frailty … disqualifies”.
  8. Character involves, among other things, the acceptance of high standards of conduct and acting in accordance with them under pressure.
  9. Fitness and propriety is to be determined at the time of hearing.
  10. In considering the question of whether conduct if established would justify a finding that the practitioner is not a fit and proper person to engage in legal practice regard is to be had to the circumstances in which the conduct was committed, although the mere fact of a failure to pay superannuation guarantee contributions on time does not, on itself, constitute professional misconduct: Law Society of NSW v Koffel [2010] NSWADT 149.
  11. Fame refers to a person’s reputation in the relevant community, whereas character refers to a person’s actual nature: Prothonotary of the Supreme Court of New South Wales v Da Rocha [2013] NSWCA 151, [17] (Ward JA). Good character must relate to the qualities relevant to practice as a professional.
  12. Non-payment of statutory creditors and superannuation entitlements is conduct occurring in connection with the practice of law.
  13. Failure by a practitioner to ensure that a law practice pays its statutory creditors is sufficient in some circumstances to constitute professional misconduct without a particular finding that the legal practitioner preferred his or her own interests over employees and statutory creditors.
  14. The systematic failure to ensure payment of statutory fiscal obligations in most circumstances and even without dishonesty warrants a finding of professional misconduct.

Further, in McBride v Walton [1994] NSWCA 199, [61]-[62] (referred to in Da Rocha), it was said that the relevant matters for a finding of not being of good fame and character consequential to a finding of professional misconduct included:

  • whether the misconduct can be satisfactorily explained as an error of judgment rather than a defect of character;
  • the intrinsic seriousness of the misconduct qua fitness to practise medicine;
  • whether the misconduct should be viewed as an isolated episode and hence atypical or uncharacteristic of the practitioner’s normal qualities of character;
  • the motivation which may have given rise to the proven episode of misconduct;
  • the underlying qualities of character shown by previous and other misconduct; and
  • whether the practitioner’s conduct post the proven episode of misconduct demonstrates that public and professional confidence may be reposed in him to uphold and observe the high standards of moral rectitude required of a medical practitioner

On striking off practitioners from the roll, NCAT observed:

  1. There are two important considerations. One is that the basic test for determining whether a legal practitioner should be struck off is that he or she must be found, on the balance of probabilities, to be permanently unfit for practice. The other is that the purpose of orders made against a practitioner by way of penalty should be protection of the public, not punishment of the practitioner: Council of the Law Society of NSW v Kingston [2014] NSWCATOD 21.
  2. a finding of professional misconduct arising from the failure … to ensure that statutory revenue obligations are met is, without more, not usually the subject of an order for removal from the Roll. Generally such an order has not been made unless the practitioner also failed to file tax returns (thereby committing an offence under tax law) and/or engaged in another deliberate strategy including going bankrupt in order to prevent the ATO from recovering tax due to it.

Put briefly, NCAT’s review of the authorities was that, in a sufficiently serious case of revenue-related misconduct, an order for striking-off can be justified.

NCAT found that the failure to pay “statutory creditors” and superannuation, and Wehbe’s “failure to ensure that such payments were made”, was knowing and intentional: [267]. (In Stirling, the finding was that the failures to pay were reckless.) However, there was no finding that his conduct was “deliberately dishonest” ([310]) and “there is no evidence that Mr Wehbe intended that the Company evade its obligations with regard to tax and superannuation” ([351]). It said further ([267]):

It was Mr Wehbe’s decision not to cause the [ILP] to make or otherwise ensure that it made payments to statutory creditors and in respect of superannuation entitlements as they fell due for payment. He was aware that staff superannuation payments were not being met. … [T]he failure was systematic. The non-payment continued from November 2009 in respect of GST and PAYG and February 2010 in respect of superannuation entitlements until liquidation of the [ILP] in April 2012.

A selection of NCAT’s further damning findings follow:

  • Wehbe preferred “his own interests over the interests of staff and statutory creditors”: [301].
  • “where the alternative was to liquidate the Company and incur no further indebtedness to creditors Mr Wehbe preferred continuing the conduct of the business over the entitlements of statutory creditors and staff who were not paid”: [309].
  • “the failure to ensure the payment of statutory fiscal liabilities cannot in the circumstances be satisfactorily explained as an error of judgment. It occurred from November 2009 until liquidation of the Company in April in 2012”: [330].
  • “The conduct cannot be viewed as an isolated episode nor was there any evidence before us upon which we could determine that it was atypical or uncharacteristic of Mr Wehbe’s normal qualities of character. The non-payment of statutory liabilities arose in the circumstances of the Company having exhausted other avenues of capital or debt funding for the purposes of maintaining the business activities of the law practice. This had the benefits to Mr Wehbe which we have identified”: [335].
  • “The failure to ensure payment of the statutory fiscal obligations was not inadvertent …. Mr Wehbe did not acknowledge responsibility to ensure that payment was made or otherwise effect payment”: [338].
  • “there was no evidence of any reasonable or other steps taken by Mr Wehbe to ensure that the Company met its revenue responsibilities apart from seeking to refinance and make instalments arrangements with the ATO. There is no evidence that Mr Wehbe took steps to reduce his expenses. The continuing operation of the practice was funded at least in part by non-payment of statutory creditors”: [339].
  • “The systematic decisions to continue to trade and not to pay statutory creditors were those of Mr Wehbe”: [343].
  • “There is no basis for us to conclude that Mr Wehbe had an honest and reasonable belief that the Company’s illiquidity which in fact had been longstanding would be resolved by receipt of funds in the future within a reasonable timeframe”: [347].

NCAT’s view of the evidence was summarised in the following comment ([352]):

Mr Wehbe’s conduct in not ensuring the payment of statutory creditors and staff superannuation in breach of his professional obligation for nearly two and a half years in an amount exceeding $300,000 during which time as we have found his interests in continuing the business and receiving payment of superannuation and reduction of his loan account from time to time were knowingly being preferred to the interests of statutory creditors and staff even in the absence of dishonesty reflects a failure to accept high standards of conduct and acting in accordance with them

Unsurprisingly, NCAT was satisfied that Wehbe was guilty of professional misconduct. It said ([352]):

the conduct falls outside the generally accepted standards of common decency and common fairness. We find that Mr Wehbe was not of good fame and character and that the conduct would justify a finding that he is not a fit and proper person to engage in legal practice … and that he is guilty of professional misconduct.

It went further ([361]):

the serious breach of his professional obligation in the remaining circumstances reflects a failure to accept high standards of conduct and acting in accordance with them and falls short of generally accepted standards of common decency and common fairness. We find that he was not of good fame and character and that his conduct would justify a finding that he is not a fit and proper person to engage in legal practice … and that he is guilty of professional misconduct in respect of the breach in those circumstances alone.

Wehbe had two problems with the way he conducted his part of the hearing. Firstly, he did not request a separate hearing on penalty. This had the practical problem that he did not know on what basis he stood to be penalised before the decision was made. Secondly, he did not give evidence. Although there is no rule that a practitioner is required to give evidence, it is routinely frowned upon. In NSW Bar Association v Meakes [2006] NSWCA 340, [70], Tobias JA said:

there is an expectation that legal practitioners will mount the witness box to provide some explanation as to their conduct, rather than simply relying upon evidence from the Bar table.

The practical difficulty for Wehbe was that NCAT was left with evidence, that he had not contradicted with his own evidence, that led it to find that his conduct was such as to suggest he was not a fit and proper person to practise. In the absence of contradictory evidence, it was left with “no material before us upon which we might be satisfied that Mr Wehbe is at the date of hearing a fit and proper person to remain on the Roll”.

The conclusion ([384]-[385]):

In [Council of the Law Society of New South Wales v Adams [2011] NSWADT 177,] [151], the Tribunal concluded that the established conduct was inconsistent with the respondent being of good fame and character. It concluded that he was not a fit and proper person to engage in legal practice and that for the protection of the public and the reputation of the profession there should be an order that he be removed from the Roll. The Tribunal considered that a reprimand and a costs order would be an inadequate response to such serious professional misconduct. It said that such orders would not have provided protection to the public and would not have addressed the need to protect the reputation of the profession. Nor it considered would an order to restrict the respondent’s practising certificate to that of an employed solicitor be an adequate response.

The finding of professional misconduct in the circumstances to which we have referred even without the finding that Mr Wehbe preferred his interests in continuing the operations of the business over those of staff and statutory creditors and the absence of any evidence or submissions that might show him no longer to be unfit for practice justify a finding in the nature of that made in Miller at [37], namely that the probability now is that Mr Wehbe is permanently unfit for practice. We make that finding. In our view orders in the nature of a reprimand or fine or restriction on Mr Wehbe’s practising certificate would not ensure the protection of the public or future employed staff or the maintenance of professional standards. The only appropriate order is that Mr Wehbe’s name be removed from the Roll.

Striking-off in Victoria and NSW: a comparison

Wehbe appears to be a faithful application of settled principles. But what is unsettling is what is missing. Compare the conclusion in Wehbe with the nuanced and detailed orders made in Stirling. What is particularly unsettling about Wehbe is the absence of any consideration of alternative remedies. One of the “important considerations” that NCAT quoted from Kingston was that the penalty was for the protection of the public and not punishment of the practitioner.

In Victoria, Maxwell P said in Quinn v Law Institute of Victoria [2007] VSCA 122, [30]:

The available sanctions are, by their nature, punitive, and the objectives of specific and general deterrence – which serve the protection of the public – depend upon the sanctions having punitive effect.

I quoted [384] of Wehbe above, because it contains what appears to me to be the only consideration of alternative remedies. It is confined to an observation in a previous decision of the old Administrative Decisions Tribunal that, once it was found that:

  1. “the established conduct was inconsistent with the respondent being of good fame and character”;
  2. the practitioner “was not a fit and proper person to engage in legal practice”; and
  3. “for the protection of the public and the reputation of the profession there should be an order that he be removed from the Roll”;

the Tribunal did not think that “an order to restrict the [practitioner’s] practising certificate to that of an employed solicitor [would] be an adequate response”.

In my respectful view, that reasoning is unsound. It puts the cart before the horse. By concluding that an order for removal from the roll is necessary before considering restrictions on a practising certificate, it will inevitably follow that restrictions on a practising certificate will be inadequate.

That form of reasoning appears to proceed from the form of professional misconduct contained in the definition described as “conduct … that would, if established, justify a finding that the practitioner is not a fit and proper person”. If the conduct is established, a finding of professional misconduct will follow; even though on a strict reading it is not necessary to do so, it will probably also be found that the practitioner is not a fit and proper person. That puts in jeopardy the practising certificate and the practitioner’s name on the roll.

In order to determine the appropriate penalty, it is necessary to consider how to punish the practitioner so as to protect the public: Quinn. In the case of professional misconduct of the kind discussed here, the range of penalties involved are those that restrict or suspend the practising certificate to striking off the practitioner.

In my view, Wehbe is a classic case of a businessperson ill-suited to running a business. No allegation was made in Wehbe about his capacity to practise. Nothing was said about his honesty or conduct in the course of practise, as opposed to his conduct “in connection with” – namely the management of – his practice. Despite all the damning comments by NCAT of Wehbe’s conduct, none of it went beyond the proposition that he could not be trusted to meet the fiscal obligations of an employer and an operator of a business. No consideration was given to whether the public would be protected from his inability – even permanent inability – to meet these obligations by restricting his practising certificate to one of an employee only. No consideration was given to whether the public would obtain adequate protection if Wehbe were be required to obtain CPD points in practice management. No consideration was given whether either of these conditions on his practising certificate ought to be paired with a period of suspension as a form of punishment to ensure that he learnt from the experience.

Put simply, in my view, the outcome in Wehbe was short-sighted and overly harsh.

In Wehbe, the leap was made, it seems to me, all too quickly from failure to pay taxes and superannuation contributions to a quasi-permanent inability to be a fit and proper person justifying removal. Wehbe’s conduct was not like Cummins’ systematic, deliberate defrauding of the Commonwealth. Whilst there were findings that he preferred his own financial requirements to that of the ILP’s employees, his conduct did not include a lavish lifestyle like in Stirling.

In Law Society of New South Wales v Teys [2018] NSWCATOD 163, NCAT engaged in similarly deficient reasoning. Further, it had no regard to the fact that the practitioner had been banned from being the director of a company for 5 years (the longest period that can be imposed administratively; ASIC apparently did not see fit to seek a court order for a longer ban). It was not contested that the practitioner was guilty of professional misconduct. He had engaged in conduct that was calculated to avoid paying revenue his incorporated legal practice owed. He used money that could have paid the debt to fund an extravagant lifestyle. Again, had there been an examination of the alternatives, particularly in light of ASIC’s penalty, it may well have been the case that the practitioner could continue to provide effective, useful legal services in a position where he would be unable to engage in similar conduct.

The reasoning in Teys appears to be a product of the reasoning in Wehbe and, before it, Adams. It erroneously cites Cummins for the proposition that, “a solicitor’s name should be removed from the roll where they were found to be guilty of professional misconduct because of their failure to pay tax debts or superannuation contributions”.

The upshot is that NCAT appears to jump unduly rapidly from revenue-related professional misconduct to striking-off.

In an application to the Supreme Court for the removal of a practitioner, the Court must be persuaded that the tribunal’s findings justify removal. In Legal Services Board v McGrath [2010] VSC 266, Warren CJ refused an application for removal of a solicitor based on little more than a record of the practitioner pleading guilty to certain charges. The Board had served the practitioner with the papers for the removal proceeding, but the practitioner did not participate in the proceeding. Although her Honour disapproved of the practitioner taking that course, it remained for the Board to discharge its onus of proof for the removal of the practitioner. Her Honour refused the application, stating, “I am not satisfied at this stage that the practitioner is not a fit and proper person to remain on Roll, and what is even more serious, will remain so for the indefinite future”: [28].

A more recent decision involving the recommendation of VCAT for removal is Victorian Legal Services Commissioner v Spaulding [No 3] [2017] VSC 510 (Ginnane J).

It remains to be seen how the NSW Supreme Court will deal with applications for removal of practitioners from the roll following NCAT-issued recommendations for removal that are infected with the kind of reasoning in Wehbe and Teys.

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