The Magistrates’ Court of Victoria at Melbourne today has found a law firm employee guilty of two charges of commencing employment in a law practice without having first informed his prospective employer of his previous relevant prior convictions. He was convicted and fined $2,000 following charges brought against him by the Legal Services Board.

The Board brought both charges against the individual after receiving information that he had been employed as a lay associate (non-lawyer employee) of a local law practice despite having convictions for dishonesty offences. The Board’s investigation revealed that in the previous 12 months he had become a lay associate of two local law practices, without informing the law practices of his prior convictions. 

Legal Services Commissioner and Board CEO, Michael McGarvie, said that this law was not often fully understood by partners of law firms. Failing to follow the strict rules of integrity and honesty in the legal profession can have very serious consequences for the employee, or potentially the law firm. In this case the firm did not know of his prior convictions, so the criminal penalty applies to the employee. Law firms can employ an individual with prior convictions, however they must first get permission from the Board before employing the individual. In this field, rules of integrity extend beyond licensed lawyers to ‘lay associates’ as well.

“Heavy criminal penalties apply to employees themselves if they fail to notify their employer of this information. Lawyers employing staff can risk major disciplinary findings that could imperil their practising certificates when employing non-legal people who have been found guilty of dishonesty offences like theft. The reputation of firms can suffer as a result of either of these outcomes. They must get the regulator’s permission if they are to avoid major penalties. This issue is highlighted by the findings in the Magistrates’ Court today”.

The individual was also ordered to pay the Board’s costs of $5,000. Although the charges were admitted in this case, he has 28 days to appeal the sanction.

The Legal Services Board has awarded approximately $2.1 million in funding to 10 major grants recipients in the 2012 Major Grants Round. The funding was awarded to recipients whose projects aim to promote and improve the legal and justice system in Victoria.

The purpose of each project must be for law reform, legal and judicial education, legal research or any other purpose relating to the legal profession or the law that the Board considers appropriate.

Projects that received funding in the latest round of Major Grants included:

• Identifying issues and proposing the best approach to establishing a specialist Court list to respond to child sexual abuse cases in the Family Division of the Melbourne Children’s Court.
• Providing justice support for people with disabilities to six regional and remote courts in north east Victoria.
• Educating newly arrived refugees to enhance their understanding of parenting, family law and family violence matters.

Legal Services Board Chairperson, Colin Neave AM, said that he was pleased with the variety of worthy projects put forward by applicants for grants.

“Grants were awarded to a wide variety of organisations serving to address gaps in legal education and services. The projects reflect the ways in which the law impacts upon the lives of members of the community. In particular, the projects awarded in this round will benefit young people, people in rural Victoria, people living with cancer, women seeking intervention orders and not for profit organizations.”

Mr Neave said he was delighted that the Legal Services Board is able to continue to fund projects that deliver invaluable services to the community, particularly to those who face greater challenges in accessing the justice system.

The Grants Program is funded through the Public Purpose Fund, which is administered by the Board. Grants are awarded in two streams: the Project Grants stream, which funds projects with budgets of up to $60,000 and the Major Grants stream, which funds projects with budgets over $60,000. All successful grant applications have been approved by the Attorney-General on the recommendation of the Board.

The complete list of projects funded through the Major Grants can be downloaded from the Media Resources page.

The Legal Services Board’s 2011-12 Annual Report is now available online. Click on the link to Annual Reports under the Publications page.

Michael McGarvie, Legal Services Board CEO and Legal Services Commissioner, has today announced that the Register of Disciplinary action (the RODA) has been enhanced and relaunched on the Legal Services Board website.

In accordance with the Legal Profession Act 2004, the RODA is a register of disciplinary action taken against Australian legal practitioners in this jurisdiction. The RODA includes disciplinary action from 1 April 1959.

Members of the public may now search the RODA by the name, sanction/penalty imposed or the last known law practice at which the legal practitioner was employed.

Click here to search the RODA.

In discussions with the Costs Court and VCAT it has been noted that there are 2 very common errors in solicitors’ costs disclosure documents and solicitors’ bills.  Anecdotally, it is estimated that of the documents seen by the Costs Court and VCAT, half of solicitors are getting this wrong.  These are:

• The interest rate on unpaid costs can be no more than the Cash Target Rate plus 2%.  Many solicitors still wrongly claim interest pursuant to the Penalty Interest Rates Act 1983.
• The period of time in which the client can approach the Costs Court is now 12 months.  Many solicitors still wrongly state 60 days.

Prior to November 2007, the Legal Profession Regulations 2005 permitted interest to be charged on unpaid legal costs pursuant to the Penalty Interest Rates Act 1983.  From November 2007 however, interest on unpaid legal costs can be no more than the Cash Target Rate plus 2% (section 3.4.21 of the Legal Profession Act 2004 and regulation 3.4.3).  

• Any solicitor or firm who has actually charged interest at the wrong rate is urged to make every effort to contact the affected client to rectify the situation.

Prior to 9 May 2007, an application for review of legal costs to the Costs Court must have been made within 60 days. Since then that period has been extended to 12 months.  See section 3.4.38(5) of the Legal Profession Act 2004. 

• All solicitors and firms are urged to check their disclosure documents, costs agreements and bills.

The Legal Services Board has published an Incorporated Legal Practice (ILP) Information Kit for corporations engaging in legal practice in Victoria. The ILP Kit provides detailed information regarding the commencement, practice, and compliance requirements of an ILP. A summary of the key points is outlined below.

ILPs are corporations engaging in legal practice in Victoria and are regulated by Part 2.7 of the Legal Profession Act 2004. An ILP is capable of providing most services and conducting most businesses that a corporation may lawfully provide or conduct. One exception is conducting a managed investment scheme. Before commencing to engage in legal practice, a corporation must provide to the Board a notice in the approved form of its intention to engage in legal practice.

The following obligations are placed on ILPs:

• An ILP must have at least one legal practitioner director
• An ILP must have professional indemnity insurance before commencing to engage in legal practice

The following obligations placed on directors of ILPs are in addition to all the other legal obligations placed on company directors:

• The legal practitioner director must maintain and implement appropriate management systems
• The legal practitioner director is responsible for breaches of professional obligations

The Board may conduct an audit of the ILP and its officers and employees, and the management and provision of legal services. Upon application by the Board, the Supreme Court may make an order disqualifying the corporation from providing legal services and disqualify a person from managing an ILP.

More information is available on the Incorporated Legal Practices page of the LSB website.

The Legal Services Board 2013 Major Grants round is now open. Download the guidelines and application form from the Major Grants page on the LSB website.

The Legal Services Board will be closed from Friday, 21 December 2012 and will reopen on Wednesday, 2 January 2013. During this period Board staff will not be available to assist with transfers of money from the statutory deposit account to the trust account. Please ensure your trust account balance is sufficient to cover the Christmas period. If you have misplaced your SDA PIN, please contact the Board’s Practitioner Information Team on 9679 8000.

For information on how to transfer funds using your secure PIN please refer to the information sheet Transferring funds from your Statutory Deposit Account to your Trust Account

Please contact the Board’s Practitioner Information Team on 9679 8000 if you have any queries regarding this matter.

The Legal Services Board has approved Legal Outsourcing Guidelines to assist all Victorian practitioners engaged in legal outsourcing.  The Guidelines aim to address the inherent risks involved in outsourcing and inform of best practice.

Outsourced tasks such as legal research, due diligence, and document review and discovery potentially involve significant risks to data security, confidentiality, conflict of interest, competence, supervision and insurance. The Guidelines focus on the existing obligations and responsibilities of practitioners and law firms as set out in the Legal Profession Act 2004 and Professional Conduct and Practice Rules 2005, providing recommendations to assist those engaged in outsourcing.  

View the Guidelines on the LSB website.

The Board will be closed from 5pm on Friday, 21 December 2012 and will reopen at 9am on Wednesday, 2 January 2013.

The Supreme Court of Victoria ordered on 26 March 2012 that Melbourne lawyer David Tansey be struck off the roll of legal practitioners maintained by the Supreme Court.

The Legal Services Board made an application to the Supreme Court to have Mr Tansey’s name removed from the roll of local legal practitioners on the basis that Mr Tansey pleaded guilty to 25 charges of theft. The offences involved $1.9 million stolen from 11 clients between 1999 and 2004. The Supreme Court sentenced Mr Tansey to four years imprisonment in relation to the charges.

In accordance with its Fit and Proper Person Policy, the Board will not usually consider that a person is fit and proper to hold a practising certificate if the person has been found guilty of a serious offence, and their conviction involved dishonesty, prior history of similar offences or indicates a material risk of harm to consumers of legal services unless there are mitigating circumstances.

The Supreme Court also made compensation orders in favour of the Board for claims made on the Fidelity Fund by victims of Mr Tansey’s offences, in the sum of $318,047. The purpose of the Fidelity Fund is to provide compensation to clients who have lost trust money or property due to the dishonest or fraudulent behaviour of a lawyer, law clerk, barrister’s clerk or law practice.

The Legal Profession (Practising Certificate Fees) Regulations 2012 state that the prescribed fee for a practising certificate in force for the financial year beginning 1 July 2012 is:

• 36.50 fee units for a practising certificate with trust authorisation; and
• 24.71 fee units for a practising certificate without trust authorisation.

The state Treasurer has fixed the value of a fee unit for 2012-13 in the amount of $12.53. Accordingly, from 1 July 2012, the fee for a practising certificate will be:

• $457 for a practising certificate with trust authorisation; and
• $310 for a practising certificate without trust authorisation.

 The fees will be pro-rated on a quarterly basis. Please contact the Board on 9679 8000 for more information.

In an extremely rare event, the Supreme Court of Victoria has sentenced a Melbourne solicitor to prison for one month for contempt of court.

David Brian Forster, former principal of Hollows Lawyers (in receivership) and current principal of Whistleblowers Lawyers of Frankston, committed the act of contempt by breaching an earlier order of the Supreme Court.

In 2011 Mr Forster was ordered by the Supreme Court not to approach or make direct contact with a barrister retained by the Legal Services Board in litigation involving the receivership of Mr Forster’s legal practice. The order followed Mr Forster hand-delivering an intimidating letter and displaying threatening behaviour towards the barrister, Dr Kristine Hanscombe SC during the case.

Mr Forster breached the order when he sent an email in 2012 to Dr Hanscombe, announcing he would have her restrained from acting for the Board and requiring her to show him her fees for work done in the case.

Justice Karin Emerton found that Mr Forster had breached her 2011 order banning him from making contact. Although the Judge accepted the email was not a wilful or disobedient breach, it was deliberate and not accidental and it was intended to interfere with the administration of justice by intimidating Dr Hanscombe to cease acting. The Judge determined that this constituted a serious contempt of court which amounted to criminal contempt, justifying a prison term.

Of particular importance to the legal profession, Justice Emerton described the higher standard expected of legal practitioners, as officers of the court, in complying with the law, compared to members of the public. The Judge stated that Mr Forster was well aware that compliance with court orders was one of the cornerstones of the administration of justice. Given Mr Forster had breached a clear court order, and given he had not met any financial penalties imposed by court orders to date, the Judge recorded the criminal conviction and imposed the prison term.

The Court suspended the prison term for twelve months, to be imposed if there is a further breach.

A Melbourne solicitor has been struck off the roll of legal practitioners after being convicted over serious offences involving theft.

Mr Mohsin Chakera, of Chakeras Lawyers, was struck off by consent in the Supreme Court of Victoria.

Mr Chakera had earlier pleaded guilty to three counts of obtaining a financial advantage by deception after having stolen $360,000 from three clients between March 1999 and August 2000. The Supreme Court had sentenced Mr Chakera to 26 months prison, with all but 3 months suspended. Given that Mr Chakera was found guilty of a serious criminal offence, the Legal Services Board contended he was no longer a fit and proper person to engage in legal practice.

In accordance with the Board’s Fit and Proper Person Policy, an application for a practitioner’s name to be struck off the roll will be made if found guilty of a serious offence, and the conviction involved dishonesty, prior history of similar offences or indicates a material risk of harm to consumers of legal services unless there are mitigating circumstances.

His Honour Justice Kyrou of the Supreme Court ordered Mr Chakera’s name to be removed from the role on 15 February 2013.

A Warrnambool solicitor has been fined $13,000 for misconduct after failing to lodge or re-lodge caveats over properties to secure the interests of the vendor.

Mr Stephen Blaker of the firm HBH Legal, represented both the purchasers and the vendor in a complex transaction involving the sale of a coastal property and a related loan arrangement. Despite a clear conflict of interest developing between the financial interests of the two parties, Mr Blaker continued to act for both from 2002 to 2007. In addition, Mr Blaker failed to lodge or re-lodge caveats over the property to secure the interests of the vendor, and failed to provide highly relevant information to the vendor about securities created by the purchasers.

The Legal Services Commissioner brought charges against Mr Blaker in relation to a failure to avoid a conflict of interest, failure to advise, a failure to lodge a caveat and a failure to communicate with a client. While there was no suggestion of dishonesty, the Commissioner submitted that Mr Blaker’s failure to exercise due care and diligence eventually led to dramatic financial consequences for both clients.

Mr Blaker appeared before the Victorian Civil and Administrative Tribunal in January and pleaded guilty to one count of professional misconduct and three counts of unsatisfactory professional conduct. VCAT Member Wentworth took into account the practitioner’s plea of guilty, the absence of any suggestion of dishonesty and the practitioner’s general good character before reprimanding Mr Blaker and ordering him to pay a fine of $13,000, and the Commissioner’s costs of $5,057.80.

For more information see the VCAT judgement.

The Victorian Civil and Administrative Tribunal has confirmed that charging clients based upon a percentage of damages or costs awarded to the client in a court proceeding amounts to professional misconduct.

In November 2012 VCAT found Mr John Barrett, a sole practitioner practising in Melbourne, guilty of professional misconduct and unsatisfactory professional conduct in relation to a costs disclosure statement provided to a client and the method by which he charged his client.

Mr Barrett had requested that his client agree to pay his fees of $10,000 plus an additional amount of 10 percent of the damages and costs awarded by the court to the client in a personal injuries matter. Charging clients in this way is expressly prohibited as a contingency fee under s3.4.29 of the Legal Profession Act 2004.

Senior Member Jonathan Smithers said that “Lawyers’ primary duty is to the courts, and the legal system generally. Their secondary duty is to their clients. Contingency fees have been regarded as having the potential to create conflict between those duties, and lawyers’ own interests”.

“The mention of contingency fees can tend to evoke notions of highly entrepreneurial lawyers treating litigation as a means of siphoning disproportionate amounts from damages payouts received by vulnerable clients”. However, he specifically noted that “Barrett’s case is a long way from this”. Senior Member Smithers accepted that Mr Barrett was not aware of the prohibition even though it is a fundamental principle that few lawyers would be ignorant of.

VCAT ordered that Mr Barrett be reprimanded, pay a fine of $5,000 to the Legal Services Board and pay the Commissioner’s costs of $5,000.

See the VCAT decision for more information.

A solicitor pleaded guilty to misconduct charges before VCAT in November 2012 for misleading his client.

Mr John Powell, of Doncaster East, told his client that he had issued a writ and was proceeding with a personal injuries claim for his client’s son who was injured in 2001 at a Primary School. The solicitor pretended for nine years that the case was in hand and progressing normally. He dishonestly advised his client that the delay was caused by the other side’s lawyer. In fact the solicitors representing the Primary School had already closed their file due to inaction.

Mr Powell pleaded guilty to conduct that was short of the standard the public is entitled to expect of a lawyer, and which involved a substantial and consistent failure to act competently and diligently. A penalty hearing has been listed before VCAT in March 2013.

The Victorian Civil and Administrative Tribunal has ruled that causing a deficiency in a trust account can be sufficiently serious to constitute professional misconduct.

Mr William Hamish McGregor, of Ballarat firm Baird and McGregor, was found guilty of professional misconduct for causing a deficiency in his firm’s trust account after establishing a ‘round robin’ of cheques between several bank accounts.

Mr McGregor acted for a client who wanted to transfer the title of a property to her intellectually disabled adult son. Mr McGregor initiated an arrangement which he believed could be done in a way which would mean the transaction would be legitimately exempted from government duties on the $160,000 property.

An exchange of cheques was set up between the client, her son and the firm’s trust account. This was intended to take place near simultaneously, meaning no party would effectively be out of pocket. However problems were encountered with this round robin and the cheque from the firm’s trust account was drawn without a balancing deposit from the son being received, meaning the Trust Account was in deficit by $160,000. After successive cheques were drawn and cleared between the client’s and her son’s accounts, the deficit was restored 10-12 days later.

The Legal Services Commissioner was notified by the State Revenue Office (SRO) of ‘irregularities in connection with the receipt, recording and disbursement of trust money’ in relation to the transaction, following a review of the property transfer. The Commissioner requested a trust account inspection be undertaken by the Law Institute of Victoria. Based on the results of the report, the Commissioner brought a charge of professional misconduct against Mr McGregor for causing the deficiency in the firm’s trust account.

Senior Member Smithers found Mr McGregor guilty of professional misconduct by creating a deficiency in his trust account, although he accepted that the deficiency occurred inadvertently as a result of an error of judgement, and was for the benefit of the client, not the practitioner himself. However given the ‘sanctity’ of the trust account, the practitioner’s conduct was sufficiently serious to constitute professional misconduct.

Mr McGregor was reprimanded, fined $2,000 and required to pay the Commissioner’s costs of $13,944. VCAT also directed Mr McGregor to undertake further legal education in trust accounting.

After a review of the transaction by the SRO, the land transfer was ultimately found to attract stamp duty. The duty was paid by the client, while a penalty and interest fee was paid by the firm.

See the VCAT decision for more information.

A Mildura solicitor has been reprimanded for mishandling trust monies and was ordered to pay $10,875 in costs. Mr Colin Chadwick of the former firm Chadwick Lawyers and Associates was charged after a trust account inspection found trust money had been banked into incorrect accounts and a payment had not been made, despite records showing otherwise.

In late 2007 Mr Chadwick purchased a conveyancing firm, employing the practice’s conveyancer to continue to work for him as a conveyancing clerk. Mr Chadwick obtained a practising certificate enabling him to receive trust monies and sought the assistance of a friend to establish banking accounts for his practice. Mr Chadwick did not open a general trust account to bank his clients’ trust money, as he should have.

In 2008 the lawyer wrongly allowed estate trust money to be placed in an ordinary office account. A trust account inspection also revealed an Estate Statement indicating a $10,000 bequest had been paid when it had not. The payment did not actually take place until some months later.

The Legal Services Commissioner brought misconduct charges against Mr Chadwick in VCAT for failing to properly deposit trust money into a trust account, failing to keep trust records, and failure to pay trust moneys without a reasonable excuse to do so.

The Tribunal heard that Mr Chadwick was at the time suffering from a significant mental health condition. This led to him relying unduly and inappropriately on others to help him establish the practice, and to providing an inadequate level of supervision to his staff.

Senior Member Smithers of VCAT accepted that the main cause of Mr Chadwick’s misconduct was his mental illness. It was recognised that Mr Chadwick had expressed appropriate contrition and demonstrated insight in to his conduct, and that his condition was now being managed, however the Tribunal’s primary consideration was for the protection of the public. VCAT reprimanded Mr Chadwick for the breaches and ordered him to pay three quarters of the Commissioner’s costs. Whilst Mr Chadwick was still entitled to practice, he was ordered not to receive trust monies, and prevented from getting a practising certificate entitling him to receive trust money for a period of 12 months. This condition was also recommended to apply to an interstate practising certificate held by the solicitor.

Legal Services Commissioner, Michael McGarvie, commented on the importance of lawyers seeking treatment for mental illness before it affects their performance and professional relationships. “Mental Illness features significantly in our complaints profile and I am sure proper management of mental illness dramatically reduces the risk of transgressions and complaints about misconduct”, Mr McGarvie said. “That’s why the Board has put so much effort into encouraging early treatment of mental illness, as evidenced by the Mental Health policy”.

RPA Alert 1, 2012 is available for download (120KB PDF).