This article considers two cases relating to claims brought against property lawyers – one in the Supreme Court of Queensland and one in the Civil and Administrative Tribunal of New South Wales. There are four key issues which, had they been adequately addressed, might have resulted in the avoidance of the claims.
Wise Investments Pty Ltd v Ruddy Tomlins & Baxter Solicitors & Anor involved the transferral of property between a couple that had recently separated.
The claimant (Wise) was the accountancy firm for the husband, Mr Cullen, and a firm of solicitors (RTB) acted for his former wife Mrs Cullen. Wise brought a claim against RTB alleging that they had only sold one lot of land when they had been retained for the sale of seven lots.
Wise maintained that it and Mr Cullen had retained RTB to prepare contracts for the sale of seven lots of land to Wise, but they did not do so.
Instead, they prepared a contract for the sale of one lot, and the contract was signed by both Wise as Trustee and by Mr Cullen. They did not at any stage tell the solicitor from RTB of an agreement to purchase 7 lots.
The primary judge found that neither Wise nor Mr Cullen told the solicitor of any agreement to purchase seven lots. They asked her to create a contract for a single parcel of land with the sale price of $200,000 but with the overriding condition that it was for Mr Cullen to decide whether or not the contract would proceed.
This miscommunication regarding whether or not the sale of land was for one or seven lots, highlights the importance of clarifying instructions and communicating any hesitation or doubts directly to the client, in order to fully understand what they are asking you to do.
Another issue before the court was who was the actual client to whom the RTB solicitor owed her duty. When accepting instructions from anyone other than the client, make sure you have written authority from the client (or each of them if there is more than one), permitting and authorizing you to obtain instructions from, and give advice to, that person.
Council of the Law Society of NSW v Gurusamy involved disciplinary proceedings against a solicitor, Baskaran Gurusamy (Gurusamy). The Law Society alleged that Gurusamy was guilty of professional misconduct, having breached sections of the Legal Profession Act 2004 and the Legal Profession Uniform Law (NSW) including claims that he misused trust funds, failed to maintain a file register and failed to disclose to his client that a financial benefit had been incurred for the referral of that client.
The first issue that this judgement raised was the importance of understanding what is trust money and how it may be appropriated. Gurusamy received moneys into his office account, for advance payments of legal costs and disbursements totalling $8,120. These moneys were trust funds and should have been banked into a trust account. He failed to send any tax invoices to the relevant clients. As such, Gurusamy was not entitled to use the trust funds as fee payments as no invoices were raised. Until they were, the money had to remain in the trust. The Tribunal found that Gurusamy was in breach of the Legal Profession Act 2004 by misappropriating trust funds. Remember, trust money must be deposited into a trust account and only used as the client directs. If the money is received on account of costs it cannot be transferred to you until there is a valid tax invoice issued.
The Tribunal also found that Gurusamy had failed to disclose to his clients that he was paying a third person a fee for referring clients to him in conveyancing matters, which totalled $5400. The Tribunal relied on the common law principle that Gurusamy’s commission payments to the third person constituted disgraceful and dishonourable conduct. Referral arrangements for a fee are sometimes used as a way of generating business. Note however the prohibition on inducements to third parties by rule 16 of Rules of Conduct (Schedule 3 of the Conveyancers Licensing Regulation 2015).
Gary Newton
Partner, HWL Ebsworth Lawyers
