Indemnity costs against a solicitor & referral to the LSC

Perpetual Trustee Company Limited v Cowley & Anor [2010] QSC 65

 

Douglas Laing McClelland acted for defendants in setting aside a default judgment for mortgagee seeking a warrant for possession. The judgment was set aside and leave file a defence. In support of the application the defendants solicitor swore an affidavit and filed it by leave:

[57] Mr McClelland swore in an affidavit filed by leave on 9 July 2009, that he had been shown the bank statements of the defendants which were exhibited to Mrs Cowley’s affidavit “and say that all of those repayments have been made.” In doing so, he expressed a personal opinion which appeared to provide independent confirmation that the payments had in fact been made. By making that positive statement he came under a duty to the court pursuant to clause 14.2 of the Solicitors Rule to correct the statement made by him in that affidavit if he became aware that it was untrue.

However, it became clear to even a casual observer that the bank statement provided by the defendants had been falsified:

[61] After the hearing of the application on 9 July 2009, further investigations by the plaintiff showed that the payments which the defendants and their solicitor deposed had been made to the plaintiff had not in fact been made and that the purported bank and credit union statements had been falsified.

[74] Mr McClelland deposed that on 11 August 2009, Mrs Cowley delivered to him stamped copies of bank statements from Westpac. He said that they appeared to contain “the same identical transactions as to those exhibited to the Affidavit of Kylie Cowley sworn 3 July 2007.” Mr McClelland said that he “did not perform any accounting work whatsoever on those statements and they appear on their face to be legitimate.” However, even a cursory examination of these statements without the obliterations shows anomalies that at least call for explanation. They do not appear even at face value to be true bank statements. The payments purportedly made on 3 October 2008 have been previously set out. Once the previously obliterated transactions are revealed one can see that the balance before the first payment to Fox Symes on that date is $4,851.29, and the balance after the purported payment of $2,758.68 is $4,824.39. Such a result is not possible. One simply cannot pay $2,758.68 from $4,851.29 and be left with a balance of $4,824.39.

[77] It should have become clear to anyone perusing the bank statements without the obliterations that there was some real doubt as to their authenticity. Mr McClelland had the alleged bank statements from 19 June 2009 which, if he had carefully perused them, would have put him on notice that they had been falsified.

[108] Mr McClelland’s evidence as to what he did following that email tends to show that he had lost his professional objectivity. He deposed: “On receiving that information the Second Defendant was unable to explain how the alleged trace with Sue Young’s signature apparently affixed thereto came into their possession, other than it was posted and at their request. The Second Defendant informed me that Sue Young had performed some banking type tasks for them (for example the transfer of monies between Accounts on their behalf) in the past and she as an old family friend from Armidale, New South Wales. The actions performed by Sue Young and the Cowley Family in the past were apparently against the New England Credit Union’s operational policies.

On 3 September 2009 I questioned the Second Defendant about the authenticity or otherwise of the Westpac Bank Statements that she delivered to our office bearing the date 11 August 2009 with Westpac’s stamp. I also asked her if she was telling me the truth or had anything to hide. She confirmed that she had not been involved in any fraudulent activity whatsoever. As Defendants’ Solicitor I believed my instructions. One explanation was that the Bank Statements were authentic however in the light of evidence provided by the Plaintiff the only logical conclusion I could reach was that of identity theft by a person or persons unknown.” His justification is difficult to comprehend. His reasoning was that he believed his client. Nevertheless, given the positive statement he made in 2009 to the court in his affidavit of 7 July, if Mrs Crowley had in fact lied to him and falsified documents, he had misled the court. In those circumstances he owed a duty to the court which could not be satisfied merely by believing his instructions, whatever they were. The explanation of identity theft is quite implausible given that the only persons who stood to gain from falsifying the documents from NECU and from Westpac were his clients. The bank statements provided by Westpac showed that the defendants were often in financial difficulties and the payments alleged to have been made by them were either not made or were dishonoured.

[109] From this time at the very latest, Mr McClelland failed to undertake the steps required of him to correct the misleading statement he had made to the court. He also failed to advise his clients as to their liabilities once they had put falsified documents before the court. His failures meant that the plaintiff incurred further costs.

The solicitor’s response was simply to rely on his instructions

 

[127] On 27 October 2009, Mr McClelland interviewed his client with a view to obtaining her instructions on waiving legal professional privilege so that he could, to use his words, fully defend himself against the claim for costs by the plaintiff against him personally. In the course of that interview Mrs Cowley agreed with the following statement made by Mr McClelland:

“Kylie is happy for me to waive legal professional privilege and confidentiality in defending this wild allegation that either Kylie Cowley, Darren Cowley or the writer have conspired or in any way perpetrated fraud against the court or any other person.”

[128] He asked her leading questions about the bank statements such as:8

“Doug: You say you’ve never doctored any of these documents at all.

Kylie: never

Doug: have you always told the truth

Kylie: I have, yes

Doug: Have you had any reason to lie?

Kylie: No

Doug: there is no real point in lying is there?

Kylie: no

Doug: is there any point in trying to doctor these payments

up that you’ve made.

Kylie: no

Doug: Did you get someone to do it for you

Kylie: no

Doug: um, ok, so you got no reason to lie have you

Kylie: no

Doug: ok, righteo, so these are true copies of Bank Statements that you have downloaded and all of that sort of stuff

Kylie: yep.”

“Doug: ok, so there is no way you can alter those Bank Statements is there

Kylie: no

Doug: you don’t have the opportunity and you wouldn’t know how would you

Kylie: no”

“Doug: have you doctored any documents

Kylie: no I have not

Doug: have you got someone to doctor them

Kylie: no I have not

Doug: do you believe that you have told the truth, cross your heart hope to die

Kylie: I do

Doug: you haven’t told me any lies

Kylie: no I have not. I have been extremely upfront and honest with you from day dot.

Doug: have you told the Court any lies through me

Kylie: no I have not. No

Doug: so you believe that through out this whole scheme of things you are an innocent party you and your family

Kylie: yes

Doug: and because I have done work for you and tried to protect you that I am also a victim of this so called fraud, you no

Kylie: yes

Doug: fair enough

Kylie: yes”

[129] With regard to Platinum Lawyers no longer acting for the defendants, Mr McClelland had the following exchange with Mrs Cowley: “Doug: then so what happened is I said to you ok, um, we got this letter from Charlie Young

Kylie: uh huh

Doug: which we showed you I think you got a bit of a copy to it, we note your clients have refused to make any payment to our client under the home loan since October 2008, refused to hand over, ladiladilah, we’re going to do all sorts of things were are also going to seek costs from Platinum Lawyers.

Kylie: un huh

Doug: any I responded by saying thank you for your long and threatening letter and piss off.

Kylie: yep

Doug: yep. Um we said go to buggery, the following day you filed a Notice of Party Acting in Person which meant you were no longer represented by us.

Kylie: uh huh

Doug: the basis of that was that we new you were going Bankrupt, we weren’t going to get paid and we weren’t even going to get aid for doing the sale of the house.

Kylie: yep

Doug: so we said well bugger this

Kylie: yep

Doug: so we wrote to them and said do it yourself. But if

they didn’t seem to get that picture and then they

proceeding with this Application.”

8 The spelling and punctuation are taken from the original.

Conclusion

 

Not surprisingly her Honour Atkinson concluded:

[130] Mr McClelland had robustly represented his clients as was his duty to them. However, a solicitor is not merely a passionate and gullible mouthpiece for his or her client. A solicitor’s primary duty is to the court. If the solicitor discovers that his or her client has lied to the court or falsified a document which has been made an exhibit then the solicitor must advise the client that the court should be informed of the lie or falsification and request authority so to inform the court. The solicitor must refuse to take any further part in the case unless the client authorises the solicitor to inform the court of the lie or falsification, and must promptly inform the court of the lie or falsification upon the client authorising the solicitor to do so.

[131] In this case where it appears that Mr McClelland’s client swore an affidavit which was false and exhibited documents which had been falsified, he was obliged to advise his client in the manner herein set out. It appears that he did not do so.

[132] However Mr McClelland came under another duty because of the positive statement in his affidavit that the repayments had been made. That was a misleading statement. I accept for the purposes of this application that he did not knowingly make a misleading statement but as soon as he realised or must have realised that the statement was misleading he was under an obligation to the court to take all necessary steps to correct such misleading statement as soon as possible. He did not do so and further expense was incurred by the plaintiff because of Mr McClelland’s failure to comply with his duty of frankness to the court.

[133] Mr McClelland, and his firm, Platinum Lawyers, are responsible for the costs incurred by the plaintiff from at least 7 September 2009 when he was sent two emails by Mr Young attaching original documents form NECU and Westpac which showed that, not only were the credit union and bank statements provided by the defendants falsified, the tracing results purportedly provided by NECU and Westpac to the defendants were also forgeries.

[134] Mr McClelland and Platinum Lawyers should be ordered to pay the plaintiff’s costs from that date on an indemnity basis. The costs are to be paid on an indemnity basis because of Mr McClelland’s obstinate and egregious refusal to comply with his duties to the court. As foreshadowed during the hearing, I refer this matter to the Legal Services Commissioner for further investigation and any disciplinary action that appears warranted.

See also

Supreme Court Act 1995 (Qld) s 221

Legal Profession Act 2007 (Qld)

Uniform Civil Procedure Rules 1999 (Qld) r 681, r 702, 703(2)

Legal Profession (Solicitors Rules) Notice 2007 (Qld) r 3

Legal Profession (Solicitors) Rule 2007 (Qld) r 12, r 13.3, r

14, r 15

Briginshaw v Briginshaw (1938) 60 CLR 336,

Myers v Elman [1940] AC 282,

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170; 110 ALR 449, and

White Industries (Qld) Pty Ltd v Flower & Hart (a firm) [1998] FCA 806; (1998) 156 ALR 169.

Brisbane Barrister – David Cormack

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