Catch 32 On Solicitors' Independence
OPINION
by Tim O'Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au
Queensland’s Office of Fair Trading has lost, and lost badly, a landmark case mounted in the Commercial and Consumer Tribunal against Gold Coast solicitor Donald Dickie. The implications of this decision, which Fair Trading decided not to appeal, are likely to significantly affect residential property sales and conveyancing practices across Queensland. Attorney-General Kerry Shine, the Bligh Government’s minister responsible for the Fair Trading portfolio, may need to consider whether the Beattie Government’s much-maligned and oft-amended Property Agents and Motor Dealers Act 2000 (PAMDA) will now require further amendment.
In August this year Mr Dickie, successfully defended charges laid by Fair Trading for the first time against a Queensland solicitor. These serious but belated charges were that, between February 2001 and October 2003, he engaged in misleading conduct contrary to Section 573A of PAMDA and/or made false or misleading representations contrary to Section 573C of PAMDA. Mr Dickie’s defence was conducted by barristers, John Greenwood QC and Keith Howe, who were instructed by solicitors Stacks Gray.
Tribunal member, Mr R.V. Hanson QC, dismissed Fair Trading’s case which was based on its allegation that Mr Dickie failed, contrary to Section 365B of PAMDA, to disclose to conveyancing clients referred to his law firm by Cross Country Realty that he had a business relationship with that estate agency. Cross Country allegedly made 283 referrals of property buyers to Mr Dickie’s firm. 156 of those clients’ contracts proceeded to settlement.
Mr Hanson noted that the expressed purpose of Section 365B is to enhance consumer protection for residential buyers by ensuring their conveyancing solicitors’ independence. Under this section solicitors must certify on a government-prescribed Form 32a whether they are, among other things, independent of the seller’s agent and whether they have any relationship with the agent.
Mr Hanson also noted Chief Justice Paul de Jersey’s view (stated in the Legal Practice Tribunal case of Legal Services Commissioner v McClelland) that Section 365B intended buyers should be alerted to any relationship their conveyancing solicitors might have with anyone “on the other side of the transaction” if this relationship could “imperil” their solicitors’ capacity to act independently. (The Chief Justice last year suspended Gold Coast solicitor Douglas McClelland, a former employee of Mr Dickie’s, from practice for four months after he shared fees with an unqualified conveyancer while neglecting to give Form 32a certificates to a number of clients).
Mr Hanson had to consider whether there was an independence-compromising relationship between Mr Dickie and Cross Country requiring disclosure to referred buyer clients.
Fair Trading tried to prove a disclosable business relationship existed, and argued that anti-marketeering Sections 573A and 573C were breached when Mr Dickie’s certificates to his clients disclosed “no business, family or other relationship” with Cross Country.
Although Mr Dickie’s defence was that the referrals were gratuitous, and therefore not part of any business relationship, Mr Hanson ruled there could be such a relationship without “financial aspect or mutual obligations”.
Nevertheless, he ruled further that, if a solicitor was simply the “passive recipient of unsolicited referrals,” there is no relationship requiring disclosure. Mr Hanson also made these guarded observations:
“If the solicitor is shown to encourage the agent to refer purchasers, it might be argued that there was the requisite relationship. If it were the case that some psychological pressure were brought to bear on the purchaser to engage the recommended solicitor, and if the solicitor was seen to approve of, or connive at, that conduct, then there may be an argument, depending on the circumstances, that there was the necessary relationship. If nothing more appears than that the solicitor receives unsolicited referrals, then the number and frequency of the referrals cannot be said to establish a relationship that could compromise the independence of the solicitor.”
Fair Trading made no allegation and produced no evidence that Mr Dickie had actively encouraged Cross Country’s referrals. Its case was based solely on the number and constancy of these referrals. This was, in Mr Hanson’s opinion, not sufficient. The result may have been different if Fair Trading had more fully investigated the circumstances of Cross Country’s referrals and, particularly, whether there was any pre-arranged availability by Mr Dickie and his staff to see newly-referred clients. No matter that Cross Country itself had, in fact, acknowledged and declared a business relationship with Mr Dickie to buyers as part of its PAMDA disclosure obligations.
Prior to this decision the best Fair Trading could do regarding probable infringements, because Section 365B contained no penalty provisions, was to obtain Enforceable Undertakings as it did from Gold Coast solicitor Gregory Pointon, law firm Butler & Clements and Brisbane solicitor Stephen Rodgers – all of whom may now regret not securing the legal representation their colleague Mr Dickie had.
How to properly protect real estate consumers – not only in Queensland but across Australia - from self-interested agents, less-than-independent solicitors and others?
These radical but simple measures might work:
• Prohibit real estate agents from referring solicitors, conveyancers, finance brokers, building and pest inspectors to buyers
• Prohibit solicitors and conveyancers from handling clients’ conveyancing if not completely independent of “the other side of the transaction”
• Prohibit finance brokers, building and pest inspectors from providing services to buyers referred by agents
• Prescribe stiff penalties for solicitors, conveyancers, agents and others who breach or attempt to circumvent these prohibitions.
(A version of this article has appeared in LAWYERS WEEKLY)
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