Solicitor Jones Ethics Case: Misconduct and Fiduciary Duty

Facts of the Case

A complaint has been filed against Solicitor Jones that questions a number of his actions. The complaint alleges that Jones breached several ethical obligations and that he should be held responsible for those breaches. Specifically, the complaint states that Jones made a serious error in calculating the value of his client's business and that this error caused the potential buyer to withdraw his offer of purchase.

Jones did, in fact, make the miscalculation. Furthermore, he withheld knowledge of the error from the client until he was compelled to admit it in court. His fiduciary duty required him to disclose the mistake as soon as he became aware of it and to correct it before the situation escalated. Instead, he did the exact opposite — concealing the mistake from his client, his client's wife, and the court. Jones also breached his responsibility to act with care and competence in valuing the business. The valuation was a primary concern to both his client and the prospective purchaser, and his failure to exercise due care in the calculations constitutes gross incompetence.

Information was also withheld from the client and the client's wife regarding the retainer Jones had accepted as part of the previous business negotiations. Jones had accepted the retainer to serve as the client's counsel in the business matter, not in the ongoing litigation that was actually being instigated and instructed by the client's wife — with the client's knowledge and approval. The fact that Jones had little expertise in pursuing a writ of this nature, having never conducted such actions in the past, further compounded his culpability.

Jones continued his representation of the client even though he had misgivings about the legality of the retainer with respect to the new case. Before accepting the wife as a client, he had a responsibility to advise her that he had little, if any, expertise in the matter and that a new agreement and retainer would be required before any further steps could be taken. Jones also accepted instructions from the client's wife after learning that the client had signed a power of attorney, yet he did not inform her of the original mistake.

In fact, Jones continued the litigation process even though the miscalculation was entirely his fault. He withheld information about the mistake from the court as well, flouting his duty of candour to the court. His obligation was to conduct proceedings with candour and honesty; instead, he deliberately concealed the process and methodology he had used to determine the valuation of the company from both the court and the defendant. Conflicting valuations were a primary component of the case. Finally, although the client for the continued litigation was the original client's wife, Jones represented to the court that his client was the original client — not the wife. The complaint alleges that the case would have had very different results had Jones not committed these breaches.

Issues Raised by the Complaint

Several issues in the complaint require attention. The first concerns whether Jones was a qualified solicitor. Jones qualified as a solicitor in 2005 and had been working with a small two-partner firm. Although background information indicated that he often worked with little or no supervision, he was a qualified solicitor under Part 5, Division 5(2) of the Legal Profession Act 2008, which states: "In determining whether a person has the required experience, regard can only be had to a period of supervised legal practice that the regulations permit to be taken into account for the purposes of this section" (p. 54).

The second issue is Jones's miscalculation of the business value and the resulting termination of the sale. Mistakes and miscalculations are an inevitable part of human interaction and commerce. A solicitor, however, must exercise care and caution when making calculations that could harm a client. This is precisely why Division 9 — Interstate Legal Practitioners 68(1) provides that a legal practitioner must be covered by professional indemnity insurance covering legal practice in the jurisdiction. The critical issue here is not only that Jones made an error in judgment and calculation, but that he compounded the matter by keeping the error entirely to himself.

The central question is whether Solicitor Jones can be found to have engaged in unsatisfactory professional conduct or professional misconduct when he miscalculated and then concealed the miscalculation. His reticence regarding the identity of his actual client is an additional issue that must be addressed with gravity and seriousness.

Discussion of Conduct Classifications and Penalties

There are a number of ways Jones's conduct can be addressed. Since he has seemingly admitted to the infractions — including the miscalculations and the breaches of professional duty — the simplest approach would be mediation. Under Division 5 (417) of the Legal Profession Act 2008, the complainant and the Australian legal practitioner to whom the complaint relates may enter into a process of mediation (p. 295). This would be the least severe method of resolving the matter.

However, Jones's behavior appears to be at best unsatisfactory professional conduct and at worst professional misconduct, and either classification would demand more than mediation alone. Under Division 2 — Key Concepts (402), unsatisfactory professional conduct includes "conduct of an Australian legal practitioner 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 Australian legal practitioner." To characterize Jones's conduct as merely falling short of this standard may itself be an understatement.

Professional misconduct, by contrast, is defined under Division 2 — Key Concepts (403) as unsatisfactory professional conduct "where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence." Given the facts of the case, professional misconduct appears far more likely than mere unsatisfactory professional conduct. It is necessary to determine the appropriate classification, since different penalties apply to each.

A finding of unsatisfactory professional conduct — assuming no professional misconduct — would result in a public or private reprimand and a fine not exceeding $2,500 (p. 298). A finding of professional misconduct carries substantially harsher and longer-lasting consequences. The penalties for professional misconduct begin with a fine not exceeding $25,000 and may include an order to complete a specified course of further legal education.

Jones could also be ordered to pay additional legal costs and the legal costs of the complainant, to practice under supervised conditions for a specified period, and to refrain from specified activities in connection with the practice of law. Additionally, he could be ordered to conduct his financial affairs in a specified manner for a specified period, to submit to periodic inspections, to use the services of an accountant or financial specialist, and to seek management advice from a specified person. Finally, he could be ordered to undergo counseling or medical treatment and would be prohibited from applying for a local practicing certificate before the end of a specified period (p. 306).

Ultimately, the punishment must fit the conduct. It will be for the board to determine at what level, if any, Solicitor Jones is found guilty.