High Court of Ireland Decisions

12 November 1997

COSTELLO P:

INTRODUCTION.

The Law Society has brought to the High Court the report of the Disciplinary Committee following an inquiry it held into allegations of misconduct by a solicitor who acted for the complainant up to June of 1988. The complaints were numerous but in the light of the Committee's report I need only concern myself with two of them. They relate (1) to an undertaking given in June 1988 by the solicitor on behalf of the complainant to the complainant's bank to hold the Land Certificate of certain lands in County Waterford in trust for the bank as security for a loan of £15,000 to be made to the complainant and (2) an allegation that the solicitor acted in conflict with the interests of his client in acting for a company called Crotty Inn Ltd in proceedings the complainant instituted in 1988 to wind up the company. It will be seen that the wrongdoing alleged occurred a considerable time ago. The delays which have occurred have had, for reasons to be explained later, a significant effect on the course of the proceedings before the Disciplinary Committee. The Committee obtained a considerable amount of evidence (both on affidavit and orally) but because the issues which I have to decide are very net it will suffice if I give a summary of facts established before the Committee which relate to those to which I have just referred.

THE FACTS.

(1) The solicitor acted in 1981 for three businessmen, the complainant, Mr Spurling and Mr Foley who were in partnership in a number of ventures, including the running of a public house at Lemybrien in the County of Waterford. The three partners were registered owners of the land on which the premises stood. By an agreement dated the 31 December, 1981 Mr Spurling and Mr Foley agreed to sell their interest in the licensed premises to the complainant. In return the complainant agreed to transfer to Mr Spurling and Mr Foley shares which he held in certain specified companies, to resign as director of certain specified companies and to accept liability for certain specified debts. In the normal way the solicitor furnished the transfer deed for registration and adjudication for stamp duty purposes. He was aware that problems in relation to adjudication would probably arise and he put the sum of £7,000 on deposit in the joint names of his firm and the complainant to meet the estimated liability. These problems did indeed prove troublesome and very considerable delays occurred in the adjudication process. It was not until 1986 that the amount of stamp duty payable was established. Two points about it should be noted; (a) because of the delay in adjudication the complainant was never registered as owner of the land and (b) in a detailed and comprehensive opinion which the complainant received from senior counsel in 1990 counsel advised him that the solicitor was not negligent causing or contributing to the delay in having the transfer stamped.

(2) The evidence establishes that in 1986 the complainant was in financial difficulties and he agreed with his former partners to sell back the licensed premises to them. It was known that the complainant had not at that time been registered as owner of the land and the agreement the solicitor drafted provided that the complainant would either complete his own registration and transfer the lands as sole owner or transfer to his partners his one-third interest in the lands in respect of which he was currently registered. The consideration for the sale was the assumption by the purchasers of certain specified debts due by the complainant, a cash sum to be determined for the stock in trade of the licensed premises, such sum to be not less than £25,000 and not more than £50,000. It was also agreed that the purchasers would grant an option to the complainant for one year in the sum of £2,000 to enable him to buy a building site on the land he was transferring to the purchasers. The transfer was to be to a new company which was to be established called Crotty Inn Ltd. In the following year, on the 8 March, 1987 the parties agreed in writing that the sum then due by the company to the complainant was £56,177.45.

(3) The complainant never formally exercised his option but nonetheless began building on the site. The solicitor wrote to him about this on 14 December, 1997 at the instigation of Mr Spurling. But in January 1988 the solicitor was told by Mr Spurling that his company had agreed with the complainant that he could have the site for £2,000 and that there was no objection to his continuing to build a dwelling house on it.

(4) On the 22 June, 1988 the complainant called to the solicitor. He explained that he had negotiated a loan with a building society, that the loan was not presently payable (the house was still only in the course of construction), that he needed what he called a "bridging loan" from his bank of £15,000 to enable him to complete the building on the site, and that he needed a letter of undertaking from the solicitor which he could give to his bank by which the solicitor would agree to hold the Land Certificate of the site in trust for the bank. There and then the solicitor had an undertaking typed out and gave it to the complainant. It was in the following terms;

"We confirm that we act for Mr and Mrs Norris for whom a loan of £20,000 has been sanctioned by Irish Nationwide Building Society on the security of the dwelling house which they are at present constructing at Lemybrien, Kilmacthomas.

We understand that our clients will be seeking accommodation of £15,000 from you.

We have been instructed, and we hereby undertake, to repay this accommodation (with accumulated interest) out of the proceeds of the loan and in the meantime to hold the titled deeds of the property in trust for your bank".

The solicitor knew that the company had not transferred at that time the site to the complainant and he requested him to obtain a map of the site so that he could draft a transfer of the site to him. The complainant left him and never returned.

(5) The bank never wrote to the solicitor about his undertaking. It never sought to enforce it. The building society never lent the money and never wrote about the complainant's title to the site and neither it or complainant ever wrote demanding the completion of the transfer of the site to the complainant. It is to be noted that at that time the complainant and his two partners were still registered as owners of the entire lands, as the company had not yet been registered as owners of them. Where the land certificate was at that time is a matter to which I will return in a moment. It is also to be noted that when senior counsel advised the complainant in 1990 his opinion was not sought as to whether failure to obtain the loan from the building society was the result of the failure by the solicitor to have the site transferred to the complainant. And no such finding has been made by the Disciplinary Committee.

(6) When the complainant called to the solicitor on the 22 June 1988 he had already instructed another solicitor to act on his behalf claiming the sum of £31,000 from the company, being the balance of the purchase price he said was payable on the sale of the licensed premises. Unknown to the solicitor Mr Spurling on behalf of the company and the complainant had earlier agreed to pay off the agreed balance by instalments and a dispute had arisen between them concerning the amount that was then due. Instead of suing for the debt the complainant petitioned for an order that the company be wound up. The solicitor acted for the company in these proceedings and whether he was correct in so doing is the second issue which I have to decide.

(7) The winding-up proceedings were vigorously contested. The company admitted that it owed a sum of £9,135.60 and this was paid into court. By order of the 13 March 1989 the winding up proceedings were stayed.

(8) The complainant failed to repay the Bank the £15,000 he had borrowed. As I have said, the Bank chose not to rely on the solicitors undertaking but instead sued the complainant and obtained judgment against him. Much later the complainant reached a compromise with the bank and he withdrew out of court the sum of £9,135.60, the winding up proceedings were struck out and a transfer of the site was effected. The complainant also issued a Plenary Summons in 1992 claiming damages for negligence against the solicitor and renewed it later but has since taken no further step in the action.

THE COMPLAINTS.

The first letter of complaint to the Society was dated 1 April, 1989. It was sent by him to the solicitor for his comments. Thereafter correspondence took place until 20 September 1989 when the Society wrote to the complainant asking for further comments on a letter sent by the solicitor. It received no reply. As a result it put away its file. The complainant revived his complaints a year later expressing dissatisfaction with the manner in which the matter had been dealt with. On the 12 November 1990 the Society replied advising him that he could apply direct to the Disciplinary Committee. No further communication was received from the complainant until March of 1993 when he wrote again to the Secretary of the Law Society. After further correspondence the Registrar's Committee decided that the conduct of the solicitor warranted an application for an inquiry by the Disciplinary Committee and on 21 September 1994 the Society applied to the Disciplinary Committee for an inquiry into the conduct of the solicitor. On the 4 April 1995 the Committee decided that a prima facie case had been shown. It was to hold a hearing on the 7 December 1995 but this was adjourned because of the solicitors illness. Instead, it was held on 27 February, 1996. By Petition of the 19 June 1996 the report of the Disciplinary committee was presented to the High Court under section 7(3) of the Solicitors Act 1960. The Report dated May 1996 concluded that the respondent solicitor was guilty of misconduct tending to bring the solicitors profession into disrepute in that he;

(1) Gave an undertaking to AIB Bank on the 22 June 1988 when it should have been clear to him on that date that the complainant was not the registered owner of the property in question and that he could not hold the title deeds to the order of the Bank;

(2) Acted in conflict with the interests of his client, as particularly set out in paragraph 20(b) of the affidavit of Linda Kirwan sworn on the 15 September 1994;

The paragraph in the affidavit referred to contained a submission that the solicitor had been guilty of conduct tending to bring the profession into disrepute in that he;

(b) "acted in conflict with the interests of his client, particularly the complainant, having firstly represented all parties in the various transactions and then representing two parties against the third party complainant in disputes arising out of these transactions and having drafted certain documentation then acting against one party, the complainant, in proceedings relating to that documentation".

The Petition sought an order that the solicitor be censured, fined £3,000 and that he should pay the costs before the Disciplinary Committee and the High Court.

The Petition was heard on 4 November 1996 and in the light of an affidavit of 24 July, 1996 by consent (for reasons to be explained later) the matter was remitted to the Disciplinary Committee who held a further inquiry on the 27 March, 1997.

It reported on the 23 May, 1997 that having read the affidavit and heard further evidence that its findings and recommendations made on 26 February 1996 should remain unchanged.

The matter was re-listed before me and was heard on the 21 October, 1997.

CONCLUSIONS.

First Issue.

It is clear that on the 22 June 1988 the solicitor was well aware that the site had not been transferred to the complainant and that the complainant and his two former partners were still registered as owners of all the lands. He was also of course well aware that the company had bought the lands and he had been instructed that it had agreed to sell back to the complainant a building site for the sum of £2,000. At the first hearing before the Committee the solicitor's evidence was that the Land Certificate in June 1988 was held either by Allied Irish Finance Co Ltd or Allied Irish Banks Ltd but that as their debts had been paid it was available to him on request. Accordingly he had submitted to the Committee that if called upon he could have honoured his undertaking to the bank. At the hearing of the Petition the solicitor accepted that this evidence was incorrect. He deposed to the fact that prior to the hearing he had for some years suffered from ill health, that he had in all six operations connected with problems associated with his eyes and ears (four of which having taken place prior to the hearing of the Committee). He explained that after the hearing in February 1996 he wrote to the financial institutions and that he obtained a copy of a letter from Allied Irish Finance Co Ltd dated the 2 February, 1987 (which he exhibited) forwarding to him the original Land Certificate Folio No 5031F. He then searched a number of old files in his own office and found the letter. He had forgotten this letter when he gave evidence before the Disciplinary Committee in February 1996. It established that when he gave the undertaking on the 22 June 1988 the Land Certificate was in his possession and counsel on his behalf submitted that all that was required to effect a transfer of the site and the obtaining of a new Land Certificate in relation to it was the map which he had requested his client to obtain. His client could, he submitted, have honoured his undertaking had the bank called on him to do so.

I agree with this submission. In June 1988 the solicitor could have ensured that the site was legally transferred to the complainant and a Land Certificate issued in respect of it. The complainant had a contractual right to a transfer. It is true that there was not then in existence a Land Certificate in respect of the site, but the solicitor had a Land Certificate in his possession which would have enabled a Land Certificate in respect of the site to be issued. So, had the bank wished to realise the security for its loan it had obtained as a result of the letter of undertaking it could have done so as the Land Certificate could have been obtained. The solicitor may have been very unwise in the way he handled this transaction but in the special circumstances of the case I do not think that his conduct amounted to professional misconduct.

THE SECOND ISSUE.

The second issue is whether the solicitor was guilty of misconduct tending to bring the solicitors profession into disrepute in that he acted in conflict with the interests of his client as particularly set out in paragraph 20(b) of the affidavit of Linda Kirwan sworn the 15 September, 1994 to which I have already referred.

This complaint relates to the fact that the solicitor acted for three clients, Mr Spurling, Mr Foley and the complainant over a number of years; that he acted for all parties when they agreed that the licensed premises be transferred to the complainant and again when it was agreed that it would be re-transferred back to the company established by Mr Spurling and Mr Foley, and that he continued to act for Mr Norris up to 18 June, 1988 and then acted for a company the two former partners formed which was sued by the complainant.

The opinion of senior counsel of 23 May 1990 which the complainant obtained explains the nature of the issues raised in the winding-up proceedings. The parties had agreed on the 8 March 1987 that the company's debt was then £56,177.45. Counsel expressed the view that the documents in the possession of the company established that £34,500 had subsequently been paid off that debt and that the company was correct in further deducting the balance of the stamp duty outstanding on the 1981 transaction (and interest), arrears of rates and the option price of £2,000 on the sale of the site to the complainant. This meant he said that the sum of £9,135.50 paid into court as the balance due by the company was correct.

The solicitor knew nothing of the agreement between the company and the complainant that its indebtedness would be paid by instalments and when he acted for the company had no knowledge of the payments actually after 8 March 1987. The information which he had concerning the earlier transactions, and particularly the information contained in the agreement of the 8 March 1987 was common knowledge shared by all parties. I do not think that because he had acted for the complainant in the past he was precluded from acting for the company in the complainants action against it. By so doing he did not give any unfair advantage to the company. He did not make any unfair use of information given to him by the complainant; indeed any information he then had the company, through its directors, already had.

I agree with the opinion of the Counsel he consulted at the time that there was nothing improper in his acting for the company and I do not consider that he was guilty of any professional misconduct in doing so.

I will therefore make no order on the petition.