[Author – Tim ODwyer]
Gold Coast solicitor Douglas McClelland, who charged conveyancing fees seven times higher than some other solicitors, has had his Practising Certificate suspended for four months.
While cut-price Queensland law firms currently advertise buyers’ fees from as low as $350, McClelland charged 27 clients buying investment properties $2,500 per transaction. After investigation by the Queensland Law Society for the Legal Service Commissioner, no disciplinary action was taken against him over high fees.
Rather McClelland faced a professional misconduct charge for sharing those fees from his law practice with an unqualified person between September 2003 and June 2004. The Legal Practice Tribunal found this charge established and, because of “the gravity of the misconduct involved”, (to quote Tribunal Chair Chief Justice Paul De Jersey) ordered McClelland to be suspended, to receive a public reprimand and to pay costs. A second charge of unprofessional conduct, relating to breaches of Section 365B of the Property Agents & Motor Dealers Act (non-disclosure to buyers about independence), was also established.
A well-placed legal source quipped that a four months suspension was “a bit light”. Twelve months would have been “more appropriate”.
The circumstances of the first (more serious) charge were that McClelland had an “arrangement” with Simply Conveyancing Australia Pty Ltd (”Simply Conveyancing”), a company owned by Anne Mullins, whereby she organised contracts to be signed by purchasers, assisted with securing finance then referred them to McClelland to complete the conveyances. From $2,500.00 fees for each matter Mullins (described by the Chief Justice as a “legally unqualified clerk”) picked up $1,000 while McClelland got $1,500.00.
There were 32 such deals. In 31 the contract named the buyer’s solicitor as Simply Conveyancing. In nine cases this private company got all fees at settlement then McClelland sent in his account for payment. In 18 cases McClelland collected at settlement his fees as well as a payment for Simply Conveyancing which he on-forwarded on production of an invoice. In five cases, settlement did not occur. The Tribunal accepted that some of the work done by Mullins was “solicitor work.” (In Queensland there are no licensed conveyancers, so only practising solicitors may charge for handling conveyancing.)
Chief Justice De Jersey concluded that McClelland and Mullins agreed on a division of labour and fees, and effectively “worked in tandem under a collaborative umbrella agreement”. McClelland had sanctioned a solicitor’s work by an unqualified person in circumstances “where it suited him not to attend himself to that early work”.
McClelland’s barrister submitted that monies paid to Mullins or Simply Conveyancing were never receipts of his client’s practice. Rather these were for services following Simply Conveyancing’s retainer from a buyer. The Tribunal found that this argument ignored the significant “antecedent arrangement” which consisted, in reality, of McClelland’s retainer “to an extent via his agent Simply Conveyancing” with whom he shared fees. The Chief Justice remarked that these circumstances were similar to those in a previous case where former Gold Coast solicitor, Christopher Adamson, had an illegal fee-sharing arrangement with an unqualified conveyancing clerk.
The Tribunal concluded that the details of the McClelland/Mullins arrangement were apparently crafted with some care to avoid any perception of sharing: Mullins kept separate premises, she “retained” McClelland to complete the work, they each billed the client separately. The perception that McClelland paid money received in his practice was avoided, but this was irrelevant to a consideration of his overall conduct whereby fees for conveyancing work, which only he could legally perform, were shared with Mullins. This arrangement also raised, in the Tribunal’s view, “the prospect of undesirable uncertainty as to the identity of the buyer’s solicitor at various stages of the transaction.”
The second charge resulted from McClelland’s failure to provide buyers with a lawyer’s certificate. He had earlier given a compliance undertaking to and agreed with the Office of Fair Trading to allow it access to his conveyancing files to audit compliance. The Tribunal accepted the Legal Service Commissioner’s submission that these failures, going to “competence and diligence amounting to unprofessional conduct”, were based on “a misreading of the legislation.” Was the Tribunal or the Commissioner aware of comments made by Queensland’s Fair Trading Minister Margaret Keech when McClelland gave his Fair Trading undertaking? At that time she said, “It is important for solicitors to provide the lawyer’s certificate to their clients to protect the integrity of conveyancing transactions by guaranteeing the lawyer is independent from the transaction or that any benefit the lawyer may receive is disclosed …. Clients have a right to know whether the lawyer they have employed has a business or other relationship with other parties involved in the sale and, if there is an established relationship, the clients may choose to take their business elsewhere.” Nevertheless, the Tribunal ruled that a strict interpretation of Section 365B meant McClelland did not have to disclose his arrangement with Simply Conveyancing.
McClelland originally became an acquaintance of Mullins’ when both were employed by another Coast solicitor. McClelland considered Mullins a capable conveyancer whose rapport with clients ensured she obtained much repeat business.
Some time in 2003, after the other solicitor closed his practice, Mullins told McClelland she wanted to continue in the conveyancing/property sales area. Would he be interested in referrals of clients from estate agents she knew from working for that solicitor? McClelland considered this an opportunity to expand his practice. Although she had registered her company, Mullins soon consented to assigning the business name of Simply Conveyancing Australia to McClelland but this was not accepted by Queensland’s Office of Fair Trading.
How a lucrative “arrangement” began and ended
In April 2004 Channel Nine’s Sixty Minutes program featured a story entitled “The Sting” – about “the biggest property scam ever” where thousands of mum and dad property investors were betrayed by lawyers, banks and others who should have been on their side.
Among many viewers who soon contacted consumer advocate Neil Jenman – he appeared and explained in the story how the scams were worked – was Jerrabomberra (NSW) couple Brendan and Helen Chadwick. They recognised much of their own experience when they had been cold-called, seminared and convinced to secure their retirement by investing in a negatively-geared, off-the-plan villa at Redbank Plains near Ipswich, Queensland. Two months earlier they had signed a bundle of contract and other documents showing a licensed agent for the vendor, another company paid over $10,000.00 for “promotion, advertising and administration” and Simply Conveyancing Australia Pty Ltd as their solicitor.
The purchase price was $179,400.00. The Chadwicks’ later independent valuation indicated that the property, when completed, would be worth only $145,000.00.
Mr Jenman referred an anxious couple to my firm which succeeded in putting a satisfactory end to this dubious investment. I was shocked to find not only Simply Conveyancing handling Chadwicks’ conveyancing, but also correspondence to them and to the sellers’ solicitors describing this company as a “Division of D L McClelland & Co. Solicitors”. In the course of rescuing the Chadwicks I gave full details to the Law Society and Fair Trading. A year earlier Fair Trading investigators had raided the selling agent’s Surfers Paradise office and seized documents as part of an investigation into that firm’s activities and those of an associated financial planning company (whose name appeared in Chadwicks’ documents). Proceedings were launched, but are still before the courts. At the time of the raid the solicitor who had employed McClelland and Mullins, and who had been named in the media as a former associate of a property marketeer described in the Queensland Parliament as “King Con”, admitted receiving conveyancing referrals from that agent. Meanwhile McClelland soon cut his ties with Simply Conveyancing, and found himself under investigation by both Fair Trading and the Law Society. He has until Christmas Eve to appeal the Legal Practice Tribunal’s decision and orders. To date no action appears to have been taken against Anne Mullins or her company.
Gold Coast District Law Association President Ted Skuse this week told The Australian Real Estate Blog, “Solicitors’ illegal fee-sharing has been endemic on the Coast for more than 20 years. McClelland’s fate should be a warning to many local law firms.”