Barber v Law Society of New South Wales (No. 2)

[2001] NSWSC 861

CITATION:	Barber v Law Society of New South Wales (No. 2) [2001] NSWSC 861
FILE NUMBER(S):	SC 10479/00
HEARING DATE(S):	14/12/00, 22/3/01, 29/6/01, 3/7/01
JUDGMENT DATE:	2 October 2001
PARTIES :	Charles William BARBER (Plaintiff) Law Society of New South Wales (Defendant)
JUDGMENT OF:	Bell J at 1

COUNSEL :	D. Higgs SC / K. Rees (Plaintiff) S. Epstein SC / B. Skinner (Defendant)
SOLICITORS:	Burn & Swift Solicitors (Plaintiff) A S Brown Solicitor (Defendant)
CATCHWORDS:	Claim upon the Solicitor's Fidelity Fund - failure to account - administrative law challenge to the finding by the Law Society Council that the solicitor's acts or omissions were not dishonest
LEGISLATION CITED:	Consumer Claims Tribunals Act 1987 (NSW) Controlled Substances Act 1984 (SA) Legal Profession Act 1987 (NSW)
CASES CITED:	Abebe v Commonwealth (1999) 197 CLR 510 Barber v the Law Society of New South Wales [2000] NSWSC 1164 East End Real Estate Pty Limited v CE Health Casualty and General Insurance Limited (1993) 7 ANZ Insurance Cases 61-151 Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 GIO (NSW) v RJ Green & Lloyd Pty Ltd (1965) 114 CLR 437 Laurent v The Law Society of New South Wales [2000] NSWSC 1103 Levinge v Director of Custodial Services (1987) 9 NSWLR 546 McCann v Switzerland Insurance Australia Limited (1999) 10 ANZ Insurance Cases 61-432 McMillan v Joseph (1987) 4 ANZ Insurance Cases 60-822 Minister for Immigration v Eshetu (1999) 197 CLR 6111 Probiz Business Software Pty Limited v Magee (unreported) NSWSC, 27 February 1998 Puhlhofer v Hillingdon London Borough Council [1986] AC 484 Stego Pty Ltd v Law Society of NSW (1994) 35 NSWLR 466 Vassiliadis v Law Society of New South Wales (1997) 41 NSWLR 383 Vishnevski v The Council of the Law Society of New South Wales (unreported) NSWSC, Barr J, 20 February 199 Whitfield v The Law Society of NSW (unreported) NSWSC, Greg James J, 4 December 1998
DECISION:	1. Declaration that the finding of the defendant on 23 November 2000 pursuant to section 79A(2)(b) of the Legal Profession Act 1987 (NSW) is invalid and of no force and effect; 2. direct the defendant is to fulfil its duty by making a finding pursuant to section 79A(2)(b) of the Legal Profession Act 1987 (NSW) according to law; 3. appeal stood over generally; 4. declaration sought in prayer 5 of the third amended summons is declined; 5. defendant is to pay the plaintiff's costs as agreed or assessed

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J
Tuesday 2 October 2001
10479/00 - Charles William BARBER v THE LAW SOCIETY OF NEW SOUTH WALES (No 2)

JUDGMENT
HER HONOUR:

1 These proceedings were commenced by summons filed on 21 September 1999 by way of appeal pursuant to s 90D(3)(a) of the Legal Profession Act 1987 (NSW) (“the Act”) against a decision of the Council of the Law Society (“the Society”) wholly disallowing the plaintiff’s claim upon the Solicitors’ Fidelity Fund (“the Fund”).

2    The plaintiff made a claim on the Fund on 12 December 1994 in the amount of $325,000, plus interest, being monies said to have been received by or entrusted to Justin Birk Hill, solicitor (“the solicitor) in the period 1984 - 1992. It was the plaintiff’s claim that the solicitor had told him the monies would be invested in the construction of villas in Queensland. The plaintiff claimed that in June 1994 the solicitor telephoned him and informed him that he had been arrested and that his assets had been seized and he was unable to pay anything to the plaintiff at all. The claim was submitted on a pro forma document verified on oath by the plaintiff (“the claim form”).

3 On 22 October 1996 the Society disallowed the plaintiff’s claim on the basis that the monies were not received by or entrusted to the solicitor in the course of his practice. The Society made no finding as to the dishonesty or otherwise of the solicitor’s acts or omissions pursuant to s 79A(2)(b) of the Act. Following this determination the plaintiff provided further information to the Society in support of his claim. On 27 February 1998 the Society affirmed its decision disallowing the plaintiff’s claim. Again, no finding was made as to dishonesty (or no) for the purposes of s 79A(2)(b) of the Act.

4    Thereafter the plaintiff commenced the present proceedings. The history of the proceedings is outlined in Barber v the Law Society of New South Wales [2000] NSWSC 1164. Relevantly, prior to the appeal coming on for hearing, the Society advised the plaintiff of its intention of making a determination as to the question of dishonesty for the purposes of s 79A(2)(b) of the Act. The plaintiff was invited to forward any documents or submissions to the Society for its consideration. Written submissions together with an affidavit sworn by Graeme Cunynghame, formerly a member of the NSW Police Service, were submitted to the Society in support of the plaintiff’s claim.

5    On 23 November 2000 the Society’s Fidelity Fund Management Committee resolved in these terms:

“ RESOLVED that the Committee finds that Mr Hill was not dishonest in relation to the claimant’s monies.”

6 Section 74 of the Act provides that the Society may by resolution delegate all or any of its functions in relation to the Fund to a management committee. These proceedings have been conducted upon the footing that the Fidelity Fund Management Committee was acting pursuant to a valid delegation.

7    On 22 March 2001 the plaintiff sought, and was granted leave, to further amend his summons so as to contend that the Society’s resolution of 23 November 2000 (“the November resolution”) was invalid and of no force of effect.

8    Ultimately, on 29 June 2001 the plaintiff was given leave to file in court a third amended summons. By that summons the plaintiff claims:

1. An order that the time for appealing against the Defendant’s decision be extended.
2. An order that the hearing of the appeal be expedited.
3. An order that the appeal be allowed.
4. A declaration that the failure of Justin Birk Hill, solicitor, to repay $325,000 entrusted to him by the plaintiff amounted to ‘a failure to account’ within the meaning of ss79A(1) and 79A(4) of the Legal Profession Act 1987 (NSW).
5. A declaration pursuant to s79A(2)(a) of the Legal Profession Act 1987 (NSW) that the ‘failure to account’ referred to in para four arose from an act or omission of Justin Birk Hill for which he had been convicted of a crime or an offence involving dishonesty.
6. Alternatively to para 5:
(a) a declaration that the finding of the defendant on 23 November 2000 pursuant to s79A(2)(b) of the Legal Profession Act 1987 (NSW) is invalid and of no force or effect;
(b) an order pursuant to s65 of the Supreme Court Act 1970 (NSW) directing the defendant to fulfil its duty by making a finding pursuant to s79A(2)(b) of the Legal Profession Act 1987 (NSW) according to law.

9    Attached to the plaintiff’s claim form were statements made by him to the police on 27 July 1994 (“the first police statement”) and 30 August 1994.

10    The plaintiff’s claim, as particularised in the first police statement, was that he invested the sum of $5,000 in cash with the solicitor in 1984. He invested further monies, namely the sums of $5,000, $122,000, $15,000, $30,000, $20,000 and $100,000, with the solicitor between 1984 and May 1992. The sum of $100,000 was made up of the proceeds of sale of a property at Godwin Beach, Caboolture in Queensland together with a further cash sum of $15,000.

11    In the claim form the plaintiff asserted that the solicitor had informed him that the moneys were to be applied towards investment in villas in Queensland. In answer to Q 12 (concerning whether any demand had been made on the borrower of investment funds) the plaintiff stated: “Not applicable. Hill informed me the moneys were being used by him”.

12    In the first police statement the plaintiff described the arrangement as one in which he invested cash sums with the solicitor in return for interest payments calculated at the rate of 16% per annum. The solicitor told the plaintiff that the interest payments were “clear of tax”. The plaintiff said that he inquired of the solicitor “How can you back yourself up if you go into liquidation?”. He said the solicitor responded by saying “I am a member of the Law Society and they have a Fidelity Fund and my receipt will be paid out. The investment is guaranteed. I pay $5,000 into the law Society’s Fidelity Fund each year and with my official receipt and signature they’ll pay the amount shown”. The plaintiff said that he asked the solicitor “Do you loan money?” and the solicitor replied “Yes, bridging loans mostly”.

13    It was the plaintiff’s account that he withdrew sums of money from his bank from time to time and kept it at home until he had a sufficient sum to invest with the solicitor. In the first police statement he said: “On one occasion I took some money to a dance at Petersham Town Hall and I handed Justin $122,000 in a plastic bag. Justin said words to the effect, “you’re half an hour late but I waited for you as you have never let me down before.”

14    In a statutory declaration sworn on 12 February 1998 the plaintiff sought to clarify the account given in the first police statement concerning the circumstances in which he handed the sum of $122,000 to the solicitor. He said that the police statement had been condensed from a deal of material and that the paragraph dealing with this topic did not accurately reflect the course of events. He explained that he had attended the Seniors’ Dance at Petersham Town Hall in the morning and that he had taken the sum of $122,000 with him. Thereafter he had called at the solicitor’s office in Kogarah and handed the cash to him and been given a receipt for the same.

15    In the first police statement the plaintiff asserted that he had retained the solicitor to act on his behalf upon the sale of a property which was registered in his son’s name at Godwin Beach, Caboolture, Queensland.

16    Jean Sayer was appointed Receiver for the solicitor on 10 October 1994. Her report to the Society dated 19 April 1995 set out the results of inquiries concerning the sale of a property registered in the name of the plaintiff’s son at Godwin Beach to Dudley Glyn Lovekin for a consideration of $95,000.00. Contracts were exchanged on 29 July, 1991. Ms Sayer noted that the balance of the proceeds of sale were paid on settlement, on 28 August 1991, in the amount of $85,383.05 at the direction of the solicitor by cheque made out in favour of Kurts Developments Limited. These funds were subsequently applied to the purchase of a property on the Gold Coast. This latter property was seized by the NSW Crime Commission.

17    In the first police statement the plaintiff said that after the Godwin Beach property was sold the solicitor said words to the effect, “Will you invest the proceeds of the sale with me?”. The plaintiff said he asked “can you pay me the interest?” and the solicitor replied “Yes, no trouble”. The plaintiff said that he invested the $85,000 (the settlement monies) with the solicitor who issued him with a receipt for this amount. A short time later the plaintiff added a further $15,000 to this sum making a total of $100,000. The solicitor issued a fresh receipt in the amount of $100,000.

18    In the claim form the plaintiff stated that he first became aware of the failure to account by the solicitor in November 1992. He had been unable to locate the solicitor. In subsequent contact with him the solicitor had made promises to repay but had failed to do so. In June 1994 the plaintiff said that he had received a telephone call from the solicitor in which the latter said that he had been arrested on 9 June 1994 on “trumped up” charges and that his assets had been seized leaving him unable to repay the plaintiff. The plaintiff inquired about the failure to make interest payments and the solicitor said that his assets had been seized about two years earlier. The plaintiff stated that interest payments had been duly made until 31 August 1992.

19    The plaintiff gave a more detailed account concerning his dealings with the solicitor after regular interest payments ceased in his first police statement. He said that In December 1993 the solicitor contacted him and arranged a meeting at a park. On this occasion the solicitor gave him an account: “I had a slump in sales. I’ve paid too much for the land in Queensland. I’m selling it at cost but sales are nil. I’ve got my house at 8 The Grand Parade on the market. It’s for sale and when I am successful I’ll pay you out.” The plaintiff went on to state that on 22 February 1994 he saw the solicitor who paid him the sum of $8,000 leaving a shortfall in interest due of $5,000. The solicitor said that this was all he could afford. On this occasion the solicitor wrote out a receipt which he dated “28.8.91” in the sum of $325,000 and signed it. The receipt states “moneys to be held in trust for an indefinite period” and bore the solicitor’s stamp on the back “Justin HILL Solicitor 10 Gray Street Kogarah 5886390 PO Box 69 Kogarah.” The plaintiff said that he did not read the receipt and did not note the word “indefinitely” recorded on it. This was not part of the terms of his agreement with the solicitor. The agreement was that the plaintiff might receive his funds on demand. The amount of $325,000 represented the sum then owed to the plaintiff by the solicitor.

20    The plaintiff said that in the course of his dealings with the solicitor he was issued by him with a number of receipts. The solicitor would take back the receipt previously issued and hand the plaintiff a fresh one with each deposit. Copies of various of these receipts were attached to the plaintiff’s claim.

21    The plaintiff said that he received a further payment from the solicitor (paid over by the solicitor’s mother) in the amount of $8,125.00 in cash on 22 May 1994.

22 The plaintiff’s appeal, pursuant to s 90D(3)(a) of the Act, is against a decision by the Society wholly disallowing his claim upon the Fund. Section 80(1) provides that the Fund is held, and to be applied, for the purpose of compensating persons who suffer pecuniary loss because of a failure to account or a dishonest default. Dishonest default is dealt with in s 79B of the Act. It is not suggested that the plaintiff’s claim arises by virtue of a dishonest default by the solicitor.

23 The plaintiff’s claim is based upon a contention that he suffered pecuniary loss because of a failure to account by the solicitor. Failure to account is defined in s 79A of the Act. Relevantly, that section is in these terms:

79A Meaning of ‘failure to account’
(1) In this division, a reference to a failure to account is a reference to a failure by a solicitor to account for, pay or deliver money or other valuable property received by, or entrusted to, the solicitor or an associate in the course of the solicitor’s practice (in the case of an associate, being money or valuable property under the direct or indirect control of the solicitor).
(2) This section applies only to a failure to account that arises from an act or omission of the solicitor or associate:
(a) for which the solicitor or associate has been convicted of a crime or an offence involving dishonesty, or
(b) which the Law Society Council has found to be dishonest.
(3) A finding by the Law Society Council under subsection 2(b) that an act or omission is, or is not, dishonest is final and conclusive.
(4) This section applies whether the money or other property was received by the solicitor or associate as trustee, agent, bailee or stakeholder or in any other capacity.

24    No claim upon the Fund may succeed unless the failure to account arose from an act or omission of the solicitor (or associate) for which the solicitor (or associate) has been convicted of a crime or an offence involving dishonesty or which the Law Society Council has found to be dishonest; Vassiliadis v Law Society of New South Wales (1997) 41 NSWLR 383.

25 The plaintiff claims a declaration that the solicitor’s “failure to account” arose from an act or omission for which he had been convicted of a crime or an offence involving dishonesty for the purposes of s 79A(2)(a) of the Act.

26 On 31 July 1996 the solicitor was convicted of an offence contrary to s 32(1)(b) of the Controlled Substances Act 1984 (SA) of taking part in the production of methylamphetamine and of a conspiracy to produce 3, 4 methylenedioxymethamphetamine contrary to the same provision of that Act.

27 Section 32(1) of the Controlled Substances Act 1984 (SA) provides:

(1) A person shall not knowingly -
(a) manufacture or produce a drug of dependence or a prohibited substance; or
(b) take part in the manufacture or production of such a drug or substance; …

28 It was the plaintiff’s submission that the “failure to account” need not be caused by the acts for which he was convicted but there must exist a reasonable relationship the two. In this case it was submitted that the solicitor’s inability to repay the monies received from or entrusted to him by the plaintiff arose from the confiscation of his property following his arrest. The solicitor’s subsequent conviction for an offence contrary to s 32(1)(b) of the Controlled Substances Act 1984 (SA) was said to bring this claim within the terms of s 79A(2)(a) of the Act.

29    It was contended that the words “arises from” define a wide nexus between the failure to account and the conviction for a crime or offence involving dishonesty. In this respect my attention was drawn to the judgment of James J in Probiz Business Software Pty Limited v Magee (unreported) NSWSC, 27 February 1998 dealing with the scope of the expression “arises from” in the definition of “consumer claim” for the purposes of the Consumer Claims Tribunals Act 1987 (NSW). His Honour considered them to be words of considerable width, meaning to “have a reasonable relationship to and to exist in consequence of”.

30    Reliance was also placed on the judgment of Hunter J in McCann v Switzerland Insurance Australia Limited (1999) 10 ANZ Insurance Cases 61-432. His Honour was in that case dealing with the terms of an insurance policy which indemnified the insured “against all loss … arising from any claim”. His Honour accepted that a policy expressed to cover the insured against losses “arising out of” certain perils did not require the loss to be proximately caused by the peril. It was sufficient that there exist a “non-coincidental nexus” between the peril and the loss.

31    The plaintiff contended that the phrase “arises from” should be construed as requiring no more than a “non-coincidental” nexus between the failure to account and the act or omission of the solicitor for which he had been convicted of a crime or an offence involving dishonesty. Further support for this approach was said to derive from GIO (NSW) v RJ Green & Lloyd Pty Ltd (1965) 114 CLR 437 per Barwick CJ (with whom McTiernan and Taylor JJ agreed) at 443:

“… I think the expression “arising out of” must be taken to require a less proximate relationship of the injury to the relevant use of the vehicle than is required to satisfy the words “caused by”. It may be that an association of the injury with the use of the vehicle which it cannot be said that that use was causally related to the injury may yet be enough to satisfy the expression “arise out of” as used in the Act and in the policy.”

32 The conviction of which s 79A(2)(a) speaks is one for a crime or offence involving dishonesty. It seems to me that the crime or offence the subject of the conviction must be one which answers that description without further inquiry. Offences involving dishonesty embrace those such as stealing and robbery in which the property of another is taken with the intention thereby of permanently depriving the rightful owner of it and offences where property or some advantage is gained through indirect means such as false pretences, conspiracy to defraud and the like. Glanville Williams notes that while the great majority of offences of dishonesty relate to property it is not true to say that all do; Textbook of Criminal Law, 2nd Ed, Stevens, Lond. 1983, at p 699. He cites as an illustration of an offence of dishonesty not involving property the commission of perjury in order to avoid going to prison.

33 I am not persuaded that on a generous interpretation of the concept of a crime or offence involving dishonesty that a conviction for the offence of taking part in the manufacture of a prohibited drug (or conspiring to produce) contrary to s 32(1)(b) of the Controlled Substances Act 1984 (SA) might properly come within the terms of s 79A(2)(a) of the Act.

34 The plaintiff’s administrative law challenge to the November resolution was advanced upon a number of grounds. It was submitted that the November resolution was not a valid determination for the purpose of s 79A(2)(b) of the Act. From the way in which the November resolution was framed I was invited to infer that the Society had directed itself to the wrong question, namely, to a general consideration of whether the solicitor had acted dishonestly with respect to the plaintiff’s moneys and not to a consideration of whether his failure to account arose as the result of one or more identified acts or omissions which was dishonest. I will return to this.

35    It was also submitted on the plaintiff’s behalf that the Committee had taken into account irrelevant matters in arriving at the November resolution.

36    The materials which had been before the Committee at the time of the November resolution were in evidence before me. These included a report prepared by Anne Siddons, solicitor, and David McKillop, legal officer, dated 16 November 2000 (“the Siddons/McKillop report”). Ms Siddons is the Manager of the Fund. On the plaintiff’s behalf I was invited to infer that the Committee had adopted the reasoning of the Siddons/McKillop report, namely, that the solicitor had not acted dishonestly in relation to the plaintiff’s monies because they had been received by way of a personal loan. It was submitted that a view that the solicitor’s conduct was not relevantly dishonest was only explicable upon such a basis.

37    In the plaintiff’s submission it was not open to the Society to determine the question of whether the solicitor’s acts or omissions giving rise to the failure to account were dishonest by reference to a consideration of whether they had been received by or entrusted to him in the course of his practice.

38 Two discrete issues were said to arise for determination by virtue of the definition of “failure to account” for the purposes of s 79A of the Act: (i) were the monies invested by the plaintiff with the solicitor received by the solicitor “in the course of the solicitor’s practice” and (ii) was the solicitor’s failure to account something which “arises from” an act or omission which the Society has found to be dishonest. On the plaintiff’s behalf it was submitted that these two issues are factually exclusive. Thus, the question of dishonesty should be determined without reference to whether the funds had been entrusted in the course of the solicitor’s practice (alternatively, it was put that this latter question should be determined upon the assumption that the funds had been entrusted in the course of the solicitor’s practice). To do otherwise was said to deprive the plaintiff of the benefit of his right of appeal pursuant to s 90D(3) of the Act on the issue of entrustment in the course of practice.

39 In the plaintiff’s submission “dishonest” for the purposes of s 79A(2)(b) of the Act should be given a meaning consistent with that given to it by Cook P McMillan v Joseph (1987) 4 ANZ Insurance Cases 60-822 namely, that the actions of a solicitor would be dishonest if the solicitor “must have realised that his actions (were) not straight forward but underhand and not only legally but also morally wrong”. On the plaintiff’s behalf reliance was also placed on the judgment of Rolfe J in East End Real Estate Pty Limited v CE Health Casualty and General Insurance Limited (1993) 7 ANZ Insurance Cases 61-151 in which his Honour observed that conduct may be dishonest if it is discreditable in the sense of being at variance with honourable dealing.

40 In Mr Higgs’ submission it was dishonest for the solicitor not to inform the plaintiff that he was engaged in the manufacture of methylamphetamine at the time the plaintiff was investing funds with him. The solicitor’s illegal activities exposed him to a continuing risk of arrest and to the confiscation of his assets. Understood in this way, it was submitted that the solicitor’s conduct might relevantly be found by the Society for the purposes of s79A(2)(b) to be dishonest notwithstanding a view that the plaintiff’s funds had been not received by or entrusted to the solicitor in the course of the solicitor’s practice. It is to be noted that this submission necessarily carries with it the contention that the expression “failure to account” for the purpose of s 79A(2) of the Act does not bear the meaning given to it in s 79A(1) of the Act. The Society did not submit to the contrary on this latter point. I approach the matter on this basis having regard to the way the case was argued.

41    In Vassiliadis consideration was given to the scope of the right of appeal pursuant to s 88(4) of the Act as it then stood. It has not been suggested that the terms of s 88(4) differed in any relevant respect from the provisions of s 90D(3) of the Act. In that case the Society had neither made a finding as to receipt or entrustment in the course of the solicitor’s practice or the question of dishonesty for the purpose of s 79 of the Act (which was in like terms to s 79A(2)(b)).

42    Sheller JA (in a judgment with which Dunford AJA and Sperling AJA agreed) in Vassiliadis observed at 387:

“The ultimate questions remains the same, namely whether the claimant is entitled to compensation from the fund having suffered “pecuniary loss because of a failure to account”. The Act stated clearly what was meant by failure to account. Relevantly it could only be a failure arising from an act or omission of the solicitor or associate which the Law Society Council had found to be dishonest. A challenge on appeal to such a finding would have led nowhere. If the Council had not found the act or omission to be dishonest, the fact that the court did so find would not bring the failure within the definition of failure to account. Equally, if the Council had found that the act or omission was dishonest, the fact the court found otherwise would not take it outside the definition. In short, the Fidelity Fund could only be applied for the purpose of compensating persons who suffered pecuniary loss ‘because of a failure to account’. Unless that definition was satisfied there was no basis upon which the court could intervene to uphold a claim.”

43 The court rejected a submission that the right of appeal conferred by s 88(4) (now s 90D) of the Act had been rendered almost nugatory. Sheller JA cited the observations of Windeyer J in Stego Pty Ltd v Law Society of NSW (1994) 35 NSWLR 466 at 469B with approval in which his Honour indicated some of the findings which were susceptible to challenge on appeal. Those included a finding that there was no pecuniary loss, or that there was no solicitor-client relationship, or that there was no entrustment of monies or property to a solicitor.

44    In the plaintiff’s submission the acknowledgment in Vassiliadis that an unsuccessful claimant might appeal against a finding of no entrustment lent support to the contention that the question of dishonesty for the purpose of s 79A(2)(b) of the Act was to be determined without reference to a consideration of the circumstances in which the solicitor came to be in receipt of the funds (or, alternatively, upon an acceptance that they had been entrusted in the course of the solicitor’s practice). I am not persuaded that this is so.

45    I consider that there is force to the Society’s contention that the question of dishonesty is a question of fact and that the circumstances in which the solicitor came to receive or be entrusted with the funds may bear relevantly on the determination of whether his act or omission giving rise to the failure to account was dishonest. In this respect, while not conceding that it had adopted the reasoning in the Siddons/McKillop report, it was the Society’s submission that a finding that the solicitor’s act/s and or omission/s (from which the failure to account arose) were not dishonest because the monies had been lent to him personally was open. I accept that to be the case. This seems to me to accord with the reasoning of Greg James J in Whitfield v The Law Society of NSW (unreported) NSWSC, 4 December 1998 at pp 16 & 17.

46    It was also the Society’s contention that it had been open to it to reject the plaintiff’s account as set out in his claim form and subsequent statements in its entirety. Mr Epstein pointed to cases such as Abebe v Commonwealth (1999) 197 CLR 510 where a challenge upon the grounds of Wednesbury unreasonableness failed, the Court holding that it had been open to the Refugee Review Tribunal to refuse to act upon the appellant’s claims.

47 In the light of this contention Mr Higgs invited me to embark upon a hearing of the plaintiff’s s 90D(3) appeal at the same time as the administrative law challenge to the November resolution. In his submission, in the event that I were to hold that the plaintiff had entrusted funds to the solicitor in the course of the solicitor’s practice, it would not be open to the Society to defend a Wednesbury challenge to the November resolution upon the footing that it had been open to it to reject the whole of the plaintiff’s account. I am not persuaded that is so. However, in any event, I accepted Mr Epstein’s submission that one might only seek to revisit the determination relating to the entrustment of funds by way of appeal pursuant to s 90D(3) of the Act in a case where the solicitor had been convicted of an offence involving dishonesty for the purpose of s 79A(2)(a) or where the Society had made a finding of dishonesty for the purpose of s 79A(2)(b); Vassiliadis; see too Vishnevski v The Council of the Law Society of New South Wales (unreported) NSWSC, Barr J, 20 February 1998; Whitfield v The Law Society of NSW (unreported) NSWSC, Greg James J, 4 December 1998; Laurent v The Law Society of New South Wales [2000] NSWSC 1103.

48    The scope for successful challenge to a finding of fact made by an administrative body upon Wednesbury grounds is closely confined; Minister for Immigration v Eshetu (1999) 197 CLR 6111 per Gleeson CJ and McHugh J at paras 40 - 45, Gummow J at paras 121 - 126. The court will intervene in a case where the determination is perverse; Eshetu at para 41 citing the judgment of Lord Brightman in Puhlhofer v Hillingdon London Borough Council [1986] AC 484 at 518.

49    In the Society’s submission the determination that the solicitor had not acted dishonestly in relation to the plaintiff’s funds could not be characterised as perverse. In support of the contention that it had been open to it to reject the plaintiff’s account in its entirety my attention was drawn to what were said to be inconsistencies, in some instances amounting to glaring improbabilities, in the various accounts which the plaintiff had given. An administrative decision maker just like a judicial decision maker was said to be permitted to reject an account even where it had not been the subject of challenge. In this respect Mr Epstein referred to Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 per Samuels JA at 586 and Levinge v Director of Custodial Services (1987) 9 NSWLR 546 per McHugh JA at 560.

50 In the light of the material which was before the Society on 23 November 2000 concerning the proceeds of sale of the Godwin Beach property I would incline to the view that for it to have approached the determination of dishonesty for the purpose of s 79A(2)(b) of the Act upon the basis that it was not satisfied that any funds had been received by the solicitor on the plaintiff’s behalf was perverse. It is not apparent that the Society approached the November resolution on this basis.

51 I return to the challenge to the form of the Society’s November resolution. Section 79A(2)(b) of the Act refers to a failure to account that arises from an act or omission of the solicitor (or associate) which the Society has found to be dishonest. It is the finding that an act or omission is, or is not, dishonest which is made final and conclusive by operation of s 79A(3) of the Act. In this case the Society found: “that Mr Hill was not dishonest in relation to the claimant’s moneys”.

52 In Mr Epstein’s submission although the wording of the Society’s November resolution does not mirror the terms of s 79A(2)(b) of the Act this does not invalidate it. It must be taken that the Society found that no act or omission of the solicitor giving rise to any failure to account was dishonest.

53 The plaintiff’s claim upon the fund was in respect of a failure to account for sums entrusted by him to the solicitor over a period of years. As I have noted I accept the Society’s submission that, in determining the question of dishonesty for the purpose of s 79A(2)(b) of the Act, it was open to it to consider the circumstances in which the solicitor came to be in receipt of the plaintiff’s funds. It flows from this that the act/s and or omission/s which gave rise to the failure to account may be characterised in respect of some part of the plaintiff’s claim as dishonest and in respect of other parts of the plaintiff’s claim as not being dishonest. In this respect I note that the Society in determining a claim may wholly or partly allow it; s 80(3)(b) of the Act.

54    The material before the Society in support of the plaintiff’s claim included that he instructed the solicitor to act for him upon the conveyance of the Godwin Beach property which was registered in the name of his son. On Ms Sayers’ report it is open to conclude that the solicitor did not pay the balance of settlement monies into his trust account but rather that he applied the same otherwise than in accordance with a direction from his client. It may be that the act or omission giving rise to the failure to account in respect of the balance of settlement monies from the sale of the Godwin Beach property is to be differently characterised in terms honesty to the act or omission giving rise to the failure to account for the sums of cash said to have been handed to the solicitor.

55 The terms of the Society’s November resolution do not identify the act/s and or omission/s giving rise to the failure to account with respect to the sums which from time to time were received by or entrusted to the solicitor. That the finding “Mr Hill was not dishonest in relation to the claimant’s moneys” is not necessarily to the point for the purposes of s 79A(2)(b) of the Act may be illustrated by reference to the proceeds of sale of the Godwin Beach premises. On one view (which I understood Mr Epstein to advert to in the course of oral submissions) the proceeds of the sale of the Godwin Beach premises were not the plaintiff’s moneys. This is not to say that the plaintiff might not establish that he had suffered pecuniary loss by reason of the failure to account for these funds.

56 I have concluded that the Society’s November resolution is not a valid determination for the purpose of s 79A(2)(b) of the Act. In a case where sums have been received by or entrusted to the solicitor over a period of years in differing circumstances it seems to me to be necessary for the Society to determine with respect to each discrete part of a claimant’s claim whether the act or omission giving rise to the failure to account is, or is not, dishonest.

1. I declare that the finding of the defendant on 23 November 2000 pursuant to section 79A(2)(b) of the Legal Profession Act 1987 (NSW) is invalid and of no force and effect;

2. Pursuant to s 65 of the Supreme Court Act 1970 I direct the defendant is to fulfil its duty by making a finding pursuant to section 79A(2)(b) of the Legal Profession Act 1987 (NSW) according to law;

3. Stand the appeal over generally;

4. I decline to make the declaration sought in prayer 5 of the third amended summons;

5. The defendant is to pay the plaintiff’s costs as agreed or assessed.

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Last Modified: 10/03/2001