BARRY JOHN JENNER - [2007] SASC 263

Supreme Court of South Australia
(Civil: Application)
In the Matter of BARRY JOHN JENNER
[2007] SASC 263
Judgment of The Honourable Justice Debelle (ex tempore)
9 July 2007
PROFESSIONS AND TRADES - LAWYERS - PRACTISING CERTIFICATES
Practitioner petitioning for own bankruptcy – application for authority to practise as a barrister – whether applicant fit and proper person to practise as barrister – relevant principles – application granted subject to conditions.
Legal Practitioners Act 1981 s 49, referred to.
New South Wales Bar Association v Cummins (2001) 52 NSWLR 279; Ziems v Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279, applied.
re Davis (1947) 75 CLR 409; re Read (2006) 243 LSJS 368, considered.

In the Matter of BARRY JOHN JENNER
[2007] SASC 263
Civil

DEBELLE J. This is an application by a barrister who proposes to petition for his own bankruptcy for authority to continue to practise as a barrister. The application is made pursuant to s 49 of the Legal Practitioners Act 1981 which invests the court with jurisdiction to grant authority to a legal practitioner, who has become bankrupt or to one who is about to become bankrupt, to practise the profession of the law notwithstanding the bankruptcy.
The jurisdiction of the court to permit a bankrupt to practise must be exercised with considerable circumspection. The overriding consideration must be the public interest, that is to say, the protection of the public. The public confidence in the administration of justice must be maintained. The court must have regard to the interests of those members of the public whose clients will consult the legal practitioner. The court must ensure so far as lies within its power that the practitioner is a fit and proper person to practise notwithstanding the bankruptcy or intended bankruptcy. There is another aspect of the public interest to consider. It is to do what is reasonably possible for the purpose of enabling the practitioner to earn an income so that the practitioner may be in a better financial position to discharge the debts due to creditors.
The fact that a legal practitioner has become bankrupt raises real concerns as to whether that practitioner is a fit and proper person to practise. At the same time, it must be remembered that bankruptcy may result from a wide variety of circumstances ranging from dishonesty through incompetence to simple misfortune. It is necessary, therefore, to examine the circumstances in which the person has become bankrupt for the purpose of determining whether those circumstances disclose conduct which is inconsistent with fitness to practise. The purpose of an inquiry under s 49 is not to discipline the practitioner. The Legal Practitioners Act makes separate provision for discipline of a legal practitioner. The purpose of an inquiry under s 49 is to determine whether, notwithstanding the bankruptcy or intended bankruptcy, the legal practitioner is a fit and proper person to practise.
In re Read (2006) 243 LSJS 368 at [20] Besanko J said that the question whether an order should be made under s 49 will have to be decided in the context of proposed conditions that will limit the way in which the applicant is to practise. I respectfully agree. However, the court must take care not to rely unduly on conditions. It must first decide whether the applicant is, notwithstanding the bankruptcy, a fit and proper person. The primary consideration should be whether the legal practitioner has the qualities which equip the practitioner to provide sound legal advice and proper legal representation to members of the public. The conditions may relate to such issues as assistance or supervision of the legal practitioner in relation to his financial affairs or the management of his practice.
The applicant is aged 50 years. He obtained a law degree in 1978. He was admitted to practice on 4 February 1980. In 1991 he obtained the degree of Master of Business Administration at the University of South Australia. He was a partner in the firm of Lynch & Meyer for 11 years from 1982 until he retired from the firm on 31 December 1994. He left the firm on good terms. He was a managing partner of that firm from 1985 until he retired. During the time he was managing partner, the firm joined a national group of solicitors. The applicant was a member of the organising committee of that national group and for two years the co-ordinator of that committee.
The greater part of the applicant’s experience as a legal practitioner has been as counsel. He practised as a barrister during his association with Lynch & Meyer. He has practised only as a barrister since 1 December 1997.
From January 1995 until September 1997 the applicant practised as a sole practitioner operating a practice as a solicitor. In that period his practice essentially centred around the conduct of an action against the auditors of the State Bank of South Australia for negligence in the discharge of their duties as auditors. It was a substantial and complex action. It settled in September 1997.
It is not necessary to go into all of the details of the reasons for the appellant’s bankruptcy. It is sufficient to note the following. For the years ending 30 June 1996, 1997 and 1998 the applicant’s then accountant recommended investments said to be a means of legitimately reducing income tax. The taxation saved in that way was applied to the acquisition and renovation of the applicant’s then matrimonial home. In 2002 the Australia Tax Office issued retrospective rulings declaring the investments the applicant had made to be taxable. The office disallowed the deductions made and imposed a liability for income tax with interest and penalties.
In 1997 the applicant and his first wife separated. The marriage was dissolved in March 2000. The only child of the marriage, a daughter, lives with her mother in Queensland. The applicant has an obligation to pay a child support allowance of approximately $48,500. A property settlement agreed between the applicant and his first wife resulted in his wife taking all of the matrimonial assets, including the matrimonial home. The applicant incurred the debt associated with those assets.
In the period 1988 to 2004 the applicant became involved in several business ventures which failed. These distracted him from his practice as a barrister and his income fell in consequence. He borrowed some $310,000 from his father for one of his business ventures. It was not a success. The applicant’s parents have since died. Although the applicant is a beneficiary of his father’s estate, he has an obligation to re-pay some $300,000 to his father’s estate.
Shortly stated, the applicant’s financial difficulties stem from the settlement of matrimonial property consequent upon the dissolution of his first marriage, substantial liabilities as to the payment of income tax as a result of disallowance of schemes to reduce income tax, a failure to set aside sufficient funds to pay for his income tax as it was incurred from year to year, failed business ventures, a liability for child support, substantial indebtedness on credit cards, and a substantial debt to his father’s estate. His liabilities total almost $1.5 million. The major part of his liabilities is constituted by a liability to the Australian Taxation Office of the order of $848,000.
Part of the applicant’s present financial difficulties stem from the fact that a number of these liabilities have crystallised relatively concurrently with the result that he had an inadequate cash flow to meet the liabilities he was incurring. However, it must be said that part of his financial difficulties plainly results from what can only be described as financial mismanagement. It would be naive to suggest otherwise.
The applicant failed to lodge income tax returns for the years ended 30 June 2000, 2001 until February 2003. The applicant says that the reason for this delay was a loss of confidence in his first accountant and the pressure of business and personal issues. He instructed a new accountant and returns were lodged in 2003 before default notices were issued.
The applicant entered into arrangements with the Australia Taxation Office concerning payment of his outstanding liabilities. He has repaid at least $166,000. However, he has not been able to adhere to the arrangements and discharge the substantial liability. An amount to the order of $848,000 remains.
On three occasions the applicant has failed to renew his practising certificate within the prescribed time. It was largely a consequence of a failure to attend properly to the orderly administration of his practice.
The indebtedness of the applicant is so substantial that it raises a serious question as to his competence to practise. It points to either serious financial incompetence or an inability to keep a proper oversight of his financial affairs or both. His income tax liabilities suggest a lack of financial judgment as well as lack of legal judgment. However, there is no suggestion there was dishonesty in any of his financial dealings. The fact that he has a substantial liability on credit cards indicates a disposition to live at a level beyond his means.
The office of a barrister of the court carries with it functions which demand high standards. They were expressed in these terms by Kitto J in Ziemsv Prothonotaryof the Supreme Court of NSW (1957) 97 CLR 279 at 298:
The Bar is no ordinary profession or occupation. These are not empty words, nor is it their purpose to express or encourage professional pretensions. They should be understood as a reminder that a barrister is more than his client’s confidante, adviser and advocate, and must therefore possess more than honesty, learning and forensic ability. He is, by virtue of a long tradition, in a relationship of intimate collaboration with the judges, as well as with his fellow members of the bar, in the high task of endeavouring to make successful the service of the law to the community. That is a delicate relationship, and it carries exceptional privileges and exceptional obligations. If a barrister is found to be, for any reason, an unsuitable person to share in the enjoyment of those privileges and in the effective discharge of those responsibilities, he is not a fit and proper person to remain at the Bar.
Those remarks were re-affirmed by Spigelman CJ in New South Wales Bar Association v Cummins (2001) 52 NSWLR 279 at [21], after he had expressed the following view:
Honesty and integrity are important in many spheres of conduct. However, in some spheres significant public interests are involved in the conduct of particular persons and the state regulates and restricts those who are entitled to engage in those activities and acquire the privileges associated with a particular status. The legal profession has long required the highest standard of integrity.
There are four interrelated interests involved. Clients must feel secure in confiding their secrets and in trusting their personal affairs to lawyers. Fellow practitioners must be able to depend implicitly on the word and the behaviour of their colleagues. The jurisdiction must have confidence in those who appear before the courts. The public must have confidence in the legal profession by reason of the central role the profession plays in the administration of justice. Many aspects of the administration of justice depend on the trust by the judiciary and/or the public in the performance of professional obligations by professional people.
I respectfully agree. As Spigelman CJ held, even today in a period where other values have become of significance to the registration of the legal profession, the traditional professional paradigm still has a vitality of abiding significance.
At the same time a distinction between personal misconduct and professional misconduct must be noted: Ziems at 290, per Fullagar J. Personal conduct, as Fullagar J noted, may be a ground for preventing a person from continuing to act as a barrister because it may show that the person guilty of it is not a fit and proper person to practice as a barrister: see, for example, re Davis (1947) 75 CLR 409 and the cases cited by Spigelman J in Cummins at [36] to [43]. Although the accumulation of a substantial indebtedness of some $1.5 million does not constitute misconduct, it bespeaks a real lack of financial management and a lack of proper management of financial affairs. It raises questions as to the applicant’s ability to exercise sound judgment in advising others on financial affairs. This is relevant as a reasonable proportion of the applicant’s practice relates to commercial matters. However, it must be recognised that the applicant’s financial mismanagement relates to his personal affairs. He has in the past demonstrated the ability to run a reasonably sized law firm and to co-ordinate the national group of which that firm was part. He successfully ran his own legal practice as a solicitor for a period of two and a half years. He satisfactorily discharged the financial and statutory duties and obligations in respect of each. There is, I think, a sufficient separation of his personal financial affairs from the professional obligations to which a barrister is subject that the applicant’s financial difficulties should not prevent him from continuing to practise.
One very important consideration is that there is no suggestion that the applicant has acted dishonestly. Although he was late in lodging two income tax returns, he remedied that position before the Commissioner of Taxation acted. His liability to the Australian Taxation Office is a liability occasioned by a lack of funds available to pay those liabilities as well as a lack of prudent saving to allow for those liabilities to be paid. Equally importantly, there is no suggestion of any wrongdoing.
The applicant has expressed his willingness to subject himself to a number of conditions if he is permitted to continue to practise. They include a condition that he will submit to the regular supervision of Mr Slattery QC who himself has agreed to provide a written report to the Law Society of South Australia every six months. In addition, the conditions require that he retain an accountant who will manage his financial affairs and assist him in ensuring compliance with his financial and taxation obligations. The accountant is to report to the Law Society on a quarterly basis. Furthermore, there will be a requirement that he complies with the reasonable directions of his trustee in bankruptcy and a further requirement that he limits his business activities to those of a practising barrister. The intent of that last condition is to ensure that the applicant applies his energies to the profession in which he is most likely to succeed.
The applicant has also agreed to a condition that he will not act as a barrister except pursuant to a brief delivered to him by a solicitor. Whilst this condition differs slightly from the terms of the Rules of the South Australian Bar Association, the intent is that he will be provided with work only by one of his peers. In this way, the interests of the public are further safeguarded given that one of the applicant’s peers will exercise a judgment as to whether he has the skills necessary to discharge what is required by the brief.
The applicant has undertaken to comply with the conditions I have named as well as with other conditions. The conditions will be included in the order which I make which will be noted at the foot of these reasons. The conditions are designed to address the factors which have caused the applicant to become bankrupt. He will have financial supervision as well as supervision in the conduct of his practice as a barrister. In making this order, I am not to be taken to be expressing any view which might affect possible disciplinary proceedings against the applicant. I add this rider out of an abundance of caution and emphasise that it has not been suggested that any such proceedings are on foot.
For all of these reasons and not without a great deal of hesitation, I authorise the applicant to continue to practise as a barrister.
I have given serious consideration to the question whether the court itself should not exercise some kind of review every six months for a period of, say, the next three years. However, the orders which will be made will permit the Law Society of South Australia to apply for an order revoking this order should the applicant fail to comply with any of the conditions. That, I think, is a sufficient safeguard of the interests of the public.
Orders as follows:
Upon the undertaking of Barry John Jenner to comply with the conditions hereafter set forth
THE COURT ORDERS that:
1.In the event that Barry John Jenner (hereinafter referred to as “the practitioner”) becomes bankrupt, the practitioner is hereby authorised until further order to practise the profession of law, subject to the following conditions:
1.1 the practitioner’s right of practice is limited to that of a barrister;
1.2the practitioner shall not engage in any other work, business or occupation than that of a barrister;
1.3the practitioner shall not act as a barrister unless he has received instructions to do so from a solicitor;
1.4the practitioner shall be subject to regular supervision and monitoring by Mr Paul Slattery QC;
1.5the practitioner shall ensure that future applications for a practising certificate and for professional indemnity insurance are lodged in a timely and compliant manner with the Registrar of Legal Practitioners at the Law Society of SA in accordance with the prescribed time for doing so;
1.6the practitioner shall not receive or handle moneys directly from clients and, if any are received, he must return those moneys to the client, or provide them to his accountant, Mr Brian Hopping;
1.7the practitioner shall comply with the reasonable directions of his Trustee in Bankruptcy;
1.8the practitioner shall retain Mr Brian Hopping a certified practising accountant, of Hopping’s Pty Ltd, 146 Greenhill Road, Parkside SA 5063 as his accountant from 1 July 2007 and until further order, to manage his financial affairs and to assist him in ensuring compliance with his financial and taxation obligations;
1.9the practitioner shall co-operate with Mr Brian Hopping and provide him with all documentation sufficient to enable the timely filing within the prescribed periods of all future BAS statements and income tax returns with the Australian Tax Office;
1.10subject to the operation of the Bankruptcy Act 1966 the practitioner shall pay all amounts self-assessed or assessed as payable by the Australian Tax Office as and when such payments fall due;
1.11the practitioner shall co-operate with Mr Brian Hopping to ensure that payment for future applications for practising certificates and professional indemnity insurance are made within the prescribed time frame; and
1.12the practitioner shall forthwith advise the Law Society of South Australia should he cease to practise in the manner provided in this order.
2.Mr Paul Slattery QC is to satisfy himself that the practitioner is meeting his professional and business obligations in a timely manner and shall provide a written report to the Law Society on a six monthly basis during the period of the order.
3.Mr Brian Hopping shall provide a written report to the Law Society of South Australia on a quarterly basis as to the practitioner’s compliance with his financial and taxation obligations, the first report to be provided by 31 October 2007 in respect of the quarter ending 30 September 2007.
4.Liberty to apply generally to both the practitioner and the Law Society of South Australia.
5.If the practitioner fails to comply with any of the conditions in paragraph 1 hereof, leave to the Law Society of South Australia to apply for an order revoking this order.