Ex Parte Law Society of Tasmania

[1998] TASSC 47

47/1998

PARTIES:  McCULLOCH & McCULLOCH (a firm)
  LAW SOCIETY OF TASMANIA, The (ex parte)

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  M273/1997
DELIVERED:  1 May 1998
HEARING DATE/S:  20 April 1998
JUDGMENT OF:  Cox CJ

CATCHWORDS:

Professions and Trades - Lawyers - Disciplinary proceedings - Statutory proceedings - Tasmania - Order that firm in default pay expenses of managing and realising securities for payment into Court fund - Whether statute confers power to make order - Whether order premature.

Legal Profession Act 1993 (Tas), s111(4).
Re Hurburgh (No 2) 69/1997, referred to.
Aust Dig Professions and Trades [134].

REPRESENTATION:

Counsel:
           Applicant (Solicitors' Trust):                 C A Cunningham
           Respondent (Law Society):  K B Procter
           Respondent (The Firm):  D R Wallace
Solicitors:
           Applicant (Solicitors' Trust):                 Simmons Wolfhagen
           Respondent (Law Society):  Murdoch Clarke Cosgrove & Drake
           Respondent (The Firm):  Wallace Wilkinson & Webster

Judgment category classification:
Court Computer Code:  
Judgment ID Number:  47/1998
Number of pages:  3

Serial No 47/1998
File No M273/1997

IN THE MATTER OF
McCULLOCH & McCULLOCH (a firm)
EX PARTE THE LAW SOCIETY OF TASMANIA

REASONS FOR JUDGMENT  COX CJ

1 May 1998

On 7 November 1997, Wright J made an order under the Legal Profession Act 1993 ("the Act"), s111(1) declaring the firm of McCulloch and McCulloch ("the firm") to be in default and ordering that a Court fund be established under s111(2) and that any moneys standing to the credit of any trust bank account or trust deposit account of the firm relating to four numbered loans in its mortgage register be paid into the fund.

The Solicitors' Trust has now applied for orders that the mortgages securing the loans in question be transferred to it by the two practitioners who were members of the firm when the mortgage loans were made in the circumstances constituting the default and for ancillary orders, including one that the Solicitors' Trust realise the securities as soon as reasonably practicable and pay the proceeds of realisation into the Court fund.  The other parties to the litigation, namely the Law Society and the two members of the firm (although one has not been a member of it since 18 April 1997), consented to these orders.  The Solicitors' Trust also sought an order that the two McCullochs should pay to the Solicitors' Trust its reasonable expenses in attending to the management and realisation of the securities in question.  This order the latter opposed.  The Solicitors' Trust submitted that I had power to make it by virtue of s111(4) which provides:

"(4)     If a Court fund is established in respect of a firm or legal practitioner corporation, the Supreme Court may make any order specified under section 119 (2)."

Counsel for the McCullochs submitted that the Court had no specific power to make such an order and therefore lacked jurisdiction; but that even if it did have jurisdiction, it would be premature to make such an order at this stage.  As to the question of jurisdiction, he adverted to Re Hurburgh (No 2) 69/1997 where Zeeman J had occasion to consider the power of the Court where a default declaration had been made, as had an order establishing a Court fund under s111(2), to order that the former solicitor should not be employed with any firm or legal practitioner corporation.  His Honour concluded that the Court's powers to make orders under s119(2) were insufficient to ground jurisdiction for such an order.  That subsection is in the following terms:

"119 ¾ (1) ...

(2)  On the hearing of an application in respect of a legal practitioner, a judge may make any or all of the following orders ¾

(a)      an order authorizing the Council to serve a notice in writing ¾

(i)on the manager of a bank or other financial institution in which a firm or legal practitioner corporation keeps a trust financial institution account prohibiting the bank or other financial institution from permitting a withdrawal from, or any other dealing with, that account (other than the deposit of money into that account) unless the judge otherwise directs; or

(ii)on a person who holds on behalf of that firm or legal practitioner corporation any property (other than money in that trust financial institution account) prohibiting any dealing with that property unless the judge otherwise directs;

(b)      an order appointing a person as manager of the practice of that legal practitioner;

(c)      an order authorizing the Council to suspend the legal practitioner from practising as a legal practitioner for such period as is specified in the order;

(d)      an order quashing or varying a notice served by the Council under section 109;

(e)      any other order it thinks appropriate."

Zeeman J rejected the submission that s119(2)(e) authorised the making of the order sought from him.  At 3 - 4 he said:

"... I consider that the range of orders which may be made is limited by the apparent object of s111(4).  As was said by the Full Court in Campbell v Epping [1970] Tas SR 215 at 224 'the legislative purpose and intent of a statute as revealed by its content is the primary object of consideration.' The legislative purpose and intent of s111(4) is to be implied from the circumstances in which the power conferred by it arises. Where a Court fund is established, s111(5) requires that certain moneys be paid into it. A number of the express powers conferred by s119(2) are capable of being exercised in aid of ensuring that that requirement is met. In my view, the power conferred by s111(4) is to be construed as a power to make such orders of the type specified in s119(2) as will operate so as to ensure that all moneys required to be paid into the Court fund are paid into it or which are reasonably incidental to the administration of the Court fund."

The order sought in the Hurburgh case did not, in his view, fall into either of those categories.  In the present case, however, I am of the view that an order making provision for the payment of the expenses of realising moneys destined for the Court fund can be said to be reasonably incidental to the administration of that fund.  I rule that I have jurisdiction.

Counsel for the firm then submitted that such an order was premature.  He relied on the Land Titles Act 1980, ss58 and 60 by virtue of which he submitted that the Solicitors' Trust would acquire all the rights and remedies of the mortgagee and if, at the end of the day, the expenses of attending to the management and realisation of the securities in question were not met, then would be the time to seek reimbursement from the firm under the Act, s111(8). In determining what amount is recoverable thereunder, the Court is required by s111(9) to take into account a number of matters, including matters relating to a "fiduciary default" and any investigations into that default. "Fiduciary default" is defined as (inter alia) a misapplication of money held on trust by a legal firm, which this default clearly is.  It was submitted that many of these matters are unknown at this stage and are certainly not the subject of evidence.  Furthermore, it was submitted that losses may not be due to such a default, but rather to a decrease in land values and may be due to other factors.

It is not clear to me what expenses (apart from those associated with preparation and registration of the transfer of the four mortgages which are readily ascertainable) are anticipated by the Solicitors' Trust in managing and realising the securities which would not normally be recoverable from the mortgagor in the normal course, nor when they will be incurred, nor how assessed in terms of reasonableness.  While I am sympathetic to the proposition that those who created the need for a Court fund to be established and for the securities to be realised should bear the consequential expense, I think there is substance in the submission that factors about which we know little, if anything, at this stage may be relevant to any order for reimbursement.  In addition, the Court should be reluctant to make orders lacking in any precision as to the method of ascertaining what expenses are intended to be covered.  I think the application is therefore premature and I decline to make the order.