Forster v Legal Services Board

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCR 2011 0213

DAVID BRIAN FORSTER	Appellant
	v
LEGAL SERVICES BOARD (ABN 82 518 945 610)	Respondent

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JUDGES	WEINBERG and HARPER JJA and KYROU AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	4 February 2013
DATE OF JUDGMENT	11 April 2013
MEDIUM NEUTRAL CITATION	[2013] VSCA 73
JUDGMENT APPEALED FROM	Forster v Legal Services Board [2011] VCAT 2216 (Ross J)

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LEGAL PRACTITIONERS – Receivers appointed by Supreme Court to appellant’s legal practice on basis of deficiencies in trust account – Legal Services Board subsequently refused to renew appellant’s practising certificate on basis he was not a fit and proper person to hold practising certificate – Application to Victorian Civil and Administrative Tribunal (‘VCAT’) for review of Board’s decision dismissed – Appeal against order dismissing application – Legal Profession Act 2004 ss 5.2.2(2)(c), 5.5.1.

ISSUE ESTOPPEL – Comparison with res judicata – Whether issue estoppel applied to Supreme Court’s findings regarding trust account deficiencies – Whether Supreme Court and VCAT proceedings involved same question – Whether Supreme Court decision was final – Whether same parties in both proceedings – Whether VCAT relied on Supreme Court’s findings regarding deficiencies in trust account.

LEGAL PRACTITIONERS – Duty of honesty and candour – Duty applies when practitioner is a party to litigation – Misrepresenting nature of document exhibited to affidavit – Not disclosing to Court alterations made to document before being exhibited to affidavit – Not intervening when counsel asked questions of witnesses based on premise known to appellant to be factually incorrect – Not correcting position once error became apparent – Failure to disclose to Court known facts which were inconsistent with positive assertions made by counsel – Legal Profession Act 2004 ss 1.2.6, 2.4.4(1), 2.4.7(2)(b).

TRUSTS – Deficiency in trust account – Deficiency not dependent on commission of breach of trust or client suffering loss – Legal Profession Act 2004 s 3.3.21(3).

PRACTICE AND PROCEDURE – Appeal from VCAT to Supreme Court on question of law – Error of law must have affected outcome of VCAT’s decision – Victorian Civil and Administrative Tribunal Act 1998 s148(1).

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Appearances:	Counsel	Solicitors
For the Appellant	The Appellant appeared in person
For the Respondent	Dr K P Hanscombe SC with Mr S R Senathirajah	Corrs Chambers Westgarth

WEINBERG JA:

I have had the advantage of reading in draft the reasons for judgment prepared by Kyrou AJA. I agree, for the reasons that his Honour gives, that the appeal should be dismissed.

I wish to add only this. The appellant conducted this appeal with an apparent fixation upon findings that Emerton J had earlier made, in other proceedings,[1] regarding the appointment of receivers to his legal practice, ‘Hollows Lawyers’. He persisted throughout in seeking to challenge her Honour’s conclusion that the practice committed ‘serious irregularities in relation to trust money’ and that ‘double payment of disbursements … created deficiencies in the firm’s trust account of significant proportions’.[2] Indeed, a major part of his argument before this Court involved an attempt to relitigate that very conclusion.
[1]Legal Services Board v Forster [2010] VSC 102.
[2]Ibid [295].

One difficulty with that approach, as Kyrou AJA makes clear, is that the decision by Ross J — sitting in his former capacity as President of the Victorian Civil and Administrative Tribunal — to refuse to renew the appellant’s practising certificate was not itself based upon any finding relating to any such trust account deficiency. As Ross J’s reasons make abundantly plain, the appellant was found to be unfit to hold a practising certificate largely because of the manner in which he was found to have conducted himself in relation to the receivership proceeding. Ross J’s decision had nothing whatever to do with Emerton J’s finding that there had been a deficiency in the firm’s trust account. That meant that much of the appellant’s argument before this Court was completely irrelevant.

As regards the remaining grounds in support of this appeal, I agree with Kyrou AJA that they are without merit.

HARPER JA:

I agree for the reasons given by Kyrou AJA that this appeal should be dismissed.

KYROU AJA:

Introduction and summary

This is an appeal from an order made by Ross J, in his capacity as President of the Victorian Civil and Administrative Tribunal (‘VCAT’), dismissing an application for review of a decision of the Legal Services Board (‘Board’).[3] The Board’s decision was to refuse to renew the appellant’s practising certificate on the ground that he was not a fit and proper person to continue to hold a practising certificate.
[3]Forster v Legal Services Board [2011] VCAT 2216 (8 December 2011) (‘Ross J’s decision’).

The appellant was, at all relevant times, the principal of ‘Hollows Lawyers’ (‘Practice’) which acted on a ‘no win no fee’ basis for former navy personnel who claimed compensation from the Commonwealth for injuries they allegedly suffered as a result of the collision in 1964 between HMAS Melbourne and HMAS Voyager (‘Melbourne Voyager clients’). The Commonwealth settled many of the Melbourne Voyager clients’ claims in 2008 and made compensation payments to the Practice on behalf of those clients.

The Board’s decision not to renew the appellant’s practising certificate relied heavily on the findings made by Emerton J on 31 March 2010 in a proceeding by the Board against the appellant for the appointment of a receiver to the Practice (‘Receivership proceeding’).[4] Her Honour found that there were deficiencies, caused through inadvertence, in the Practice’s trust account relating to the Melbourne

Voyager clients. She concluded that those deficiencies and associated breaches of the Legal Profession Act 2004 (‘Act’) and the Legal Profession Regulations 2005 (‘Regulations’) required the Practice to be placed in receivership. On 12 April 2010, her Honour made an order appointing Noel Batrouney and Andrew Lyle, partners of Hall & Wilcox, as receivers to the Practice (‘Receivers’) for an initial period of six months (‘Receivership order’). Subsequently, her Honour extended that period.

[4]Parts of Emerton J’s decision have been reported as Legal Services Board v Forster (2010) 29 VR 277. As these reasons refer to parts of the decision which have not been reported, I refer to the unreported version of the decision Legal Services Board v Forster [2010] VSC 102 (‘Emerton J’s decision’).

At the hearing of the appellant’s application for review to VCAT (‘VCAT proceeding’), Ross J made a ruling that issue estoppel applied to the findings made by Emerton J that necessarily established the legal foundation or justification for her Honour’s decision in the Receivership proceeding (‘Estoppel Ruling’). Although Ross J referred to Emerton J’s findings concerning trust account deficiencies, his Honour based his decision that the appellant was not a fit and proper person to hold a practising certificate on his own findings. Those findings were that the appellant had acted dishonestly in his dealings with a Melbourne Voyager client, Mr Vic Rann, and had failed to comply with his duty of honesty and candour to the Court in the Receivership proceeding.

In his appeal against Ross J’s decision, the appellant has relied on 12 grounds of appeal. They include that the Estoppel Ruling was erroneous and that Ross J made factual findings that he should not have made and failed to make factual findings that he should have made.

The Board has filed a notice of contention by which it seeks to support Ross J’s decision on the basis of the appellant’s behaviour before Emerton J on 17 February 2011.[5]
[5]See below [37].

The appellant was represented in the Receivership proceeding by Mr John Arthur of counsel, who also appeared for the appellant for parts of the VCAT proceeding. The appellant otherwise appeared for himself in the VCAT proceeding. He represented himself on the hearing of the appeal.

For the reasons that follow, I would dismiss the appeal.

Relevant legislative provisions and the role of the Board

The Board is established by pt 6.2 of the Act to regulate the legal profession in Victoria. Section 6.2.3 of the Act provides that the objectives of the Board are:

(a)to ensure the effective regulation of the legal profession and the maintenance of professional standards;
(b)to address the concerns of clients of law practices and legal practitioners through the regulatory system and provide for the protection of consumers of legal services;

(c) to ensure the adequate management of trust accounts;
(d)to ensure that the Victorian system is at the forefront of regulation of legal practitioners.

Section 6.2.4(1) of the Act provides that the Board has the functions conferred on it by or under the Act, or any other Act. Further, under s 6.2.4(2), the Board has all the powers necessary to perform its functions and achieve its objectives, including the powers conferred on it by or under the Act, or any other Act. The Act confers numerous functions on the Board. These include:

(a)administration of practising certificates, including granting, refusing, suspending and cancelling practising certificates (ss 2.4.3, 2.4.12, 2.4.21);
(b)making legal profession rules (s 3.2.9);
(c)trust account administration (pt 3.3);[6]
(d)appointment of a supervisor of trust money of a legal practice or a manager to a legal practice (ss 5.3.1, 5.4.1);
(e)making a determination to apply to this Court for the appointment of a receiver to a legal practice (s 5.2.2(c)); and
(f)making an application to this Court for the appointment of a receiver to a legal practice (s 5.5.1).

[6]See, eg, ss 3.3.12, 3.3.27, 3.3.29.

Section 2.4.7(2)(b) of the Act provides that the Board must not renew a practising certificate ‘if it is satisfied that the applicant … is not a fit and proper person to continue to hold the certificate.’ Under s 2.4.4(1), in considering whether a practitioner is a fit and proper person, the Board may take into account ‘any suitability matter relating to the person’ and may also take into account whether the person has contravened the Act or the regulations made under the Act, or ‘any other matter the Board thinks appropriate.’ Section 1.2.6 defines ‘suitability matters’ to include whether the person is of ‘good fame and character’; whether the person has contravened ‘a law about trust money or trust accounts’; and whether a receiver has been appointed to any legal practice engaged in by that person.

Background relating to the Practice

The Practice has acted for Melbourne Voyager clients for many years. Legal proceedings were commenced against the Commonwealth on behalf of a number of those clients. After protracted litigation, in 2008 the Commonwealth appointed Mr Gormly QC to settle the claims. Settlement conferences took place, which were often attended by the appellant or another lawyer of the Practice, the client and the Commonwealth’s legal and other representatives.

Prior to a settlement conference, the Practice provided to a client an invoice showing professional fees for work performed in pursuing the client’s claim and disbursements — such as counsel’s fees — that had been incurred on the client’s behalf. In respect of an offer of settlement, the invoice enabled the client to assess the amount that he or she was likely to receive after the payment of the invoice, and thus to make an informed decision whether to accept the offer.

Where a claim was settled at or after a settlement conference, the Commonwealth remitted the settlement amount directly to the Practice. Sometimes, the Commonwealth provided a cheque for the claim and a separate cheque for party and party costs. The Practice paid the amounts it received from the Commonwealth into its trust account. In some cases, the Practice subsequently used the trust funds to pay disbursements and then the invoice amount, including the disbursements that had already been paid. Any balance remaining was paid to the client.

The Practice used an accounting software package that it had purchased from Fujitsu in New Zealand. Fujitsu’s software (‘Infinity Law software’) required that a credit note be recorded in the Practice’s debtors ledger whenever trust funds were used to pay disbursements. The credit note had the effect of reducing the debtors ledger by the amount of the credit note. However, unbeknown to the appellant, the Infinity Law software did not automatically adjust an invoice by the amount of the credit note where a disbursement that was included in the invoice was paid directly from the trust account. The Practice did not have procedures in place to adjust an invoice to reflect direct payment from the trust account of disbursements that were included in the invoice.

The result was that, for some of the Melbourne Voyager clients, disbursements were paid twice, initially when the disbursements were paid directly from the trust account and subsequently when trust funds were used to pay the invoice rendered by the Practice, which continued to show the disbursement as unpaid.

On 28 October 2008 the Law Institute of Victoria (‘LIV’) appointed Mr Colin Chun and Ms Val Kozovska as inspectors to inspect the Practice’s trust account (‘Inspectors’). The Inspectors examined 12 of the 82 files of Melbourne Voyager clients (‘Melbourne Voyager files’). In their report dated 28 April 2009 (‘Chun report’), the Inspectors identified a number of trust account deficiencies and breaches of the Act and the Regulations in relation to the 12 Melbourne Voyager files. The deficiencies and breaches included the duplicate payments of some disbursements. The Chun report also identified two instances where the Practice billed Melbourne Voyager clients the full amount of barristers’ fees and subsequently negotiated discounts from the barristers which it failed to pass on to the clients. It was on the basis of the Chun report that the Board commenced the Receivership proceeding on 2 June 2009.

When the Inspectors alerted the appellant to the trust account deficiencies, he contacted Fujitsu to discuss the problem. A representative of Fujitsu informed him that the Infinity Law software did not automatically generate adjustment notes and that manual adjustment notes had to be prepared in order to avoid double payment of disbursements.

The appellant sought to rectify the trust account irregularities by preparing manual adjustment notes. Except for four Melbourne Voyager clients,[7] the amount of any disbursements that were paid twice was not paid back into the Practice’s trust account. Rather, the appellant dealt with the problem by making various accounting entries. One mechanism that was adopted was to write back against a client’s file fees that had been written off that file and ‘netting off’ the double payment of the disbursement against those fees.
[7]Mr Rann, Mr Smith, Mr Trudgett and Mr Vesty.

The appellant has consistently maintained that, having regard to the substantial amounts that the Practice had written off from the fees that it was entitled to charge Melbourne Voyager clients, the rectification measures had the effect that no Melbourne Voyager client had been overcharged. According to the appellant, the amounts written off greatly exceeded the double payments, and the accounting irregularities that the Chun report identified did not result in any Melbourne Voyager client suffering any loss. He has relied upon experts’ reports that support this contention.

Emerton J’s decision

Emerton J made the following findings in relation to trust account deficiencies:

Having carefully considered the Chun Report and heard extensive evidence in relation to the 12 files that were examined by the inspectors, I am satisfied that the law practice has –
(a)committed serious irregularities in relation to trust money. The double payment of disbursements in particular created deficiencies in the firm’s trust account of significant proportions;
(b)failed properly to account in a timely manner to clients for trust money received by the practice on their behalf; and
(c)contravened the Act and Regulations, in particular, s 3.3.31 of the Act.

…
Although the major problems identified in the Chun Report – the double payment and double billing of disbursements – were most likely inadvertent, they occurred because the law practice did not pay sufficiently close attention to its trust accounting obligations when settlement monies started to flow in from the Commonwealth. I do not accept that these problems were caused by a defect in the accounting software used by the law practice, as submitted by the defendant.
…
It appears … that once settlement took place and settlement moneys were paid by the Commonwealth, the defendant may have been unduly hasty in taking his professional fees. I have come to the conclusion that the defendant was careless in dealing with settlement moneys, and that many of the problems that arose could and should have been avoided by careful trust account management as required by the Act and Regulations. The problems experienced were inextricably bound up with the failure by the law practice to prepare and furnish final trust statements as required.
…
I find that the defendant has not given a satisfactory explanation of how the double payment of disbursements occurred. Moreover, the defendant did not properly turn his mind to the requirement to send out final trust account statements, which reflects a poor appreciation of his obligations and the importance of that requirement. His explanations for not passing on the benefit of creditor discounts, for the double billing of disbursements and for failing to pay trust moneys as directed were unsatisfactory. Furthermore, his treatment of Mr Rann displayed disregard for his obligation to give a proper accounting and, more generally, to the interests of Mr Rann as his client. This gives cause for concern about the rectification measures undertaken by the law practice, which principally involved raising new invoices and reversing previous write-offs to offset amounts that the law practice had appropriated in error.
…
… The task of the receiver will be to examine the Melbourne Voyager files held by the law practice to ensure that all irregularities in relation to trust money, trust property or the affairs of the practice have been fully identified and rectified and, in particular, that all trust deficiencies have been properly restored. Depending on what is found, the task may involve recovering moneys or property taken in breach of trust, improperly or unlawfully. Ultimately, it may be necessary to wind up the law practice, but this is a matter for further investigation.[8]

[8]Emerton J’s decision, [295], [298], [300], [304], [310].

In relation to the appellant’s rectification measures, Emerton J made the following findings:
… the manner in which the trust account irregularities were remedied by the law practice gives rise to concern because –
(i)trust moneys that were appropriated in breach of the Act and Regulations were actually restored to the trust account in only a very small number of cases;
(ii)in the majority of cases, to deal with the deficiencies identified, amounts ‘written off’ were ‘written back in’ or new invoices were raised, even though many of the matters had been finalised some time earlier;
(iii)in the matter of Rann, the new invoice that was raised to partially offset the deficiencies identified included fees for professional services that the defendant was not able to properly explain;
(iv)the review conducted by the law practice to identify deficiencies in its Melbourne Voyager files looked only for deficiencies created by one means (the double payment of disbursements) and did not look for errors of other kinds, such as those identified by the inspectors in the files that were reviewed by them.
Accordingly, I cannot be confident that trust account deficiencies have been properly identified and restored or that the errors that gave rise to them have been rectified. It is necessary for the protection of clients and former clients of the law practice that a suitably qualified person … be appointed to examine the Melbourne Voyager files held by the law practice to ensure that all irregularities in relation to trust money, trust property or the affairs of the practice have been fully identified and rectified and, in particular, that all trust deficiencies have been properly restored.
…
It may well be that, from an accounting point of view, there were or are no deficiencies in the practice’s accounts where amounts paid by the law practice to itself in error can be offset by moneys owing to the law practice by the client for unbilled work or work that has been written off. As a matter of simple mathematics, so much is clear. That does not, however, address the problem that has been identified relating to the creation of deficiencies in the first place, nor does it mean that the deficiencies have been restored in compliance with trust accounting requirements …[9]
[9]Emerton J’s decision, [6], [7], [189].

Emerton J made the following finding in relation to the appellant’s failure to pass on to clients discounts provided by counsel:

At the very least, the failure to pass on one or more of the discounts shows poor accounting practices on the part of the law practice. Because trust moneys were used to pay the law practice rather than the creditor, the failure creates a trust account deficiency.[10]

[10]Emerton J’s decision, [177].

Emerton J delivered her reasons for decision on 31 March 2010 in the appellant’s presence. Following further submissions from the parties, on 12 April 2010, her Honour made the Receivership order pursuant to which the Receivers took control of the regulated property of the Practice. The regulated property mainly comprised the Practice’s trust account. It did not include the premises in Frankston from which the appellant conducted the Practice (‘Frankston premises’) or the office equipment used by the Practice.

The Receivership order was for a period of six months and contained a condition that the Receivers could not wind up the Practice. Her Honour subsequently made further orders extending the receivership, which is still extant. On 21 May 2010, her Honour removed the condition preventing the Receivers from winding up the Practice.

On 21 April 2010 the appellant filed a notice of appeal against the Receivership order. On 30 April 2010, the appellant applied to Emerton J for a stay of the Receivership order. Her Honour refused the application on the same day. The appellant subsequently abandoned the appeal.

Ross J’s decision
(a) Estoppel Ruling

Ross J made the Estoppel Ruling on the first day of the VCAT hearing, 17 August 2011. His Honour held that the Board had the same interest and capacity as a party in both the Receivership proceeding and the VCAT proceeding.[11] The key paragraphs of the Estoppel Ruling were as follows:

… the parties to this proceeding are bound by all of the findings and rulings made by the Supreme Court in the proceedings between the Board and the Applicant.
The estoppel will operate to prevent the Applicant from seeking to relitigate, either in submissions or by adducing evidence, issues which have been the subject of findings and rulings made by the Supreme Court in [the Receivership proceeding]. The estoppel only covers those matters which necessarily established as the legal foundation or justification for the Supreme Court’s conclusion in its judgment and rulings in the receivership proceeding.[12]
[11]Ross J’s decision, attachment 1, [11]–[12].
[12]Ross J’s decision, attachment 1, [13]–[14]. See also Ross J’s decision, [56].

(b) Relevance of trust account deficiencies in the VCAT proceeding

Ross J referred at length to Emerton J’s findings about the Practice’s trust account deficiencies and the associated breaches of the Act and the Regulations. However, his Honour did not make any finding that those deficiencies and breaches rendered the appellant unfit to hold a practising certificate. Further, based on a concession by the Board, Ross J stated that he was prepared to assume, in the appellant’s favour, that the rectification measures taken by the Practice complied with the relevant legislative provisions. His Honour also assumed that the rectification measures had rectified the deficiencies identified in the Chun report. Accordingly, his Honour determined that it was unnecessary for him to pursue ‘that issue’ further.[13]
[13]Ross J’s decision, [78].

As discussed at [97] below, in the concluding paragraphs of Ross J’s decision, his Honour returned to the issue of the trust account deficiencies. The question of whether those deficiencies influenced his Honour’s decision that the appellant was not a fit and proper person to hold a practising certificate is discussed at [138] to [143] below.

(c) Issues upon which Ross J made findings

Ross J did not consider all of the issues upon which the Board relied against the appellant.[14] His Honour confined himself to the following issues, which he considered under the headings shown in light italics:
[14]Ross J’s decision, [83], [146].

Good fame and character (s 1.2.6(1)(a))

(a)the appellant’s failure to pass on to clients discounts provided by counsel;
(b)the appellant’s sending of an email to Mr Rann;

Any other relevant matters (s 2.4.4(1)(f)): The Applicant’s Candour

(c)the appellant’s conduct in relation to a redacted document headed ‘Item 10’ which he obtained from the LIV upon subpoena (‘Item 10 document’);
(d)the appellant’s affidavit of 11 November 2009 concerning his communications with a witness in the Receivership proceeding;
(e)the appellant’s failure to disclose the sale of the Frankston premises;
(f)the appellant’s conduct during the VCAT hearing;

Additional Matters

(g)the appellant’s conduct towards the Board’s senior counsel, Dr Kristine Hanscombe SC, Mr Batrouney and Mr Mann;
(h)the appellant’s conduct in the course of the Receivership proceeding;
(i)the ‘scandalous’ contents of some of the appellant’s affidavits;
(j)the appellant’s alleged claim for costs of rendering an itemised account; and
(k)the appellant’s ‘ill advised’ letter to the Chief Justice dated 20 July 2010.

Ross J did not make any adverse findings against the appellant in relation to issues (d), (h), (i), (j) and (k) above.

The Board’s notice of contention relates to issue (h) above. On 17 February 2011, during the hearing of the Receivership proceeding, the appellant repeatedly interrupted Emerton J on two separate occasions, causing her Honour to order that he be removed from the precincts of the Court for the remainder of the day. Although Ross J held that the appellant’s behaviour towards Emerton J on 17 February 2011 was ‘patently inappropriate’, his Honour concluded that the behaviour did not go to the appellant’s fitness to practise and that Emerton J had imposed an appropriate sanction at the relevant time.[15]
[15]Ross J’s decision, [279].

In relation to issue (a) above, Ross J referred to Emerton J’s findings that the appellant did not give a proper explanation for his failure to pass on to clients discounts on counsel’s fees; that the failure showed poor accounting practices; and that the failure created a trust account deficiency. After referring to the appellant’s evidence in the VCAT proceeding, his Honour concluded that it remained the position that the appellant had not advanced any satisfactory explanation for the deficiency which arose from his failure to pass on the discounts.[16] However, his Honour did not specifically rely on that conclusion in support of his decision that the appellant was not a fit and proper person to hold a practising certificate.
[16]Ross J’s decision, [88].

Ross J made adverse findings in relation to issues (b), (c), (e), (f) and (g) above. I will now discuss those findings.

(d) Ross J’s findings in relation to the appellant’s email to Mr Rann

Mr Rann’s claim against the Commonwealth was resolved following a settlement conference on 18 April 2007.[17] On 21 May 2007, the Practice received from the Commonwealth a cheque for $162,735.14 in respect of the claim, which the Practice deposited in its trust account, and a cheque for $125,000 in respect of party and party costs. The Practice deposited the cheque for $125,000 in its office account and subsequently applied those funds in part payment of one of its invoices. The Practice paid Mr Rann a net amount of $82,188.39.
[17]The meeting on 18 April 2007 is described in some of the documents as an informal mediation conference. The name is not material.

The Chun report identified the payment of $125,000 directly into the Practice’s office account as a potential breach of s 3.3.13(1) of the Act. That section requires trust money to be paid into a firm’s trust account in the absence of a ‘written direction’ to the contrary.

Prior to the hearing of the Receivership proceeding, on 24 September 2009, the appellant sent the following email to Mr Rann (‘Email’):

Dear Vic,
Please forward me a fresh email along the lines of: …
At my settlement conference I can recall Mr Forster explained to me that there would be two cheques received for settlement and that the smaller of the 2 cheques would be costs and I directed him to put this cheque into his office account directly against my outstanding accounts.

Mr Rann did not respond to the Email.

At the Receivership hearing, the Board filed an affidavit sworn by Mr Rann on 14 October 2009 in which he deposed that ‘no such conversation took place at the settlement conference’. Counsel for the appellant, Mr Arthur, cross-examined Mr Rann but did not put to him that he directed the appellant to pay the cheque for $125,000 directly into the Practice’s office account. The appellant filed an affidavit about his conversation with Mr Rann at the settlement conference. The affidavit did not mention any direction from Mr Rann about the cheque for $125,000. The appellant relied on other documents that Mr Rann had previously signed as constituting a ‘written direction’ for the purposes of s 3.3.13(1) of the Act.

In her decision, Emerton J said the following about the Email:

This conduct by the defendant suggests that in September 2009, the defendant believed that the only authority that he had to pay the funds into his office account derived from things that were said at Mr Rann’s settlement conference. In the light of this, the defendant sent Mr Rann – out of the blue and entirely without explanation – a request to do something that Mr Rann did not understand, and which served the sole purposes of the defendant.
Mr Rann was asked whether he recalled his solicitor at the settlement conference explaining in detail about costs and disbursements incurred in the matter. He said that he did not. He said the conference was really quite short. Importantly, it was not put to Mr Rann by the defendant that the conversation in question did in fact occur and that Mr Rann did direct the defendant to put the cheque for party/party costs into his office account directly against outstanding accounts. I have to conclude that no such direction was given at the settlement conference.
It follows that the defendant’s request to Mr Rann to send him an email with the statement set out in the defendant’s email involved, in effect, the defendant asking Mr Rann to say something that was not true.
In seeking to ‘shore up’ his entitlement to be paid directly the party/party costs obtained from the Commonwealth, the defendant seems to have paid scant regard to the interests of Mr Rann. This causes me concern about the way in which rectification of the irregularities was carried out by the law practice.[18]

[18]Emerton J’s decision, [246]–[249]. See also Emerton J’s decision, [304].

At the VCAT hearing, the Board relied on Emerton J’s finding at [45] above regarding the Email as one of the grounds for its contention that he was not a fit and proper person to hold a practising certificate. The Board said that it did not wish to call any fresh evidence on the issue. The appellant contended that he should have the opportunity to question Mr Rann. On 24 August 2011, Ross J ruled that issue estoppel did not apply and that, as the Board relied on Mr Rann’s evidence before Emerton J, the Board should call Mr Rann as its witness and the appellant should be able to cross-examine him.

Following Ross J’s ruling, the appellant filed a witness statement dated 31 August 2011 in which he stated that, at the settlement conference, Mr Rann ‘approved the arrangement whereby the party party costs would go direct to me’. In his statement, the appellant referred to a file note which was said to state that $125,000 was payable to the Practice. However, the file note in question, which was prepared by an employee solicitor who was present at the settlement conference, referred to two amounts that were payable to the Practice ($125,000 and $110,000) and did not mention any directions from Mr Rann about the accounts in which the amounts were to be paid. The appellant gave evidence in chief and was cross-examined about his discussions with Mr Rann at the settlement conference. The appellant’s evidence was rambling and confusing and did not precisely support the contents of the Email.

The Board called Mr Rann to give evidence in relation to the settlement conference and the Email. In his evidence in chief, Mr Rann confirmed the accuracy of the affidavit he had sworn on 14 October 2009. Mr Arthur appeared for the appellant for the specific purpose of cross-examining Mr Rann. Mr Arthur repeatedly prefaced his questions with the words ‘Do you recall’. In response to questions about whether he recalled giving to the appellant an instruction about the cheque for $125,000, Mr Rann said ‘No’. However, when Mr Arthur directly put to Mr Rann — at Ross J’s prompting — that there was a conversation at the settlement conference in the manner set out in the Email, Mr Rann said ‘I dispute that and I deny it’.

In his decision, Ross J referred at length to the appellant’s and Mr Rann’s evidence both before Emerton J and before VCAT. His Honour also referred to the appellant’s written response of 5 March 2009 to the Inspectors’ allegation in their letter dated 3 February 2009 that the Practice’s failure to pay the Commonwealth’s cheque for $125,000 into the Practice’s trust account appeared to have created a deficiency in the trust account. That response was as follows:

We apologize for this error. It has been an operator error and the deposit should have been made to the trust account. Given the large number of transactions this error was overlooked.

Ross J also considered the file note to which I referred at [47] above and concluded that the file note made ‘no mention of any oral direction by Mr Rann that the sum in respect of party party costs was to be paid into the Hollows office account.’[19]
[19]Ross J’s decision, [127].

Ross J made the following finding in relation to the Email:

On the more limited material before the Court in the receivership proceedings her Honour Justice Emerton found at [304] ‘… his treatment of Mr Rann displayed disregard for his obligation to give a proper accounting and, more generally, to the interests of Mr Rann as his client’.
On the evidence before me I would go further and find that by the email of 24 September 2009 the Applicant had deliberately attempted to get a client, Mr Rann, to confirm instructions that were not given – in other words to participate in a lie – in an effort to shore up his defence in the receivership proceeding. In doing so the Applicant behaved dishonestly and put his interests ahead of those of his client.[20]
[20]Ross J’s decision, [143]–[144].

(e) Ross J’s findings regarding the Item 10 document

At the Receivership hearing, the appellant adduced evidence for the purpose of establishing that the LIV was aware of the problems with the Infinity Law software but failed to warn practitioners. He relied on the Item 10 document, which was in the following terms:

Infinity has advised that they will not act until the LIV have provided them with directions as to what modifications are required. They have stated that they are awaiting a meeting with the LIV in August to seek direction from the LIV. Accordingly there is very little we can do unless the LIV can document the necessary changes they would like to see so that we can pass them on to Infinity. Clearly, it is in everyone’s interest to have Infinity correct the necessary system deficiencies, as it seems very likely that all users of this particular software product will have similar breaches of the regulations as a consequence of the system handling of items that have been highlighted above. Infinity have confirmed that all users of their software are in conflict with 3.3.34 as interpreted by the LIV but the LIV know about the issue and have approved the use of their software.

The appellant exhibited a copy of the Item 10 document to his affidavit sworn on 5 November 2009 (exhibit DBF 94). The affidavit described the Item 10 document as ‘[t]he Law Institute Executive Council Item 10’. After quoting from the Item 10 document and commenting on its contents, the affidavit stated:

Now produced and shown to me at the time of swearing this affidavit and marked with the letters ‘DBF 94’ is a copy of the Law Institute of Victoria Executive Council minute Item 10 with redaction undated.

In the form of exhibit DBF 94 to the appellant’s affidavit, the Item 10 document contained two hand-written annotations. The first annotation was on the right margin of the document and stated: ‘Depends on funding. Changes to enable disbursement payments from trust while maintaining integrity of debtors and creditors system proposed’. The second annotation was written by the appellant. It was at the top of the Item 10 document and stated ‘Executive Council’.

At the hearing of the Receivership proceeding, the appellant’s counsel, Mr Arthur, informed the Court that his instructions were that it had been ‘indicated to [the appellant] that [the Item 10 document] is from the Executive Council.’ Mr Arthur put to two employees of the LIV (Mr Chun and Mr Jolyon Arthur Dunn) that the Item 10 document was a minute of the executive council of the LIV. He also asked another LIV employee, Mr Noel Henman, whether he had written the words ‘Executive Council’, which Mr Henman denied. Mr Henman said that the Item 10 document was an extract from a letter from a law firm to the LIV and that he had written the annotation in the right margin. The CEO of the LIV, Mr Michael Brett Young, gave evidence that the Item 10 document was not a document of the LIV’s executive council and that the version that was produced by the LIV upon subpoena did not contain the words ‘Executive Council’.

Following the evidence of the LIV employees, the appellant took no steps to correct the inaccurate description of the Item 10 document in his affidavit of 5 November 2009. Nor did he at any time disclose that he had written the words ‘Executive Council’.

Emerton J did not make any adverse findings against the appellant in relation to the Item 10 document. In footnote 13 of her decision, Emerton J stated:

The document in question exhibited to the defendant’s affidavit had a handwritten notation, ‘executive council’. There was evidence before the Court that the document produced on subpoena by the LIV did not have the notation.[21]

[21]Emerton J’s decision, [156] n 13.

At the VCAT hearing, the Board relied upon the appellant’s incorrect description of the Item 10 document in his affidavit dated 5 November 2009 and on the manner in which the appellant’s counsel cross-examined employees of the LIV on that document, in support of its contention that the appellant was not a fit and proper person to hold a practising certificate. The Board submitted that the appellant displayed a lack of candour in the Receivership proceeding by incorrectly describing the Item 10 document and by not disclosing the fact that he had written the words ‘Executive Council’ on the document.

The appellant submitted that, as Emerton J had dealt with this issue and had not made any adverse findings against him, the Board was estopped from further pursuing the issue before Ross J. His Honour ruled that issue estoppel did not apply because Emerton J had not made any findings in relation to the issue.

The appellant gave evidence at the VCAT hearing about the Item 10 document. He conceded that his description of the document in his affidavit of 5 November 2009 was incorrect and that he had written the words ‘Executive Council’ on the document. He said that he did so because he believed that it was an executive council document. That belief was based on the fact that, at a meeting with LIV employees, he asked them whether it was an executive council document and they neither confirmed nor denied that it was.

Ross J discussed at length the evidence on the Item 10 document that was given at the Receivership hearing and at the VCAT hearing and made the following finding:

By his conduct in the Supreme Court proceedings the Applicant has failed in his duty of honesty and candour to the Court. By affidavit the Applicant proferred document DBF94 to the Court as a minute of the LIV’s Executive Council. That document had a handwritten notation on the top left hand corner: ‘Executive Council’. The Applicant remained mute while his counsel suggested to Mr Henman that the words ‘Executive Council’ had been written by [him], when in fact the notation had been written by Mr Forster. Even when the Board squarely put the issue in its final address to her Honour on 18 December 2009 – that either Mr Forster or somebody at Hollows Lawyers had written the words ‘Executive Council’ on the document – the Applicant still remained mute and did not inform the Court that he had made the notation.[22]

[22]Ross J’s decision, [182].

His Honour then referred to the following evidence of the appellant in which he stated that the issue of the Item 10 document was minor:

Mr Forster: The mere fact that Her Honour Justice Emerton as I understand it, didn't seem to think that this issue of candour was important or that Her Honour hasn't said anything about it, it just seems to me that effectively what you're trying to do is you're trying to make a big issue out of something that my counsel didn't regard as important. I certainly have never seen my behaviour as being something that was dishonest or intending to mislead anyone and that in terms of the suggestion that I didn't pick up to be in the cross-examination or in the tribunal, I didn't - I wasn't focussing on that. What I was focussing on in the case, was I was focussing - what I was focussing my mind on and what I regarded as very important is I thought that the words, ‘Depends on funding’ changes to ‘the disbursement payments,’ well, I thought those words were absolutely critical to my case because what I thought was that those words meant precisely the problem with the disbursement payments and I wasn't focussed on these words, ‘Executive Council.’ What I was doing is that when I saw that document as with other documents I wrote on documents when I believed that's what it was and I believed it was that and once the people corrected - obviously what's happened is it's been corrected and obviously it's been said that it's [not] an Executive Council meeting, well then that's the end of the matter.
Dr Hanscombe: So it really wasn't a very big issue?
Mr Forster: Well, sorry, it wasn't in my mind. Obviously if I'd believed that I was - had done an affidavit for the purposes of misleading the court or trying to create some false impression then obviously myself and I think my counsel would have been focusing on this issue and he would have - in his final submissions he would have regarded it as a very important issue and he would have said something about it …[23]

[23]Ross J’s decision, [183].

On the basis of the above evidence, Ross J concluded that the appellant lacked insight. His Honour said:

The Applicant’s evidence demonstrates a lack of insight into the gravity of his conduct. Such a lack of insight also bears on the question of whether or not he is a fit and proper person to hold a practising certificate.[24]
(f)Ross J’s findings regarding non-disclosure of sale of Frankston premises

[24]Ross J’s decision, [184].

As discussed at [29] above, Emerton J delivered her reasons for decision regarding the appointment of the Receivers on 31 March 2010 in the appellant’s presence but her Honour did not make the Receivership order until 12 April 2010.

On 9 April 2010, the appellant entered into a contract for the sale of the Frankston premises from which he had been conducting the Practice.[25]
[25]Ross J’s decision, [197].

On 12 April 2010, Emerton J heard submissions from the appellant and the Board on who should be appointed receivers. The appellant’s counsel, Mr Arthur, in the presence of the appellant, made submissions in relation to the identity of the receivers and the duration of the receivership. In relation to the latter, Mr Arthur stated that a ‘critical factor is that without appointing a local practitioner as a receiver who is familiar with the Frankston area and Frankston clients [the appellant] is concerned that a receivership which is going to last on the plaintiff's proposal for six months, by the time the six months has expired he won't have a practice any more, his goodwill will be completely gone’.[26]
[26]Ross J’s decision, [198].

At 7pm on 12 April 2010, the appellant sent an email to one of his clients in which he stated ‘I confirm that I am closing my practice’.[27]
[27]Ross J’s decision, [199].

On 13 April 2010, when the Receivers took possession of the Frankston premises, they found letters and emails to clients transferring files to another law practice; a checklist of things to do, which referred to the closure of all files, the preparation of disconnection letters for all services and the preparation of data ‘for accountant for ceasing business operation’; and a letter prepared in February 2010 terminating the employment of the appellant’s practice manager (Peter Scott) on the basis that it was not viable to employ a practice manager.[28]
[28]Ross J’s decision, [200].

On 1 May 2010, the appellant wrote to Mrs Marks (the widow of one of the Melbourne Voyager clients) and Mr Rann stating that he had established Whistleblowers Lawyers and was going to engage in legal practice from his home in Flinders.[29]
[29]Ross J’s decision, [203].

On 30 April 2010, without disclosing to the Court that he had sold the Frankston premises or that he was proposing to practise from his home in Flinders, the appellant applied to Emerton J for a stay of the receivership. The application was made on the express basis that the receivership was causing ‘mortal damage to the practice’. [30] Her Honour refused the application.
[30]Ross J’s decision, [202].

On 18 May 2010, the Board applied to Emerton J for a freezing order in relation to the proceeds of the sale of the Frankston premises. On 21 May 2010, her Honour granted the freezing order. In her ruling, her Honour said:

In circumstances where the sale of the office premises took place on the Friday before the Monday on which the receivers were to be appointed and the defendant knew that such an appointment was going to be made because reasons had already been handed down, the purchaser was expressly asked not to say anything about the sale to the receivers, and there were two subsequent occasions on which the defendant could have informed the receivers (and indeed the Court) of the sale and did not but instead made loud complaint that the receivership was putting the practice in mortal danger, there is in my view a basis for an apprehension that the proceeds of sale may be dissipated by the defendant.[31]

[31]Ross J’s decision, [205].

At the VCAT hearing, the appellant did not dispute any of Emerton J’s findings in respect of the sale of the Frankston premises.[32] The Board submitted that the appellant had withheld information from Emerton J which was relevant to the issues dealt with by her Honour and that he had failed to comply with his duty of candour to the Court. The Board contended that the appellant’s conduct fell below the standards expected of a legal practitioner.
[32]Ross J’s decision, [207].

The appellant made the following submission before Ross J:

The allegation of lack of candour to the court is misconceived. I am entitled to change my mind regarding my intentions as to place to practice. I was never requested to tell the Receiver of my decision that an offer made for the purchase of my building was under contract. The duty of candour can be divided into two separate categories, candour in the presentation of the law and candour in the presentation of the facts. I never presented any evidence to the court which was misleading or false. Whether or not I sold my [personal] asset was not material to the decision to appoint a receiver. It was not regulated property it was my private business affair. My counsel was aware of the sale.[33]

[33]Ross J’s decision, [209].

After considering the evidence and submissions set out at [64] to [73] above, Ross J made the following finding:

I reject the submission advanced by the Applicant. In my view it was disingenuous to be seeking a stay of the receivership on the basis that, inter alia, the receivership was doing mortal damage to the practice in circumstances where (undisclosed to the Court) the practice was effectively closing down or at the very least being significantly wound back. The Applicant’s conduct in this regard [amounts] to a breach of his duty of candour to the Court.[34]
[34]Ross J’s decision, [210].

(g) Ross J’s findings on the appellant’s conduct in the VCAT proceeding

Prior to the commencement of the VCAT hearing, the appellant made an application that the hearing be adjourned. That application was made at a directions hearing held on 24 June 2011. The basis for the application was that the appellant had been denied procedural fairness because of the late receipt of the four volumes of material which the Board had filed and upon which it wished to rely. The four folders and their contents had been sent to the appellant under cover of letters dated 4 and 9 March 2011.

The appellant swore an affidavit on 24 June 2011, in which he stated:

I did not receive the 4 volumes of material provided to me by the Legal [Services] Board until recently delivered to my home. I collected the mail on the 9th of March and on the 15th March my wife collected the mail. On both
these occasions the 4 volumes of material were not provided and letters were provided …[35]

[35]Ross J’s decision, [223].

At the VCAT hearing, the appellant conceded that his affidavit of 24 June 2011 was incorrect and that he had in fact received the Board’s material.[36]
[36]Ross J’s decision, [224].

Ross J made the following finding:

I … find that the Applicant received the letter from the Board dated 9 March 2011 and the attached documents, on 15 March 2011. But I am not persuaded that the Applicant has deliberately sought to mislead the Tribunal. When this issue arose during the hearing the Applicant identified the folder referred to by Mr Muir and brought it to the Tribunal’s attention. Such actions are not consistent with someone seeking to cover up a deliberate lack of candour.
However, I do find that the Applicant’s conduct in respect of this issue is indicative of a somewhat casual approach to his duty of honesty and candour to the Tribunal. Mr Forster’s actions speak of a reckless disregard of his duty to the Tribunal.[37]

[37]Ross J’s decision, [225], [226].

Prior to the VCAT hearing, on 4 July 2011, the appellant sent an email to Ross J’s associate in which he stated that he had not received two emails dated 1 July 2011 from the Board’s solicitor, Mr Matthew Muir. At the VCAT hearing, the appellant conceded that he had in fact received the emails. Ross J made the following finding:

I am not persuaded that the Applicant deliberately sought to mislead the Tribunal in relation to his receipt of Mr Muir’s emails of 1 July 2011. But it provides a further example of a general pattern of behaviour by the Applicant – he asserts first and, when challenged, checks later.
As I have said, such conduct speaks of a reckless disregard of his duty of honesty and candour to the Tribunal.[38]
[38]Ross J’s decision, [233], [234] (emphasis in original).

(h) Ross J’s findings on the appellant’s conduct towards other practitioners

At the VCAT hearing, as part of its case that the appellant was not a fit and proper person to hold a practising certificate, the Board relied on:

(a)the appellant’s conduct towards Dr Hanscombe SC in the Receivership proceeding and the contents of his letter of 3 February 2011 to her;
(b)the appellant’s conduct towards one of the Receivers, Mr Batrouney; and
(c)the appellant’s conduct towards one of his former employees, Mr Garry Mann.

In an affidavit dated 15 February 2011, Mr Muir stated the following:

I was in court at the hearing in this matter on 18 November 2010. At the end of the hearing, once Justice Emerton had left the court room, the defendant approached the Board's Senior Counsel (Dr Hanscombe), and with his face within inches of her face, and in an intimidatory manner, as he followed her from the bar table towards the court door, he repeatedly called her a ‘monster’. As he did this, I said to the defendant that he should stop and that if he had anything to say he should speak to me and not counsel directly …[39]

[39]Ross J’s decision, [238].

The appellant sent a letter dated 3 February 2011 to Dr Hanscombe SC which included the following statement:

… it is my heartfelt opinion that your advocacy is unduly vindictive and totally disproportionate. As you are no doubt aware legal costs claimed against me now exceed $1.5 million and the prospects of say three further years designed to destroy me is not pleasant. My opinion of your behaviour is causing me emotionally very disturbing thoughts towards myself and you.

At a hearing before Emerton J on 17 February 2011, the appellant did not contest that he had used the word ‘monster’.[40] Her Honour found that the appellant’s letter of 3 February 2011 was threatening.[41]
[40]Ross J’s decision, [240].
[41]Ross J’s decision, [241].

At the VCAT hearing, the appellant did not deny that he had repeatedly called Dr Hanscombe a ‘monster’ on 18 November 2010. However, he disputed that he had done so within inches of Dr Hanscombe’s face. He said that he was four or five feet away from Dr Hanscombe. In his submission to VCAT dated 2 August 2011, the appellant apologised for his discourteous language and stated that he was under great stress at the time.[42]
[42]Ross J’s decision, [263].

Ross J preferred the evidence of Mr Muir to that of the appellant and found that the appellant was within inches of Dr Hanscombe’s face when he called her a ‘monster’.[43] His Honour also found that the appellant’s letter of 3 February 2011 was threatening.[44]
[43]Ross J’s decision, [253].
[44]Ross J’s decision, [241].

The appellant informed Ross J that he was sorry for his actions. However, he has never apologised to Dr Hanscombe.[45]
[45]Ross J’s decision, [254].

At a hearing before Emerton J on 30 September 2010, the appellant referred to Mr Batrouney as a ‘vulture’ and a ‘[b]loody parasite’. At the VCAT hearing, the appellant said that he was sorry for his outbursts against Mr Batrouney. However, he has never apologised to Mr Batrouney.[46]
[46]Ross J’s decision, [257], [258].

Mr Mann sat in Court for part of the Receivership hearing. At the commencement of the hearing on the morning of 19 November 2009, Dr Hanscombe made a submission to Emerton J that, on the previous afternoon, before her Honour came on to the bench, the appellant stood in the witness box and taunted Mr Mann about his marital affairs. Dr Hanscombe also submitted that, after her Honour had risen on the previous day, the appellant went across the Court and taunted Mr Mann.[47]
[47]Ross J’s decision, [259].

The appellant was in the witness box under cross-examination at the time that Dr Hanscombe made her submissions. From the witness box, he said that Dr Hanscombe’s assertions were ‘not accurate’ and ‘not correct’. Dr Hanscombe then cross-examined the appellant regarding his exchange with Mr Mann. In the course of rambling and confusing answers to Dr Hanscombe’s questions, the only specific fact that the appellant denied was that he was standing in the witness box at the time he directed his comments to Mr Mann. However, when Dr Hanscombe put to the appellant that what he had said to Emerton J that morning was wrong, he denied that it was wrong.[48]
[48]Ross J’s decision, [261].

At the VCAT hearing, the Board submitted that the appellant’s evidence at the Receivership hearing on 19 November 2009 reflected upon the appellant’s candour.

Ross J found that the appellant’s conduct in initially denying Dr Hanscombe’s account of what had occurred and then merely disputing where he was standing at the relevant time was ‘a further illustration of the [appellant’s] recklessness in relation to his duty of candour’.[49] His Honour stated that, ‘[i]n seeking to explain some of his behaviour — particularly his antagonism towards Mr Mann — the [appellant] … displayed a reckless disregard towards his duty of candour to the Tribunal.’[50]
[49]Ross J’s decision, [262].
[50]Ross J’s decision, [264].

In a witness statement dated 31 August 2011 that the appellant filed in the VCAT proceeding, he stated ‘I have found it very difficult coping with a situation particularly when as soon as the appointment of the Receiver was made Mr Mann gave the thumbs up signal to Ms Rivalland which was acknowledged and immediately thereafter the thumbs down to me.’[51] The appellant gave evidence that the incident took place after Emerton J made the Receivership order on 12 April 2010.
[51]Ross J’s decision, [265].

Ms Sonia Rivalland, an employee of the Board, swore an affidavit in which she denied that Mr Mann had at any time given her the ‘thumbs up’ signal or given the appellant the ‘thumbs down’ signal. Mr Muir gave evidence which supported Ms Rivalland’s evidence. There was evidence at the VCAT hearing that, when the Receivership order was made on 12 April 2010, the appellant was not in Court. When it was put to the appellant in cross-examination that it was impossible for him to have observed the alleged incident on 12 April 2010, he initially sought to suggest that Mr Arthur told him about the incident and then sought to suggest that the incident may have occurred on 31 March 2010.[52]
[52]Ross J’s decision, [269].

Mr Arthur gave evidence that, on 12 April 2010, after Emerton J made the Receivership order, he saw Mr Mann gesticulate with a ‘thumbs up’ gesture towards Dr Hanscombe and that the appellant was not in Court at that time. Mr Arthur did not take any issue with Ms Rivalland’s evidence.[53]
[53]Ross J’s decision, [270]–[271].

Ross J referred to the matters discussed at [92] to [94] above and made the following finding:

This is a further illustration of the Applicant recklessly making a statement to the Tribunal without checking the facts. It shows a reckless disregard towards his duty of candour to the Tribunal.[54]

[54]Ross J’s decision, [272].

Ross J also made the following general finding in relation to the appellant’s conduct towards Dr Hanscombe, Mr Batrouney and Mr Mann:

The Applicant’s conduct towards Dr Hanscombe, Mr Batrouney and Mr Mann was reprehensible and amounts to conduct which falls short of the professional standards expected of a legal practitioner.[55]
[55]Ross J’s decision, [274].

(i) Ross J’s decision as to why the appellant was not a fit and proper person

Ross J stated the following reasons why he was satisfied that the appellant was not a fit and proper person to hold a practising certificate:

The Applicant is responsible for the serious irregularities committed by his practice in relation to trust money; the failure to properly account in a timely way to clients for trust money received by the practice on their behalf and various contraventions of the Act and the Regulations … . A receiver has been appointed to his practice. While paying lipservice to contrition it was obvious that the Applicant feels a strong sense of entitlement to the fees he has taken and persists in seeking to attribute blame for the trust account irregularities to others. In my view he has limited insight into the seriousness of the trust money contraventions.

Yet had the Board’s case only been based on the appointment of a receiver to the Applicant’s practice and on her Honour’s findings in relation to the trust account deficiencies I would have been inclined to grant the application for review, subject to significant limitations being placed on the Applicant’s practising certificate. Regrettably that is not the case. There are a number of candour issues and other matters which have led me to conclude that the Applicant is not a fit and proper person to hold a practising certificate. I now turn to deal with those issues.
…
In the context of this case the Applicant’s actions and motives tell against his character and his fitness to practise. In particular I rely on the following findings:
·The Applicant deliberately attempted to get a client, Mr Rann, to confirm instructions that were not given – in other words to participate in a lie – in an effort to shore up his defence in the receivership proceeding. In doing so the Applicant behaved dishonestly and put his interests ahead of his client.
·The Applicant failed in his duty of honesty and candour to the Court in relation to document DBF94 and has demonstrated a lack of insight into the gravity of his offending.
·The Applicant breached his duty of candour to the Court in seeking a stay of the receivership on the basis that, inter alia, the receivership was doing ‘mortal damage’ to the practice in circumstances where he failed to disclose to the Court that the practice was effectively closing down or at the very least being significantly wound back.
·The Applicant has displayed a somewhat casual approach to his duty of honesty and candour to the Tribunal in these proceedings. The Applicant’s actions – for example in denying that he had received certain Board documents and in stating that he had not received Mr Muir’s email of 1 July 2011 – speak of a reckless disregard to his duty of honesty and candour.[56]
[56]Ross J’s decision, [292]–[293], [295] (citations omitted).

Ground of appeal 1: Estoppel Ruling was erroneous

Ground of appeal 1 in the appellant’s amended notice of appeal is as follows:

The learned judge’s ruling that the Appellant was estopped from contesting matters found by the Honourable Justice Emerton in proceedings in this Court for the appointment of a Receiver to the Appellant’s practice was wrong in law.

There were three limbs to the appellant’s submission that the doctrine of issue estoppel did not apply to Emerton J’s findings and that, accordingly, the Estoppel Ruling was erroneous. The first limb was that the issues in the Receivership proceeding and the VCAT proceeding were not the same. The second limb was that the Receivership order was interlocutory rather than final. The third limb was that the capacity and interest of the Board as a party to the Receivership proceeding differed from its capacity and interest as a party to the VCAT proceeding.

In Carl Zeiss Stiftung v Rayner & Keeler Ltd [No 2],[57] Lord Guest stated that issue estoppel does not arise in respect of a judicial decision unless the following three components are satisfied:

(1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.[58]

[57][1967] 1 AC 853.

[58][1967] 1 AC 853, 935.

The above passage was quoted with approval by the High Court in Kuligowski v Metrobus.[59]
[59](2004) 220 CLR 363, 373 [21] (‘Kuligowski’).

(a) ‘Same question’ component of issue estoppel

Authorities such as Blair v Curran[60] and Ramsay v Pigram[61] make it clear that the expression ‘same question’ in the first component of the doctrine of issue estoppel does not refer to the ultimate question, as identity in the ultimate question would give rise to a res judicata. Rather, the first component refers to an issue which established the legal foundation or justification for the judicial decision. Accordingly, the doctrine of issue estoppel can apply notwithstanding that the ultimate question for decision in a subsequent proceeding is different.
[60](1939) 62 CLR 464 (‘Blair’).
[61](1968) 118 CLR 271 (‘Ramsay’).

In Ramsay, Barwick CJ stated:

Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case.[62]

[62](1968) 118 CLR 271, 276.

The difference between res judicata and issue estoppel was explained by Dixon J in Blair as follows:

The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.[63]

[63]Blair (1939) 62 CLR 464, 532.

With respect to the nature of issue estoppel, his Honour held that:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared.[64]

[64]Blair (1939) 62 CLR 464, 531–2.

Dixon J also emphasised that nothing but what is legally indispensable to the conclusion is finally ‘closed or precluded’. In matters of fact, issue estoppel is confined to the ultimate facts which form the ingredients in the cause of action. It includes any matter which it was necessary to decide, and which was actually decided, as the groundwork of the decision, though not then directly the point at issue.[65] The corollary of this is that:

… matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion.[66]

[65]Blair (1939) 62 CLR 464, 532.

[66]Blair (1939) 62 CLR 464, 532.

Although the appellant’s written submission states, rather ambiguously, that ‘[t]he appointment of the Receiver is a different capacity to the fitness to [practise]’, he did not elaborate on why the first component of the doctrine of estoppel has not been satisfied.

It may be accepted that the cause of action in the Receivership proceeding concerned whether the requirements in s 5.5.1 of the Act for the appointment of a receiver to the Practice were satisfied, and that this differed from the cause of action in the VCAT proceeding which concerned whether the appellant was a fit and proper person to hold a practising certificate under s 2.4.7(2)(b) of the Act. The existence of this difference, however, does not determine whether issue estoppel arises.

Ross J was correct to conclude that, while the ultimate issue or cause of action in the Receivership proceeding was not the same as the ultimate issue or cause of action in the VCAT proceeding, the factual question relating to the existence of trust account deficiencies and resultant breaches of the Act and the Regulations — which the appellant sought to agitate in the VCAT proceeding — had been determined in the Receivership proceeding. His Honour also correctly concluded that Emerton J’s factual findings on this question necessarily established the legal foundation or justification for her Honour’s decision to make the Receivership order. Had Ross J permitted the appellant to re-litigate this question, the result may have been two inconsistent decisions (one judicial and the other administrative) on the same factual matter. This is precisely the type of result that the doctrine of issue estoppel seeks to avoid.

It follows that the first limb of the appellant’s contention that the Estoppel Ruling was wrong must be rejected.

(b) ’Final decision’ component of issue estoppel

The second component of the doctrine of estoppel requires consideration of whether the decision made by Emerton J in the Receivership proceeding was ‘final’.

The High Court in Kuligowski held that a ‘final’ decision is one which is not of an ‘interlocutory character’, but is completely effective unless and until rescinded, altered or amended.[67] The fact that an appeal lies from a decision does not make it any less final.[68]
[67]Kuligowski (2004) 220 CLR 363, 375 [25], 377 [32].
[68]Kuligowski (2004) 220 CLR 363, 375 [25].

In Ainslie v Ainslie,[69] Isaacs J stated:

The true rule is to see whether or not the Legislature has by its enactment left the order entirely floating, so to speak, as a determination enforceable only as expressly provided and in the course of that enforcement subject to revision, or whether the order has been given the effect of finality unless subsequently altered. This can only be ascertained by construing the Act as a whole.[70]

[69](1927) 39 CLR 381.

[70](1927) 39 CLR 381, 390.

The distinction between a ‘final’ decision and a decision which has an ‘interlocutory character’ may not always be immediately apparent, and requires consideration of the relevant provisions of the Act.

Section 5.2.1(d) of the Act provides that external intervention may take place in relation to a legal practice where the Board forms a belief on reasonable grounds about the existence of one or more of the circumstances set out in that provision.[71] When the Board becomes aware that one or more of the circumstances exists in relation to a legal practice and decides that, having regard to the interests of the clients of the practice and to other matters that it considers appropriate, external intervention is warranted, s 5.2.2 applies. Under s 5.2.2(2)(c), the Board may apply to the Court for the appointment of a receiver to the legal practice, if the Board is of the opinion:

(i)that the appointment is necessary to protect the interests of clients in relation to trust money or trust property; or
(ii)that it may be appropriate that the provision of legal services by the practice be wound up and terminated.

[71]Section 5.2.1(a), (b) and (c) sets out additional circumstances which are not relevant in the present case.

Section 5.5.1 of the Act empowers the Court to make an order appointing a receiver to a legal practice. It does not contain any specific criteria to be considered by the Court in the exercise of that power. The role of the Court is not to judicially review the Board’s determination to apply to the Court.[72] However, the Court’s decision must be informed and guided by the same considerations applied by the Board in making its determination under s 5.2.2(2)(c), discussed at [115] above. That is, the Court must decide whether, on the evidence before the Court in relation to the matters set out in s 5.2.1, the appointment is necessary to protect the interests of clients in relation to trust money or trust property, or whether it may be appropriate that the provision of legal services by the legal practice be wound up and terminated. The seriousness of these matters, the gravity of the consequences of a receivership order and the thorough decision-making process that must be followed before such an order can be made, suggest that it was not intended that such an order be made on an interim or provisional basis.
[72]Emerton J’s decision, [24]–[25].

In the Receivership proceeding, Emerton J decided to appoint the Receivers on the basis of the factual findings regarding trust account deficiencies and breaches of the Act and Regulations, set out at [26] above. Those findings were final, and were made after her Honour had heard extensive evidence and submissions in the course of a lengthy trial, and after taking time to consider her decision.

Once a receiver has been appointed to a legal practice, the receiver assumes the role of receiver of the regulated property of the practice as described in s 5.5.4 of the Act. That section and those that follow it have the effect that the receiver displaces the owner of the legal practice as the manager and controller of the practice. Indeed, under s 5.5.3(1), the owner would commit an offence if he or she were to participate in the affairs of the practice. The receiver may deal with the regulated property, seek information and conduct investigations.[73] The receiver is also required to comply with the detailed reporting requirements set out in s 5.6.8 of the Act. The nature of all these provisions indicates that the Act does not contemplate that a receiver be appointed on a merely interim or provisional basis.
[73]See ss 5.5.8, 5.5.9 and 5.5.10 of the Act.

The Receivership order was effective to appoint the Receivers to the Practice, and to specify their functions and term of appointment. The Receivers immediately commenced their work in accordance with the Receivership order and the Act. While the Act does not explicitly describe the Court’s decision to appoint receivers as ‘final’ or ‘conclusive’, s 5.5.17 of the Act relevantly prescribes the circumstances in which a Court-ordered receivership will terminate, as follows.

Termination of receiver's appointment by Supreme Court
(1)The appointment by the Supreme Court of a receiver for a law practice terminates in the following circumstances —
(a) the term (if any) of the appointment comes to an end;
(b)the appointment is set aside under section 5.6.4 [by way of appeal to the Court of Appeal];
(c)a determination of the Supreme Court that the appointment be terminated has taken effect.

(2)The Supreme Court may, on application by the Board or receiver made at any time, determine in writing that the appointment be terminated immediately or with effect from a specified date.
(3)A receiver for a law practice must apply to the Supreme Court for termination of the appointment when the affairs of the practice have been wound up and terminated, unless the term (if any) of the appointment has already come to an end.
(4)The Supreme Court may make any order it considers appropriate in relation to an application under this section.

The appointment of a receiver will therefore continue until one of the above prescribed events takes place. This is reinforced by s 5.5.17(5), which provides that the appointment of a receiver is not stayed by the making of an application to terminate that appointment. Rather, the receiver may continue to perform his or her functions as receiver, pending the Court’s decision on the application.

Under s 5.5.17 of the Act, unless and until the term of the appointment of the Receivers ended or their appointment was set aside by the Court, the Receivership order had ongoing effect and settled the rights of the parties with respect to that appointment. The Court’s power to reconsider the Receivership order does not prevent it from being final.[74]
[74]Kuligowski (2004) 220 CLR 363, 377 [33].

The fact that the term of the Receivers’ appointment was fixed does not alter the conclusion that the Receivership order was final with respect to the Board’s application for that order. Emerton J formed the view that the Practice would be financially ruined by a lengthy receivership.[75] However, given that the Receivers would require sufficient time to identify and resolve all irregularities in relation to the Practice’s trust account, they were appointed for an initial term of six months. As noted above, it later became necessary to extend this initial term. It is clear that, given the scope of the Receivers’ task, and the period of time allocated to them in which to perform it, the appointment was not intended by Emerton J to be an interim or provisional one.
[75]Emerton J’s decision, [311].

Likewise, the fact that the Receivers were initially appointed on the condition that, without further order from the Court, they did not move to wind up the Practice,[76] does not indicate that Emerton J’s decision lacked finality. The imposition of this condition necessarily affected the character of the work performed by the Receivers. However, it did not alter the character of Emerton J’s decision. It is not a requirement of a receivership under the Act that the legal practice in question be wound up. The appointment of the Receivers — subject to the condition that they not wind up the Practice without further order from the Court — would continue under the terms of that appointment until it terminated in accordance with s 5.5.17 of the Act.
[76]Emerton J’s decision, [311].

This conclusion is not affected by s 5.6.5 of the Act, which provides for directions to be made by the Court in relation to any matter affecting a receivership or a receiver’s powers, duties or functions. Once a decision has been made by the Court to order the appointment of a receiver, a subsequent direction by the Court in respect of the receivership does not affect the finality of the initial decision. A change in the nature of the receivership does not change the character of the original decision by the Court. The original decision remains final and effective unless and until one of the events prescribed in s 5.5.17 of the Act should occur.

Emerton J’s decision made final findings on the issues which necessarily established the legal foundation or justification for her decision to appoint the Receivers. Her Honour’s findings were not tentative or provisional in any sense. They were unlike the findings that suffice for an interim order, such as an interlocutory injunction, namely, that there is a serious question to be tried and that the balance of convenience favours the making of an order. Nor were her Honour’s findings made to the standard of a prima facie case or whether the matters were arguable. Her Honour made factual findings on the balance of probabilities, which warranted the making of an order under s 5.5.1 of the Act to appoint receivers to the Practice. The findings were not ones that required revisiting by her Honour in the light of further evidence and submissions at a subsequent trial.

The fact that an appeal against the decision to appoint a receiver to a legal practice may be made to the Court of Appeal under s 5.6.4 of the Act, does not assist in determining whether the orders made by Emerton J were ‘final’ for the purposes of issue estoppel. Had the appellant appealed against the Receivership order and the Court of Appeal had set aside the order, self-evidently the order would have ceased to be final. In the present case, however, the appellant abandoned his appeal to the Court of Appeal and the Receivership order continued to be final.[77] Following several extensions and the removal of the condition precluding a winding up of the Practice, the Receivership order continues to be fully efficacious according to its terms.
[77]Rogers v The Queen (1994) 181 CLR 251, 279.

The appellant submitted that Emerton J’s decision was ‘interlocutory and was affected by the subsequent reports of Munday Wilkinson, David Osborne and Deloitte’. For the reasons I have already discussed, Emerton J’s decision was not interlocutory. Even if it is established that the reports upon which the appellant relied demonstrate that her Honour made erroneous factual findings, that would not affect the correctness of the Estoppel Ruling. The whole purpose of the doctrine of issue estoppel is to prevent re-litigation of factual issues with a view to persuading a court in a subsequent proceeding between the same parties to make different factual findings. In any event, as discussed at [152] below, insofar as the reports in question support the proposition that the trust account irregularities had not resulted in a breach of trust or in any Melbourne Voyager client suffering a loss, they do not demonstrate error in Emerton J’s findings regarding deficiencies in the Practice’s trust account.

Accordingly, the second limb of the appellant’s challenge to the correctness of the Estoppel Ruling is not made out.

(c) ‘Same parties’ component of issue estoppel

In relation to the third component of the doctrine of issue estoppel, the appellant asserted that, in the VCAT proceeding, the Board acted in a different capacity and pursued a different interest compared with the capacity and interest in the Receivership proceeding. The appellant did not explain the basis of his assertion.[78]
[78]The appellant referred to, without discussing, the case State Securities Pty Ltd v Dromi [2010] VSCA 264. That case makes no reference to the capacity and interest in which the parties acted, or the doctrine of issue estoppel more generally. It offers no support for the appellant’s contentions.

It is clear from [14] and [15] above that the Board’s overall statutory function is to regulate the legal profession for the purpose of giving effect to the objectives set out in s 6.2.3 of the Act. Under the Act, the Board is empowered to give effect to these objectives in a number of ways, including making decisions about the granting, refusal, suspension and cancellation of practising certificates and seeking restrictions to the control by practitioners of their practices by applying to the Court for the appointment of a receiver. In undertaking its various functions, the Board acts with the same interest and in the same capacity. The fact that, under the Act, the Board has power to make certain decisions itself whereas in relation to some matters it must apply to the Court for an order, does not alter the Board’s interest and the capacity in which it acts.

In deciding to apply for the Receivership order, the Board acted in its capacity as regulator of the legal profession and sought to further the interest of protection of consumers of legal services. In deciding to refuse to renew the appellant’s practising certificate and defending that decision before VCAT, the Board acted in its capacity as regulator of the legal profession and sought to further the interest of protection of consumers of legal services. In each proceeding, the interest of protection of consumers of legal services also involved other related interests such as maintenance of professional standards and ensuring the adequate management of trust accounts. Even if those related interests may not have had the same prominence in each proceeding, that did not deny their presence.

It follows that the third limb of the appellant’s challenge to the correctness of the Estoppel Ruling cannot succeed.

For completeness, it is worth noting that there are features of VCAT’s jurisdiction to review decisions on their merits that have a bearing on the way that the doctrine of issue estoppel may apply to VCAT. VCAT is required to review a decision on its merits and make its own independent decision which it considers to be correct or preferable in the light of the facts and the law as at the date of VCAT’s decision.

Where a court finds that a particular state of affairs exists as at the date of the court’s decision, the doctrine of issue estoppel may require VCAT to accept the existence of that state of affairs as at that date. However, that state of affairs may not be determinative of the issues that VCAT must decide, because it must consider the facts as at the date it makes its own decision. For example, in a case before VCAT where a lawyer’s financial position is relevant, if a court had decided that the lawyer was a bankrupt as at a particular date, VCAT would be bound by that decision but it would also have to consider whether the lawyer remained a bankrupt as at the date of the hearing before VCAT.

In the present case, VCAT was bound by Emerton J’s findings that, as at the date that her Honour made the Receivership order, there were deficiencies in the Practice’s trust account and that the Practice had breached the Act and the Regulations. However, if Ross J intended to base his decision about the appellant’s fitness to hold a practising certificate on the existence of deficiencies in the Practice’s trust account and breaches of the Act and the Regulations, he would be required to consider the appellant’s conduct in relation to those matters as at the date of his Honour’s decision. Such consideration could not have made any difference, however, because the Receivers were in control of the Practice continuously from the date the Receivership order was made and therefore the appellant’s conduct in relation to those matters could not have altered since that date. In any event, as discussed at [138] below, Ross J reached his decision that the appellant was not a fit and proper person to hold a practising certificate independently of the existence of any trust account deficiencies or breaches of the Act and the Regulations.

(d) Error in Estoppel Ruling would not affect outcome of appeal

As the Estoppel Ruling was correct, it follows that Ross J did not err in precluding the appellant from challenging Emerton J’s critical finding that there were deficiencies in the Practice’s trust account — with resultant breaches of the Act and the Regulations — that warranted the appointment of the Receivers. This is the only finding of Emerton J that Ross J discussed in his decision without considering the evidence (including fresh evidence) and making his own independent findings.[79] Put another way, this was the only finding in respect of which the Estoppel Ruling had any practical relevance to Ross J’s decision.
[79]Emerton J’s finding that the Practice had failed to pass on to clients discounts provided by counsel was in the context that such a failure created a trust account deficiency. See above at [28].

Even if the Estoppel Ruling were vitiated by error, however, such an error would not have affected the outcome of this appeal. This is because, under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (‘VCAT Act’), not all errors of law made by VCAT warrant leave to appeal. In order for leave to appeal to be granted under that section, the person seeking leave must identify a question of law which is ‘important to the appeal’s succeeding or failing’.[80] An error of law which would not have made any difference to the outcome of a decision of VCAT would not satisfy that requirement and would not warrant an appeal being allowed.[81]
[80]Secretary of the Department of Premier and Cabinet v Hulls [1993] 3 VR 331, 335 [9].
[81]Cf Rugolino v Howard [2010] VSC 590, [72].

A careful reading of Ross J’s decision indicates that, while Emerton J’s findings about trust account deficiencies — and resultant breaches of the Act and the Regulations — provided background context for the issues that Ross J took into account in deciding that the appellant was not a fit and proper person to hold a practising certificate, his Honour reached that decision independently of those findings.

My conclusion at [138] above is borne out by para 293 of Ross J’s decision, which is set out at [97] above. In para 293, his Honour stated that, if the Board’s case had been based only on Emerton J’s findings in relation to the trust account deficiencies, he ‘would have been inclined to grant the [appellant’s] application for review [against the Board’s decision to refuse to renew the appellant’s practising certificate], subject to significant limitations being placed on the [appellant’s] practising certificate’.[82] His Honour went on to say that ‘a number of candour issues and other matters … [had] led [him] to conclude that the [appellant] is not a fit and proper person to hold a practising certificate.’
[82]In n 208 of his decision, Ross J clarified what he meant by ‘significant limitations’. His Honour said: ‘In particular, I would have provided that Mr Forster only be permitted to engage in supervised legal practice and that he not be authorised to receive trust money’.

In my opinion, it is clear from para 293 of Ross J’s decision that his Honour was of the view that Emerton J’s conclusions concerning the trust account deficiencies did not support a finding that the appellant was not a fit and proper person to hold a practising certificate. This is because, by definition, a person who is not a fit and proper person to hold a practising certificate cannot be granted a practising certificate, including one that is subject to limitations. It is also clear from para 293 that the only matters that led Ross J to conclude that the appellant was not a fit and proper person to hold a practising certificate were the ‘candour issues and other matters’ that are dealt with at para 295 of his Honour’s decision.

Paragraph 295 of Ross J’s decision, which is set out at [97] above, also supports my conclusion at [138] above. In para 295, his Honour stated that the appellant’s ‘actions and motives tell against his character and his fitness to practise’. Ross J then stated that he particularly relied on four findings namely, his findings about the appellant’s Email to Mr Rann; the appellant’s breach of his duty of honesty and candour to the Court in relation to the Item 10 document; the appellant’s breach of his duty of candour to the Court in failing to disclose that he was effectively closing down the Practice; and the appellant’s reckless disregard of his duty of honesty and candour in the VCAT proceeding.

The second, third and fourth findings to which I have referred at [141] above are the ‘candour issues’ that Ross J foreshadowed at para 293 of his decision, while the first finding constitutes the ‘other matters’ which his Honour foreshadowed in the same paragraph.

While, at first blush, the phrase ‘[i]n particular I rely on the following findings’ that precedes the four findings may suggest that Ross J relied on other matters, it is clear from the overall context that this is not the case. His Honour’s conclusion that the appellant was not a fit and proper person to hold a practising certificate was based solely on his findings relating to the appellant’s Email to Mr Rann and on his findings relating to the duty of honesty and candour. Not all of the latter findings are mentioned in para 295. This is made clear by the words ‘for example’ in that paragraph. It follows that the phrase ‘[i]n particular I rely on the following findings’ is intended to convey that his Honour also relied on the adverse honesty and candour findings to which he referred earlier in his decision even though he did not specifically mention them in para 295.

For the above reasons, ground 1 must be rejected.

Grounds of appeal 2, 3, 4 and 5: Natural justice and factual findings

Grounds of appeal 2, 3, 4 and 5 are as follows:

2.The learned judge erred in law in directing the Appellant to make numerous deletions from the written submissions, statements, affidavits and proposed evidence of the Appellant which precluded him from putting his case properly.
3.The learned judge erred in exercising his discretion to refuse to renew the Appellant’s practising certificate as he ought to have found or held that the withdrawals from the Hollows trust account were made in accordance with the requirements of the Legal Profession Act 2004 and the Legal Profession Regulations 2005.
4.The learned judge erred in exercising his discretion to refuse to renew the Appellant’s practising certificate as he ought to have found or held that the accounting errors were errors in the firm’s office account and not its trust account and that all such errors have been rectified.
5.The learned judge erred in exercising his discretion to refuse to renew the Appellant’s practising Certificate in relying on obiter of Emerton J in reaching his conclusions.

Under cover of the above grounds, the appellant sought to impugn the manner in which Ross J applied the Estoppel Ruling. In particular, the appellant submitted that his Honour erred by failing to make his own independent findings on certain issues and by limiting the evidence and submissions that the appellant was permitted to pursue in the VCAT proceeding.

Grounds 2, 3, 4 and 5 assume that the Estoppel Ruling is erroneous, and complain about its practical effect on that basis. As I have held that the Estoppel Ruling was correct, there is no substance to these grounds. However, as the appellant made submissions on them, I will briefly consider them.

Under cover of ground 2, the appellant submitted that VCAT denied him natural justice by precluding him from adducing oral and documentary evidence and making submissions on particular issues at the VCAT hearing. In his oral and written submissions on the appeal, the appellant described the material that he wished to present at the VCAT hearing and which he contended that he was inappropriately prevented from doing because of the erroneous Estoppel Ruling.

The material included correspondence and other documents relating to problems with the Infinity Law software, expert reports prepared by Munday Wilkinson, Mr David Osborne of Shepard Webster & O’Neill Pty Ltd and Deloitte, and evidence from the appellant, Mr Angus Fulton, Mr John Lombardo (accountant of the Practice), Mr Ron Male (auditor of the Practice), Mr David Osborne (trust auditor), Ms Lindy Thewlis (employee of Fujitsu) and Mr Peter Scott (practice manager of the Practice).

The material broadly related to the causes of trust account irregularities, including the roles of the Infinity Law software and the LIV; the reasonableness of the Practice’s failure to detect the irregularities; whether there were deficiencies in the Practice’s trust account; the rectification measures the Practice had undertaken and whether they were in accordance with the Act and the Regulations; whether any Melbourne Voyager clients had suffered any loss; and the conduct of the Receivers since they were appointed.

The correctness of the Estoppel Ruling means that Ross J did not err in precluding the appellant from re-agitating the question of whether there were deficiencies in the Practice’s trust account. In any event, for the reasons discussed at [137] to [143] above, even if the Estoppel Ruling were incorrect, Ross J decided that the appellant was not a fit and proper person to hold a practising certificate independently of the trust account deficiencies.

The existence of a trust account deficiency does not depend on whether a practitioner has committed a breach of trust[83] or on whether a client has suffered a loss. This is because s 3.3.21(3) defines ‘deficiency ‘ in a trust account as including ‘the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account.’ Accordingly, evidence and submissions on these issues were not relevant to the VCAT proceeding.
[83]It follows that the appellant’s reliance on In Re Hallett’s Estate (1880) 13 Ch D 696 is misconceived.

Likewise, insofar as the appellant was precluded from presenting evidence and submissions to establish that the rectification measures were in accordance with the Act and the Regulations, he was not denied natural justice because Ross J assumed in his favour that the rectification measures complied with the relevant statutory provisions.[84]
[84]See para 78 of Ross J’s decision, which is discussed above at [33].

In his written submission on the appeal, the appellant contended that, as part of his evidence about his fitness to practise, he should have been permitted to explain the difficulties he encountered in obtaining information from the Inspectors to support him in promptly rectifying the accounting errors. The appellant also contended that the Inspectors ignored his rectification work and proposed letters to clients and that they refused to meet his auditor, his staff and Fujitsu representatives. Even if these assertions are correct, as I have already discussed, the appellant was not prejudiced by any rectification issues because Ross J made a favourable assumption about those issues. In any event, the transcript of the VCAT hearing indicates that Ross J permitted the appellant to rely on evidence and to make submissions in relation to aspects of the trust account irregularities and their rectification insofar as the evidence and the submissions were considered to be relevant to his character.

The conduct of the Receivers since their appointment was not relevant to the issues before VCAT and, in any event, that conduct was not relied upon by Ross J.

Under cover of ground 3, the appellant submitted that Ross J erred by failing to find that the withdrawals from the Practice’s trust account were in accordance with the requirements of the Act and the Regulations and that there were no trust account deficiencies. For the reasons set out at [151] and [152] above, ground 3 is not made out.

Under cover of ground 4, the appellant submitted that Ross J erred by failing to find that the accounting errors that the Practice made were in its office account and not in its trust account, and that all such errors have been rectified. For the reasons set out at [151] to [154] above, ground 4 must be rejected.

Under cover of ground 5, the appellant submitted that Ross J erred by relying on obiter statements of Emerton J in the Receivership proceeding in reaching his conclusions. The obiter statements, as described in the appellant’s written submission, relate to accounting issues and the Infinity Law software. For the reasons set out at [137] to [143] above, Ross J’s decision would have been the same independently of these matters. Accordingly, ground 5 is not substantiated.

Grounds of appeal 7, 8, 10, 11 and 12: Factual matters and standard of proof

Grounds 7, 8, 10, 11 and 12 are as follows:

7.The learned judge’s finding (at Reasons para 182) that ‘by his conduct in the Supreme Court proceedings the [Appellant] has failed in his duty of honesty and candour to the Court’ was not open to him on the evidence.
8.The learned judge erred in law in failing to apply the principle in Briginshaw v Briginshaw in considering whether the Appellant lacked insight ‘into the gravity of his conduct’ (Reasons para 184).
10.The learned judge erred in holding that as the Appellant he did not have a proper basis for annotating exhibit ‘DBF 94’ as he did and he was acting dishonestly and with a want of candour.
11.The learned judge’s finding (at Reasons para 139) that the Appellant’s evidence did not provide a reasonable basis for his email request to Mr Rann was not open to him on the evidence.
12.The learned judge erred in law in failing to apply the principle in Briginshaw v Briginshaw in considering whether the Appellant ‘had deliberately attempted to get … Mr Rann to confirm instructions that were not given – in other words to participate in a lie - in an effort to shore up his defence in the receivership proceeding’. (Reasons para 144).

Before considering the above grounds, it is necessary to briefly outline the elements of a legal practitioner’s duty of honesty and candour to the Court that underlie some of the grounds.

In Meek v Fleming,[85] Holroyd Pearce LJ agreed with the proposition that while a lawyer must not knowingly mislead the Court as to the facts or the law, he or she may put such matters as he or she believes will best advance the client’s case.[86] A party need not reveal something to the discredit of that party. However, this does not mean that the party can by implication falsely pretend that a particular state of affairs exists, and knowing that the court has been misled with respect to a material matter, foster and confirm the misrepresentation through answers given by the party.[87] A lawyer who is a party to the presentation of evidence or the making of a statement to the court that is partly true, but which does not amount to the whole truth, can create a misleading impression to the Court and thereby breach his or her duty to the Court. Once a misleading impression has been created, even if innocently, the lawyer has an obligation to correct that impression as soon as he or she becomes aware of the true position.[88] That obligation continues until judgment is given.[89]
[85][1961] 2 QB 366.
[86]Meek v Fleming [1961] 2 QB 366, 379.
[87]Meek v Fleming [1961] 2 QB 366, 380.
[88]Myers v Elman [1940] AC 282, 294.
[89]Vernon v Bosley [No 2] [1999] QB 18, 37, 56, 63.

Misleading the Court by presenting a misleading or false document is contrary to the lawyer’s duty of honesty and candour, including in his or her capacity as a litigant.[90] In Law Society of New South Wales v Foreman,[91] the New South Wales Court of Appeal ordered that the respondent be removed from the Roll of practitioners, because she had knowingly presented a falsified document to the Court on the basis that it was genuine. Mahoney JA stated that:

A practitioner must not merely not deceive the court before which she practises; she must be fully frank in what she does before it. This obligation takes precedence over the practitioner's duty to her client, to other practitioners and to herself: Meek v Fleming [1961] 2 QB 366 at 382, 383. The justice system will not work if a practitioner is, for her own purposes, free to put to the court that which she knows to be false.[92]

[90]Coe v New South Wales Bar Assn [2000] NSWCA 13, [8], [10]; NSW Bar Assn v Cummins (2001) 52 NSWLR 279, 290 [59].

[91](1994) 34 NSWLR 408 (‘Foreman’).

[92]Foreman (1994) 34 NSWLR 408, 447.

In Myers v Elman,[93] Viscount Maugham said that: ‘A solicitor who has innocently put on the file an affidavit by his client which he has subsequently discovered to be certainly false owes it to the Court to put the matter right at the earliest date if he continues to act as solicitor upon the record.’[94] Similarly, in Foreman, Giles AJA stated that the respondent’s failure to reveal and correct the conduct by which the Court had been misled, compounded the unacceptable conduct involved in preparing the falsified document.[95]
[93][1940] AC 282.
[94]Myers v Elman [1940] AC 282, 294.
[95]Foreman (1994) 34 NSWLR 408, 466.

Under cover of grounds 7, 8 10, 11 and 12, the appellant sought to impugn Ross J’s decision on the basis that certain factual findings were not open to him and that, in making those findings, his Honour failed to apply the standard of proof principles in Briginshaw v Briginshaw.[96]
[96](1938) 60 CLR 336 (‘Briginshaw’).

These grounds are misconceived because an appeal under s 148 of the VCAT Act is confined to errors of law. A complaint that VCAT should have made different factual findings on the evidence before it does not concern an error of law.

When this was put to the appellant at the hearing of the appeal, he sought to recast the grounds to allege that there was no evidence before VCAT which supported the impugned factual findings.[97] Even if the appellant were permitted to further amend his notice of appeal to include a ‘no evidence’ ground, such a ground would be bound to fail because there was an abundance of probative evidence before VCAT on the basis of which it was able to make the impugned findings.
[97]See Transport Accident Commission v Hoffman [1989] VR 197, 199 for a discussion of the ‘no evidence’ ground.

Two of the impugned findings concern the appellant’s conduct relating to the Item 10 document (grounds 7 and 10). At para 182 of his decision, Ross J concluded that the appellant’s conduct constituted a failure to comply with his duty of honesty and candour to the Court. At para 164 of his decision, Ross J concluded that the appellant did not have a proper basis for annotating the Item 10 document.

The evidence upon which Ross J relied in making the two impugned findings was discussed at [52] to [60] above. It simply cannot be contended that there was no evidence that enabled his Honour to reach those conclusions. On the contrary, there was overwhelming evidence to support them. Moreover, Ross J’s discussion of cases such as Rondel v Worsley,[98] New South Wales Bar Association v Cummins,[99] Coe v New South Wales Bar Association[100] and Foreman,[101] indicates that his Honour understood the scope and importance of the duty of honesty and candour to the Court and that he correctly applied those principles to the facts as found by him.
[98][1969] 1 AC 191.
[99](2001) 52 NSWLR 279.
[100][2000] NSWCA 13.
[101](1994) 34 NSWLR 408.

In his written submission, the appellant maintained that he genuinely believed that the Item 10 document was a minute of the LIV executive council and that his misdescription of it constituted an innocent mistake. This submission misunderstands the scope of a legal practitioner’s duty of honesty and candour.

In circumstances where the LIV never informed the appellant that the Item 10 document had any connection with the LIV executive council and no such connection was evident on the face of the document, the appellant breached the duty of honesty and candour in four respects after he wrote the words ‘Executive Council’ on a copy of the document which did not appear on the original. First, by ascribing to the Item 10 document the unqualified description ‘the Law Institute of Victoria Executive Council Minute Item 10’ in his affidavit of 5 November 2009 when the LIV had never described it as such. Secondly, in not disclosing that he had written the words ‘Executive Council’ on the document. Thirdly, by standing by while Mr Arthur — presumably on the appellant’s instructions — asked questions that were premised on the document being a document of the LIV executive council and on the words ‘Executive Council’ having been written by a person other than the appellant. Fourthly, in not informing Emerton J of the correct position at any time prior to the making of the Receivership order.

The third impugned finding concerns the appellant’s Email to Mr Rann (ground 11). At para 139 of his decision, Ross J found that the evidence did not provide a reasonable basis for the appellant’s request in the Email for Mr Rann to send an email confirming that he had given instructions to the Practice to pay the Commonwealth’s cheque for $125,000 for party and party costs directly into the Practice’s office account.

The appellant submitted that the evidence upon which Ross J relied in reaching his findings lacked cogency and was neither clear nor compelling. The appellant contended that Mr Rann’s evidence in the Receivership proceeding and the VCAT proceeding demonstrated that his memory was unreliable and contradictory; that the appellant had acted transparently in his dealings with Mr Rann; that, as Mr Rann was a witness, the appellant was entitled to contact him to obtain evidence; and that a file note about the two cheques supported the contents of the Email.

The evidence upon which Ross J relied in reaching the third impugned finding was discussed at [40] to [50] above. Rather than there being no evidence to support this finding, there was strong evidence to justify it. The fact that the appellant’s assessment of that evidence differs from that of Ross J cannot assist the appellant in the appeal.

In his written submission, the appellant contended that Ross J ‘was in error in limiting in an impermissible way the examination by Mr Arthur of Mr Rann as a witness in VCAT and inappropriately limited the focus on Rann as to whether a receiver should be appointed’. This contention was not the subject of any ground of appeal. In any event, the appellant’s complaint is not made out.

The transcript of the VCAT proceeding indicates that Mr Rann was called as a witness in relation to the Board’s allegation that the appellant’s conduct in sending the Email to Mr Rann supported its contention that he was not a fit and proper person to hold a practising certificate. Central to this part of the Board’s case was that, at the settlement conference on 18 April 2007, Mr Rann did not give to the appellant a direction along the lines set out in the Email. The discussions between the appellant and Mr Rann at the settlement conference were thus of critical importance. During Mr Arthur’s cross-examination of Mr Rann, Ross J reminded Mr Arthur of what was relevant but his Honour did not circumscribe the scope of the cross-examination. Although Dr Hanscombe objected to the relevance of a number of questions, Ross J was required to make only one ruling on those objections. Ross J ruled that a particular matter should be the subject of submissions rather than cross-examination. Mr Arthur was able to cross-examine Mr Rann on his memory of what took place at the settlement conference and also on credit generally.

Under cover of grounds 8 and 12, the appellant submitted that Ross J erred in law by failing to apply the principles in Briginshaw[102] in relation to two findings. The first finding, at para 184 of Ross J’s decision, was that the appellant lacked insight into the gravity of his conduct in relation to his swearing an affidavit which misdescribed the Item 10 document as an ‘executive council’ document and his failure to correct the position once he became aware of the misdescription. The second finding, at para 144 of Ross J’s decision, was that the appellant ‘had deliberately attempted to get … Mr Rann to confirm instructions that were not given — in other words to participate in a lie — in an effort to shore up his defence in the receivership proceeding.’
[102](1938) 60 CLR 336.

In Briginshaw, Dixon J stated that the considerations that are relevant to deciding whether a fact has been established on the civil standard of proof include the nature of the fact, the seriousness of any allegation encompassed by the fact, the inherent unlikelihood of the occurrence of the fact and the gravity of the consequences flowing from a finding that the fact has been established.[103]
[103]Briginshaw (1938) 60 CLR 336, 362.

At the commencement of his decision, Ross J referred to the fact that the Board had the onus of proving that the appellant was not a fit and proper person to hold a practising certificate.[104] The following statement of his Honour indicates that he was aware of the principles in Briginshaw:

The strength of evidence necessary to establish a fact on the balance of probabilities may vary according to the circumstances. Given the seriousness of the allegations made against the Applicant and the potential gravity of the consequences for him in the event that the allegations are established, clear and cogent evidence will be required before such satisfaction can be attained on the balance of probabilities.[105]

[104]Ross J’s decision, [11].

[105]Ross J’s decision, [11] (citation omitted). In support of the first sentence in the quoted passage, Ross J cited Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 450, which applied Briginshaw.

A reading of Ross J’s decision as a whole indicates that his Honour properly applied the principles in Briginshaw and that he carefully analysed and weighed up the evidence before reaching conclusions that were adverse to the appellant. This is borne out by his Honour’s refusal to make adverse findings on some of the matters upon which the Board relied.[106] There was a surfeit of evidence that enabled his Honour to reach the conclusions at paras 144 and 184 of his decision, in accordance with the principles in Briginshaw. Accordingly, grounds 8 and 12 are not made out.
[106]See above at [35]–[36].

Grounds of appeal 6 and 9: Failure to make findings

Grounds 6 and 9 are as follows:

6.The learned judge was in error in failing to hold that the [Appellant] was entitled to sell his non-regulated property without notifying the Court and or the Legal Services Board.
9.The learned judge erred in failing to hold that the provenance of exhibit ‘DBF 94’ to the affidavit of the Appellant sworn 5 November 2009 was not a live issue at the time the Honourable Justice Emerton considered her decision on the application for appointment of receivers to the practice of Hollows Lawyers by reason of the uncontradicted evidence of Noel Henman and Brett Young adduced by the appellant.

Under cover of the above grounds, the appellant submitted that Ross J erred in law in failing to make two findings. The first finding was that the appellant was entitled to sell the Frankston premises without notifying the Court and the Board. The second finding was that the provenance of the Item 10 document was not a live issue in the Receivership proceeding after the uncontradicted evidence of Mr Henman and Mr Brett Young.

Both grounds evince a misunderstanding by the appellant about the relevance of the factual matters relating to the sale of the Frankston premises and the Item 10 document.

In relation to the sale of the Frankston premises, there is nothing in Ross J’s decision that suggests that his Honour concluded either that the appellant was not entitled to effect the sale or that he had an unqualified obligation to inform the Court or the Board of the sale. Rather, his Honour focused on the appellant instructing his counsel to make submissions to Emerton J in support of a stay of the Receivership order on the basis of its impact on the Practice, without disclosing to her Honour that he had sold the Frankston premises and had taken other steps to effectively close the Practice. The sale of the Frankston premises and the other steps were correctly found by Ross J to be relevant to Emerton J’s assessment of the appellant’s submissions and the orders that her Honour was being asked to make. By withholding that information from her Honour, the appellant created a misleading impression and breached his duty of candour.[107]
[107]See the principles discussed above at [161].

It follows that ground 6 is not made out.

In relation to the Item 10 document, there is nothing in Ross J’s decision to suggest that his Honour regarded the provenance of that document as a live issue in the Receivership proceeding after Mr Henman and Mr Brett Young had concluded their evidence. The questions of whether the provenance of the Item 10 document was a live issue and whether it had any bearing on Emerton J’s decision to appoint the Receivers did not influence Ross J’s conclusion that the appellant was not a fit and proper person to hold a practising certificate. Rather, the matters that informed this conclusion were the four matters set out at [170] above.

The appellant contended that, since the true nature of the Item 10 document became apparent in the course of the evidence given by the LIV employees, it was not necessary for him to advise the Court of his misrepresentation of that document, or to amend his affidavit. According to the appellant, following the evidence of the LIV employees, it was obvious to the Court that the Item 10 document was not a minute of the LIV executive council and that the matter was a ‘dead issue’.

The appellant’s submissions disclose a fundamental misconception about the duty of honesty and candour. As discussed at [161] to [163] above, having misled the Court about the nature of the Item 10 document, the appellant had a personal duty to disclose the true position to the Court, including that it was he who wrote the words ‘Executive Council’ on the document. The fact that the Court became aware of some aspects of the true position through other sources does not mean that the appellant did not breach the duty of honesty and candour. Likewise the existence of such a breach does not depend on whether the information that was not disclosed by the appellant continued to be a live issue until the conclusion of the Receivership proceeding. The time of the Court was wasted in pursuing evidence that was based on a false foundation created by the appellant on an issue that he stated was important to his case. Also, at no stage did the appellant disclose to Emerton J a fact that was exclusively within his own knowledge, namely, that he had written the words ‘Executive Council’.

It follows that ground 9 must be rejected.

Conclusion

For the above reasons, the appellant has not demonstrated that Ross J’s decision was vitiated by error. In these circumstances it is not necessary to discuss the Board’s notice of contention.

I would dismiss the appeal.

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[2013] VSCA 73

11 April 2013