Gillespie-Jones v Legal Services Board
[2011] VCC 223
•24 March 2011
xch
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No.CI-10-00720
| SIMON GILLESPIE-JONES | Plaintiff |
| v | |
| LEGAL SERVICES BOARD | Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 1, 2 & 3 March 2011; Further written submissions received 11 March 2011 |
| DATE OF JUDGMENT: | 24 March 2011 |
| CASE MAY BE CITED AS: | Gillespie-Jones v Legal Services Board |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 223 |
REASONS FOR JUDGMENT
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Catchwords: appeal by barrister under s3.6.23 of the Legal Profession Act 2004 against decision of the Legal Services Board refusing a claim against the Fidelity Fund - whether plaintiff is a person entitled to make a claim - whether plaintiff suffers pecuniary loss because of a default to which Part 3.6 applies - whether sufficiently cogent reasons to set aside Board’s decision
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. C.W. Harrison SC with | Billings Cloak Solicitors |
| Mr B.J. McCullagh | ||
| For the Defendant | Mr. S.R Senathirajah | Corrs Chambers Westgarth |
HER HONOUR:
1 The plaintiff barrister, Mr Gillespie-Jones, alleges that he was briefed by Mr Michael John Grey during December 2006 - April 2007 to defend Mr Harry See on charges of serious sexual offences[1]. The plaintiff claims that he is owed $31,540 in respect of the professional services he provided in respect of this matter.[2]
[1] A nolle prosequi was ultimately filed in relation to these charges
[2] A statement of account generated by the plaintiff’s clerk shows that, in the matter of See ATS DPP,
2 On 14 January 2008 the plaintiff lodged a fidelity fund claim with the Legal Services Board (the Board) claiming that he had suffered pecuniary loss because of default by the solicitor, Mr Grey, under the Legal Profession Act 2004 (the Act).
3 By correspondence of 16 January 2008 the Board requested that Mr Cottee of the Law Institute of Victoria investigate the claim. That investigation was subsequently referred to Ms Elizabeth Camillo who completed her report on 1 October 2009
4 In her report Ms Camillo found that Mr Grey received trust money totalling $31,540 that was intended to be applied to the payment of the plaintiff’s fees. Further, that this money “appears to have been misappropriated by Grey” and that in the matter of See (and another matter) “there is sufficient evidence to prove that a default occurred.” However, the ultimate recommendation was that:
“The claim be refused as the claimant is not a ‘client’ for the purposes of
Part 3.6 of the Act.”5 By correspondence dated 20 October 2009 the plaintiff’s solicitors were advised that the claim had been disallowed by the Legal Services Board at its meeting on 19 October 2009 and enclosed an “information notice” detailing the reasons for the Board’s decision. Critically that notice disclosed that the fund was not liable to compensate the plaintiff “as he does not meet the threshold test of being a client of the practice in accordance with the operation of Part 3.6 of the Act.”
6 The plaintiff appeals to this Court pursuant to s3.6.23 of the Act in relation to the Board’s decision and seeks an order, inter alia, that the Board’s decision should be set aside and that the claim be allowed in an amount of $31,540.
7 The primary issue is therefore whether this court should set aside the Board’s decision. Pertinent to this question were two pivotal matters being:
(a) whether the plaintiff, as a barrister, is entitled to make a claim under
Part 3.6;(b) whether the plaintiff suffered pecuniary loss because of “a default to
which this Part applies” pursuant to s3.6.7.3Statutory provisions
purpose
8 The provisions relating to Fidelity Cover are contained in Part 3.6 of the Act. Section 3.6.1 contains a “purpose” provision which states:
"The purpose of this Part is to compensate clients for loss arising out of defaults by law practices arising from acts or omissions of associates and defaults by approved clerks.”
claims about defaults
9 Division 3 contains provisions relating to claims about defaults. Critically, pursuant to s3.6.7:
“A person who suffers pecuniary loss because of a default to which this Part applies may make a claim against the Fidelity Fund to the Board about the default.”
10 The critical concepts are hence the concept of “pecuniary loss” and “a default to which this Part applies.”
11 The concept of “pecuniary loss” is defined in s3.6.2 in relation to a default as follows:
“(a) the amount of trust money, or the value of trust property, that
is not paid or delivered; or
(b) the amount of money that a person loses or is deprived of, or
the loss of value of trust property.”
12 Section 3.6.5(1) is concerned with “defaults to which this Part applies” and states that this Part applies to:
“(a) a default of a law practice arising from or constituted by an act or omission of one or more associates of the practice, if this jurisdiction is the relevant jurisdiction for the only associate or one or more of the associates involved;”
13 It is also immaterial where the default occurs (s3.6.5(2)) or that the act or omission giving rise to or constituting the default does not constitute a crime (s3.6.5(3)).
14 “Default” itself is also defined in s3.6.2. The plaintiff relied on part (a)(i) of that definition which read:
“ a failure of the practice to pay or deliver trust money or trust property that was received by the practice in the course of legal practice by the practice, where the failure arises from or is constituted by an act or omission of an associate that involves dishonesty.”
15 Division 4 provides for the determination of claims by the Board which includes the power to wholly or partly allow or disallow a claim (section 3.6.14(1)). Section 3.6.15 also provides that, subject to certain exceptions, the amount payable to a person in respect of a default “must not exceed the amount of the person’s actual pecuniary loss resulting from the default.”
appeal
16 Pursuant to s3.6.23 a claimant may appeal to an “appropriate court” against a decision of the Board to wholly or partly disallow a claim. “Appropriate court” is defined in s3.6.23(8) as a court that would have jurisdiction to determine the claim if it were a claim for a debt owing to the claimant. Although this would appear to include the Magistrates’ Court, in this instance the case was transferred to this Court given s100(2) of the Magistrates’ Court Act 1989.[4]
[4] This sub-section provides that the Court does not have jurisdiction in any cause of action-
17 On appeal, the appropriate court “may review the merits of the Board’s decision.” (s3.6.23(4)). Further, the court may set aside the decision and make a decision in substitution for the decision set aside “if satisfied that the reasons for varying or setting aside the Board’s decision are sufficiently cogent to warrant doing so.”
18 Both parties accepted that this entitled this Court to engage in a de novo appeal on the merits, although the outcome turned largely on the two fundamental issues already identified.
19 However, both Counsel attempted to analyse these fundamental
problems by defining the issues further as follows[5]:
[5] This was pursuant to a joint “Statement of Issues” document handed up in Court on 2 March 2011
1. Did Harry See, a client of the solicitor Michael Grey, instruct that solicitor (who had retained the plaintiff on behalf of See) to pay the plaintiff’s fees from moneys paid by See to Grey? (plaintiff’s question)
1A. What did Mr See instruct Mr Grey to do with the $32,930 he paid to
Mr Grey (defendant’s question)[6]?[6] this figure was calculated on the basis that only the amount paid into the trust account after the plaintiff
2. If yes to 1, were those moneys paid by See to Grey for the plaintiff thereby “transit money” and thereby “trust money” as defined in s3.3.2. of the Act?
3 Was the failure of Grey to pay the outstanding sum of $31,540 to the
plaintiff an act or omission which involved dishonesty?
4 if yes to 3, did the plaintiff suffer actual pecuniary loss as a result of
Grey’s actions?5 Has the plaintiff established that the whole of the amounts sought to be recovered from the Board are not reasonably available from other sources in compliance with s3.6.23(3)(a) of the Act?
6 What is the fair and reasonable value of the plaintiff’s professional
services provided to See?7 What was the amount of the plaintiff’s actual pecuniary loss?
(defendant’s question)8 Is the plaintiff entitled to claim from the Board under s3.6.7(1) of the Act as “a person who suffers pecuniary loss because of a default…” in the light of:
(a) the statement of purpose at s3.6.1 of the Act;
(b) the definition of “client” in s1.2.1 of the Act;
(c) the definition of “legal services” in that section?20 In the result, the resolution of the two issues I have earlier identified has resolved most of the questions raised by the parties.
21 It was agreed, however, that, should I find for the plaintiff, then it would be necessary for him to establish the “fair and reasonable value” of the legal services he provided pursuant to s3.4.19(c) in the absence of a costs agreement or applicable remuneration order or scale of costs.
22 However, both parties agreed that this should be managed by referring the following issue to the Costs Court pursuant to Order 63A.65 :7
“For the purposes of section 3.4.19(c) of the Legal Profession Act 2004, what was the ‘fair and reasonable value’ of the legal services that the Plaintiff provided to Mr See in the period December 2006-20 April 2007?”
Background Facts
Preliminary23 The plaintiff gave evidence and also called Mr See.
24 No other oral evidence was adduced and the solicitor, Mr Grey, was not called. It was common ground that both parties had tried to contact him and serve him but were unable to do so. The investigator’s report also recorded that although Mr Grey said he would collect relevant papers and trust records, no trust records or matter files were ever received from him. Further “no bills were issued by Grey recording Counsel’s fees or statement of accounts were able to be located by the investigator.”
25 No issues of credit were raised and the facts were largely undisputed and turned on an analysis of the payments made to Mr Grey.
26 After being charged in 2005, Mr See said that he met and retained Mr Grey to act for him on recommendation from a Mr Gus.
27 Mr See first met Mr Grey when he came to his office in Springvale. He did not tell him what he was going to charge, or how, but, at some point after this, Mr Grey asked Mr See to get $10,000 ready in cash (in a telephone conversation). Mr See then provided this amount on the second occasion he met Mr Grey. At this point he received a signed business card stating: “Received $10,000 towards prosecution-receipt to follow” which is apparently signed by Mr Grey. However, no receipts ever “followed” and Mr See never received any account from Mr Grey.
28 In the result, between August 2006 and May 2007 Mr See paid amounts totalling $91,700 to Mr Grey. These amounts are further described in a document Mr See prepared for the investigator, Ms Camillo, prior to October 2009. They may be grouped into three “sets” being, firstly, a group of “cash” payments; secondly, a payment direct to a barrister’s clerk; and, finally, a group of electronic transfers.
Cash payments
29 In terms of the cash payments, they totalled $21,700. Mr See described these payments as follows:
•
09/08/2006 $6000: “Cash Chq Cashed by M Grey, plus the cash below, he signed on the back of his business card.”
•
09/08/2006 $4000: “Cash paid to him when he inspected my office when he was nearby, sending his son to football.
•
15/09/2006 $3000: “Cash Chq Cashed by H See, plus the amount below. He said he will give me a receipt later.”
• 15/09/2006 $7000: “Cash paid to M Grey at his office.” • 15/09/2006 $1700: “Cheque to M Grey for some legal fees.” Payment to Mr Richter
30 In terms of the next $15,000 paid on 16 September, 2006, this was an amount that was related to Mr See’s committal hearing. Mr Richter QC was retained in relation to this committal and Mr See’s evidence was that he paid $15,000 by way of cheque to Mr Richter’s clerk, GW Meldrum. However, Mr Richter only charged $6600 in relation to his services with the result that $8400 was refunded to Mr Grey on 21 September, 2006.
31 Mr Richter was not retained after the committal as Mr See was not happy with his “hint” that he should plead guilty. The plaintiff was then retained instead at some point after 24 October 2006.
32 Despite the payments totalling $36,700 to this point, the statutory trust account for Poulton Elliott & Grey (attached to these reasons and marked Appendix A) shows no corresponding deposit entries. Further, although there is a “cheques deposit” entry on 31 October 2006 in an amount of $37,500, by 16 November there is only a credit balance of $1890.66.
33 In these circumstances, the defendant submitted that the Court should conclude that “none of the $36,700 paid before [December 2006] was to be found in the balance of $1890.66” and “that Mr Grey had appropriated the $36,700 by that time.”8 I generally accept that submission save that the $6600 properly paid to Mr Richter should be excluded with the result that $30,100 was misappropriated by Mr Grey for himself.
Electronic transfers
34 The third “set” of payments was a set of eleven electronic transfers in an amount of $5000 each between 19 December 2006 and 24 May 2007, giving a total of $55,000.9
35 These may be further broken down into sub-sets wherein the first sub-set comprises 7 groups of $5000 described as being to Grey “&” the plaintiff (variously named as, for example, “SJones” and “Simon”) and made between 19 December 2006 and 15 January 2007; and the second sub- set of 4 described as SGJ “via” M Grey made between 7 May-9 May 2007.
36 After the completion of the first seven electronic transfers, the balance in the trust account was down to zero by 2 April 2007 notwithstanding that only $4,070 had been paid to the plaintiff on 8 January 2007.
37 After the completion of the further four transfers, the plaintiff had been paid an amount of $18,000 on 25 May10 while $2000 has been appropriated otherwise.
38 As properly conceded by the defendant, since the time of the plaintiff first being retained Mr See paid $55,000 to Mr Grey. Of that amount, Mr Grey paid only $22,070 to the plaintiff and “appropriated the remaining $32,930 for himself.”11
Oral evidence of Mr See concerning payments
39 In terms of the oral evidence of Mr See the following extracts were significant ( it commences with examination on the electronic transfers):
“Was there any reason why they were all of $5,000?---That's the
maximum amount I can transfer in any one transaction.
And why did you use the expression, for example, "S.G.J. via M. Grey"?---The second lot of transfers, Michael told me he has to pay Simon.Did you ever see an account from Simon?---Never.
So Mr Grey told you he had to pay Simon. Is that why you wrote with those four, I think, "S.G.J. via M. Grey"?---You see, I cannot engage a barrister myself.
Yes - - -?---I've got to go through a lawyer.
Yes - - -?---So whenever a lawyer asks for money I assume that is for whatever expenses including the engagement of whoever to do the job.
Yes, and in this instance it was for the engagement of?---Everybody
that come and help me.And the specific person in this instance was whom?---Yes, is S.G. Jones and I think the doctor was included, I think Michael Grey say that, you know, I need to pay him for more legal expenses.
Did you ever see an account from a doctor?---No.
So as far as you're concerned is there any significance to you in the earlier formulation of Michael Grey and S. Jones, Grey & S.G. Jones, Grey & Simon, Grey & S.G. Jones,as opposed to S.G.J. via M. Grey?---I don't understand the question.
You've used slightly different forms of words?---Yeah, you see, each time I go on the computer, if I don't look back then I don't know what I wrote, so I know that my intent - right, the intent is to pay Grey, to pay whoever that has been engaged.
And did Grey tell you, or I think you've told us that he said he needed money to pay Simon, you said that just within the last few minutes?---(No audible reply.)
When he asked you for money did he ever tell you what he was going to do with it?---I assume it was to pay whoever, that he said he was going to pay.So who did he say he was going to pay?---I would say then Simon and keeps, and some - what - document fees or whatever.” (emphasis added)
40 The substance of Mr See’s evidence, above, was that he was paying on account of any legal costs in relation to his defence, including “everybody that was to come and help him” in his defence.
41 Although this might include Mr Grey himself, the Board did not press any claim in respect of the value of Mr Grey’s work. This was an appropriate concession to make given the paucity of evidence as to any work he performed and his failure to prosecute any claim including by serving any account. It also did not produce any claim or evidence to support a claim by an expert mentioned in passing, a Dr Walton.
42 However, as well as the plaintiff, there was evidence that another expert, a Dr Gibbs, had made a claim on the fund in an amount of $16,880 for work done in relation to Mr See’s defence. The plaintiff accepted that this amount was claimed but made no concession as to its reasonableness or otherwise.
Whether plaintiff is entitled to claim
43 Pursuant to s3.6.7 a “person” who suffers pecuniary loss because of a defined default may make a claim to the Board.
44 There is nothing in the ordinary words of s3.6.7 which suggest that the concept of a “person” should be read as a “client.”
45 Indeed, pursuant to the definition in s38 of the Interpretation of Legislation Act 1984 (ILA) a “person” is broadly defined and simply “includes” a body politic or corporate as well as an individual “unless the contrary intention appears.”
46 However, the defendant submits that the term “person” in s3.6.7 should be “narrowly construed as permitting only a client to recover from the fidelity fund”12 as provided for in s3.6.1.
47 The plaintiff rejects this approach and says, in any event, that Mr Gillespie-Jones was a “client” as contemplated by the purpose clause in s3.6.1.
Proper construction of s3.6.7
48 In support of its construction, the Board submitted, in particular, that13:
• All words must prima facie be given some meaning and effect; • It is not permissible to construe the meaning of a section in isolation from other sections of the same Act; • In some cases a general provision should override a specific provision (citing Lyons v Registrar of Trade Marks14); • That various extrinsic material supported its approach including the national model provisions; provisions in other jurisdictions; and the history of the Victorian Act. giving all words meaning and effect
49 The difficulty with the defendant’s first submission is that it requires the court to effectively ignore the word “person” in s3.6.7 and substitute a completely different word. This in circumstances where Parliament has chosen to use the word “person” where it could have readily inserted the word “client.”
50 In any event, it is not necessary to “ignore” the purpose provision in s3.6.1 in order to give “person” its natural and ordinary meaning in s3.6.7. Rather, Part 3.6 can still operate to generally compensate clients if s3.6.7 is given its ordinary effect.
context
51 I further accept that it is appropriate to read s3.6.7 in context.15 However, the context does not support the defendant’s position.
52 Thus, there appears nothing in Part 3.6 generally which suggests that a claimant should be limited to a client.
53 Counsel for the Board submitted that s3.6.28(2) confirmed its narrow construction of Part 3.6 since, if s3.6.7 otherwise generally provided for practitioners to make claims, there would be no need for a provision such as s3.6.28.16
54 Section 3.6.28(2) specifically provides that a claim may be made “by another associate of the law practice” in certain circumstances. Although another associate might be thought to be covered by being a “person” anyway, there may be doubts as to whether the legislature would cover such a situation, given that associate’s relationship with a “defaulter” of that same law practice. Section 3.6.28 thereby clarifies that a broad remedy is intended and confirms that the Part is meant to provide wide relief consistent with its remedial character.17
55 Returning to the main provisions in Part 3.6, there is nothing in the provisions which define a “default to which this Part applies” and “pecuniary loss” which suggests that only clients are contemplated (see ss3.6.5 and 3.6.2). The definition of “pecuniary loss” in s3.6.2 makes explicit reference to a “person” in part (b). Further, there is no suggestion in the “default” definition contained in s3.6.2 that there must be a failure to pay or deliver “to” anyone, including a client.
56 Rather, the legislature uses the concept of a “person” in the Part consistently with an approach that a “person” not only a “client” is contemplated. In s3.6.2, for example, the definition of “claimant” is a “person” who makes a claim. References to a “person” are also made in ss 3.6.15 and 3.6.18. Section 6.7.16 of the Act further provides that the fidelity fund is to be applied for the purpose of compensating “claimants” in respect of claims allowed under Part 3.6 in respect of defaults to which that Part applies.
57 There is no reason why the legislature could not have substituted “client” in each of the references cited if it was intended that only a client could make a claim. Instead, a natural reading of the Act is that any person may make a claim provided they “suffer pecuniary loss because of a default to which Part 3.6 applies.”
58 A reading of the Part as a whole therefore supports a natural reading of the word “person” in s3.6.7.
general versus specific
59 I do not regard the issue before the court as concerning two provisions in “conflict.” Rather, the two provisions deal with different subject matter; s3.6.1 dealing with the general purpose of Part 3.6 and s3.6.7 defining the jurisdictional facts necessary to establish an entitlement to claim.
60 If I am wrong about this, the case of Lyons v Registrar of Trade Marks18 does not provide a basis for the general provision (s3.6.1) to “override” the specific provision (s3.6.7). That case dealt with a completely different question, being whether there was power to extend the time to lodge notices of opposition to a trade mark application which was outside the time provided for in s49 of the Trade Marks Act 1955 by relying on s131 (which provided for power to extend time in certain defined circumstances). Beamont J found that there was power since s131 was not really a “general power in any abstract sense” but limited to “quite special situations.” He also referred to the history of the relevant legislation and its remedial character to support the conclusion that time could be extended beyond the period specified in s49 by reliance on s131.19
61 In the present case, the defendant has not suggested any basis on which s3.6.1 should “override” s3.6.7. Thus there is no “remedial basis” for restricting access to the fund to clients. Further, although the word “client” appears to have been inserted in the 2004 Act for the first time in the purpose provision, the legislature has not generally restricted the other provisions in Part 3.6 in this way, but has left the “person” references in tact. As indicated already, it would have been relatively easy to substitute “client” for “person” throughout the Part if the legislature had wanted to limit all relevant provisions.
62 It follows that, if the provisions are to be seen as a contest between a general and a specific provision, in my view, the more specific provision should prevail according to the usual principles.20
Other material
63 The defendant submitted that the Victorian Parliament should be taken to have deliberately chosen to use the word “client” to restrict the purposes of the fund to compensating clients. This was evident given it had departed from both the model provisions on which the Act is based and the purpose provisions in other jurisdictions. It was also said to be evident from a history of the Victorian Act itself which showed a “steady narrowing” of the circumstances that entitle payments.21
64 In terms of the national model, s1.1.1(a) of the Act provides that one of the purposes of the Act is to improve the regulation of the legal profession, principally by (i) implementing national model provisions for the regulation of the profession. However, the purpose provision in the national model provisions22 provides that the purpose of the Part “is to establish and maintain a fund to provide a source of compensation for defaults by law practices arising from acts or omissions of associates” which is not restricted to clients (see clause 801 and 3.6.1). The model provisions also provide that a “person” may make a claim (clause 810 and 3.6.11, respectively).
65 Given the clear purpose of the Act is to establish a source of compensation for “defaults,” there is no mandate for limiting the class of persons to clients. More particularly, given the overriding purpose of the Act, there is no reason why s3.6.1 should qualify all other relevant provisions in part 3.6 as is suggested. If anything, the national provisions suggest that s3.6.7 should be the overriding provision. Thus, while the purpose provision for the Part is said to be a “non core” provision, the entitlement for a “person” to make a claim is expressed to be a “CNU” provision, being a core provision which does not require textual uniformity.
66 The purpose provision in s3.6.1 does appear to be different to that provided in other jurisdictions (which do not refer to “clients”23). However, this does not support the highly strained reading contended for given the other clear provisions in the Victorian Act. This is particularly so given one of the general purposes of the whole Act is “to facilitate the regulation of legal practice on a national basis across State and Territory borders” (s1.1.1(b)). In the absence of clear words it is desirable that all “persons” be entitled to claim on a similar basis throughout Australia. The statement of purpose in s3.6.1 should also be understood by reference to other provisions contained in the Act.24
67 Finally, I have not found great assistance in a reference to the history of the Act. Even from the selected history of the Victorian Act with which I was provided, it is not clear that there has been a “steady narrowing” as suggested. Certainly in 1995 there appears to have been an exclusion of defaults relating to financial services or investments.25 However, as will be referred to below, the concept of a “default” has apparently been substituted for that of a “defalcation.” Critically, while the definition of a “defalcation” formerly required a claimant to prove “that a criminal act of a particular kind or a criminal failure to account” had been committed,26 the current Act provides that it is “immaterial that the act or omission giving rise to or constituting a default does not constitute a crime.”27
68 The extrinsic material therefore did not support the defendant’s contention; rather reference to the national model suggested that the Part was intended to be remedial in character. Moreover, the Act, historically, has not been regarded as being restricted to clients. Thus, as Lush J said in Baker v Law Institute of Victoria28:
“Although in the cases under s64 so far reported, the plaintiff has
been a client or the assignee of a client (Eumeralla Finance Co.
Pty. Ltd. v Law Institute, [1973] VR 98, and the Cowan
Investment Survey Pty. Ltd. Case, [1973] VR 293, respectively),
it has never been said that in order to succeed in a claim under
the section the plaintiff must show that he was either a client of
the solicitor or a person on whose behalf property has been
received by the solicitor. The language of the judgment of the
Chief Justice and Menhennitt, J, in the Cowan Case at p. 299,
indicates by its analysis of the section that neither requirement is
to be found in it… My view is that the requirements of the section
are as I have stated them. The plaintiff or claimant must show
that he has suffered loss as a result of the defalcation, but in my
opinion the section does not require that he be either a client or
a person on whose behalf money or property was received or
someone claiming through a client or such a person. This view is
consistent with what I have said concerning the extent of the
protection to be given by the Act” (emphasis added).
69 More recently, in the decision of Trustees of the Legal Contribution Trust v Bailey29 Le Miere J said (of the Western Australian equivalent legislation):
“ the Act is beneficial remedial legislation and should be given the interpretation that is most favourable to the persons whom it is intended to assist, that is the claimant.”
70 Although I accept that I need to look at the Act in its current form, a study of the history confirms a remedial approach unrestricted to clients. There is no mandate in those circumstances to read down the ordinary words of s3.6.7.
Summary
71 Part 3.6 is beneficial and remedial in character designed to afford protection against defaults by law practices. Having regard to all the provisions in Part 3.6 I am satisfied that the concept of a “person” should not be restricted and read down to mean “client.”
72 The words in s3.6.1 can still be given effect without such an unnatural reading down.
73 The overall purposes of the Act in implementing the national model further support such a construction. Such a construction - which would promote the purpose or object underlying the Act - is to be preferred pursuant to s35 of the ILA.
74 The word “person” in s3.6.7 should therefore be given its ordinary and natural meaning and I am satisfied that the plaintiff is a “person” who is entitled to make a claim pursuant to s3.6.7.
Whether a “client” in any event
75 In the light of my above finding, it is unnecessary to consider the plaintiff’s submissions that he could be construed to be a “statutory client.”
76 However, if it was necessary to determine this, in my view, this submission should be rejected. I will briefly record my reasons for this view.
77 Pursuant to s1.2.1 the concept of client is defined so that it “includes a person to whom or for whom legal services are provided.” “Legal services” means “work done, or business transacted, in the ordinary course of legal practice.”
78 Senior Counsel for the plaintiff submitted that the concept of “legal services” in this context meant taking money from a client which is to be paid to a barrister in the ordinary course of legal practice.
79 I do not accept this submission. Although the concept of “business transacted” might include obtaining money from a client to pay a barrister that service is essentially being provided to or for the benefit of the client. I therefore do not accept that attending to the mechanics of paying the barrister’s fees is providing a service “to” or “for” that barrister.
80 Further, although I accept that the definition is inclusive, a barrister appears to be totally outside the class of persons contemplated within the inclusive definition. Inclusion of a barrister could also require a solicitor to send cost disclosure letters to a barrister (as a “client”) pursuant to s3.4.9 ( and see also s3.4.10). This does not appear to be a result intended by the Parliament.
81 Whatever the precise ambit then of the inclusive definition, I do not accept that it properly extends to barristers. However, beyond this it is unnecessary to say given my finding that the plaintiff barrister is a “person” who is entitled to make a claim under s3.6.7.
Did the plaintiff suffer pecuniary loss because of a default to which
Part 3.6 applies?82 Pursuant to s3.6.7, the plaintiff must show that he suffers “pecuniary loss” “because of” “a default to which Part 3.6 applies.”
default
83 In terms of the “default” pursuant to s3.6.5 and the definition in (a)(i) of s3.6.2 the plaintiff must show:
•
There is identifiable trust money or trust property that was received by the practice in the course of legal practice by the practice;
• there has been a “failure to pay or deliver” that money or property; • there is an act or omission of an associate that involves dishonesty; •
The said “failure” arises from or is constituted by the relevant act or omission.
trust money or property
84 Firstly, as I have already found, each one of the payments made by Mr See to Mr Grey were provided for paying “everybody that was to come and help him” in his defence.
85 The plaintiff submitted that the money in this case was thereby both “trust money” and also “transit money.”
86 Dealing with the issue of “transit money,” this term is defined to mean money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice. (s3.3.2)
87 The plaintiff submitted that transit money could be “composite money” which could be stamped with the character of transit money even if it also included money for the associate.
88 I do not accept this submission. The Act makes clear that different consequences flow if money is transit money. Thus, pursuant to s3.3.11(3) if a practice receives only transit money (other than cash) it does not need to maintain a general trust account but must keep only brief particulars pursuant to regulation 3.3.27.
89 It is therefore important that third party transit money be clearly identified as such which does not apply to the present case where the money was potentially designated for Mr Grey himself.
90 However, even though the money is not transit money, the definition of a “default” in s3.6.2 does not require a default in relation to transit money but “trust money.” The definition of “trust money” contained in s3.3.2 states that trust money in relation to a law practice means money entrusted to the law practice in the course of or in connection with the provision of legal services by the practice and includes (a) “money received by the practice on account of legal costs in advance of providing the services.”
91 The money given to Mr Grey by Mr See clearly met this definition and the defendant did not challenge this characterisation in oral submissions.
92 The money advanced would also appear to fall within part (d) being “money received by the practice, that is the subject of a power, exercisable by …an associate of the practice, to deal with the money for or on behalf of another person.” Thus the money was received subject to a power to deal with the money for or on behalf of Mr See for the payment of the legal costs of his defence, including by way of payment to third parties such as the plaintiff.
93 Accordingly, I am satisfied that each of the amounts paid to Mr Grey constituted “trust money” or “trust property.”
94 Given the money was also received by Mr Grey so as to be able to properly assist Mr See in paying for the legal costs of his defence, I am also satisfied that the money was received by the practice “in the course of legal practice.” The Board did not challenge such a finding.
Whether failure to pay or deliver trust money
95 Pursuant to ss 3.3.13 and 3.3.17A a law practice must deposit trust money in a general trust account. There is a penalty of 120 penalty units if this is not done.
96 Pursuant to s3.3.14(1)(a) a law practice must also hold trust money in a general trust account exclusively for the person on whose behalf it is received and, pursuant to s3.3.14(1)(b), disburse it “only in accordance with a direction given by the person.”
97 Section 3.3.14(1)(b) has been breached in this case given Mr Grey has disbursed the trust money or moneys set out previously contrary to the direction given by Mr See to pay for his legal costs and instead has used that money for himself.
98 The defendant highlighted that the funds were held on trust for Mr See and not for the plaintiff and submitted that the plaintiff had not demonstrated actual pecuniary loss.30 However, there is good authority in existence that it is not necessary that the applicant should have a legal or equitable interest in the moneys entrusted to the solicitor. This is discussed further, below.
99 In any event, trust money was received “on account of legal costs” and was to be disbursed only in accordance with Mr See’s directions under s3.3.14. The concept of a “default” only requires a “failure to pay or deliver;” it does not require a failure to pay or deliver “to the person on whose behalf the trust is held”. In my view therefore, there is a default if there is a “failure to pay or deliver” in accordance with directions as in the present case.
100 The defendant also submitted that the plaintiff had no immediate right to receive the money given ss3.3.20 and regulation 3.3.34 were not complied with in respect of the plaintiff’s fees.31
101 Section 3.3.20 makes provision for the procedures Mr Grey was to comply with before he could properly withdraw trust money for payment of legal costs by, for example, the sending of a request for payment (as is set out in regulation 3.3.34(3)(b)). However, it can hardly be supposed that there can only be a “failure to pay or deliver” trust money where a solicitor has properly taken steps to render a bill before withdrawing trust money. There is nothing in Part 3.6 which suggests that there will only be a “default to which this Part applies” where a solicitor has properly completed such records. To the contrary, s3.6.14(3)(d) actually contemplates that proper records might not be brought into existence or might be destroyed. However, in such a case the Board may reduce a claim only in circumstances where the claimant “knew or ought reasonably to have known that records of that kind would not be kept or would be destroyed.”
102 In my view therefore the concept of a “failure” to pay or deliver is not dependent on compliance with the procedural steps set out under s3.3.20. If a solicitor has disbursed trust moneys contrary to directions he/she has “failed” to pay or deliver trust money regardless of whether that solicitor has or has not complied with s3.3.20.
103 In my view, there is a failure to pay or deliver trust money in this case.
Act or omission involving dishonesty
104 As indicated already, the Board concedes that Mr Grey had appropriated the amounts paid to Mr Grey prior to December, 2006. This included the cash amount of $21,700 and the amount returned by Mr Richter’s clerk of $8400 giving a total of $30,100 as previously found.
105 The Board also concedes that, of the further $55,000 paid to Mr Grey, Mr Grey only paid the plaintiff $22,070 and appropriated the remaining $32,930 for himself.
106 Such violation of trust clearly “involves” dishonesty in the taking of something that does not belong to Mr Grey and the Board did not contend otherwise.
Failure arises from or is constituted by the relevant act or omission
107 Given the relevant trust monies effectively disappeared, that money was simply not there so as to be able to meet Mr See’s legal costs including the costs of the plaintiff. Thus, the failure to “pay or deliver trust money” arises from or is constituted by the wrongful acts of Mr Grey involving dishonesty in appropriating the moneys for himself.
108 In these circumstances, I am therefore satisfied that all of the elements of the definition of a “default” are met and that the plaintiff has established a default to which Part 3.6 applies.
Pecuniary Loss
109 The plaintiff must then demonstrate that he has suffered “pecuniary loss” “because of” the default as found. Moreover, that loss must not be more than the “actual pecuniary loss” resulting from the default.
110 The phrase “because of” connotes some causative effect. Using a common sense approach32 the plaintiff has not been paid his fees because Mr Grey disbursed money designated for legal costs contrary to Mr See’s instructions. “Because of” Mr Grey’s acts, the plaintiff was deprived of monies which would otherwise have been available to meet his fees.
111 Put another way, “but for” the default, there were sufficient funds available to meet all of Mr See’s legal costs established on the evidence, below, including the plaintiff’s outstanding fees.
112 However, the Board denied that the plaintiff could establish pecuniary loss and in particular submitted:
(a) that because the amount totalling $36,700 was completely appropriated by the time the plaintiff was retained, he could not have suffered an “actual pecuniary loss”;33
(b) that the plaintiff could only suffer an actual pecuniary loss if some of the further money paid was held on trust for the plaintiff and only if Mr Grey was under an obligation to pay the money to the plaintiff34;
(c) that the court should have regard to a number of previous authorities which show that the word “actual” has a limiting effect on the recoverable loss,35 as well as a passage in Eumeralla Finance Co Pty Ltd v Law Institute of Victoria36 which suggested that a claimant must show that at the time of the conduct relied upon, the solicitor was holding identifiable funds in trust for that claimant.37
No loss re amounts paid to december
113 In my view, the plaintiff may suffer a pecuniary loss “because of” the default previously found even in relation to cash amounts which were already “appropriated” prior to the retention of the plaintiff.
114 For reasons already given, the moneys provided were “trust money” as that term is defined. The fact they were not actually put into the trust account does not change this characterisation. It merely suggests that there may be an extra default in failing to deposit/pay the trust money into the trust account as provided for in s3.3.17A. In Law Institute of Victoria v Cowan,38 the Full court of the Supreme Court of Victoria also found an entitlement to compensation notwithstanding that the solicitor did not pay the relevant cheque into a trust account.
115 The gravamen of the defence appeared to be a complaint that there was a separation between the act of misappropriation (which occurred prior to December) and the suffering of the loss ( which occurred only after the plaintiff was retained).
116 However, in the decision of Law Institute v Baker,39 cited already, Lush J was concerned with circumstances where there was a separation in timing between the act constituting the defalcation (being a false statement that the solicitor had money to pay for bonds) and the subsequent loss (being the loss of the value of the bonds provided). His Honour nevertheless found for the claimant which decision was upheld by the High Court. In the High Court it was argued that the Act only applied to a defalcation occurring after the solicitor had received the money or property. This proposition was rejected by Barwick CJ who stated:40
“The possibility of a temporal separation between the defalcation
and the loss is, in my opinion, apparent on the face of s64.”
117 In my view, there is, equally, nothing in the provisions in the present Act to suggest that there must be a coincidence of timing between the event of default and the suffering of pecuniary loss. As long as there has been pecuniary loss suffered “because of” a requisite default a claim may be made.
118 In any event, there is a coincidence of timing between the act of default and the suffering of pecuniary loss since the act of default is constituted by a “failure” to pay or deliver. Such “failure” may be seen as ongoing and coincidental with the absence of the trust funds constituting the plaintiff’s loss.
119 The defendant emphasised that the pre-December funds had dissipated and suggested that the trust thereby ceased “for a lack of corpus” at the time the plaintiff was briefed.41 However, again, the wrongful dissipation of the trust funds does not deny the character of the funds as being trust funds. Moreover, simply because the plaintiff is unable to effectively trace those funds does not disentitle him from relief. Thus, the concept of “pecuniary loss” in s3.6.2 is defined to include the “value” of trust property that is not paid or delivered or “the amount of money” that a person loses or is deprived of or the loss of “value” of trust property. This definition does not suggest that the plaintiff must be able to physically identify the misappropriated funds.
Lack of beneficial interest
120 As previously explained, the fact that the moneys might have been held on behalf of Mr See is not fatal to the plaintiff’s claims. There is also support for this view in relation to the Victorian legislation.
121 Thus, in Law Institute of Victoria v Cowan,42 the Full court of the Supreme Court of Victoria determined that an assignee of a debt due from a solicitor was entitled to compensation out of the fund even though the assignee had not actually entrusted the relevant trust money to the solicitor. In the course of a joint judgment, Winneke CJ and Menhennit J said43:
“The defalcation was in relation to money which in the course of or in connexion with the solicitor’s practice was entrusted to or received by the solicitor. The section does not require the money to be entrusted by the claimant or received by the solicitor from the claimant. It is sufficient that it is entrusted to the solicitor by anyone or received by the solicitor from anyone.”
122 In Baker v Law Institute of Victoria,44 Lush J also pointed out that the plaintiff in that case was not a client of the solicitor “nor was the property the subject of the defalcation received by the solicitor on his behalf.” The claim succeeded and His Honour’s judgment was upheld in the High Court.45
123 The reasoning in these cases is applicable to the present form of the Act. Thus, the Act does not require the plaintiff to demonstrate that he personally had a beneficial interest in the relevant trust, merely that he has suffered pecuniary loss because there has been a “failure to pay or deliver” trust property in the requisite circumstances. Importantly, the definition of “trust money” in s.3.3.2 is also broad, particularly parts (a) and (d) as previously set out. Part (d) also appears similar to the provision facing the courts in Cowan and Baker which provided for relief in relation to moneys entrusted “for or on behalf of any other person.”
124 In all the circumstances then, there is high authority for the view that, in relation to the Victorian legislation, it is not necessary that the claimant on the fund be a person who has a beneficial interest in the relevant property. The present provisions, equally, do not contain any such requirement.
Previous decisions including Eumeralla
125 The cases cited46 were generally concerned with clarifying that no consequential losses were to be recoverable. I can find no support therein for the defendant’s proposition that a claimant must show that at the time of the conduct relied upon, the solicitor was holding identifiable funds in trust for that claimant. To the contrary, the cases of Cowan and Baker are directly to the contrary.
126 The relevant passage cited from Eumeralla was as follows:
“the claim on the fund is confined to the actual pecuniary loss resulting from the particular crime or crimes proved in relation to the particular sums of money or particular piece of property entrusted or received. The legislation does not purport to provide for the payment out of the fund of a balance found on the taking of an account of dealings with trust money, whether as between the claimant and the solicitor, or as between the claimant or other clients of the solicitor.”47
127 Firstly, as is apparent from the passage itself, the Full Court was concerned with a different concept of “defalcation” rather than a “default” which concept required the proving of a criminal act. In those circumstances the passage is readily understood given the need for full particulars.
128 Secondly, the Eumeralla case was concerned with the question of whether the plaintiff’s claim should be reduced because of other benefits received “in reduction of the loss” pursuant to s64(5) (the predecessor to s3.6.18) rather than whether a plaintiff can demonstrate pecuniary loss.
129 In any event, even if the passage suggests that the loss must result from a particular wrongful act proved in relation to a “particular sum of money” the plaintiff would be able to identify the particular sums in this case as follows:
•
each of the cash amounts paid by Mr See to Mr Grey totalling $21,700;
• the amount of $8400 returned by Mr Richter’s clerk; •
six of the first seven payments of $5,000 totalling $30,000 (the account is down to zero by 2 April 2007 after these payments are made with only $4070 paid as directed. Accordingly (at least) six of the seven payments are not properly applied according to directions);
•
An amount of $2000 (the last four payments of $5,000 each are made after 2 April 2007; of these, $18,000 is properly allocated to the plaintiff by cheque number 61 on 25 May).
130 It is therefore possible to identify that particular sums totalling $62,100 have not been paid for legal costs given these amounts have not been paid to the only two claimants being the plaintiff and Mr Gibbs.
131 Given the plaintiff’s “actual” pecuniary loss is only $31,540 he is thereby entitled to this amount which leaves more than enough for the other proper claimant, Dr Gibbs, for $16,880.
132 It follows that I am satisfied that the plaintiff has established that he suffers pecuniary loss “because of” the default identified.
Resolution of agreed issues
133 In terms of the other issues the parties agreed were outstanding, the above findings resolve all but one of the issues identified by the parties. That remaining issue is whether the plaintiff has established that the amount is “not reasonably available from other sources” under 3.6.23(3).
134 The Board accepted that the plaintiff has entered judgment against Mr Grey and has pursued him to bankruptcy. However, it pleaded that Mr Grey was Mr See’s agent in respect of the matter.48
135 The plaintiff however said that the relevant contract was made between the plaintiff and Mr Grey and not Mr See. Alternatively, if Mr See was a contracting party in circumstances where Mr Grey was his agent, the plaintiff had chosen to sue Mr Grey. In such circumstances, he had made an election and was thereby prevented from suing Mr See now.49
136 The question of who the contracting parties are in a case concerning a barrister and solicitor depends on the circumstances.50 There is no backsheet of the plaintiff in evidence in this case. However, the statement of account generated by the plaintiff’s clerk is addressed to the solicitors, Poulton Elliot & Grey. The oral evidence of the plaintiff was also that he thought that 2006 was the first year that Mr Grey began to brief him. In the absence of any contrary evidence, the retention of the plaintiff by Mr Grey would thereby result in a contract between the barrister and solicitor and there is nothing to show that there was any other contractual arrangement with Mr See.51
137 In circumstances where the plaintiff has already pursued Mr Grey to bankruptcy I am thereby satisfied that the amount claimed is not reasonably available from other sources under s3.6.23(3)(a).
138 The outcome of the issues for resolution are therefore as follows:
1 Mr See instructed Mr Grey to pay the costs of his defence, including
the plaintiff’s costs, from moneys he paid to Mr Grey.2 The moneys so paid were not transit money but were trust money as
defined in s3.3.2 of the Act3 The failure of Mr Grey to disburse that money in accordance with Mr See’s directions was a failure which arose from, or was constituted by, a dishonest act of Mr Grey in appropriating the moneys for himself.
4 The plaintiff suffered actual pecuniary loss because of this default.
5 The plaintiff has established that the amount sought to be recovered is not reasonably available from other sources given he has pursued Mr Grey (with whom he contracted) to judgment and bankruptcy.
6. The fair and reasonable value of the plaintiff’s services is to be
referred to the Costs Court.7 I am satisfied that the plaintiff’s actual pecuniary loss is $31,540.
8 The plaintiff is entitled to claim from the Board under s3.6.7 as a “person” who suffers pecuniary loss because of a default to which Part 3.6 applies.
Resolution of appeal
139 I am satisfied that the plaintiff has suffered a pecuniary loss because of a default to which Part 3.6 applies.
140 I am further satisfied that the amount properly payable to him which does not exceed his actual pecuniary loss is $31, 540.
141 Having reviewed the merits of the Board’s decision I am satisfied that the plaintiff is properly entitled to be paid the amount sought. In particular, I am satisfied that the Board wrongly refused the plaintiff’s claim on the basis that he was not a “client.”
142 In all of the circumstances, I am therefore satisfied that there are sufficiently cogent reasons to set aside the Board’s decision and make a decision in substitution for that decision.
143 The decision of the Board of 20 October 2009 should be set aside and the plaintiff’s claim for $31,540 should be allowed subject to the following issue being referred to the Costs Court pursuant to Order 63A.65:
“For the purposes of section 3.4.19(c) of the Legal Profession Act 2004, what was the “fair and reasonable value” of the legal services that the Plaintiff provided for Mr See in the period December 2006-20 April 2007.”
144 I will hear further from the parties as to the appropriate form of final orders.
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Certificate
I certify that these 33 pages are a true copy of the reasons for decision of Her Honour
Judge Kennedy, delivered on 24 March 2011.
Dated: 24 March 2011
Sonja Mileska
Associate to Her Honour Judge Kennedy
fee slips to the value of $53,610 were rendered to solicitors Poulton Elliot & Grey between December
2006 and April 2007 with a total paid of $22,070 leaving a total unpaid of $31,540
was an “opinion” only3 The Board, on appeal, did not accept the finding of default by the investigator and emphasized that it (a) in which the effect of, or the validity or invalidity of, any act, matter or thing done or
omitted to be by any person or body whatsoever in the exercise or purported exercise of any power or duty conferred or imposed on that person or body or purportedly conferred
or imposed on that person or body by or under…
(ii) any statute.
was retained of $55,000 should be the starting point from which should be subtracted the amount of
$22,070 actually paid to the plaintiff, giving a net amount of $32,930
the work in accordance with his hourly rate.7 In so saying the Board was not suggesting that the plaintiff did not do the work or that he did not do 8 Defendant’s Outline of Submissions dated 3 March 2011(DOS) para 33 9 The dates the electronic transfers were made were as follows: 19/12/2006,20/12/2006,21/12/2006,22/12/2006,23/12/2006,12/01/2007,13/01/2007,6/05/2007, 7/05/2007,8/05/2007,9/05/2007. 10 This is shown in the plaintiff’s statement of account as being in two parts from cheque 61 in amounts of $14,790 and $3210 giving a total of $18,000 11 DOS para 36 12 DOS at para 21. 13 DOS at pp 4-5 14 (1983) 50 ALR 496
15 See generally Pearce and Geddes, Statutory Interpretation in Australia, 6th ed at [4.2]
16 Defendant’s Outline of Further Submissions dated 11 March at [11]-[13]; these submissions wereobtained following the court’s request for further submissions after the decision was reserved 17 There may be an issue as to whether a barrister could be another “associate” by reason of being a “consultant” pursuant to s1.2.1 and s1.2.4(1)(a)(vi) in which case a barrister would be specifically covered. However, I have not considered this further given my ultimate views that the Part covers a “person” in any event. 18 (1983) 50 ALR 496 19 (1983) 50 ALR 496 at 507-8 20 And see Pearce and Geddes, Statutory Interpretation in Australia, 6th ed at [4.32]
21 DOS para 2422 Legal Profession-model provisions dated 28 June 2004 and August 2006 23 See for example Legal Profession Act 2006 (ACT) s318; Legal Profession Act 2004 (NSW) s418; Legal Profession Act 2007 (QLD) s355. 24 See D C Pearce & R S Geddes, Statutory Interpretation in Australia (6th ed, 2006) at [2.10]. 25 See Legal Profession Practice (Amendment) Act 1995 No. 95 s9.
26 See discussion in Eumeralla Finance Co Pty Ltd v Law Institute of Victoria [1973] VR 98 at 99 perSmith J. 27 S.3.6.5(3) and see also s3.6.14(6) 28 [1974] VR 388 at 396; an appeal from this decision to the High Court was dismissed in Law Institute v Baker (1974) 48 ALJR 160 29 [2004] WASC 175 At [47] 30 DOS paras 25-49 31 DOS para 42 and 45 32 And see generally March v E & MH Stramare Pty Ltd & Anor (1991) 171 CLR 506 33 DOS para 35 34 DOS paragraph 38 35 Dobcol Pty Ltd v Law Institute of Victoria [1979] VR 393 at 395,396 and 398. Ristevski v Kyriacou & Zard Constructions Pty Ltd & Law Institute of Victoria (unreported; Supreme Court of Victoria; Harper J; 5 August 1997) at 17; Schofield v Consolidated Interest Fund (1988) 49 SASR 546 at 554,555. 36 (1973) VR 98,99-100
37 DOS 29 and 3238 [1973] VR 293 39 [1974] VR 388 40 [1974] 48 ALJR 160 at 161 41 DOS para 35
42 [1973] VR 293
43 [1973] VR 293 at 29944 [1974] VR 388 at 396 45 (1974) 48 ALJR 160 46 Dobcol Pty Ltd v Law Institute of Victoria [1979] VR 393 at 395,396 and 398. Ristevski v Kyriacou & Zard Constructions Pty Ltd & Law Institute of Victoria (unreported; Supreme Court of Victoria; Harper J;
5 August 1997) at 17; Schofield v Consolidated Interest Fund (1988) 49 SASR 546 at 554,555.47 Eumeralla Finance Co Pty Ltd v Law Institute of Victoria (1973) VR 98,99-100. 48 Defence to Amended Statement of Claim dated 16 September 2010 paragraph 6KA 49 Citing Sunray Irrigation Services Pty Ltd v Hortulan Pty Ltd [1993] 2 VR 40 50 Dimos v Hanos and Egan [2001] VSC 173 at para 71
51Dimos v Hanos and Egan [2001] VSC 173 at para 100.