Hall, K.C. Law Society of New South Wales

[1993] FCA 139

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JUDGhIENT No. ...... , ........ ... .,,.,...,,,, i,

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IN FEDERAI. COURT OF AUSTRALIA )

GENERAL DMSION )

EANKRUPTCY DISTRICT OF 1 No NP 3217 of 1992

STATE OF NEW SOUTEi W-S 1

Re:	KEVIN CElARLES
Debtor

Ex Patte: LAW SOCIETY OF NEW

SOUTH WALES

Petitioning Creditor

I	EX TEHPORE m m
I

EINFELD a SYDNEY 16 FEBRUARY 1993

The Law Society presents a petition for the sequestration of the estate of the debtor on the basis of the non-payment of certain expenses and costs incurred by the appointed receiver of the legal practice which the debtor previously conducted. The claim appears to be based upon section 110 of the Legal Profession Act which provides that an amount paid by the Law Society to the receiver for the expenses of receivership is recoverable by the Law Society as a debt owed by the relevant solicitor.

Tribunal he may be awarded an amount of costs which would	him by the Law Society in the Legal Profession Disciplinary
extinguish the debt owed to the Society. Today he seeks an adjournment of the bankruptcy petition to await the decision of the Tribunal which was reserved following the conclusion of a lengthy hearing on 4 December 1992.
Obviously if the debtor could show that an amount might be' coming to him soon which would enable 'him to pay the petitioning creditor's debt, an adjournment would be indicated. But the question is whether the debtor's claim in this regard accords with the facts. The debtor appeared for himself before the Tribunal and he has annexed to an affidavit a transcription of a statement which he made to the Tribunal in relation to costs. In the event that the Tribunal's findings were, to put it in general terms, favourable to him in such circumstances, the debtor told the Tribunal that it would be appropriate:

The debtor has filed a notice of intention to appear at the hearing of the petition and appears today by his solicitor. The single ground of opposition to the petition is that if the debtor is successful in current proceedings brought against

t o d i r e c t not an order f o r c o s t s a s I am appearing

f o r m y s e l f but an order that there be a payment t o

myself of the rece iver ' s c o s t s .

He suggested that this would flow from the operation of	section 163(6A) of the Legal Profession Act. This provides
that if the Tribunal is satisfied that a practitioner is not guilty of professional misconduct, the Tribunal may in special circumstances order payment to the practitioner, from what is known as the statutory interest account, of such amount by way of costs as it may determine.
It is clear that the costs so envisaged would be the legal costs incurred by the practitioner in appearing before the Tribunal to defend his or her interests. As the debtor rightly said to the Tribunal, he would not be entitled to ordinary legal cats because-.he appeared £0; himself. In fact as I read his submissions, he did not make a submission that there were, as section 163(6A) requires, special circumstances which would warrant him obtaining the costs which the subsection permits. It is certainly the case, as I read the section and section 110, that the debtor would not be entitled under subsection (6A) to a payment of the amount recoverable from him by the Law Society for the receiver's expenses permitted by section llO(2).
In his submissions to the Tribunal to this effect, the debtor referred to a case of Terence Dominic Maher, which was determined by the Tribunal on 7 June 1990. The report of that decision which has been handed to me contains a statement that the costs of the solicitor in answering the complaint
which he had contributed $20,000 to the costs of the receiver. before the Tribunal amounted to about $40,000, in addition to
Having determined that the solicitor was not guilty of professional misconduct and having recommended that he be issued with an unrestricted practising certificate, the Tribunal found that payment from the statutory interest account of $20,000 towards the solicitor's costs would be appropriate and it made such an order. Although the figure of $20,000 so ordered was the same as the solicitor's
contribution to the costs of the receiver, it is clear from the judgment that these figures are quite CO-incidental. The solicitor was allowed about half the costs that he said he had incurred in answering the complaint but he certainly was not the recipient of any order that the recr?..yer's costs payabre under section 110(2) were to be paid to him. Whatever the special circumstances, required by section 163(6A), were in Maher's case would have influenced the amount ordered to be paid.
Section 111 of the Legal Profession Act makes provision for the challenging of the expenses of the receiver in the Supreme Court. Not only is that a substantive right but it also indicates that the Legal Profession Disciplinary Tribunal has no power to order that the amount now said to be owing.for the costs of the receiver could be paid to him. In those circumstances, it seems to me that there is no likelihood, indeed on his own submissions no possibility, that if the Tribunal finds him not guilty of any professional misconduct,
present debt. it can award him costs under section 163(6A) to cover the
For those reasons I regret that it is not possible to uphold the opposition to the petition and therefore not possible to grant an adjournment. No doubt, however, if funds do come to the hands of the debtor which enabled him to pay the amount of the debt involved in this case, he will be in a position to apply for early discharge or for annulment.

I therefore dismiss the grounds of opposition to the petition and will proceed with its hearing.

RECORDED : NOT TRANSCRIBED

I am satisfied that the debtor has committed the act of bankruptcy alleged in the petition and with the proof of the

other matters of which section 52 (1) requires proof. I make a sequestration order against the estate of the debtor and order that costs including any reserved costs be taxed and paid in accordance with the Bankruptcy Act. I direct that a draft of the order be delivered to the registrar within seven days in accordance with Rule 124(2) as set out in short minutes of order which I have initialled and dated and placed with the papers.

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