Hannan v Zindilis

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2016 03297

NEIL FRANCIS HANNAN (as manager of Zindilis Lawyers)	Plaintiff
v
GEORGE ZINDILIS	Defendant

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JUDGE:

McMillan J

WHERE HELD:

Melbourne

DATE OF HEARING:

Plaintiff’s written submissions dated 1 and 8 September 2016, further submissions dated 4 November 2016.

Written submissions dated 4 November 2016 by the non-party, the Victorian Legal Services Board, pursuant to the leave of the Court granted 27 October 2016.

DATE OF JUDGMENT:

30 November 2016

CASE MAY BE CITED AS:

Hannan v Zindilis

MEDIUM NEUTRAL CITATION:

[2016] VSC 723

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TRUSTS — Where plaintiff appointed manager to defendant’s legal practice — Where shortfall in funds held in legal practice’s trust accounts — Where manager seeks directions to distribute remaining funds to clients — Which method of distribution most appropriate in the circumstances — Pari passu method of distribution applied — Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337 — Australian Securities and Investments Commission v Letten (No 7) (2010) 190 FCR 59 — Legal Profession Uniform Law (Victoria), s 334

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P J Pascoe of counsel and Ms N L Papaleo of counsel	Thomson Geer
For the non-party, the Victorian Legal Services Board	Mr E Moran PSM QC and Ms L H Kirwan of counsel	Victorian Legal Services Board and Commissioner

HER HONOUR:

Introduction

1. On 6 May 2016, the Victorian Legal Services Board (‘the Board’) resolved to appoint the plaintiff as manager of the legal practices operated variously as Zindilis Lawyers, Zindilis Lawyers Footscray, AEMG Pty Ltd and/or Paul Shaba and Associates Lawyers (‘the law practice’) as a result of issues with the management of the law practice and, in particular, certain dealings with trust money.  An instrument of appointment was executed on 9 May 2016, pursuant to s 334 of the Legal Profession Uniform Law (Victoria)  (‘the Uniform Law’).

1. The Court has been provided with an outline of the statutory scheme and the relevant provisions of the Uniform Law relating to external intervention and the obligations of legal practitioners in respect of trust money.  Consistent with the obligations of a manager of a law practice, the plaintiff has provided regular written reports to the Board relating to the management of the law practice and advised, inter alia, that:

(a)        the law practice had previously operated a branch office at Box Hill, which had been closed and the files and other documents transferred to the law practice’s office at Footscray, but no provision had been made for the proper closure of the trust account of the Box Hill office;

(b)        he had updated records of the Box Hill account with the assistance of an external consultant and found it was deficient with several transactions conducted on the Box Hill account not properly recorded in the law practice’s records; and

(c)        the defendant, Mr Zindilis, had made representations to the effect that he…