Hubble-Marriott v Voon (No 2)
[2022] VSC 253
•20 May 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2022 00846
| MARIKA HUBBLE-MARRIOTT AS MANAGER OF THE LAW PRACTICE OF ROLAND LIT JEN VOON (ABN 67 849 568 437) TRADING AS LLOYD MERIDIAN LEGAL | Plaintiff |
| v | |
| ROLAND LIT JEN VOON | Defendant |
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JUDGE: | MOORE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 May 2022 |
DATE OF JUDGMENT: | 20 May 2022 |
CASE MAY BE CITED AS: | Hubble-Marriott v Voon (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 253 |
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LEGAL PRACTICE – Trust accounts – Manager appointed to legal practice – Trust account and office account of legal account frozen – Manager seeking direction from the Court to make certain payments from trust account of law practice and to refuse making other non-urgent payments – Application pursuant to Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 – Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms L Kirwan | Lander & Rogers |
| For the Defendant | No appearance |
HIS HONOUR:
On 18 February 2022, the Victorian Legal Services Board appointed the plaintiff as manager of a law practice formerly conducted by the defendant.
On 18 March 2022, I made orders directing and approving the making of certain payments by the plaintiff from the law practice’s trust account.
On 27 April 2022, the plaintiff filed a summons seeking the Court’s direction and approval to make two further payments from the trust account of the law practice. The plaintiff also sought the Court’s direction and approval to refuse, or to abstain from, making certain other payments from the trust account. The background to this application is set out in my reasons for judgment for making the orders dated 18 March 2022 which I here adopt.[1]
[1]Hubble-Marriott v Voon [2022] VSC 152 (the previous reasons for judgment). In these reasons, I adopt the same abbreviations as defined in the previous reasons for judgment.
I heard the plaintiff’s application on 2 May 2022 and made orders substantially in the terms sought. The defendant again did not appear at the hearing of the application. These are my reasons for judgment for making those orders.
The Urgent Transactions
In relation to the approval given by the Court for the plaintiff to make certain payments from the law practice’s trust account, on 2 May 2022 I made the following order:
The Court directs and approves the plaintiff making payments from the trust account (Trust Account) of the law practice formerly conducted by the Defendant trading as Lloyd Meridian Legal (the Law Practice) to the New Trust Account (as defined in her affidavit dated 15 March 2022) comprising the funds held on trust for each of the two clients of the Law Practice who are party to the Urgent Transactions (being those transactions referred to in paragraphs 40 to 58 of the plaintiff’s affidavit dated 26 April 2022) and thereafter to make payments from the New Trust Account to allow for settlement or completion of the Urgent Transactions
The evidence about the two ‘urgent transactions’ the subject of this order establishes that they are of the same character as the ‘priority transactions’ that were the subject of my orders made on 18 March 2022. One involves the settlement of an off-the-plan property transaction entered into by a client of the law practice which was due to settle in late March or early April 2022. The other involves the payment of moneys required under a building contract entered into by clients of the law practice, which payments were due to be made by 26 April 2022. The funds required to complete both transactions were held in the law practice’s trust account. Both clients have confirmed that the funds recorded as being held in the trust account on their behalf are correctly recorded. The plaintiff has also examined bank account statements for the trust account and confirmed that the funds indicated in the trust ledger were deposited as shown. The plaintiff has deposed that there is no evidence of which she is aware, nor any basis on which to believe, that the funds which are the subject of the Fidelity Fund claim, have been applied towards the funds held on behalf of the clients involved in these two transactions.
In the circumstances, for the reasons set out in the previous judgment in respect of the ‘priority transactions’, the equities of this case also properly justify the Court directing and approving the plaintiff paying the necessary trust funds from the law practice’s trust account in order to ensure that the ‘urgent transactions’ are able to be completed.
Non-urgent matters
The plaintiff’s application to obtain the Court’s direction and approval to refuse, or to abstain from, making certain payments from the trust account concerns what were described in the materials filed with the Court as the ‘non-urgent matters’. These matters concern 12 clients of the law practice, each of whom have funds in the law practice’s trust account. After being notified of the plaintiff’s appointment as manager of the law practice, and the freezing of the trust account, each of these clients sought the refund of the trust funds held on their behalf.
Each of these clients has a charge over the mixed fund in the trust account in respect of the money paid into the trust account on their behalf.[2] In addition to the obligation on the plaintiff to deal with the clients’ equitable ownership of these moneys in accordance with her fiduciary obligations, the law practice and the plaintiff as manager of the law practice are subject to various duties and obligations under the Legal Profession Uniform Law which in substance provide that they:[3]
[2]Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337, 371 [117].
[3]Legal Profession Uniform Law Application Act 2014, sch 1 Legal Profession Uniform Law, ss 138, 142, 148.
(a) must disburse trust money only in accordance with the direction given by a client;
(b) must act in accordance with any written direction received from a client in respect of trust money within the period specified in the direction, or otherwise as soon as practicable after it is received;
(c) must not, without reasonable excuse, fail to pay or deliver any trust money.
It follows that, absent the plaintiff’s appointment as manager of the law practice and the freezing of the trust account, each client involved in the ‘non-urgent matters’ would otherwise have an immediate entitlement to the refund of the money held on their behalf in the trust account.
It was in this context that I made the following order on 2 May 2022:
The Court directs and approves the plaintiff abstaining from making payments from the Trust Account of the Law Practice to the New Trust Account (as defined in her affidavit dated 15 March 2022) comprising the funds held on trust for each of the 12 clients of the Law Practice who have made a request to the plaintiff for refunds to them of the funds held on trust for each of the Non Urgent Matters (being those clients and funds referred respectively to by the plaintiff in paragraphs 60 to 144 of her affidavit dated 26 April 2022) until the earlier of:
(a)the completion of the plaintiff’s investigations in relation to the Trust Account, and any hearing and determination of any application to this Court for directions/approval following completion of the investigation; or
(b)if it becomes apparent that any the funds held on trust in the Trust Account are required for the completion or settlement of any Non-Urgent Matters, or for some other urgent and/or compelling reason disclosed by a client, upon the hearing and determination of any application to this Court for directions/approval arising as a consequence of those matters.
I made this order because, in my assessment, the ‘equities of the case’ as I outline below were such that the abstaining by the plaintiff from making the refunds sought by the clients involved in the ‘non-urgent matters’ was the ‘proper thing’ for her to do in the circumstances at hand.[4] I was also satisfied that the terms of r 54.02(2)(b)(iii) and, in particular, the words ‘abstain from doing any act’ appearing therein, confirm the Court’s power to make such an order.
[4]Re Allen-Meyrick’s Will Trusts; Mangnall v Allen-Meyrick [1966] 1 WLR 499, 503.
In my previous reasons for judgment, I noted that the plaintiff had been unable to verify the legitimacy and accuracy of all of the transactions on the trust account. The deficient nature of the record keeping previously maintained in the law practice was such that it was anticipated that a proper investigation and understanding of the alleged trust account deficiency would take several more months to complete. Those enquiries and investigations are ongoing and have not yet been completed. The plaintiff has deposed about the nature of these ongoing and incomplete investigations in relation to the trust account, including various investigations being undertaken by the Board’s senior forensic accountant. As a consequence, it remains the case that this application for judicial advice falls to be determined before all the relevant facts and circumstances have been established to finality.
While these investigations remain incomplete, I cannot be satisfied that the amounts recorded in the trust ledgers in relation to each client to whom the non-urgent matters relate will be able to be fully satisfied from the trust account without affecting other clients who might have an interest in the same funds. As explained by Debelle J in Re Magarey Farlam Lawyers Trust Accounts (No 3), ‘the trust ledger is a means by which the client traces his beneficial interest in the trust account’, tracing being neither a claim nor a remedy, ‘but a process of identifying assets, belonging to the realm of evidence’.[5] Because the investigations into the transactions in the trust account are incomplete, neither the plaintiff nor the Court is able to be satisfied that the amounts recorded in the trust account ledger in respect of each client are an accurate means by which a client would be able to trace its interest into the trust fund.
[5]Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337, [117].
However, as I explained in the previous reasons for judgment, the exigencies of a situation may justify the Court providing advice permitting a trustee to deal with trust funds, notwithstanding that the trustee is not in a position to finally confirm the veracity of the amounts recorded in the trust ledgers. The risk that clients involved in the priority transactions and the urgent transactions might sustain serious adverse consequences because of their inability to meet their contractual obligations, considered in the broader context of the investigations undertaken to date, illustrate this proposition.
Such countervailing considerations do not, however, arise in the case of the ‘non-urgent matters’. Except potentially in relation to one matter, none of those matters concern pending transactions. The one exception concerns a transaction for the purchase of land where an authorised agent for a client informed the plaintiff that the estimated settlement date for the transaction was to occur in a matter of weeks’ time. However, that very general claim has not been further detailed or substantiated through the provision of any documents.
The other important feature of the ‘non-urgent matters’ is that, aside from the instance referred to in the previous paragraph, in only two cases was any reason advanced for why the release of funds was said to be urgent. In one, the explanation given was for the purchase of a new vehicle. In the other, the client was said to be ‘a senior retiree over 72 years of age’ who was ‘jobless, incomeless and dependent on savings’, but that no further information as to urgency could be provided. However, no specific information about the client’s financial circumstances was provided which might establish why there was any particular urgency for the funds to be released.
I accordingly accept the plaintiff’s evidence that, in circumstances where the investigations into the transactions on the trust account are incomplete, the 12 clients involved in the ‘non-urgent matters’ have not provided sufficient justification to warrant the payment to them of the amounts recorded in their respective trust ledgers. In reaching this conclusion, I am also mindful that the interests of the clients involved in these matters is protected by the terms of paragraph (b) of my order made on 2 May 2022.
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