Laurent v Law Society of NSW - [2002] NSWSC 655

No judgment structure available for this case.

CITATION: LAURENT v LAW SOCIETY OF NSW [2002] NSWSC 655 revised - 31/07/2002

FILE NUMBER(S): SC 10513/01

HEARING DATE(S): 23.8.01; 31.8.01; 3.9.01; 4.9.01

JUDGMENT DATE: 26 July 2002

PARTIES :

Plaintiff: Daniel Laurent
Defendant: The Law Society of NSW

JUDGMENT OF: Hulme J at 1

COUNSEL : Plaintiff: M Slattery QC
Defendant: S Epstein SC

SOLICITORS: Plaintiff: Maurice May & Co
Defendant: AS Brown

DECISION: Principle issues resolved; Adjourned for further argument.

- 60 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HULME J

26 July 2002

No: 10513/2001

DANIEL ANTOINE LAURENT & 3 ORS v THE LAW SOCIETY OF NEW SOUTH WALES

JUDGMENT

1 HIS HONOUR: These Reasons are divided into the following sections.

Paragraph

Introduction 2
The Limits on the Appeal 19
Are Reasons Required 45
The Bondi Properties – Mr Laurent’s claim 52
The Bondi Properties – The Receiver’s Reports 74
Instructions as to Proceeds 80
Fabrama P/L, Ormtrend P/L and Affiliated Equities 94
Ormtrend’s Claim for $774,219.8 99
Fabrama P/L’s and Affiliated Equities’ Claims 109
Mr Laurents Claim for $322,804.70 119
Mr Kandy’s Dealings 124
Credits/Offsets 146
Absence of Records 154
Mr Laurent’s Health 159
The Relationship between Mr Laurent and Mr Kandy 163
Sundry Matters 164
History of Claims 168
Denial of Natural Jusitce 194
The Plaintiff’s Claims – Conclusions 208
Res Judicata 250

Introduction

2 In these proceedings the Plaintiff seeks the following orders:-

1. Declaration that the late Michael Lawrence Kandy:

(a) was a solicitor practising as a solicitor in the State of New South Wales;
(b) received or was entrusted with the money claimed by the plaintiffs;
(c) received or was entrusted with the said money in the course of his practice; and
(d) failed to account for, pay or deliver the said money in accordance with section 79A(1) of the Legal Profession Act, 1987.

2. An order that the decisions of the defendant’s Fidelity Fund Management Committee purporting to disallow the first plaintiff’s claim for $317,500.00, $308,966.63, and $322,804.70, and the second, third, and fourth plaintiffs’ claims of $806,975.22, $774,219.88 and $308,966.00 be set aside.

3. In the alternative, an order that the decisions of the defendant’s Fidelity Fund Management Committee of 25 January 2001, purporting to disallow the first plaintiff’s claim for $317,500.00, $308,966.63 and $322,804.70, and the second, third and fourth plaintiffs’ claims of $806,975.22, $774,219.88 and $308,966.00 be quashed.

4. An order in the nature of mandamus requiring the defendants to make determinations according to law, pursuant to section 79A(2)(b) of the Legal Profession Act 1987 whether the solicitor’s failure to account in relation to each of the claims made by each of the plaintiffs was dishonest.

5. Further, orders that the plaintiffs’ claims relating to the late Michael Lawrence Kandy, made upon the Solicitors’ Fidelity Fund maintained pursuant to part 7 of the Legal Profession Act, 1987 be allowed in whole or in such part or parts as the Court thinks fit together with interest and costs pursuant to section 79C and 85 of the Legal Profession Act, 1987 subject to the defendant’s determination according t olaw of the issue of dishonesty under section 79A(2)(b) of the Act.

6. Costs.

7. Such further or other orders as the Court thinks fit.

3 The Law Society filed a “Notice of Contention and Issues in Opposition”. Its terms were:-

1. The Plaintiffs are not entitled to any of the declarations sought in paragraph 1 of the Amended Summons because the Legal Profession Act 1987 (“the Act”) by providing the right of appeal under s90D of the Act, has impliedly excluded the power of the Court to grant declaratory relief.

2. In the alternative to 1, as a matter of discretion, the Court ought not grant the declarations sought because that would ignore the means by which the Act has provided that decisions of the Defendant made under Part 7, Division 3 of the Act should be challenged, that means being the means set out in s90D of the Act.

3. In the further alternative to paragraph 1, and additionally to paragraph 2, the Court ought not in its discretion make the declarations sought because to do so would be futile.

4. To the extent the Plaintiffs seek the orders claimed in paragraphs 2, 3 and 4 of the Amended Summons on the grounds set out in the grounds of appeal which form part of the Amended Summons (“the grounds of appeal”), the Defendant says that the Plaintiffs are not entitled to any of the orders sought because the Act, by providing the right of appeal under s90D of the Act, has excluded the power of the Court to entertain proceedings by way of judicial review in respect of determinations made by the Defendant pursuant to Pat 7 Division 3 of the Act relating to the Solicitors’ Fidelity fund.

5. In the alternative to paragraph 4, if s90D of the Act does not exclude the power of the Court to entertain proceedings by way of judicial review in respect of determinations made by the Defendant pursuant to Part 7 Division 3 of the Act relating to the Solicitors’ Fidelity Fund, the Defendant:

(a) does not admit that in making the decisions referred to in paragraph 2 of the Amended Summons (“the decisions”), the Defendant denied the Plaintiffs natural justice or procedural fairness in the manner alleged in paragraph 1 of the grounds of appeal;

(b) admits that it has not provided reasons for the decisions as alleged in paragraph 2 of the grounds of appeal, but says it was not obliged to do so;

(c) does not admit that the decisions were so unreasonable that no reasonable decision maker could have made them as alleged in paragraph 3 of the grounds of appeal;

(d) does not admit that the Defendant erred in the manner alleged in paragraph 4 of the grounds of appeal;

(e) in relation to paragraph 5 of the grounds of appeal, does not admit that:

(i) the facts referred to in paragraph 5 of the grounds of appeal were jurisdictional facts;

(ii) the Defendant’s finding of fact referred to in paragraph 5 of the grounds of appeal were erroneous;

(iii) the Defendant’s decisions were ultra vires;

(f) does not admit that the Defendant failed to take into account the matters referred to in paragraph 6 of the grounds of appeal.

(g) in relation to paragraph 7 of the grounds of appeal, does not admit that:

(i) the Defendant was required to make determinations in relation to identified acts and omissions of the late Michael Lawrence Kandy (“Kandy”) including the particular acts and omissions which the Plaintiffs alleged he had committed, or alternatively, that the Defendant was required to make a determination about the honesty or dishonesty of identified acts or omissions of Kandy upon the hypothesis that those acts or omissions occurred;

(ii) The Defendant failed to make determinations in relation to identified acts and omissions of Kandy, including the particular acts and omissions which the Plaintiffs alleged he had committed, or alternatively, that the Defendant failed to make a determination about the honesty or dishonesty of identified acts or omissions of Kandy upon the hypothesis that those acts or omissions occurred.

6. The Court has no power to make the order claimed in paragraph 5 of the Amended Summons because the Defendant has decided that there was no act or omission of Kandy that was dishonest.

7. In the alternative to paragraph 6, the order claimed in paragraph 5 of the Amended Summons ought not to be made because, in view of the Defendant’s having decided that there was no act or omission of Kandy that was dishonest, the making of the order would be futile.

4 The matter has a long history. It is sufficient at this stage to say that on 11 January 1993 Mr Kandy, a solicitor, committed suicide. It is common ground that prior to his death, and due to his dishonesty, many of his clients lost money they had entrusted to him. Some $17M has been paid to them by the Law Society out of the Fidelity Fund. Although I have not felt the need to rely on more than is referred to in copies of the reports of the receiver of Mr Kandy’s practice which are in evidence before me, further details of Mr Kandy’s defaults are to be found recorded in Macquarie Bank v National Mutual (1996) 40 NSWLR 543 at 563 et seq.

5 There is a deal of evidence that prior to Mr Kandy’s death the Plaintiffs had placed with Mr Kandy substantial sums of money which have not been repaid and which have disappeared.

6 Commencing on 11 March 1993, the Plaintiffs made or foreshadowed claims on the Fidelity Fund. Further details of these appear below but on that date Mr Laurent made claims in principal sums of approximately $145,000 and $172,500, a total of $317,500. On 18 May 1993 further claims were made by:-

Fabrama Pty Limited $806,946.69
Ormtrend Pty Limited $768,875.88
Affiliated Equities $308,966.63

7 On 20 May 1993 there was a another claim by Mr Laurent in a principal amount of $322,804.70.

8 For the next 2 years or so the matter proceeded in a somewhat desultory manner. It will be necessary below to provide some further details of this but on 27 July 1995, the Fidelity Fund Management Committee resolved that the claim for $322,804.70 be disallowed as Mr Laurent had “produced no evidence of monies entrusted to the solicitor”. A letter of 1 August from Ms Siddons, the solicitor to the Fidelity Fund, asserted that Mr Laurent had failed to provide copies of the 9 cheques the subject of the claim.

9 On 30 April 1998, the Committee considered the claims by Mr Laurent for $317,500 or thereabouts and by Fabrama Pty Limited, Ormtrend Pty Limited and Affiliated Equities. The Committee resolved:-

“That these claims be disallowed on the basis of no entrustment to the solicitor in the course of his practice as a solicitor, no failure to account, and that insufficient evidence and documentation has been produced to enable the claimants to establish that the solicitor was dishonest.”

10 The Plaintiffs appealed. The appeal came before Adams J who made the following orders:-

1. Order that the determinations of the defendant in respect of the plaintiffs’ claims (determinations of 27 July 1995 in respect of claim 118/480 and of 30 April 1998 in respect of claims 67, 110, 111, and 112/408) upon the Fidelity Fund under the Legal Profession Act, be set aside.

2. Order that the plaintiffs’ claims be remitted to the Defendant to be investigated and determined in accordance with the Legal Profession Act.

3. Direct that the defendant (by its Fidelity Fund Management Committee (“the Committee”)) in its investigation and determination of the plaintiffs’ claims is to have regard to evidentiary material filed in these proceedings in addition to such other material as it may have or may receive.

4. Direct that the defendant (by the Committee) conduct its investigation and make its determinations with expedition.

5. Note the defendant will place the claims before the Committee meeting on 14 December 2000.

6. Liberty to apply in respect of order 4.

7. The defendant pay the plaintiffs’ costs.

11 The claims referred to in the first of these orders were:-

12 According to a letter on the Law Society’s letterhead, and from Mr Andrew Brown, described as “In-House Counsel”, the Plaintiffs’ solicitors were advised that on 25 January 2001 the Fidelity Fund Management Committee resolved to disallow the Plaintiffs’ claims. However the Law Society declined to formally notify the Plaintiff’s solicitor of the decision because “the Committee’s decisions are recorded in Minutes and those Minutes still have to be settled by the Chair of the Committee, who is currently (at 12 February 2001) on leave”.

13 On 27 February 2001 the Law Society wrote providing this formal notification and on 8 March forwarded a copy of the relevant Minute. So far as presently material, it reads:-

“ M KANDY/DA Laurent (67 & 118/408)
M KANDY/Fabrama Pty Limited (110/408)
M KANDY/Ormtrend Pty Limited (111/408)
M KANDY/DA Laurent obo Affiliated Equities (112/408)

The Committee considered the evidence regarding these claims, including:

* claim forms;

* material from the Receiver; and
* Ms Siddons’ reports dated 11 December 2000, 13 December 2000 and 18 January 2001

(i) claims had been made against the Fidelity Fund by

(ii) the claims had been investigated (“the investigation”);

(iii) the claims be disallowed on the grounds that as a result of the investigation:-

(a) there had not been a failure to account as defined in Section 79A(1) of the Act; and

(b) there was no act or omission of the solicitor that was dishonest (see Section 79A(2)(b) of the Act).”

14 The Law Society declined to give reasons for its decisions, asserting that it was not required to do so.

15 On 21 February 2001 the Plaintiffs commenced these proceedings.

16 On 28 June 2001, the solicitor for the Law Society wrote to the solicitor for the Plaintiffs advising that, in addition to the material referred to in the Minute, there was also before the Committee, the following:-

* Report dated 23 March 1994 on a claim (no. 116/408) made on the Solicitors’ Fidelity Fund by Burns Bay Investments Pty Limited in relation to the late Mr Kandy;

* Letter dated 21 March 1994 from Messrs Patrick Hargraves and Co, solicitors of Maroubra Junction, regarding Saad & Ors lease to Desanges (premises: 512-514 Elizabeth street, Surry Hills); and

* One page extract from a report on the late Mr Kandy’s activities prepared by Insolvency and Trustee Service Australia.

17 In support of the relief claimed in the Amended Summons, there was placed before me a considerable quantity of documentation, most of which was before the Committee and Mr Laurent gave evidence. He was cross-examined.

18 Having regard to the extent of the time which has passed since Mr Kandy’s death and the Plaintiffs first made their claims and that this is the second appeal to this Court, there is much to be said for the view that I should, so far as possible, decide all issues which exist between the parties. However, because the terms of the Legal Profession Act and the course followed by the Fidelity Fund Management Committee may impose some limits in this regard and make other decisions futile, it seems to me desirable to defer addressing the merits of the Plaintiffs’ claims and deal with some of the legal issues first.

The Limits of the Appeal

19 A convenient starting point lies in the terms of the Legal Profession Act, 1987. So far as presently relevant, the Act provides:-

79A Meaning of “failure to account”

(1) In this Division, a reference to a “failure to account” is a reference to a failure by a solicitor to account for, pay or deliver money or other valuable property received by, or entrusted to, the solicitor or an associate in the course of the solicitor’s practice (in the case of any associate, being money or valuable property under the direct or indirect control of the solicitor).

(2) This section applies only to a failure to account that arises from an act or omission of the solicitor or associate:

(a) for which the solicitor or associate has been convicted of a crime or an offence involving dishonesty, or

(b) which the Law Society Council has found to be dishonest.

(3) A finding by the Law Society Council under subsection (2)(n) that an act or omission is, or is not, dishonest is final and conclusive.

(4) This section applies whether the money or other property was received by the solicitor or associate as trustee, agent bailee or stakeholder or in any other capacity.

(5) This section applies whether the failure to account, or the act, omission, conviction or finding of dishonesty, took place before or after the commencement of this Act.

80 Claims against Fidelity Fund

(1) The Fidelity Fund is held, and is to be applied, by the Law Society for the purpose of compensating persons who suffer pecuniary loss because of a failure to account or a dishonest default.

(3) If a claim is made against the Fidelity Fund, the Law Society Council must:

(a) investigate the claim, and
(b) determine the claim by wholly or partly allowing, comprising, settling or disallowing it.

84 Claimant required to pursue claims etc

(1) The Law Society Council may give a claimant not less than 21 days written notice requiring the claimant to do such of the following as are specified in the notice:

(a) take specified steps for the purpose of pursuing the claim,

(b) supply the Law Society Council with specified particulars in relation to the claim,

(c) produce or deliver to the Law Society Council any securities or documents necessary or available to support the claim or to enable the Law Society Council to establish any rights of the Law Society against the solicitor or an associate of the solicitor,

(d) do specified things in connection with the claim.

(2) If the claimant fails to comply with the notice, the Law Society Council may:

(a) wholly or partly disallow the claim, or

(b) direct that the whole, or a specified part of, any interest otherwise payable under section 85 not be paid.

90D Proceedings against Law Society

(1) An action does not lie against the Law Society in relation to this Fidelity Fund except:

(a) with the leave of the Law Society Council, or
(b) as provided by this section.

(2) If the Law Society Council wholly or partly disallows a claim, it must (without delay) give written notice of the disallowance to the claimant.

(3) A claimant may appeal to the Supreme Court against:

(a) a decision by the Law Society Council to wholly or partly disallow a claim, or

(b) a decision by the Law Society Council to reduce the amount allowed in respect of a claim, by virtue of section 80A, or

(c) a failure by the Law Society Council to determine a claim within such period as is prescribed by the regulations.

(4) On an appeal under this section, the Supreme Court may make such order as it thinks fit.

20 Putting aside factors not relevant in this case, it is clear from the terms of sections 80 and 79A that for a claim against the Fidelity Fund to succeed, there must be established:-

(i) pecuniary loss because of

(ii) a failure by a solicitor to account for, pay, or deliver

(iii) money or other valuable property

(iv) (which has been) received by, or entrusted to, the solicitor

(v) in the course of the solicitor’s practice

(vi) that the failure arose from an act or omission of the solicitor

(vii) being an act or omission which the Law Society Council finds to be dishonest

21 When a claim against the Fund is made, the Council is under a duty to investigate the claim and determine it – s80(3). In the previous appeal in this matter Adams J indicated that this included investigating each of the elements to which s79 and 79A referred. If the Council wholly or partly disallows a claim, it must give written notice of the disallowance to the claimant – s90D(2). Section 90D(3) gives a claimant a right of appeal to this Court against a decision of the Council to disallow a claim and section 90D(4) provides that the Court “may make such order as it thinks fit”.

22 However, counsel for the Law Society submitted that the right of appeal was only available if the Law Society Council had made a finding of dishonesty. Unless constrained by authority, I would reject such a proposition.

23 In the first place, the Act does not say so. The right of appeal is conferred in quite general terms. Nowhere does the Act say that on receipt of a claim the Law Society Council must determine the issue of dishonesty and it is drawing a long bow to say that the reference in s 79A(2)(b) and (3) to the Law Society’s finding of dishonesty being final and conclusive limit the right of appeal conferred in quite general terms to an extent greater than the terms of that reference necessarily require.

24 Secondly, the right of appeal is not only against the rejection in whole or in part of a claim but, under s90D(3)(c) against a failure by the Law Society Council to determine a claim within the appropriate time period. If the Council has been guilty of such failure it is in the highest degree unlikely that it will have made any decision on the question of honesty or dishonesty. It can hardly be suggested that there is no appeal in those circumstances, i.e. the event contemplated by s90D(3)(c) and there is no reason as a matter of statutory construction why the right of appeal in respect of an event contemplated by s90D(3)(a) or (b) should be any more limited.

25 Thirdly, the number of elements which must be established before a claim against the Fund can succeed means that the Council may reject a claim for a variety of reasons. I do not see in the provisions of the Act any requirement that even when the Council rejects a claim because of one or more of the matters I have numbered (i) to (vi) above, the Council is nevertheless obliged to go on and deal with the issue of dishonesty also. There is no express provision to that effect. It is not usual for courts or tribunals that can decide a matter on one (and sometimes a clear and easy) basis to be obliged to deal with other unnecessary matters that would call for a decision had the first matter been decided differently. And the proposition that, by implication, the Council must embark upon what may in some cases be a difficult question, just so that a right of appeal may be perfected or denied is not one which is attractive.

26 What of authority? In Van Houtoen v Law Society of New South Wales (unreported, Abadee J, 11 December 1991) and Harrison v Law Society of New South Wales (unreported, Smart J, 1993) decisions were made which involved explicit or implicit findings of dishonesty. However, given the particular circumstances of the cases, I do not regard them as authority persuasive of the issue facing me.

27 In Stego Pty Ltd v Law Society of New South Wales (1994) 35 NSWLR 466, the Plaintiff sought a declaration that a solicitor, in fact Mr Kandy, had failed to account for $50,000 and therefore that the plaintiff had suffered pecuniary loss, and alternatively a declaration that the Law Society erred in finding that there has not been a dishonest act or omission by the solicitor. The matter came before Windeyer J on a preliminary question whether the Plaintiff’s claim was precluded by reason of Section 79(3) (now Section 79A(3)) of the Legal Profession Act, 1987.

28 Windeyer J said (at 468) that “the question then is whether or not the appeal is barred by Section 79(3) (now Section 79A(3)), or more precisely whether there is any right of appeal having regard to Section 79(3) (now Section 79A(3))”. His Honour referred to the decisions of Smart J in Harrison v Law Society and of Young J in Vassiliadis v Law Soicety and said he found the reasoning of the latter more cogent and compelling and agreed with it. Later, Windeyer J said:-

“It must be remembered that there are many occasions where there would be a proper appeal against a disallowance of a claim by the Law Society. Those occasions may be a finding that there was no pecuniary loss, or that there was no solicitor/client relationship, or that there was no entrustment of moneys or property to a solicitor.

It my view, considering the history of this legislation, the words of Section 79(3) (now Section 79A(3)) should be given their ordinary meaning so that the determination of the Law Society is conclusive and therefore there is no appeal against that determination.”

29 In Vassiliadis v Law Society of New South Wales (1997) 41 NSWLR 383, the Plaintiff had lodged claims on the fund, in consequence of what were said to be defaults by a solicitor Mr Fancipane. The claims were disallowed on the grounds that:-

“Insufficient evidence and documentation had been produced so as to enable your client to establish that:-

(a) Entrustment of moneys to the Solicitor in the course of his practice as a solicitor took place;
(b) That the Solicitor failed to account; and
(c) That the Solicitor was dishonest.

30 The Plaintiff appealed, initiating the process by Statement of Claim. In paragraph 9 of its Defence, the Law Society asserted that a claim only lay against the Fidelity Fund in respect of a “failure to account” as defined in the Act, that there was no failure to account for the purpose of such a claim unless the failure arose from an Act or omission of a solicitor or his associate (as defined in the Act) for which the solicitor or associate had been convicted of an offence involving dishonesty or which the Law Society Council had found to be dishonest, that neither Mr Francipane nor any associate of his had been convicted of an offence involving dishonesty in relation to any act or omission relevant to the Appellant’s claim, and that the Law Society Council had not found to be dishonest any act or omission of Mr Francipane or any associate of his relevant to the Appellant’s claim.

31 Young J determined a preliminary question expressed as whether the Appellant had “no claim against the Fidelity Fund by reason of the matters of fact alleged in paragraph 9 of the defence …”. Young J read the question as meaning whether, in light of the matters alleged in paragraph 9, the Appellant had any claim on the Fidelity Fund, and answered it “no” and dismissed the proceedings.

32 The Court of Appeal dismissed the appeal. In doing so, Sheller JA recorded that counsel for the Appellant had “relied upon the unrestricted right of a claimant to appeal to the Supreme Court against the disallowance of or the failure to determine the claim” and went on:-

“However, whatever may be the ambit of the appeal, the ultimate question remains the same, namely whether the claimant is entitled to compensation from the fund having suffered “pecuniary loss because of a failure to account”. … In short, the Fidelity Fund could only be applied for the purpose of compensating persons who suffered pecuniary loss “because of a failure to account”. Unless that definition was satisfied there was no basis upon which the court could intervene to uphold a claim.

Stego

33 In Whitfield v The Law Society of New South Wales (unreported, 4 December 1998) Greg James J regarded the remarks of Sheller JA in Vassiliadis as precluding an appeal on the merits under s90D(3) and (4) unless there had been previously a finding of dishonesty by the Law Society Council (or I infer an appropriate conviction) and this even if the appeal were confined to matters except those made final and conclusive by s 79A(3) his Honour continued:-

“I would find it inconceivable that the legislature would expect this court to embark on a lengthy factual determination which would only be of use if some other body were to reach an independent conclusion of a particular kind on a separate matter.

In my view, s 79A requires as applicable here, not a two-stage approach but the determination by the Council as far as possible of the relevant facts and circumstances, to determine whether there has been a receipt or entrustment of money or valuable property by a solicitor or associate in the course of the solicitor’s practice which the solicitor has failed to account for, pay or deliver in accordance with the terms of the receipt or entrustment which failure arises from dishonest act or omission. It would be artificial in the extreme, except perhaps in the clearest cases of dishonesty to attempt to answer the questions relevant to s 79A(1) and (2) discretely.”

34 In the earlier appeal in this matter it was agreed that the appeal should be allowed because there had been no finding by the Law Society on the issue of honesty or dishonesty. Counsel for the Plaintiffs sought further to agitate the merits of the issues “of entrustment, whether it was in the course of Mr Kandy’s practice as a solicitor and whether there was a failure to account, in the sense not involving the characterisation of any relevant act or omission as honest or dishonest”. Adams J refused this on the ground that “the only decision which may be appealed to this Court by a claimant is one in respect of which there has been a finding of or conviction involving dishonesty”. His Honour continued:-

“This is so even where errors may be demonstrated as to the findings about the other elements of liability. This demonstrates the necessity of the Council making a finding about honesty since, otherwise, the claimant’s rights of appeal are rendered nugatory. This cannot have been the legislative intention.

An alternative mode of reaching the same conclusion is to consider the omission of the Council to make such a finding as a failure to determine the claim within Section 90D(3)(c). For present purposes it is not necessary to decide one way or another in respect of these alternative routes.

Whitfield and Anor v The Law Society of New South Wales

35 In Barber v Law Society of New South Wales [2000] NSWSC 1164 Bell J decided that the existence of a finding of no dishonesty did not preclude an appeal to this court by way of judicial review of a decision by the Society in relation to the Fund. However, in her Honour’s Reasons she records some earlier history of the proceedings with which she was involved. Initially the Society had disallowed the Plaintiff’s claim upon the basis that moneys had not been received by or entrusted to the Solicitor in the course of his practice. An appeal from that decision came before Levine J. What occurred and His Honour’s remarks as quoted by Bell J were as follows:-

“In the proceedings before Levine J it appears that the Society sought to contend that any appeal would be of limited utility if not futile. I understand that this contention was advanced by reference to the fact that a finding as to dishonesty (in the absence of evidence that the solicitor has been convicted of an offence of dishonesty) is an essential ingredient for a successful claim upon the Fund. Levine J dealt with the above submission at para 17-para 20 of his reasons:-

Vassiliadis v Law Society of New South Wales

Vassiliadis

Whilst it may be the law that the finding as to dishonesty, first, is a necessary element, secondly, can only be made by a Fund, the absence of any finding at all as to the latter cannot render futile or of little utility the proposed appeal on an issue which would be binding on the Fund if the appellant were to succeed on it.

Talarico

36 It was later, and prior to the matter coming on for hearing before Bell J, that the Society made a finding of no dishonesty.

37 None of this authority persuades me, and I do not regard any of it as compelling me, to the view that, on the proper construction of provisions of the Legal Profession Act to which I have referred, the absence of a finding of dishonesty means that there is no appeal from a decision of the Law Society Council. In Stego v Law Society of New South Wales, Windeyer J’s remarks were made in the context of a finding that there had been no dishonesty and I accept that the effect of s79A(3) means that there can be no (successful) appeal against that and perhaps against a decision which has such a finding as one of its foundations. But that is entirely different to a situation where there has been no finding on the issue of dishonesty. And when the words of Sheller JA in Vassiliadis v Law Society of New South Wales are considered, the difference between upholding a claim (which requires there to have been a finding of dishonesty) and upholding an appeal (which may relate to more limited issues) must be born in mind. One may accept that, as Young J held and the Court of Appeal affirmed, in the circumstances of that case Mr Vassiliadis had “no (valid) claim on the fund. It does not follow that absent prior resolution of the issues under s79A(2), he should have had no appeal to this court.

38 While there is force in Greg James J’s remarks in Whitfield v Law Society of New South Wales concerning the Court embarking upon issues the resolution of which will or may not finally determine a claim, the situation His Honour envisaged is not radically different from that when a trial judge decides a preliminary question or only some of the issues raised in a case and a successful appeal leads to a matter being remitted. And I think there may well be equal disadvantages if the Council is always obliged to decide the issue of dishonesty whatever other reasons there may be for rejecting a claim. Certainly the Law Society seems from time to time to have found it convenient to decide matters on bases other than honesty or dishonesty. Evidence to this effect is to be found in Whitfield v Law Society at pages 7-8 and Barber v Law Society at [8-9]. In any event, the Court has sufficient powers, in relation to adjournment and costs, to deal adequately in most cases with premature or unnecessary appeals. Furthermore, on an appeal the court may “make such order as it thinks fit” – terms wide enough to permit the court to deal with issues other than dishonesty and, if the latter issue has not been determined, remit the matter to the committee of the Law Society.

39 I accept also that there are significant disadvantages in any attempt to answer discretely the questions posed by s 79A(1) and (2). Not uncommonly resolution of the issue of dishonesty will depend on what conclusions are reached on other issues such as the terms on which any money is entrusted to the solicitor. Less commonly it may depend on resolution of the issue whether any money was entrusted. However, once regard is had to the fact that the Law Society’s determination of these sorts of issues is not made conclusive it seems to me to be an abrogation of the right of appeal on these issues for the Court to refuse to entertain them merely because no finding of honesty has been made.

40 I am comforted by the fact that, judging from his remarks quoted in Barber v Law Society of New South Wales, Levine J seems to share my views.

41 It was also argued that, in any event, here the Council had made a finding, adverse to the Plaintiffs, on the issue of dishonesty and that finding was final and conclusive. Again I disagree. Having regard to the significance which the Act gives to findings on the issue of dishonesty which fall within the terms of s79(3), it seems to me that attention needs to be given to the strict words of that sub-section. In saying that “A finding by the Law Society Council … an act or omission is, or is not, dishonest, is final and conclusive”, the provision requires that the Council direct attention to one or more specific and identifiable acts or omissions and form a judgment whether it or they are, or are not, dishonest.

42 Of itself, that requirement may not mean that the Council must identify for the benefit of a person who makes a claim on the fund or others, the act or omission but to merely say, as the minute here records “there was no act or omission of the solicitor that was dishonest” is as consistent with a conclusion that there was no act or omission as it is with a conclusion that there was one or more acts or omissions, none of which was dishonest. And to those who would say that the Council obviously considered the Plaintiffs’ claims and in the course of doing so must have considered various actions and omissions of Mr Kandy and therefore the expressed conclusion must mean none were found to be dishonest, the retort may be made that one just does not know in any comprehensive fashion what acts or omissions the Council directed attention to in making the decision called for by s79(A)(2). While a finding that an act or omission is not dishonest is final and conclusive, the same situation does not apply to the Council’s views as to what were the relevant acts or omissions.

43 Given that an unsuccessful applicant for payment from the Fund is entitled to appeal, and the only aspect of the Council’s decision which is made final is a finding that an act or omission is or is not dishonest, it seems to me to follow that there must be some specification of the acts or omissions in respect of which any such finding is made. No doubt the method and possibly the extent of that specification may vary from case to case but to wrap the matter up in the global way that has occurred in this case is wrong. The observation of Greg James J in Whitfield v The Law Society of New South Wales (unreported, 4 December 1998) that “the finding … that is contemplated by s79A(2) … must focus on identified acts or omissions …” argues towards the same conclusion.

44 I should add that counsel for the Plaintiffs conceded that, even if the Plaintiffs were otherwise successful in the Appeal, I would be forced to remit the matter to the Council so that the issue of dishonesty could be addressed.

Are Reasons Required?

45 A further question is the extent to which the Council is obliged to give reasons for its decision. The only provision of the Act which may be said to be specifically directed to this topic is s90D providing that if the Council disallows a claim it must, without delay give written notice of the disallowance to the claimant. Under the principle of “expressio unius exclusio alterius”, the specification of only “disallowance”, suggests that no further notification is required.

46 However, whether or not all that I have said above as to the need for identification of the acts or omissions in respect of which a finding of honesty or dishonesty has been made is correct, clearly if effect is to be given in the course of an appeal to any finding under s79A (2)(b), there must be notification of it. And logic would demand that that notification should be prior to the time when any appeal is being considered – in effect, at the time notice is given of the disallowance of a claim.

47 The circumstances to which the sections of the Legal Profession Act with which I am concerned relate themselves argue for the giving of reasons. Sacrificing some accuracy for brevity, the purpose of the Fidelity Fund is to provide compensation to clients of solicitors who have suffered pecuniary loss due to dishonesty on the part of a solicitor. It is notorious that such losses have, from time to time, been great. While obviously there will be claims against the Fund which should fail and some which should never be brought, many of the applicants will be those who have been failed by a member of the profession. It is unappealing that, if their claims for compensation out of the Fund also fail, they should not be told why.

48 The existence of a right of appeal has been regarded as an indication that the body from whom that appeal may be brought should give reasons. The significance of this and prior authority on the topic was the subject of consideration by Sperling J in Kennedy Miller Television Pty Ltd v Lancken (unreported, Sperling J, 1 August 1997) where his Honour held that a person assessing costs of proceedings in this Court, and from whom an appeal lies to the Court, was required to give reasons for his or her decision. Sperling J’s conclusion was upheld in Attorney General(NSW) v Kennedy Miller Television (1998) 43 NSWLR 729. Many of the considerations which applied in that case apply in the case of decisions on claims made against the Fidelity Fund, certainly in the case of claims which are disallowed, and in my view, in the case of those claims the same conclusion, viz. that reasons are required, should be reached. It is unnecessary for me to decide what should be the position in the case of successful claims.

49 That is not to say that the reasons need in the vast majority of cases to be elaborate. Both the elements required to be established if a claim is to succeed, listed above, and the issues surrounding them likely to arise, will in most cases be simple. And a statement of reasons may well have avoided the error in the Council’s determination, or in the expression of it, to which I have just referred.

50 I should perhaps add that the right of appeal also argues against the validity of a resolution as elliptical as that in this case. It effectively means that the Court hearing an appeal will not know what issues have been decided in an Applicant’s favour.

51 Two further legal submissions made on behalf of the Plaintiffs were that there had been a denial of natural justice, and that the Council’s decision was unreasonable within the decision in Associated Provincial Picture Houses Ltd v Wednesbury Corporation (1948) 1 KB 223. However any consideration of these matters requires reference to the evidence and to this I now turn.

The Bondi Properties – Mr Laurent’s Claim

52 Mr Laurent who until 18 May 1982 used the name Daniel Roger Clark owned 3 properties at Bondi. These were acquired between about September 1980 and December 1983 and sold between about March 1985 and December 1986. Mr Laurent’s personal claim for the sum of $317,500 relate to the proceeds of sale of these properties. Although there has been some modification of this subsequently, in his affidavit of 8 April 1999 Mr Laurent said that he had never received any of the proceeds of sale of any of the properties.

39/22 Penkivil St Bondi, CT 13310, Folio 115, Lot 39/SP 11889

53 Records show that this property was transferred to Mr Laurent by transfer dated 26 October 1981. It was the subject of a mortgage to Amigo Holdings Pty Limited dated 25 October 1981, the mortgage securing a principal sum of $60,000. The transfer and mortgage were registered on 25 November 1981. A Discharge of Mortgage dated 3 February 1983 shows that all monies owing had been received. Mr Laurent says that the moneys to discharge the mortgage were paid to Mr Kandy in cash.

54 Pursuant to a contract dated 27 February 1985 and a Transfer dated 3 April 1985, the property was transferred to a Mira Rosenblum for the sum of $89,000.

55 Mr Laurent annexed to his affidavit a copy of a note he identified as having come from Mr Kandy’s files after his death and in Mr Kandy’s handwriting which recorded the sums of $8,900, $78,595.73 and $57,249.02, the total of these amounts - $144,744.75 – and, as apparent dispositions of these funds an amount of $5,000 and further amounts described as:-

Amev-UDC 1,754.52

ANZ 11,935.98

Bate 16,450.00

Hattersley Maxwell 17,188.66

Kandy 90,000.00

$137,329.16

56 Also in evidence were copies of “Request(s) for Issue of Bank Cheque” dated 29 March 1985 and in amounts and payees corresponding to the first, third and fourth lines in the above list. A similar “Request” referring to the ANZ Bank had been altered from $5769.31 to $11,935.98 or $3,900.81 and then re-altered to the other of these last 2 figures. A settlement statement relating to the property did refer to a disbursement to the ANZ Bank in the sum of $3,900.81. Mr Laurent said that he had no knowledge of why Mr Kandy paid money to Amev-UDC, “Babe” or Hattersley Maxwell and that he owed them nothing. He did not understand the reference to $11,395.98 (sic).

57 A copy of one of Mr Kandy’s trust account ledger cards bearing the name of Clark and Rosenblum shows the receipt of $8,900 and payments out totalling that figure to D R Clark, J Bate and R B Kandy. The payment recorded as being made to D R Clark was $5,000. The other payments do not accord in amount with those appearing in any other document.

58 In his affidavit of 8 April 1999, Mr Laurent said that he did not know why the $5,000 appeared to be deducted and that he did not receive any of that money. He also said that he now remembered rounding up the figure of $144,744.75 to $160,000 by giving Mr Kandy the balance, including some adjustments, “in cash so that the final balance resulted in a rounded figure from which it was more practicable to calculate interest and was easier for me to remember.” The affidavit proceeded:-

“When my claim was submitted to the Law Society in March 1993 the condition of my health which had been dramatically affected by Michael Kandy’s then recent suicide was such that I could not concentrate fully on the details of the claim. It is only with the passage of time and numerous attempts to recall the chain of events that I have now remembered these additional details.”

59 In an affidavit of 11 July 2000 Mr Laurent said that he recalled requesting and receiving the $5,000.

60 When one has regard to the records in relation to the next transaction referred to below, it seems to me that it is a reasonable inference that the 3 amounts in the handwritten note to which reference has been made were intended to represent the deposit of $8,900, the balance of the sale price of the property at 39/22 Penkivil Street after taking account of adjustments and the net proceeds of the sale of the property at 31/355 Old South Head Rd. In saying that, I am not unconscious of the fact that there is not coincidence in some of the amounts. However, it is not clear whether the document came into existence when all of the final amounts were known. Furthermore, Mr Laurent made this suggestion in his affidavit and if it is incorrect one would have expected the Law Society, which has had reports from a receiver to Mr Kandy’s practice, to have been able to disprove this suggestion if it was wrong.

31/355 Old South Head Rd, North Bondi, CT Vol 9349, Folio 8 & 21, Lot 31/SP 225

61 Records show that this property was transferred to Mr Laurent by transfer dated 30 September 1980. It was the subject of a mortgage to G and L Kulisich. The date of the mortgage seems to have been 30 September 1980 and the amount seems to have been $25,000. A Variation of Mortgage dated 15 October 1980 shows an increase in the principal sum secured to $35,000. On 14 July 1982, the mortgage to G an L Kulisich was discharged and another in favour of the ANZ Banking Group executed.

62 Mr Laurent transferred the property to D and G Lovrakovic on 29 March 1985 at which time the mortgage to the ANZ Bank was discharged. The sale price was $63,000

63 Also in evidence was a settlement sheet - a photocopy which may have omitted some cents - relating to this sale showing, inter alia, the receipt of $63,000 and adjustments, disbursements of $6,382 including $3,900.81 to the ANZ Banking Group, and intermediate and final lines respectively in terms:-

64 The description of the transaction was in handwriting although most of the document was typed. There was also what seemed to be most of a handwritten draft of that settlement sheet and which also contained some of the items apparent on the face of the handwritten document mentioned when I was dealing with the Penkivil St property.

65 There was also what appeared to be a covering letter or a draft thereof, addressed to Mr A Laurent but with no address on it. The letter recorded that settlement occurred on 29 March 1985 and said there was enclosed a “Statement of our Costs and Fees together with Settlement Sheet”. The document did not refer to the payment of any money to the client. A third document showed the receipt by Mr Kandy of the sum of $57,985 (or $57,988 or $57,989) by telegraphic transfer on 29 March. I infer that all of these documents also were obtained after Mr Kandy’s death from Mr Baron, a former partner who took over Mr Kandy’s practice.

66 Mr Laurent said that in fact he paid Mr Kandy the legal costs and disbursements relating to this transaction in cash.

22/14 Wilga St, Bondi, Ct Vol 11173 Folio 42 & 49, Lots 22 & 29/SP 4233

67 This property was the subject of a contract of sale to Mr Laurent in December 1983, the purchase price being $98,000. Mr Laurent deposes to having bought the property without borrowing. It was sold by Mr Laurent in December 1986 for the sum of $175,000. A letter of 10 March 1993 from the solicitors who acted for the purchaser said that they had handed over on settlement a bank cheque in the sum of $156,957.81. A trust account ledger sheet of Mr Kandy shows the receipt of this sum on 17 December 1986 and what appears to be an earlier deposit of $16,500.

68 That ledger sheet shows a credit to Mr Laurent’s account by way of a journal transfer from some other accounts of sums totalling $26,414.13 and the disposition on 18 December 1986 of the funds by journal transfer in the following amounts to the following persons or accounts (leaving a nil balance):-

G Amigo re mtge $100,000
G Blum re mtge $30,000
F Reiss re mtge $20,000
J Star re mtge $50,000

69 Mr Laurent also annexed to his affidavit what he described as “Mr Kandy’s trust ledger … L108”. A better copy is to be found at page 523 et seq. of Exhibit A. It is entitled “Laurent Re Mort”. Included in the entries are a number in terms:-

70 I have no idea what “B/A” may stand for but the ledger card also shows regular payments or credits, more or less monthly after the above entries, to the above persons. The amounts would suggest interest was being paid to them at the rate of 16% per annum. Mr Laurent said nothing in his affidavit directed specifically to the issues of whether he had borrowed any of the above-mentioned amounts, or from the persons mentioned at about the times indicated. The ledger card purports to record some payments into the account from Mr Laurent in cash amounts that could well be for interest. They are so described on the ledger card. On the other hand, the payments were not, for much of the time, regular. The card records:-

71 It might be re-mentioned that prior to February 1983 the 39/22 Penkivil Street property had been mortgaged to Amigo Holdings Pty Limited.

72 Mr Laurent says that he received no moneys from the sale of the Wilga Street property. He says that he had an intention to round the total amount of the sale proceeds to $200,000 so handed Mr Kandy sufficient moneys in cash to cover agent’s fees, adjustments and legal costs.

73 Relevant to all three Bondi properties might be a statement by Mr Laurent in his Affidavit of 8 April 1999 that in 1983 he was in possession of sufficient funds to repay mortgages prior to expiry of the mortgage terms although there is no evidence as to the source of such funds.

The Bondi Properties – The Receiver’s Reports

74 According to a report of 12 March 1997 by Ms Sayer, the receiver of Mr Kandy’s practice, the net proceeds of sale of the Penkivil St property were $85,676.16 of which sum $5,000 was paid to Mr Laurent and the rest lent to Mr J Bate. As part of this operation, on settlement a cheque drawn payable to R B Kandy & Co was deposited to the Trust Account and credited directly to the trust account ledger of Mr Bate.

75 In that report Ms Sayer also asserts that the total net proceeds of sale of the property at 31/355 Old South Head Rd including an amount of interest, viz a sum of $58,733.43 were also advanced to Mr Bate. However, Ms Sayer goes on to say that she was unable to say whether or not the payments represented genuine advances. This sum included the proceeds of the payments to Amev-UDC, the ANZ Bank, Bate and Hattersley & Maxwell listed above.

76 There are some other matters referred to by Ms Sayer to which reference should be made. In her report of 4 May 1993 she said that Mr Bate had been a substantial borrower from trust clients of Mr Kandy’s firm and he and Mr Kandy each held a one half share in a cement group of companies. In her report of 12 March 1997 she said:-

(i) she could find no evidence of any interest paid to Mr Laurent on moneys credited to or paid to Mr Bate,

(ii) there was no record in the trust account records of a loan representing moneys paid direct form the settlement moneys in respect of the sale by Laurent to Lovrakovic, i.e. the sale of 31/355 Old South Head Rd, but

(iii) had been able to establish that no moneys remained due by Mr Bate or his company.

77 In a report of 24 March 1998,Ms Siddons, who describes herself therein as the manager of the Fidelity Fund asserts, on what evidence I do not know, that “Mr Laurent apparently ‘represented’ Kandy on a trip to Germany with Mr Bate in relation to Coastal Readymix Pty Limited, a company partly owned by Kandy”.

78 So far as the property at Wilga Street is concerned, Ms Sayer records that the sale was settled on 18 December, the net proceeds of sale being $173,585.87. She says that an amount of $26,000 was received from Mr Laurent on 6 November 1986 and that these sums, together with a balance of $414.13 in an account styled “Laurent re. Mortgage” totalled $200,000. She asserts that “this sum was applied in the repayment of advances of $200,000 made to Mr Laurent by other trust clients between 27th August, 1985 and 1st May, 1986”. The clients are Messrs Amigo, Blum, Reiss and Star listed above.

79 The topic of these 3 claims was adverted to again in later reports. On page 18 of the report of 17 March 1997 Ms Sayer said that it appeared to her that the amounts to be accounted for to Mr Laurent included a sum of $139,409.59. Ms Sayer also said that there were some payments subsequent to 30 June 1990 which should be brought to account. This topic can be left until later. Page 5 of Ms Sayer’s report of 12 March 1997 shows the makeup of the sum of $139,409.59:-

29.3.85	Ex proceeds of sale to Lovrakovic – cheques purchased form ANZ Bank	47,329.16
3.4.85	Amount transferred to the trust ledger account of Bate from the proceeds of sale to Lovrakovic	11,404.27
3.4.85	Cheque received on settlement of the sale by Clark to Rosenblum credited to he trust ledger account of Bate	78,595.73
16.4.85	Cheque drawn on the Trust Account from the proceeds of sale to Rosenblum payable to J Bate	2,080.43
$139,409.59

Instructions as to Proceeds

80 It is convenient to record at this stage Mr Laurent’s evidence concerning his instructions to Mr Kandy as to the use of the proceeds of sale or other moneys left with Mr Kandy, notwithstanding some of that evidence relates to moneys or claims arising later and unconnected with the Bondi properties.

81 There is no documentary record of Mr Laurent’s instructions to Mr Kandy as to dealing with the proceeds of the above sales. In his affidavit of 8 April 1999, Mr Laurent’s evidence was to the following effect. He said that at some time in 1985 whilst he was in Mr Kandy’s office, conversation to the following effect occurred:-

“Mr Kandy: The best thing to do would be to invest (the sale proceeds of the properties at Penkivil Street, Bondi and Old South Head Road, North Bondi) in an interest bearing form. That would be the most secure way. When do you want to retire?

Mr Laurent: I want to retire at the age of 40.

Mr Kandy: I will invest the money for you on long term deposits or bonds yielding 15% compound interest. I will also invest moneys with private borrowers. They will pay all tax on the interest. At the time of maturity you will have a tax free fund which is a big advantage.

Mr Laurent: What a fantastic idea.

82 Mr Laurent said he was happy with the arrangement and did not worry about this money for quite a few years. In 1992 shortly after his fortieth birthday, which seems to have been on 28 January 1992, he said there was further conversation to the effect:

Mr Laurent: How are my investments going? I’m 40 now what do I do next.

Mr Kandy: Let it run for a while as you are making top interest.

Mr Laurent: As long as it is not too long a while.

Mr Kandy: You can get it back on 3 months’ notice.

83 In his Affidavit of 11 July 2000, Mr Laurent re-visited the topic of instructions to Mr Kandy and conversations in that regard. After referring to his property dealing in 1988, i.e. that conducted by Ormtrend, Mr Laurent continued:-

“12. Once the transaction profits began to mount, Mr Kandy said to me, words to the effect of:-

‘I will enact term money investments for you, which will yield a high interest rate’

This money was to provide a nest egg on my retirement, which I perceived to be at aged 40.

13. Except as set out below, the proceeds flowing from the sale of real property were never forwarded to me. My impressions were that Mr Kandy was investing the money on my behalf, as was agreed.

14 Michael Kandy had my direct authority to use the funds as was required for my legal affairs in the property sales and purchases. If I was purchasing a property he had my instructions to take the moneys in the above mentioned term investment funds and use them in the transaction.

18. The net sale proceeds of the conveyances were left with Michael Kandy to invest… I accepted Michael Kandy’s assurances that, ‘the moneys are invested for your benefit. You can access them at short notice’.

22 I never gave him instructions to dispose of funds from, or belonging to any of the plaintiffs, other than by enacting a purchase of particular real property, and any associated transactions or by term investment as referred to above.

32 …. I had told him about the proceeds of sale of properties that I or my companies bought and sold, ‘These funds are to provide a nest egg for my retirement.’ …

47 Michael Kandy assured me, ‘The moneys are invested at call, and I am doing all that is necessary to have those profits brought to fruition at age 40. You need not be concerned with any legal aspect flowing from the investment as I will take care of any aspect which arises, including the preparation of income tax returns’.

50 I never received any statements regarding those moneys Michael Kandy had invested on behalf of the plaintiffs. I trusted Michael Kandy, and believed he was investing the moneys as he had told me.

84 In that affidavit Mr Laurent also gave a version of his instructions to Mr Kandy following the sale of the Penkivil St property in terms somewhat different from those recounted in his earlier affidavit. He said he advised Mr Kandy to “Please transact the funds into the term interest bearing accounts, for my benefit”. Mr Laurent gave similar evidence in respect of the proceeds of sale of 31/355 Old South Head Road. So far as the net proceeds of the Wilga St property are concerned, Mr Laurent said that his instructions were that those moneys were to be added to the other funds for investment.

85 In that affidavit, commencing at paragraph 36, when referring to a number of sales of properties in 1988 in respect of which Mr Kandy had generally written advising that the net proceeds of sale had been previously paid to Ormtrend, Mr Laurent said that he had not received those monies and that he had given instructions that all profits on real estate transactions should be added to the other funds Mr Kandy had told him were placed in high interest yielding accounts.

86 Later, commencing at paragraph 43, when referring to a number of other sales which had occurred in 1988 and in respect of which Mr Kandy had written advising that the net proceeds were invested at call Mr Laurent said that his instructions were that surplus proceeds were to be invested at call.

87 There is no evidence of instructions specifically related to the moneys the subject of the Fabrama and Affiliated Equities Claims but given the transactions which are the foundation of these claims – details of which appear below - that is not surprising.

88 The only evidence specifically directed to the instructions concerning the moneys the subject of the claim for $322,804.7 seems to be that contained in the claim form in respect of that sum. In it Mr Laurent says that the instructions were “at the best short term rates available from time to time”,

89 Mr Laurent also said that Mr Kandy had authority to use Mr Laurent’s funds for other transactions of Mr Laurent. It may be inferred that this authority extended to any company’s funds.

90 In the affidavit Mr Laurent also referred to remarks in a report of Ms Sayer to the effect that the proceeds of the sale of the property at Penkivil St had been paid to Mr J Bate and said that:-

“I have never had any financial or legal dealing with J Bate. I never instructed Mr Kandy to perform this transaction with J Bate. … Thus I can offer no explanation for the funds being credited to J Bate as Mr Kandy was never instructed to do so.”

91 Mr Laurent said also that Mr Kandy was never given instructions to credit Mr Bate with the proceeds of the Old South Head Road property and that he, Mr Laurent, never received any statements regarding the moneys Mr Kandy was supposed to have invested on behalf of the Plaintiffs.

92 Mr Laurent’s oral evidence concerning his instructions to Mr Kandy was limited in its illumination. I set out a selection of extracts which is not, I think, unfair:

Q. You do remember discussing with Mr Kandy entrusting money with him from the sale of the Bondi properties?

Q. You had a conversation with Mr Kandy in which he said, “The best thing to do would be to invest them in an interest bearing form, that would be the most secure way.”

A. He said it would be franked dividends, they will pay the tax, 100 per cent legal, no scheme, no sham, legal, that’s why we came to this country, to have it legal.” - 125.2

Q I read out from your affidavit your evidence about the conversation with Mr Kandy in which he said amongst other things, “I will invest the money for you on long term deposits or bonds yielding 15 per cent compound interest. I will also invest monies with private borrowers. They will pay all the tax on the interest.”
Do you remember that evidence?
A. He said he can get franked dividends.” - 126.9

Q. He could get franked dividends? This was in 1985, was it?
A. I don’t remember when it was. - 127.1

Q. You spoke a moment ago about Mr Kandy using the expression “franked dividends”?
A. Yes
Q. On what occasion did he use that expression.
A. Before he took the money.
Q. Which money?
A. For the apartments.
Q. Which apartments?
A. At Bondi. – 127.5

Q. Were the franked dividends mentioned at about the same time that Mr Kandy offered to invest this money for you at about 15 per cent compound interest?
A. Yeah – 128.3

Q. Do you think Mr Kandy may have spoken about franked dividends before there were any such thing in existence in Australia?
A. I don’t know about it. All I know I want to 15 per cent net (sic) and not have problem with the taxation, that is all he promised, he was a lawyer. – 128.5

Q. Do you know what a dividend is, Mr Laurent?
A. Yes.
Q. What is it?
A. Dividend is what you get on your investment – 128.7

A. That’s what he promised, that was the reason I entered in it with him. – 129.2

Q. What was it that convinced you?
A. The evidence itself. I don’t have to pay any more tax. I have a million, I get $150,000 a year and someone else pays tax. It is very good, clean, white, money, beautiful. Tax I can avoid. - 130.1

Q. While you were hoping for 15%, were you told what interest rate you were to receive?

Q. What were you told about what interest rate you were to receive?

A. 15%
Q. And did that rate ever change?
A. I don’t remember. – 132.4

Q. You thought your money was being lent out on first mortgage at 15% per annum?
A. I didn’t think so. It is a part of a situation. – 134.4

Q. And it was being lent on first mortgage at 15% per annum?
A. That’s what I have been told it would be.
Q. And the borrowers were not just paying the 15% but they were paying your income tax as well?
A. You are trying to confuse me. I am saying it again. I don’t know, I am not responsible for someone writing something in the way it is opening opportunity for you to treat me the way you are treating me and to have this trial by ambush. I don’t remember, I apologise. I am not responsibility (sic) for what is written there, only for facts, not wording of it, not technicalities, not spoke written, all the other devices. – 134.7

Q. You agreed with Mr Kandy that he could invest your money at a 15% per annum rate; it that right?
A. That was in ‘85
Q. And that money was repayable on demand to you?
A. No, not on demand. Whenever I reached 40 I needed it. I wanted to retire, buy a farm and live like a human being for a change. - 137.3

Q. The first thing you do in this affidavit, in this portion of the affidavit--
A. With all my due respects, try to remember I didn’t write it, I dictated it, and how people took it and how they put it, it was in the terms it was all right, it was all right. – 137.6

A. I don’t.

A. I don’t remember. If you would be so kind to understand, to try to listen to me. I had 56 properties. I borrowed $11 million from Esanda myself. Part of the properties were settling, part of the properties were purchased, and it is all mixed, so we were working on the balance. That’s how it was. It was crazy. – 137.7

A. I don’t remember. I don’t think I paid enough attention to it. To me most important thing I gave it to the person I could have trust, my lawyer. – 138.5

A. I didn’t write the affidavit. I just explained to you probably a clerk or someone wrote what happened, and if they misunderstand me, they misunderstand.

Q Are you saying now that you don’t know whether that statement is correct or not?
A. I don’t quite understand this statement, I’m sorry. I can’t understand. – 138.10-139.3

Q. And was something said about the preparation of income tax returns?

93 To enable some assessment of the 15% figure mentioned by Mr Laurent, there was in evidence also a publication of the Reserve Bank entitled “Interest Rates and Yields: Bill and Deposit Markets”. The document showed:-

Bank	accepted	bills	90 days	Finance company debentures
Year	High	Low	Average	June	1 year June
1984/85	17.05	10.18	13.19	15.90	13.75
1985/86	20.50	14.03	16.72	14.80	14.00
1986/87	18.85	13.30	15.88	13.45	13.75
1987/88	14.15	10.70	11.92	13.15	11.80
1988/89	18.65	12.98	15.52	18.30	16.50

Fabrama Pty Limited, Ormtrend Pty Limited and Affiliated Equities

94 Fabrama and Ormtrend were incorporated as “shelf” companies by Corporate Network Limited. It would appear from an annexure to the affidavit of Mr May of 11 July 2000 that they were “sold” to parties nominated by Mr Kandy. In the case of Fabrama Pty Ltd, this occurred on or about 12 July 1983 and in the case of Ormtrend, on or about 16 December 1987. According to Corporate Network Limited, at those times Mr Laurent was appointed a director and secretary and Sara Potza or Sarra Pozton) was also appointed a director. Both also became shareholders. Mrs Potza is Mr Laurent’s mother.

95 Mr Laurent asserted in his affidavit of 11 July 2000 that at all material times he had controlled Ormtrend and Fabrama.

96 Mr Laurent also gave evidence that for a period commencing prior to the large scale property dealings which occurred in 1988, he and/or his mother were operating a jewellery business and that this was being done in the name of Fabrama Pty Limited. Documents produced by a firm of accountants and which became Exhibit E support this claim albeit they cover only a short period. The documents show that one or two jewellery businesses were sold prior to June 1985 having been owned for less than 12 months. The documents also indicate that the operations were on a very small scale and not productive of any substantial income. Whether they should be taken at face value was not explored. Given my general experience of operators of cash businesses over 45 years I would take some persuading that they should be. Even at face value the documents throw little or no light on what Mr Laurent’s financial situation was prior to 1984 or after 30 June 1986. They do show that some attention was being given to the statutory obligations of Fabrama at least up until December 1986 and confirm that Mr Laurent and his mother were the directors. In evidence I am disposed to accept, Mr Laurent also said that Fabrama never had anything to do with any real estate transactions. I think the tenor of his evidence at T169 is that Affiliated Equity was in the same situation. The evidence does not reveal any reason for Affiliated Equities’ existence.

97 The records of Corporate Network Limited also show that in February 1989 a third company Idoline Pty Limited was sold to parties nominated by Mr Kandy. Again according to those records Mr Laurent became a director and secretary and Mrs Pozton became a director, both acquired shares and the name of the company was changed to Consolidated Equity Pacific Pty Limited. A certificate from the National Companies and Securities Commission shows that Idoline changed its name on 14 May 1989 to Affiliated Equity Pacific Pty Limited. It might be noted that when Messrs Carroll and O’Dea, solicitors, wrote on 18 May 1993 making claims on behalf of Ormtrend, Fabrama and Affiliated Equities, they asserted that Affiliated Equities was a business name of Mr Laurent. There is no evidence that prior to the events with which I am concerned the change of directors of Ormtrend or the change of directors and name of Affiliated Equities was ever notified to the corporation regulatory authority.

98 All three companies were deregistered. On 18 February 2000 the Equity Division of this Court ordered that the three be reinstated to the Australian Companies register.

Ormtrend’s Claim for $774,219.88

99 Essentially Ormtrend’s claim is for the proceeds of a number of cheques and one amount arising on the completion of a conveyancing transaction effected by Mr Kandy. Details of the cheques are as follows:

Date	Drawer	Payee	Amount
23.12.88	Ormtrend Pty Limited	Lamtala Pty Limited	191,000.00
03.02.89	Ormtrend Pty Limited	Ormtrend P/L	2,684.00
21.02.89	Ormtrend Pty Limited	Lamtala P/L	2,660.00
03.03.89	Ormtrend Pty Limited	Lamtala Pty Ltd	200,000.00
24.06.89	Ormtrend Pty Limited	Lamtala P/L	180,000.00
$576,344.00

100 Mr Laurent does not dispute that he signed the cheques but he says that to the best of his recollection he did not insert the names of the payees. He says that it is likely that the cheques were given to Mr Kandy in blank and that the cheques were given by him to Mr Kandy for the purposes of investment by the latter on behalf of Ormtrend Pty Limited. Lamtala Pty Limited was the trustee of Mr Kandy’s Family Trust.

101 Ormtrend was the payee originally named in the cheque for $2,660. This name was crossed out and Lamtala substituted. The change was initialled. The initials bear some similarity to the signature on the cheque but, particularly having regard to the poor quality of the photocopy attached to Mr Laurent’s affidavit of 8 April 1999, I would not be prepared to conclude from their appearance that the initials and signature are that of the same person. The matter was not explored in oral evidence.

102 The amount arising on the completion of the conveyancing transaction was $197,875.88, which with the above figure, totals $774,219.88. The figure of $197,875.88 is the final amount in a financial summary dated 7 February 1989, addressed to “Ormtrend Pty Limited, 106/207 Old South Head Road, Bondi Junction” and relating to the sale of 3 shops at Belmore. The description of the amount is “Amount due to you herein and deposited to your account as requested.”

103 In his affidavit of 8 April 1999 wherein the above details of Ormtrend’s claim are given, Mr Laurent says that he is unable to recall any conversation with Mr Kandy in which he gave instructions in relation to the settlement of this sale. Although this transaction is referred to in the section of his affidavit dealing with Ormtrend’s claim, Mr Laurent says nothing on the topic of whether he or Ormtrend received the $197,875.88.

104 However one of Ms Sayer’s reports of 12 March and that of 17 March 1997 say that all of the above amounts were received by the Kandy Family Trust and these sums and others relating to Fabrama and Affiliated Equities, totalling in all about $2.7M were credited to the loan account of Ormtrend in the financial accounts of that Trust.

105 At least in large part, the source of Ormtrend’s funds lay in profits it had made. In 1988, Ormtrend had begun to acquire a large number of properties in and around Sydney. Mr Laurent lists 56 in an schedule to his affidavit of 11 July 2000. A further schedule attached to the affidavit of Mr May of 11 July 2000 refers to something over 50. The first contract of purchase referred to by Mr May seems to have been on 29 March and the last on 16 August 1988. The first contract of sale seems to have been on 30 May 1988 and the last on 31 May 1989. According to the schedule the total of the purchase prices was about $4.5M and the total of the sale prices, about $6.8M. The gross profit was $2,124,118. It is clear that Mr Kandy acted as solicitor on most of these transactions and almost certainly on all.

106 The former partner of Mr Kandy produced 44 conveyancing files for the consideration of Mr May, the Plaintiff’s’ present solicitor, saying that there were others he was unable to locate. Mr May analysed those which were produced. That analysis shows that on the Statements of Fees and Costs attached to settlement letters addressed to Ormond Pty Limited contained in those files there are the following total amounts described as:-

Amount due to us herein $34,796.82

Amount due to you herein $246,580.85

Amount due to you herein and previously paid $702,845.76

Amount due to you herein and invested at call as requested $486,488.08

107 From the evidence it seems clear also that not infrequently proceeds of one transaction were used to defray or provide for expenses associated with another transaction. The amounts the totals of which appear above would seem to have been reached after provision was made for payment to persons I infer to have been mortgagees, particularly Esanda Finance and the ANZ Bank. Mr Laurent gave evidence that he borrowed $11M from one or both of those organisations. That he had a significant facility derives support from Ms Sayer’s report of 17 March 1997.

2. The position concerning the treatment by Kandy of the funds of Laurent and his companies was unique. Only in respect of Laurent and his companies were moneys received by Kandy treated as funds which formed part of the Kandy Family Trust. Only in the case of Laurent and his companies were current accounts opened in the ledgers of Lamtala and Resco. This did not occur in relation to any clients.

5. Moneys misappropriated by Kandy … also comprised some moneys which went into the bank accounts of Lamtala/Resco … which covered cheques drawn against those funds which also went to Macquarie Bank. In other words there was no pattern of the misappropriation of moneys of trust clients passing through the accounts of Resco/Lamtala. …

6. Laurent and his companies were buying and selling properties obviously as part of a profit making scheme or arrangement and any profits would be taxable. No taxes were ever paid on any profits because the profits became part of the Kandy Family Trust and were absorbed by losses in that entity – (Lamtala.) Laurent surely would be aware of the Income Tax implications in relation to these moneys and acquiesced in these moneys being offset in the accounts of Lamtala.

7. It is alleged by the claimant that the amount of $200,000 described as “mortgage advance” to Laurent should not be deducted as there is no mortgage. The trust account records show the disbursement of those moneys in relation to Laurent. I do not think the issue is whether or not there was a registered mortgage securing the moneys. Kandy’s bookkeeper described any advance as a “mortgage loan”. There does not appear to be any dispute by Laurent that the payments were made from the loan of $200,000 to or on his behalf.

10. … the claimant was aware that the cheques (the subject of the $774,219.88 Ormtrend claim) were drawn payable to Lamtala Pty Limited and were not payable to the Trust Account. He was obviously also aware that the moneys were not deposited to a Controlled Money Account. If the moneys were to be invested, I would expect that any businessman would ask for details of the security.

11. Reference is made to the entrustment of moneys by the claimants with Kandy. Moneys given by a solicitor are not an entrustment of trust moneys unless given to him in the course of his practice as a solicitor and if a solicitor/client relationship existed in respect of the transaction.

199 As I have pointed out previously, the statement in the second sentence of paragraph 2 is impossible to reconcile with the statement in Ms Sayer’s report of 17 March that:-

“As mentioned in my reports relating to other matters moneys that have been misappropriated by Kandy have been brought to account in the financial accounts of Lamtala Pty Limited as income. You will recall that amounts exceeding $M1 misappropriated from the funds of Belarus Tractor and Trading Co. Pty. Limited were treated as Management and Consultancy fees in the financial accounts of the Kandy Family Trust.”

200 Clearly on the basis of this quoted statement, moneys received by Kandy from Belarus Tractor and Trading Co Pty Limited were treated as funds which formed part of the Kandy Family Trust. On a similar basis, the last sentence quoted in paragraph 5 would seem incorrect.

201 The first part of the last sentence in paragraph 6 is potentially a very damaging comment and while it may be thought to fairly arise, the legal profession has from time to time managed to avoid for its clients tax prima-facie payable. The second part of that sentence is even more prejudicial. It virtually concludes against the corporate Plaintiffs’ any chance of success. It may be that is a conclusion at which any tribunal considering the matter may arrive but, at least on the material before me, it can only be done by way of inference after a review of a great deal of material. There is no direct evidence that Mr Laurent acquiesced in any offset, yet Ms Sayer states it as a matter of fact.

202 The statement in paragraph 7 that “Kandy’s bookkeeper described any advance as a “mortgage loan”, if true, certainly puts the records relating to the application of the $200,000 in a very different light from that which they would have if “mortgage loan” had its normal meaning. The last sentence in paragraph 7 again is one which may be justified as a conclusion to be inferred from other material but a claim for this money was made and, even before me, remains. The statement of fact in this last sentence, is prejudicial to one of Mr Laurent’s claims and, in its bald form, arguably wrong.

203 I do not find it necessary to comment on the other paragraphs of Ms Sayer’s letter although again, but without forming a final view, I incline to the view that they provide just ground for complaint.

204 When regard is had to the nature of the duties cast upon and powers given to, the Law Society Committee under the provisions of the Legal Profession Act to which I referred early in these reasons, there can be no doubt that there was an obligation to adhere to the rules of natural justice. In the context of this case I take the law to be as stated by McHugh J in Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 75 ALJR 889 at [140]-

Kioa v West

Kanda v Government of Malaya

Ridge v Baldwin

De Verteuil v Knaggs

Kioa v West

205 The matters to which I have referred constituted adverse information. They were relevant and significant to the decision to be made. Particularly is this so when the statements to the effect that Mr Laurent and his companies had been treated, not only differently from the other clients who had been defrauded, but in a unique fashion are considered in light of Ms Sayer’s earlier suggestion of a joint venture and acquiescence in the treatment of the moneys in Lamtala. Coming from Ms Sayer, the receiver of Mr Kandy’s practice, and who has been for many years a person frequently appointed by the Law Society to such a role, the information was credible. The matters were also new. Accordingly the Plaintiffs, all of whose claims were liable to be affected, directly or indirectly, by the matters to which I have referred, should have been afforded an opportunity of dealing with them. Not having been afforded that opportunity, they were denied natural justice.

206 And there are 2 other matters that might be mentioned. While in the mass of material which was before the Committee there may be found at least arguable reasons for rejecting the Plaintiffs’ claims, it is difficult to regard the letter of Ms Sayer of 13 June as other than a summary of reasons why rejection should occur. Even if nothing in the letter was new, in circumstances where one might conclude that the Committee would not or could not have appreciated much of the material – I doubt if they had a fraction of the time I have put into its consideration – there is something to be said for the view that the submission of Ms Sayer’s letter was a breach of natural justice. However, it is unnecessary for me to reach a final conclusion on this.

207 Secondly, I do not regard the fact that in Ms Sayer’s report of 17 March there can be found a statement inconsistent with the second sentence of paragraph 2 of her letter, establishes that what she said in that letter was not “new” or merely raised an issue for the Council to decide. On an issue of natural justice, one has to look at the practicalities.

The Plaintiffs’ Claims - Conclusions

208 In light of, inter alia, Mr Kandy’s clear dishonesty in transactions affecting other clients, the doubts which the absence of records creates, the number of areas of poor recollection demonstrated by Mr Laurent and the odd nature of many of the transactions, it is obviously desirable, at least in the first instance, to consider the significance of such documents and events about which there is either no or relatively little doubt.

209 So far as the properties at 39/22 Penkivil Street, Bondi and 31/355 Old South Head Road, North Bondi are concerned, it is in my view clear that the net proceeds were left with Mr Kandy. Given the circumstances, there can be no doubt that those moneys were “received by or entrusted to the solicitor (Mr Kandy) in the course of his solicitor’s practice”. Given the time lapse, it is not possible to regard what happened in 1988 as throwing any doubt on that conclusion.

210 There are, of course, a number of possible explanations for the almost immediate payment of these amounts to, or for, Mr Bate. These include (i) the discharge of a debt owed by Mr Laurent to Mr Bate or the provision of funds by the former to the latter, for example for the purchase of something, (ii) a loan from Mr Laurent to Mr Bate with Mr Kandy acting on behalf of one or both in the implementation of the loan, or (iii) the appropriation of the moneys by Mr Kandy and the payment of them on his own behalf to Mr Bate. There may well be others. In light of Mr Laurent’s evidence as to the mention in discussions with Mr Kandy of his funds being invested with private borrowers I would not be disposed to regard the second of these possibilities as unauthorised. However, it strikes me as inherently unlikely that Mr Laurent would have made any loan interest free and the absence of any documentation among Mr Kandy’s records argues against both the second of the possibilities mentioned and, perhaps less strongly, against the first or some other legitimate transaction between Mr Laurent and Mr Kandy. It is probable I would have heard of such documentation if it existed.

211 In the normal situation one would, of course, expect proper documentation of the receipt and terms of receipt of moneys by a solicitor, as indeed occurred in relation to the 2 amounts of $80,000 referred to in or about paragraph 117 above. However, given Mr Kandy’s clear tendency to appropriate to himself moneys of his clients, it would be surprising if he provided more documentation than was absolutely necessary. That tendency does not, of course, provide any explanation for why Mr Laurent may have not sought or insisted on documentation although the trust that Mr Laurent asserts he had in Mr Kandy does.

212 Thus I do find in such evidence as there is, some support for Mr Laurent’s account that he left the proceeds of sale of the 39/22 Penkivil Street, Bondi and 31/355 Old South Head Road, North Bondi properties with Mr Kandy for the latter to look after or deal with on Mr Laurent’s behalf.

213 A further factor to be borne in mind is that Mr Kandy clearly had, or perceived himself as having, a need for funds. That itself argues for the conclusion that, if the opportunity presented itself to acquire such funds without having to account for them until some time well down the track, Mr Kandy was likely to pursue it. I see in Mr Kandy’s dishonesty generally, support for Mr Laurent’s story that Mr Kandy promised him a good return if only Mr Laurent would leave the funds with him for years without interim payments meanwhile. That is not to adopt the terms Mr Laurent attributes to Mr Kandy. It is however the substance of what Mr Laurent attributes to Mr Kandy.

214 Of course one must recognise that in 1993, given the limited documentation there was, if Mr Laurent was to maintain a claim, he had to provide some explanation for not having received, or complained about the non-receipt of, interest or other return meanwhile. The possibility exists that this need was the inspiration for his evidence of the arrangement that Mr Kandy was to keep the money until Mr Laurent turned 60 and of the supplementary arrangement necessary to take account of the complication that the money was not then returned even though Mr Laurent turned 60 about a year before Mr Kandy died.

215 It strikes me that there is little scope for innocent error in the central theme of Mr Laurent’s explanation of how Mr Kandy came to have the surplus proceeds of the first 2 Bondi properties sold. That central theme is either a concoction or true. Even putting aside any belief in Mr Laurent as a witness, it seems to me that the probabilities favour it being true.

216 With the exception of the last sentence of the immediately preceding paragraph, much of what I have just said applies to the surplus proceeds arising on the sale of the Wilga St property. However associated with that property is the complication of the evidence that the proceeds were used to discharge borrowings Mr Laurent had made and which, it may be inferred, he and Mr Kandy knew had been made. Thus as must have been known by Mr Laurent and Mr Kandy, there was no such surplus. If so, it is unlikely that, as Mr Laurent asserted, he told Mr Kandy that these moneys were to be added to the other (or earlier) funds for investment.

217 Of course the question arises whether the proceeds of the Wilga St property, brought up to $200,000, were used in paying off some indebtedness Mr Laurent’s had to other of Mr Kandy’s clients. Having regard to what Ms Sayer has said in her reports as to the extent and nature of Mr Kandy’s fraud and fraudulent and fictitious record keeping, it does not seem to me that, without more, any weight whatsoever can be placed on the ledger card recording the disposition of the $200,000 to other clients. However, although the transactions so recorded were clearly raised as an answer to Mr Laurent’s claim for the $200,000, Mr Laurent never sought to specifically address them or the apparent payments of interest recorded on the ledger card. Because of this, I believe I should accept that the transactions recorded on the ledger card occurred. Thus I do not accept that Mr Laurent suffered any loss arising from the entrustment of the proceeds of this property to Mr Kandy. It follows also that there was very probably no talk of investment of the proceeds of Wilga Street as Mr Laurent asserted. This conclusion must have an impact on Mr Laurent’s credibility.

218 Other items which merit treatment at least partly discrete, are the 2 sums of $80,000 referred to in or about paragraph 117 above as having been paid into Mr Kandy’s Trust Account in November December 1988 for investment on 24 hour call. There is the oddity to which I have referred of 2 different second pages in one of the documents but the matter not having been explored, I am not persuaded by this circumstance that the documents are of no weight. They provide clear support for the view that the $160,000 referred to in them was placed with Mr Kandy for investment with BAC. The records indicate that such investment occurred, at least until 12 December 1988, when BAC repaid the moneys as part of its cheque for $305,854.90. Thus, virtually independently of Mr Laurent, there is substantial evidence that this $160,000 was “received by, or entrusted to, the solicitor … in the course of the solicitor’s practice”. The same may be said in respect of the sum of $147, 160.51 dealt with at about the same time.

219 I turn to the moneys the subject of the claims of Ormtrend, Fabrama and Affiliated Equities. As between these companies the strong probability is that all of the moneys were Ormtrend’s. It carried out the property dealing and the others seem to have done nothing productive of the moneys the subject of the claims. That is not to say that if the claims are otherwise to be allowed, they should not be allowed in the companies’ names as made. It is not difficult to see evidence of ratification of any unauthorised acts of Mr Kandy or some other agent transferring money from Ormtrend to Fabrama and Affiliated Equities. No concerns about this aspect were raised during the hearing and no doubt if they exist they can be dealt with by appropriate documentation.

220 A question which is inspired by the fact of moneys originally earned by Ormtrend being in, or invested in, the names of Fabrama and Affiliated Equities is “why”? It is not, I think, a question possible to answer and in any event, it does not seem to me that it throws much if any light on the primary issue of whether the moneys wholly belonged to what I may call the Laurent group. The fact that Fabrama and Affiliated Equities were introduced suggest that Mr Laurent may have been involved with investment in their names but experience shows that some persons of Mr Kandy’s bent, do frequently move monies around for no purpose that can be later determined by others.

221 The issue of whether the moneys wholly belonged to what I may call the Laurent group is of course the test to be found in s79A et seq. of the Legal Profession Act but in the circumstances of this case an answer to it will go a long way to answering the issues posed by the statutory provisions and which are seriously in contention.

222 Again it seems to me that analysis is assisted by oversimplifying the issues. One possibility is that the money was wholly owned by what I shall call the Laurent group. Another is that the money was wholly owned by the Kandy interests, in particular by Lamtala as trustee of the Kandy Family Trust. A third is that both groups had an interest in the money. The first of these is Mr Laurent’s position and the foundation of the company claims. The second has the support of Mr Kandy’s and Lamtala’s records wherein Ormtrend was treated as a trustee for Lamtala and Ormtrend’s income treated as income of the trust.

223 Again however, in light of what Ms Sayer has said in her reports as to the extent and nature of Mr Kandy’s fraud and fraudulent and fictitious record keeping, it does not seem to me that any weight whatsoever can be placed on the records referred to in the immediately preceding paragraph. I wish there to be no misunderstanding about that. Mr Kandy has been shown to be so dishonest and his records so inaccurate that the issue of ownership should be approached as if the records of which he was the source, indicative of Lamtala being entitled to Ormtrend’s profits did not exist. They are perfectly explicable on the basis of his misappropriation of those moneys.

224 I may add that, even if regard were had to those records, they provided no indication of any joint venture with Mr Laurent’s interests. On its own, an assertion of absolute ownership provides no evidence of 50 % ownership.

225 I do not take the same view of Mr Kandy’s records indicating the provision of funds by Resco at the time of Ormtrend’s early purchases. The nature of the records and the transactions recorded are quite different from those the subject of the later records. Firstly they would seem to be contemporaneous and in significant detail conform with known events. Mr Laurent must have known that the funds were being provided and it is a reasonable inference that he would have had known their source (though he might well not have known it was Resco as distinct from Mr Kandy). Mr Laurent has provided no explanation of this aspect of the dealings and his failure to address the topic is, I think surprising. After all he, or his legal advisers, had access to Ms Sayer’s report since the proceedings before Adams J.

226 To some extent the provision by Resco of funds argues in favour of the conclusion that it, or Mr Kandy, may have had some interest in what was occurring. So does the recording of the names of properties apparently associated with the transactions. In some circumstances a transfer of a debit balance as occurred to Mr Kandy would suggest that it was on his behalf or some entity he represented, rather than on Resco’s own behalf that the funds were provided. Because of Mr Kandy’s dishonesty, and he seemed to move funds without any obvious purpose I would hesitate to draw that inference here. However, there seems to be no other evidence which would suggest Resco itself had any interest in Ormtrend or the property-trading business.

227 If Mr Laurent was but an employee and Ormtrend wholly owned beneficially by Kandy interests, then one could understand those interests coming into possession of all of the proceeds. But the extent of Mr Laurent’s involvement argues very strongly against that conclusion, even if one made the assumption – and that is all it could be – that for some reason Mr Kandy wished to carry out property dealing but not have his name connected with it. If that was his wish he certainly went to extraordinary lengths to conceal his involvement. I do not suggest one matter on its own would be conclusive but Mr Laurent and his mother were clearly intended to be the shareholders and directors of Ormtrend and Affiliated Equity and Fabrama. I am satisfied that they carried on the business of that latter company for years before 1988. There is not the slightest suggestion that Mr Laurent was not the person who did the physical work and made the decisions involved in the property dealings. He was not challenged on his suggestion that it was he or Ormtrend who had the accommodation with the ANZ Bank and Esanda and there was no evidence to the contrary. And although Ms Sayer said in her letter of 13 December 2000 that she did not investigate the Laurent matter until 1997, her reports of 17 November 1993, 26 July and 6 December 1995 show that she was looking at Mr Laurent’s claims much earlier. One would have expected that if it was Mr Kandy who had, or had guaranteed, the accommodation with those organisations, that information was available in 1993.

228 Unless as I said, one made the assumption that Mr Kandy was doing the dealing on the quiet, it is difficult to think that all the settlement letters addressed to Ormtrend at Mr Laurent’s address were nothing but a solemn farce.

229 On, the evidence I do not think that there can be any reasonable doubt that Mr Laurent or his companies had a substantial interest in the property dealings. If it is needed, this conclusion provides another reason for rejecting the treatment of the profits in the Lamtala/Kandy Family Trust accounts.

230 Whether there was some sort of joint venture is more doubtful. The apparent provision of some early funds by Resco, and their recording argues in favour of the conclusion that it, or Mr Kandy, may have had some interest in what was occurring. So does the fact that the funds would not seem to have been a normal loan. The absence of repayment may argue in the same direction but, given the conclusion at which I have arrived that the profits did not all belong the Kandy group, a fact Mr Kandy must have known, the question arises when he decided to misappropriate some or all of them. Both the actual and potential availability of those funds must have been very attractive to Mr Kandy.

231 The fact that Mr Kandy was left in control of the moneys argues also for him having some interest in them although once the conclusion be reached that Mr Laurent had a substantial interest in them, that fact becomes of much less weight. Clearly he must have had a great deal of trust in Mr Kandy.

232 I have so far sought to approach the matter without reliance on anything Mr Laurent has said which is not substantially corroborated. The reason lies in the fact that there remain a significant number of features of Mr Laurent’s claim which are unusual and unexplained and he was a very unsatisfactory witness. Included in the matters unexplained are the apparent payments of interest to those who seem to have received the proceeds of the Wilga Street property, the apparent provision of funds by Resco, and the apparent absence of any other funds to pay for properties additional to those from the ANZ Bank and Esanda. As I have said, I do not believe that those institutions would have provided the whole purchase money at least in the case of the early properties.

233 It may be that there is some explanation. There must have been something to induce those institutions to advance millions of dollars.

234 At times Mr Laurent was evasive to an extent I do not feel able to attribute to his mental condition or what I think is understandable antipathy to the Law Society. An example is provided in my quotation from his evidence under the heading “Absence of Records”. His absence of records is unusual and, even if it be correct that this arose because in some spiteful action Ms Lamont removed them all, the timing of that provides no explanation why they were not produced in 1993 when they were requested by the Law Society. His placing of money with Mr Kandy without obtaining proper receipts – and that is the clear inference which arises quite independently of Mr Laurent’s own absence of records – is unusual and although it may be not uncommon among some members of the community, they can hardly complain when others are sceptical. Nor do I regard such actions as sufficiently explained by the trust Mr Laurent says he had. No matter how trusting one may be, the failure of the person trusted to accord with normal practice is calculated to raise at least some queries.

235 At the end of the day, the only evidence that Mr Kandy had any interest in the venture which I regard of substance is Resco’s provision of funds and the extent to which Mr Laurent left them with Mr Kandy without any effective control, or it would seem record. On the other side is the fact that the property dealing was done by Laurent and Ormtrend, which he and his mother wholly owned. While his record keeping can certainly be much criticised, if one puts aside the late records I regard as of no weight, Mr Kandy’s records of any interest in the venture are much less. Despite my grave reservations concerning Mr Laurent, the conclusion at which I arrive is that Mr Kandy had no interest in the property trading activities.

236 In that situation, once one has regard to the conveyancing transactions which led to the Ormtrend’s profits and other funds coming into Mr Kandy’s possession, and to his settlement letters, prima facie the funds “were received by or entrusted to the solicitor in the course of the solicitor’s practice”. And apart from matters with which I have dealt, and I do not regard them as sufficient, there is no persuasive evidence that the character of Mr Kandy’s possession of the funds ever changed.

237 Thus in the case of the moneys the subject of the claims by Ormtrend, Fabrama and Affiliated Equities, and subject to one matter, I regard the ingredients of a successful claim against the fund, listed by me in paragraph 20 above, as made out. The reservation in the last sentence is that the issue of whether there was the relevant act or omission by Mr Kandy was dishonest is not for me. I accordingly make no finding about it.

238 Before I leave the topic of the company claims I should refer to a 25 page commentary on the Evidence made on behalf of the Law Society. In that document it was submitted (paragraph14) that schedule A to Mr May’s affidavit casts doubt on Mr Laurent’s portrayal of Ormtrend’s activities. I do not accept this submission. It may be accepted that only in relation to a minority of sales were monies paid to the ANZ Bank or Esanda but without more evidence than is before me, I am not prepared to infer anything from that. For similar reasons, I do not see that the fact that all of the proceeds of some sales were paid to those organisations leads to any inference adverse to Mr Laurent. The proceeds of some of the sales seem, as Mr Laurent asserted, to have been used to fund other acquisitions and before the inferences suggested could be drawn, one would need to know more as to the arrangements with, and other security held at any particular time by, ANZ or Esanda.

239 Nor do I see in Ormtrend’s failure to make claims for the moneys which in the schedule were recorded as paid or payable to Ormtrend that any inference to Mr Laurent should be drawn. On the basis of the claim as made, viz. that the moneys were in fact retained by Mr Kandy and supposed to be invested by him, such further claims would be duplications. It is also apparent that at the time the claims were first made there was significant disorganisation and some time pressures in Mr Laurent’s camp.

240 I return to the claim for the proceeds of the first 2 Bondi properties. There is no persuasive evidence that after Mr Kandy’s receipt of those moneys the character of his possession of them, or his authority to deal with them, changed. There is no evidence or indeed suggestion going beyond what might have occurred, that they were held other than on Mr Laurent’s behalf. Again, despite my reservations concerning his credibility, I think the probabilities are that they were left with Mr Kandy for investment on mortgage or deposit.

241 Ms Sayer’s stated that no moneys remain due by Mr Bate. It must follow from this that if the payments to Bate were by way of loan, they had been repaid to Mr Kandy. Had they remained in the trust account or lent to another borrower, no doubt Ms Sayer would have said so. Had they been relent as a normal transaction, there is no obvious reason why it would not have been documented. The same may be said of any repayment to Mr Laurent. Ms Sayer makes no such suggestion and in these circumstances I think the proper conclusion is that no repayment has occurred. Accordingly, subject to any later credits there may be, I regard Mr Laurent as having satisfied the requirements of ss79A and 80 (other than dishonesty, which I do not deal with) in respect of these moneys.

242 I am not satisfied that Mr Laurent is entitled to succeed in his claim for $322,824.95. There is little evidence as to the circumstances of the payments the subject of this claim. What is known suggests they were odd. Some of the amounts are also peculiar.

243 I turn to the topic of the terms on which the moneys were left with Mr Kandy. While market interest rates at the time were such as to think that 15% was then attainable – Mr Laurent seems to have paid more to the 4 lenders who were repaid with the $200,000 – I am not persuaded that Mr Kandy promised such a return, as it were, no matter what. Mr Laurent’s references to “hope” argue in the same direction. I do not believe Mr Laurent who, I have no doubt, knew about the potential for rates to change, believed then that he was guaranteed 15%. In my view the terms on which the funds were left with Mr Kandy were that they were to be advanced on mortgage, or on fixed deposit at the best prevailing rates from time to time. One would clearly imply a qualification “so far as practicable” but otherwise, Mr Laurent was entitled to the best going rates.

244 Those findings involve the rejection of much of Mr Laurent’s detailed evidence as to instructions although acceptance of the broad tenor that the funds were to be invested in particular ways. On this topic, it may well be that Mr Laurent, perhaps due to his illness has convinced himself. Be that as it may, I make it clear that this is some of the evidence that contributed to my reservations concerning Mr Laurent’s credibility.

245 I am also disposed to accept that the initial arrangement was that the money would be invested until (subject to practicalities) Mr Laurent turned 40. The tenor of later conversations was that it would continue to be invested until demanded, implicitly on reasonable notice.

246 There is also Mr Laurent’s evidence that Mr Kandy promised that the earnings would be tax free. I am inclined to accept this evidence. I appreciate this may seem odd in view of my rejection of a deal of what Mr Laurent has said but so firm was Mr Laurent on the topic and, so great must have been the temptation to Mr Kandy to have the funds that I am persuaded this was the original arrangement. I would not infer this applied to the company monies.

247 Consistently with what I said early in these Reasons the Law Society should have done, I should indicate at least some of the acts or omissions which led to the failure “to account, pay, or deliver” as required by the legislative provisions. In the case of the claim for the proceeds of the first 2 Bondi properties, it included the failure to invest the monies at interest with private borrowers or on deposit or to do the same when Mr Bate repaid it, as he must have done, actually or by some set off, to achieve an indebtedness to Mr Kandy of nil. One would infer that the acts or omissions included Mr Kandy appropriating the money to himself. The instructions I have found would not entitle Mr Kandy to borrow the money for himself or his companies – see Law Society of New South Wales v Harvey (1976) 2 NSWLR 154

248 In the case of the company moneys, the acts or omissions include the payment or other appropriation of the moneys to or for the benefit of Lamtala and failure to invest it, and to continue to invest it, in accordance with instructions.

249 I have referred in these Reasons to evidence largely from Ms Sayer to the effect that one or more of the Plaintiffs should give credit for payments received after the transactions which led to the claims occurred. I am not conscious of any dispute concerning those payments but because I do not intend to make final orders at the time of delivery of these Reasons, I shall postpone expressing any conclusion as to these amounts.

Res Judicata

250 In an early part of these Reasons, circa [37] I expressed the view that the terms of the Legal Profession Act did not make a finding of dishonesty a prerequisite to an appeal to this Court. However there is a factor present in this case which may take it out of the normal rule. One of the bases upon which Adams J was asked to act was that there had been no prior finding or honesty or dishonesty. It was submitted that there was therefore no valid determination. Adams J records that counsel for the Law Society conceded that such a finding was required and “to that extent the appeal was appropriately brought”.

251 Before Adams J, counsel for the Plaintiffs sought also to agitate the merits of the issues “of entrustment, whether it was in the course of Mr Kandy’s practice as a solicitor and whether there was a failure to account, in the sense not involving the characterisation of any relevant act or omission as honest or dishonest”. Adams J refused this on the ground that “the only decision which may be appealed to this Court by a claimant is one in respect of which there has been a finding of, or conviction involving, dishonesty”.

252 The question arises whether, because of either of these matters, the issue of the necessity of a finding of dishonesty is foreclosed between the Plaintiffs and the Law Society upon the ground of Res Judicata or issue estoppel.

253 The point was not argued and accordingly I do not believe I should decide it without giving the parties an opportunity of putting such submissions as they wish before me. In that regard the references in Spencer-Bower, Turner and Handley, Res Judicata, 3rd ed., para 182-4 may repay study.

254 That issue does not however necessarily prevent the making of any order. Adams J made one setting aside the earlier decisions and remitting the Plaintiffs’ claims for determination in accordance with the Act. Bell J in Barber v Law Society of New South Wales (unreported, 12 December 2000) held that orders could be made pursuant to the Court’s general power of judicial review.

255 I have held that the Law Society erred in failing to give reasons for its decision (and possibly in its determination or expression of it) and denied the Plaintiffs natural justice. Subject to anything that may be put to me in response to the invitation contained in the immediately preceding paragraph, it seems to me that the proper orders are:

1. Order that the determinations of the Defendant made on 25 January 2001 in respect of the Plaintiffs’ claims118/480 and 67, 110,111, and 112/408 upon the Fidelity Fund under the Legal Profession Act, be set aside.

2. Order that the said claims be remitted to the Defendant to be investigated and determined in accordance with the Legal Profession Act and in accordance with these Reasons.

256 However, I will afford the parties an opportunity of making any further submissions as to the form or extent of relief when they have had an opportunity of considering what I have said. The matter should stand over for a period so this can occur.

Last Modified: 08/16/2002

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Citations

Laurent v Law Society of NSW [2002] NSWSC 655

Most Recent Citation

Wang v Council of the Law Society of New South Wales [2009] NSWSC 67

Cases Citing This Decision

1

Wang v Council of the Law Society of New South Wales [2009] NSWSC 67

Cases Cited

6

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Keet v Ward [2011] WASCA 139

Barber v The Law Society of New South Wales [2000] NSWSC 1164

CITATION:	LAURENT v LAW SOCIETY OF NSW [2002] NSWSC 655 revised - 31/07/2002
FILE NUMBER(S):	SC 10513/01
HEARING DATE(S):	23.8.01; 31.8.01; 3.9.01; 4.9.01
JUDGMENT DATE:	26 July 2002
PARTIES :	Plaintiff: Daniel Laurent Defendant: The Law Society of NSW
JUDGMENT OF:	Hulme J at 1

COUNSEL :	Plaintiff: M Slattery QC Defendant: S Epstein SC
SOLICITORS:	Plaintiff: Maurice May & Co Defendant: AS Brown
DECISION:	Principle issues resolved; Adjourned for further argument.

Amev-UDC	1,754.52
ANZ	11,935.98
Bate	16,450.00
Hattersley Maxwell	17,188.66
Kandy	90,000.00
$137,329.16

Amount due to us herein	$34,796.82
Amount due to you herein	$246,580.85
Amount due to you herein and previously paid	$702,845.76
Amount due to you herein and invested at call as requested	$486,488.08