Law Society of NSW v Koffel (No 2)

[2010] NSWADT 263

CITATION:	Law Society of NSW v Koffel (No 2) [2010] NSWADT 263
DIVISION:	General Division
PARTIES:	APPLICANT The Council of the Law Society of New South Wales RESPONDENT Ross Carl Koffel
FILE NUMBER:	092013
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	20 August 2010
DATE OF DECISION:	5 November 2010
BEFORE:	Patten D - Deputy President; Molloy G - Judicial Member; Bubniuk L - Non-Judicial Member
CATCHWORDS:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Legal Professional Act 1987 Legal Profession Act 2004
CASES CITED:	Building Professionals Board v. Ball (No 2) (GD) [2009] NSWADTAP 8 Cripps v. G & M Dawson Pty Limited [2006] NSWCA 81 Gizah Pty Limited v. AXA Trustees Limited (No 2) [2001] NSWADT 164 Law Society v.Gillroy [2010] NSWADT 232 Law Society v. Jayawardena [2008] NSWADT 187 Law Society of NSW v. Koffel [2010] NSWADT 149 Law Society v. Martin [2008] NSWADT 305 NSW Bar Association v. Osei [2009] NSWADT 196 NSW Bar Association v. Tedeschi (No 3) [2003] NSWADT 74 Randi Wiks Pty Limited v. Pokana Pty Limited (RLD) [2003] NSWADTAP 27 Wood & Anor v. Bergman (No 2) [2003] NSWADT 175
REPRESENTATION:	APPLICANT C A Webster instructed by L Pierotti RESPONDENT In person
ORDERS:	1.The Application by the Respondent for an order that the Applicant pay his costs; alternatively that his costs be paid from the Public Purpose Fund, is dismissed 2.No order for costs in relation to the proceedings generally; and no order for costs in relation to the application for costs.

REASONS FOR DECISION

Background

1 On 15 June 2010 the Tribunal dismissed an Application by the Law Society which asserted that the Respondent solicitor was guilty of professional misconduct in that his conduct was “unethical” in failure to pay the superannuation entitlements of his employee (see - Law Society of NSW v. Koffel [2010] NSWADT 149).

2 A supplementary order relating to costs was made by the Tribunal as follows:

“Should either party seek to move the Tribunal for an order for costs, that party must file and serve any such Application, with supporting submissions within twenty-eight (28) days of the date of this Decision. Should no such Application be so filed and served, the order of the Tribunal will be that there will be no order for costs. Should there be such an Application so filed and served the opposing party must file and serve submissions in reply within a further twenty-eight (28) days. Unless reasons are advanced for a hearing to be conducted, the issue of costs will be resolved “on the papers” pursuant to Administrative Decisions Tribunal Act s.76”.

3 The Respondent has applied to the Tribunal for an order that the Law Society pay his costs “in a nominated amount or as assessed”. The Law Society opposes the making of that order.

The 15 June 2010 Decision

4 The Tribunal dismissed the proceedings for the reasons set out in the 13 June 2010 Decision. There is no need for us to repeat the Decision – suffice it to say that its terms are incorporated in this Decision. However, there are a number of important facts/findings that can be derived from the decision, and these are as follows:

a) At [30-33] the Tribunal observed that the matter came to the attention of the Law Society by way of a complaint made by a former employee to the effect that the solicitor had failed to pay that employee’s superannuation entitlements for the last 12 months of his employ, notwithstanding the fact that the solicitor had told his employee that the employee’s superannuation payments would be brought up to date in the short term. This did not take place; and the Tribunal observed that meant that “the solicitor was aware that superannuation payments/obligations were outstanding” as at July 2006.

b) The Law Society properly engaged an investigator; the solicitor was interviewed on 7 November 2006 and “readily conceded that the superannuation was not up to date but that he was “in the process of getting them up to date””. He “conceded that there was superannuation owing to other employees (as well) but, again, “we are trying to get them up to date”.” In addition there were PAYG payments in arrears; and the total outstanding superannuation guarantee payments were in the order of $123,998.97.

c) The solicitor, originally practicing as a sole practitioner, incorporated a service company (“RKS”) and later a solicitor corporation (“Koffels”). The superannuation guarantee debts were incurred against those entities, RKS having been placed into voluntary administration on 10 May 2006 (at which time the arrears of superannuation entitlements were in the order of $22,272.86); prior to 10 May 2006 the superannuation entitlements had been transferred to Koffels which itself, on 27 July 2007, was also placed into administration.

d) The total amount outstanding regarding unpaid employees superannuation contributions, and relating to 33 employees, and for the period July 2005 – July 2007, was $123.998.97.

5 In short compass the solicitor got himself into this pickle because he acted for a developer who “required continuing legal assistance, including in obtaining and restructuring finance, in order to pursue … acquisitions and developments …”; and the solicitor’s appreciation was that there was a chance that the developer would come good such that fees unpaid to the solicitor, in about $2.6m, would be paid. The financial failure of the developer in mid-2006, owing creditors “in excess of $20m”, imposed more than considerable financial stress on the solicitor’s practice; RKS was placed into administration on 10 May 2006 and entered into a Deed relating to the payment of its creditors, which obligation was personally guaranteed by the solicitor; and Koffels also entered into a similar Deed on 29 August 2007 and, again, the solicitor gave personal guarantee in relation to its debts. Those debts included the outstanding superannuation guarantee payments.

6 At [26] the Tribunal observed that the outstanding superannuation payments “were moneys that were owed to employees and were not paid in a timely manner”. The solicitor, as the principal solicitor, made fiscal decisions that risked the practice’s staff receipt of the superannuation funds. At [28] the Tribunal noted that the “solicitor in his evidence stated that as to both RKS and Koffels “it has never been my intention that either of those entities should avoid any of their legal debts or obligations to the employees or to any third party. I have sought, through the provision of personal guarantees, to ensure that the obligations of those entitle to all creditors are met in full as soon as realistically possible”. The Tribunal noted that it accepted that statement from the solicitor and noted also (at [27]) that it seemed that the solicitor “has, at the date of hearing, paid almost, or all, of the outstanding superannuation liabilities”.

7 The Tribunal then reviewed in detail the case law, distinguished a number of leading cases in this particular field, noted the ready acceptance of the solicitor that he personally “had a responsibility to make sure that all the superannuation payments due from (RKS and Koffels) were in fact paid to the various employees”; also noted that the various cases supported the proposition that “an inexcusable pattern of illegal conduct in complete defiance of specific responsibility” would result in a finding of professional misconduct but, in the case of this solicitor, he made a real and genuine effort to make the payments, and in fact did make the payments such that at [55] “on the evidence the practitioner has done all the he believed he reasonably could to ultimately discharge his statutory obligations to pay the superannuation guarantee levies in respect of his employees. This is so notwithstanding the fact that his employees were employed by two proprietary corporations – the practitioner himself personally assumed those obligations in the two Deeds of Company Arrangements … and has discharged those personal obligations. Indeed in the circumstances before us, this practitioner has demonstrated that he is a fit and proper person to remain on the Roll of legal practitioners”.

The Law

8 The making of costs orders in this Division as between legal practitioners, their respective professional bodies and the Legal Services Commissioner is governed by the precise provisions of Legal Profession Act 2004. The relevant section is s.566. The relevant sub-section, which deals exclusively with applications by legal practitioners that their costs be paid out of the Public Purpose Fund, is sub-section (3) which is in the following terms:

“(3) The Tribunal may make orders requiring payment of an Australian legal practitioner’s costs from the Public Purpose Fund, but may do so only if satisfied that the practitioner did not engage in unsatisfactory professional conduct or professional misconduct and the Tribunal considers that special circumstances warrant the making of the orders. The Tribunal is to have regard to the length and complexity of the proceedings when making a determination under this subsection”. (our italics).

9 Thus it can be seen firstly, that an application that the Law Society pay the solicitor’s costs is incorrect in its terms; rather, it should be framed in or to the effect that the Tribunal should make an order requiring payment of the practitioner’s costs from the Public Purpose Fund. We have regarded this application as framed in that fashion. Secondly, the power given to the Tribunal is severely limited by the terms of the subsection and by the use of the word “only”. Thirdly, the Tribunal needs to be satisfied that the practitioner did not engage in unsatisfactory professional conduct or professional misconduct. Fourthly, and importantly, the Tribunal must find “special circumstances”, and, in addition, must find that those special circumstances “warrant” the making of such an order. There are thus a number of quite significant hurdles that need to be overcome by a practitioner seeking a costs order.

10 It is important to make the point that the concept of “fairness” and Administrative Decisions Tribunal Act 1997 (the “ADT Act”) s.88, do not apply, neither do the provisions of the Legal Profession Act 1987, s.171E. There is a detailed discussion of these various matters in NSW Bar Association v. Osei [2009] NSWADT 196 which decision also reviewed the constitution of and purposes of the Public Purpose Fund.

11 However, what is relevant is the “old” s.88 ADT Act. This section provided that:

“Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs”. (our italics).

12 There is no need to review the detailed body of law that developed relating to this section. Suffice it to say that the award of costs under this (now repealed) section involved a two step approach: firstly, a finding of “special circumstances”, and then a finding that those special circumstances “warranted” an award of costs. Reference can be made to Gizah Pty Limited v. AXA Trustees Limited (No 2) [2001] NSWADT 164 [and numerous decisions thereafter including, in particular, Randi Wiks Pty Limited v. Pokana Pty Limited (RLD) [2003] NSWADTAP 27, and Wood & Anor v. Bergman (No 2) [2003] NSWADT 175.

13 The important point is that “special circumstances” has been defined as “circumstances that are out of the ordinary, but without having to be extraordinary or exceptional” (Gizah at [29]) and this definition was adopted by the Court of Appeal in Cripps v. G & M Dawson Pty Limited [2006] NSWCA 81 at [60] where it was held by Santow JA (Mason P and Brownie A JJ agreeing):

“For this purpose, it suffices the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional. While a finding of “serious unfairness” is not a pre-requisite to determining that there are special circumstances, it is nevertheless a highly relevant consideration.”

14 And, as the Tribunal in Osei pointed out at [53]: “The categories of “special circumstances” are not closed and, in particular, are not limited to those identified in the case law or in the Tribunal’s Practice Note on costs” (referring to Practice Note 12, October 2006).

15 So, in the case before us, the Tribunal:

a) Has discretion whether or not to make orders for costs.

b) Can so do only if satisfied that the practitioner did not engage in unsatisfactory professional conduct or professional misconduct.

c) Has to identify any of “special circumstances”.

d) If there are any “special circumstances”, whether they warrant the making of a costs order.

16 Because the words “special circumstances” have been used, in relation to the awarding of costs, in LP Act 1987, LP Act 2004, and ADT Act 1977, there does not seem to be any particular reason why those words should not be given the meaning given to them in Gizah and Cripps. It is true that the Tribunal in NSW Bar Association v. Tedeschi (No 3) [2003] NSWADT 174 considered at [43] ff the meaning of the words “special circumstances”, and concluded at [46] that “there must be something which distinguishes the case from other cases where a legal practitioner has been found not guilty. There must be something that sets the case apart from the usual or ordinary case where a practitioner has been found not guilty … however, the Tribunal is also of the view that the distinguishing feature does not have to be exceptional … All that is required is that the distinguishing circumstances must be of such significance, and thus special, that the Tribunal considers that they warrant an order being made for payment from the Public Purpose Fund to the practitioner of the practitioner’s costs. It is not necessary that each circumstance be special if a combination of circumstances amounts to special circumstances”.

17 We are unable to see any significant difference from that appreciation from the appreciation of the Court of Appeal in Cripps. Indeed, this appears to be the view of the Appeal Panel in Building Professionals Board v. Ball (No 2) (GD) [2009] NSWADTAP 8 where, in relation to a matter in the General Division of this Tribunal, where the Board sought “a disciplinary finding and consequent orders against the Respondent … who is an accredited certifier”, the Appeal Panel did not differentiate between the General Division and the Retail Leases Division in interpreting the words “special circumstances”, such that, so it seems to us, the words are now sufficiently defined in the case law as “circumstances that are out of the ordinary, but without having to be extraordinary or exceptional” – see Building Professionals Board v. Ball at [56 ff].

Special Circumstances

18 It is plain that the Tribunal was satisfied that the Respondent practitioner did not engage in unsatisfactory professional conduct or professional misconduct. The next step is to identify any “special circumstances” and then, if so identified, whether they warrant the making of a costs order in his favour.

19 The Respondent made two primary submissions as to what, in his submission, amounted to special circumstances. It is convenient to deal with the second submission first, simply because it is easier to dispose of. This submission was in or to the effect that the proceedings in the Tribunal brought against him perpetuated his inability to pay his debts as promptly as possible. It was submitted that “the institution of (the) complaint (and, presumably the proceedings) diverted substantial managerial and staff resources from the conduct of the (legal) practice that could have been used to generate income to pay the outstanding debts of the practice (which included staff superannuation entitlements) …” and that additionally the Respondent “has incurred direct costs in defending the complaint (and that) such sums could have been used to further pay his debts (including superannuation entitlements) (and the) complaint by the Law Society perpetuated the delay in settling the outstanding debts of the practice”. It was submitted that there was a “special circumstance” that distinguishes the present case from any other.

20 We reject that submission. Rather than distinguishing the case it identifies the case as being quite ordinary and common. Every practitioner the subject of a complaint, or ultimate proceedings, is a practitioner who certainly has to “divert substantial managerial and staff resources” and quite often incurs direct costs in defending the complaint such that the combination often reduces the income which would otherwise be derived to the legal practice.

21 The more persuasive submission was along the following lines:

a) Although the Law Society was under a duty to investigate a complaint and has “an obligation to pursue complaints … to protect the consumer and other practitioners” this obligation comes with “a correlative duty to cautiously assess its position as the investigation unfolds, especially given the high burden of proof it must discharge before the Tribunal, (and to) inappropriately pursue a complaint when the high standard of proof cannot be met, is to fail in its obligations and exposes a practitioner to unwarranted costs, stress, worry and shame”.

b) By 4 May 2007, at latest, the practitioner’s lawyers “set out the explanation for the practitioner’s conduct and challenged the Law Society’s characterisation of the complaint … (such that) the Law Society has an obligation to assess its position … (and subsequently) found no material to contradict the practitioner’s response to the complaint … (he having asserted) that he has a reasonable and innocent explanation for his conduct that did not affect his fitness to practise as a legal practitioner …”.

c) The Law Society “was aware that there was no evidence by which it could be established that the conduct of the Respondent was wilful or fraudulent or that it could rationally affect his fitness to practise … (such that) the Law Society was put on notice as to the facts, matters and circumstances that distinguished (the practitioner’s conduct from the various cases upon which the Law Society relied)”.

d) The findings of the Tribunal at [17], [42], [48] and [55] made it “abundantly clear” that the Respondent’s conduct, as always asserted by him, “was in a category wholly different from the conduct of the practitioner’s described in those cases”. Yet the Society “proceeded with the complaint before (the) Tribunal in defiance of fair warning by the practitioner and (his lawyers) that the complaint was misconceived due to a fundamental error in categorising the nature of (his) conduct …”.

e) By the Society “prosecuting the complaint in the manner that it did, it sought to have defined a professional responsibility that was unsupported by the authorities upon which it relied and which was contrary to commonsense. If a practitioner is met with a major interruption to cash flow, or some other business interruption such as a partnership dispute, loss of client’s files or some other calamity, does the Society expect that he or she will take responsible rational steps to meet his or her obligations to all creditors? If the answer to that question is “yes” then on the facts found in this case, the prosecution should never have been instituted”.

22 In support of these submissions the practitioner relied on a considerable body of correspondence commencing 1 November 2006 and concluding 30 June 2008. There is no need for this Tribunal to deal with each of those pieces of correspondence in detail. Suffice it to say that it commenced with the initial letter from the Law Society to the practitioner 1 November 2006, to which was annexed the complaint of his former employee to the Society 10 October 2006 complaining that the practitioner had “failed to pay my superannuation entitlements for the last 12 months of my employment … (and) has failed to pay superannuation entitlements of several other professional staff within the firm”. To that letter, in turn, there were annexed a number of e-mail transmissions between the former employee and the Respondent, the most relevant being that of 6 October 2006 where the Respondent states:

“We are attempting to get all our super commitments up to date by mid-November. We are doing our best and it will include any missed interest that would have been earned through late payment of the contribution”.

23 The next relevant letter is 13 November 2006 where the Respondent wrote to the Law Society noting that his firm (more correctly Koffels) had “suffered an enormous loss when our major client collapsed and as a result has not paid all our superannuation requirements”. He then referred to the employment of “an external firm of accountants”, possible liaison with the Australian Tax Office and then expressed the view that he was “hopeful” that (the former employee’s) superannuation will be paid this month when we obtain re-finance”.

24 The most important letter is that of 4 May 2007 from the Respondent’s lawyers. This letter referred to the difficulties with the major property developer client, difficulties to which we refer to in our decision. It noted that the Respondent was “rebuilding his practice and has gone into the market place and sought new clients, ventured into new and developing areas of law such as employment law, and cold canvassing for clients”. He had “cut his overheads, replaced some higher paid more junior staff with more experienced lower paid mature practitioners”; he was engaging with the ATO as to his obligations to meet all forms of taxation of his practice; and had entered into an arrangement with the ATO relating to RKS; was “refinancing a loan on a commercial strata property”; and he believed he had “turned the corner … and … will be in a position to pay off the superannuation debt within 6 months”; and that it was his “intention to pay the superannuation out of the surplus on the refinance, however this surplus must be paid to the ATO for tax for the practice”; that “he will be able to meet his continuing obligations to pay the superannuation levies as and when they occur from this point onwards … (and) he is not meeting his current tax obligations”; that he “has held a practising certificate since 1991 and has an unblemished record”; and that the matter should not be referred to the Tribunal because “it is evident that (he) has found himself in this position not because of any intention to avoid or ignore his responsibilities. His conduct ought to be regarded as honourable in that, faced with this enormous financial burden, he has been open and frank with the ATO and has worked very hard to turn his practice around so that it will become profitable again and all his obligations can be met in full”.

25 The letter went on to deal with various decided cases and submitted that the “legal practitioners involved in those cases had one thing in common and that was they ignored their civil and legal responsibilities to pay their income tax while taking full advantages of the full range of public services made available through the taxation system. They ignored action by the ATO for recovery of unpaid tax. Those legal practitioners engaged in a systematic and intentional regime to not comply with their revenue responsibilities; that is not the case with (the) Respondent”. Furthermore, it was submitted that his conduct “should be distinguished from that of Mr Bouzanis (a reference to one of the cases in our decision) (such that his case) is not applicable in these circumstances. Unlike our client, Mr Bouzanis failed to carry out his fiscal responsibilities in that not only did he fail to meet payments of superannuation but the Deputy Commissioner of Taxation had served a Creditors Petition for unpaid taxes in the sum of approximately $260,000.00 (whereas the Respondent) is meeting his responsibilities to the revenue … (and) Mr Bouzanis did not do so”. Consequently, and “based on the fact that (the Respondent) is meeting his financial obligations his peers would have a high regard for him and consider him to be acting most honourably”. Therefore, it was submitted, that disciplinary action “is not warranted; but, if taken will have the reverse effect on (the Respondent) meeting his obligations in the sense that costs will be incurred and time will have to be expended in meeting the demands of the litigation, thereby taking him away from his goals to meet his obligations”.

26 The next important letter is that of 19 March 2008 where the Respondent’s lawyer went to some trouble to set out the relevant details relating to RKS and Koffels. They made further detailed submissions relating to the various cases (to which we made reference in our decision), repeated much of the submissions made previously, and observed “that disciplinary proceedings are not in the nature of a punishment. They are intended to be a deterrent. Conducting this case in the Tribunal would .. signal the wrong message to the profession; that message would be that if a practitioner encounters difficulties in meeting his legal and civic obligations brought about by a large amount of costs not being paid by a client, then the practitioner ought not even try to remedy the situation because he (would) face disciplinary proceedings”.

27 The final relevant letter is that of 30 June 2008 which, again, sets out in detail the financial position, up-dates it (in the manner that we describe in our decision) and submitted that in all the circumstances the need to protect the public by the commencement of Tribunal proceedings was not, in all the circumstances, warranted when the practitioner was “doing everything that he can to meet his financial obligations” and in circumstances “where the prospects of his succeeding in paying all amounts due and owing for the superannuation guarantee are on track and are likely to be paid in full”.

Submissions by the Law Society

28 Under this heading we propose only to deal with the last-mentioned submission of the Respondent, not the earlier submission that we have dismissed above at [19-20].

29 The Law Society submitted that the Respondent’s categorisation of the complaint against him as being conduct that “was to defraud the revenue or to wilfully ignore his statutory responsibilities …” was not a correct categorisation. The Society referred to the various cases to which we made reference in our decision and submitted that in those decisions the respective failures to make superannuation guarantee payments was “a sufficiently serious abrogation of fiscal responsibilities in the practice of law to warrant a finding … that the solicitor is guilty of professional misconduct”. But, it was “never the Society’s case that the Respondent’s practising certificate was in any peril by reason of the complaint made against him. Rather, the contention was that, on the authorities … the conduct amounted to professional misconduct”. The fact that there was “a lack of financial resources to permit the solicitor to discharge in full his obligations to pay his employee’s superannuation entitlements” was a factor relevant in at least one of the decisions and the Professional Conduct Committee concluded that there was no relevant distinction between the present case and that of Bouzanis and Vosnakis. The Tribunal, reached a contrary view (at [48]), concluding that the Respondent “did in fact recognise his professional, corporate and moral obligations and admit those obligations. Thus, in our opinion, the mere fact of a failure to pay superannuation guarantee contributions on time does not, of itself, constitute professional misconduct. It is the circumstances surrounding the failure, the consequences of the failure and the actions subsequently taken by the solicitor, that determine whether the conduct constitutes professional misconduct”. The Society submitted “that bearing in mind the (various) decisions … its institution of these proceedings (against the Respondent) is not such as to warrant an order for costs in favour of the Respondent.

Discussion

30 Prima facie, there is a great deal to be said for the submissions made on behalf of the Respondent. In substance, what he is saying is that “I told you that the decisions upon which the Society relied were not relevant to my position, simply because I did as much as I could reasonably do to discharge my statutory obligations to pay the superannuation guarantee levies, notwithstanding that my employees were in fact employed by two proprietary corporations, and I personally assumed those obligations in the two Deeds of Company Arrangements and I have discharged those obligations; thus, there was never any professional misconduct; and I told you all of this before you (the Society) commenced proceedings, and you should have continually re-assessed the position and formed the view that there was no professional misconduct”. That sort of submission framed (as we have so done) in a colloquial fashion, is consistent with the principles set out by this Tribunal in Law Society v. Martin [2008] NSWADT 305, at [75-77] (where proceedings were wrongly brought against the legal practitioner asserting a breach of an undertaking when the undertaking was not in fact an undertaking to the client) and in Law Society v. Jayawardena [2008] NSWADT 187, in particular at [67-68] where a number of quite serious complaints were made against the practitioner in circumstances where a rigorous analysis of the evidence would have disclosed that the complaints had no substance.

31 However, these are not the issues here. There are a number of factors that the Tribunal thinks should be taken into account. The first is LP Act 2004 s.537. That creates an obligation on the Commissioner for Legal Services and the relevant professional Council to, firstly, investigate a complaint made against a Legal Practitioner; secondly, to either commence proceedings in this Tribunal, or dismiss the complaint, or to deal with the matter in a summary way by caution, reprimand, compensation order or imposition of conditions. But, if the summary way option is not followed, the Commissioner or the Council “must commence proceedings in the Tribunal with respect to a complaint against an Australian legal practitioner if satisfied that there is reasonable likelihood that the practitioner will be found by the Tribunal to have engaged in unsatisfactory professional conduct or professional misconduct” (our italics).

32 Looking at those words of s.537, there is clearly a statutory obligation to commence proceedings where the Commissioner or the relevant professional Council is “satisfied that there is a reasonable likelihood”; and it is plain to us, on the authorities, that there was such a “reasonable likelihood” of the Tribunal finding that the Respondent had engaged in unsatisfactory professional conduct or professional misconduct by his failure to make superannuation guarantee payments.

33 The Respondent was arguably guilty of professional misconduct, on the authorities, before he started working his way out of it. The fact that he accepted, unreservedly, his statutory/legal/moral obligations, and personally guaranteed the various corporate debts, and made the payments and discharged the statutory obligations, is to his credit; but it cannot be said that the Council, or the relevant Committee, could not have been reasonably satisfied within the terms of s.537(2). In other words, the case for the Law Society was clearly, and properly, arguable, based on the facts and the various authorities.

34 The final consideration we have borne in mind is the practitioner’s original turpitude. The issue, from the point of view of the Law Society, and also (more importantly) from the point of view of the Respondent, arose out of a complaint by a former employee “to the effect that the solicitor had failed to pay that employee’s (superannuation) entitlement … for about 12 months prior to July 2006” (ie as far back as about August 2005). As we observed at [31] of our decision, the Respondent “apparently told this employee in late July 2006 that his superannuation payments would be brought up to date in the short term, but this did not take place”. Then we observed that that meant that “the solicitor was aware that superannuation payments/obligations were outstanding”.

35 Putting this into the correct factual matrix, the solicitor incorporated a service company (RKS) which was supposed to have made the superannuation guarantee payments. RKS was placed into voluntary administration on 10 May 2006, at which time the outstanding superannuation entitlements were in the order of $22,272.86. The employment, and the employee liabilities and entitlements, were taken up by the solicitor corporation “Koffels”. Ultimately, when Koffels was placed into administration on 27 July 2007, the amount outstanding for employee superannuation guarantee payments, including those acquired from RKS, was $123,998.97, in relation to 33 employees, for the period July 2005 – July 2007. The solicitor was the sole director of Koffels.

36 In addition to the above facts it was plain (at [23]) that RKS had been operating in an overdraft position since 3 August 2005; its account was ultimately frozen by its bankers in the first half of 2006; and it was placed in administration on 10 May 2006. Koffels was placed in administration on 27 July 2007.

37 Taking into account all those facts, it was plain to us that the Respondent, as the sole practitioner in the legal firm and as the sole director of RKS and Koffels, was the person who should have known about the failure of those corporations to make employee superannuation guarantee payments. The Respondent did not argue that he should not have kept a firm grip on the financial situation, but rather he argued that he was relying on a particular developer client to get himself, and the corporations, out of the financial mess, and this developer client “let the side down” by ultimately becoming insolvent and owing something in the order of $20m, including $2.6m owing to the Respondent.

38 But the plain fact of the matter is that prior to the insolvency administration of RKS there was a failure, and a considerable failure, by RKS and the Respondent to make the superannuation guarantee payments, and that position was, or should have been, known to the Respondent , and it continued, and increased in quantum, during the life of Koffels.

39 Consequently, not only was there this turpitude to which we have reference, but also clear professional misconduct at those relevant times (on all the authorities relied upon by the Law Society and on the most recent decision of this Tribunal in Law Society v.Gillroy NSWADT 232). The exculpatory factor is that the Respondent actually paid the superannuation guarantee payment such that, perhaps to put it colloquially, he converted his initial professional misconduct into, ultimately, no professional misconduct.

40 Furthermore, in our view it is really not correct to assert that by the 4 May 2007 letter “the Respondent has established that he had a reasonable and innocent explanation for his conduct, that did not affect his fitness to practise as a legal practitioner” for two reasons: first, on the facts there was no reasonable and innocent explanation simply because, not only was there a huge superannuation guarantee payment default but also we note that Koffels was not placed into administration until 27 July 2007 and its Deed of Company Arrangement was not entered into until 29 August 2007 under which the Respondent gave his personal guarantee, both events taking place after 4 May 2007. The letter, at best, sets out the personal intent of the Respondent; and even as late as 30 June 2008 (the date of the third letter replied upon by the Respondent) the statutory obligations had not been met in full.

41 It was not suggested, although it might have been inferred, that the Law Society should have delayed commencing proceedings and waited until the Respondent’s expressed intents had been fulfilled. But this would have required, at the very least, a schedule of reasonable future payments and periodic certifications that the payments had been made. It is, we understand, easy to be wise after the event (having regard to the decision of this Tribunal) but, that having been said, in the case now before us such a proposal was not advanced or, if advanced, not advanced with any specificity.

42 It is the view of the Tribunal that, taking all things into consideration and reviewing all the material that was put before the Tribunal at the hearing and on this discrete issue of costs, that there are no special circumstances demonstrated by the Respondent. Thus, it is unnecessary for this Tribunal to determine whether there are any special circumstances that would warrant the making of a costs order and there is no need for this Tribunal to exercise the undoubted discretion in s.566(3).

43 In our opinion the application should be dismissed and there should be no order for costs in relation thereto the proceedings generally nor in relation to the proceedings relating to costs.

Orders

1. The Application by the Respondent for an order that the Applicant pay his costs; alternatively that his costs be paid from the Public Purpose Fund, is dismissed.

2. No order for costs in relation to the proceedings generally; and no order for costs in relation to the application for costs.