Legal Services Board v David Brian Forster
[2012] VSC 266
•3 July 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 3551 of 2012
| LEGAL SERVICES BOARD | Plaintiff |
| v | |
| DAVID BRIAN FORSTER | Defendant |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 and 26 June 2012 | |
DATE OF JUDGMENT: | 3 July 2012 | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 266 | |
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LEGAL PROFESSION – Receivers appointed to law practice – Defendant prohibited from participating in affairs of practice – Whether defendant has engaged or is proposing to engage in prohibited conduct – Risk of harm – Injunctions granted – Legal Profession Act 2004 ss 5.5.3(1), 7.2.13
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S R Senathirajah | Corrs Chambers Westgarth |
| For the Defendant | In person | Whistleblower Lawyers |
HER HONOUR:
On 26 June 2012, I granted injunctive relief against the defendant, Mr Forster. I indicated that I would publish my reasons for decision later; these are those reasons.
Mr Forster is a lawyer. Until 12 April 2010, he was the principal of a firm called Hollows Lawyers (“the law practice”). On 12 April 2010, Noel Batroney and Andrew Lyle were appointed as joint receivers of the property of the law practice, by order of Emerton J. The terms of the receivership have been extended on three subsequent occasions, and the law practice remains in receivership.
Whilst the law practice is in receivership, s 5.5.3(1) of the Legal Profession Act 2004 prohibits Mr Forster[1] from participating in its affairs. The prohibition on participating in the affairs of a law practice which is in receivership is one to be taken seriously: contravention of s 5.5.3(1) is a criminal offence.
[1]He is a “legal practitioner associate” of the law practice: ss 1.2.4(1)(a)(i),(2)(a) of the Act.
On 13 February 2012, the receivers issued Supreme Court proceeding SCI 2012 00732 against Mr Forster (“the recovery proceeding”). On 2 March 2012, they delivered an amended statement of claim, in which they seek, amongst other things, to recover about $7.2 million, allegedly taken by him from the law practice’s trust account.
On or about 18 June 2012, Mr Forster delivered his defence in the recovery proceeding. The defence is 239 pages long, and deals in detail with the receivers’ allegations in relation to dozens of individual clients. Mr Forster personally signed the defence, as well as the proper basis and overarching obligations certificates. Counsel’s name and signature do not appear anywhere on the defence or certificates.
The essence of Mr Forster’s pleading to many of the receivers’ allegations of overcharging is that, not only has he not overcharged the relevant client, he has in fact undercharged the client by a specified amount and/or in relation to a specified period. Had he left the pleading there, the current injunction application would not have been necessary.
However, in 44 separate places in the defence, Mr Forster went on to plead words to the following effect:
On 15 June 2012 the defendant rendered a bill to [client name] in the form of a lump sum bill in respect of his professional fees which were not included in the lump sum bill identified in paragraph […] of the [receivers’ claim], as well as for interest owing on disbursements.
Whilst the gist of those allegations is the same, they are not identical. Some of those paragraphs plead a specific amount, or refer to a specific billing period, which is said to have been the subject of a 15 June bill; others do not. They all refer to different paragraphs of the pleadings. That is to say, there has not simply been a “cut and paste” exercise of the same words; somebody has turned their mind to the precise pleading in respect of more than 40 different clients. The total amount said to have been demanded by Mr Forster in the 15 June bills was more than $3.3 million.
When the receivers learned of the contents of the defence, they were, quite understandably, very concerned that Mr Forster may have impermissibly participated in the affairs of the practice by sending out bills on or about 15 June. By solicitors’ letter dated 20 June 2012, the receivers demanded that Mr Forster produce by the following afternoon copies of all bills rendered on 15 June. A copy of the solicitors’ letter was also provided to the present plaintiff, the Legal Services Board.
Mr Forster failed to respond to the solicitors’ letter by the specified time. Accordingly, the receivers wrote to the last known address of each of the relevant clients, advising them to disregard any bills or invoices they might have received from Mr Forster.
Also on 21 June, the solicitors for the Legal Services Board wrote to Mr Forster, seeking certain undertakings from him in relation to the 15 June bills. The letter said that if the undertakings were not provided, the Board would apply the following morning for injunctive relief in the Practice Court.
Around 5 pm on the 21st, a solicitor acting on behalf of the Board spoke by telephone to Mr Forster, and informed him of the Board’s letter and proposed application. Mr Forster informed the solicitor that the 15 June bills had not been sent, that counsel should not have referred to the bills in the defence, and that it was a “mistake”. Mr Forster declined to provide the undertakings.
On 22 June 2012, the Board applied for injunctive relief against Mr Forster. Mr Forster appeared on his own behalf.
Mr Forster told the court that no bills had been rendered on 15 June, and the references to the rendering of bills were simply a mistake or error, which his counsel had made, and which he had failed to pick up. Despite my repeatedly asking him to explain how such a mistake might have been made in the first place, and in so many different parts of the defence, he was unable to provide any satisfactory explanation.
Mr Forster sought time to prepare affidavits for himself and two counsel, which he said would explain what had occurred. Accordingly, I adjourned the Board’s application until 26 June, to enable Mr Forster to prepare such affidavits. In the meantime, I granted limited injunctive relief, which essentially prevented Mr Forster from sending out any such bills, or taking steps in relation to any bills already sent, until 5 pm on the 26th.
Mr Forster did not file any affidavit by Mr Bravender-Coyle, the only counsel he had mentioned by name on the 22nd. In his affidavit of 25 June 2012, Mr Forster said that he would not be calling evidence from Mr Bravender-Coyle, as Mr Bravender-Coyle had advised him that if he was a witness in this proceeding, he would not be able to further represent Mr Forster. It is not clear to me that Mr Bravender-Coyle would in fact be prevented from acting in the recovery proceeding, but I accept that Mr Forster did not call evidence from counsel for that reason. Accordingly, I did not accede to the Board’s submission that I should draw a Jones v Dunkel[2] inference in relation to Mr Forster’s failure to call evidence from Mr Bravender-Coyle; there has been an explanation provided for the failure to call him.
[2](1959) 101 CLR 298.
However, having chosen not to call evidence from Mr Bravender-Coyle, it fell to Mr Forster alone to explain how the alleged mistake came to be made. In his affidavit, the only “explanation” for the pleading that bills had been rendered on 15 June was:
1. In error I did not delete from the finalized defence the repetitive paragraphs which had originally been inserted by Counsel which said “On 15 June 2012 the defendant rendered a bill to client X in the form of lump sum bills.” When time permits I will file an amended defence deleting these errors.
2. Prior to settling the final defence due to time pressure and my typing skills I mistakenly omitted to remove the above paragraphs (which had been removed in an earlier draft).
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7. … I never intended to produce bills on 15th June 2012.
Nowhere in his affidavit did Mr Forster explain how such allegations came to be included in the draft defence in the first place. Why would Mr Bravender-Coyle have drafted a defence that alleged that on 15 June 2012 Mr Forster had sent bills for quite specific and different amounts, to dozens of different clients, unless Mr Forster had instructed him either that he had done so, or was proposing to do so? It seems highly improbable that an experienced barrister would have drawn such a pleading, in so many different places, without any instructions in that regard. And, if somebody had, as Mr Forster asserted, removed the 44 paragraphs from an earlier draft, why did counsel apparently reinstate them?
Mr Forster tendered a bundle of different versions of emails which he said had passed between himself and counsel in relation to the pleading. Even accepting for present purposes that the emails were sent on the dates they purport to bear[3], they still do not explain why or how the relevant allegations came to be included by counsel in the first place.
[3]There are a number of curious features to the different versions of the emails, but it is not necessary to consider them further for present purposes.
I allowed Mr Forster to give further oral evidence on 26 June. He was also asked questions by me and by counsel for the Board. He strenuously denied that he had sent any bills since the appointment of the receivers, and said he had no intention of doing so. He denied telling Mr Bravender-Coyle that he had rendered, or was proposing to render the bills. But, despite repeated opportunities to do so, he was unable to satisfactorily explain how counsel might have come to draw the relevant allegations in the defence, unless he had given some instructions in that regard. He proffered several speculative explanations, which were illogical and implausible.
He asserted before me that he had no intention of sending bills to any client for any amount which he alleges remains unbilled, and that he is well aware that he is not allowed to do so. But that does not sit well with his evidence before Ross J, sitting in his capacity as President of the Victorian Civil and Administrative Tribunal, on 8 September 2011. After a series of non-responsive answers, Mr Forster finally conceded before Ross J that if the Board or the receivers did not use what he regarded as “common sense”, he did propose to serve a new bill on the particular client about whom he was being asked questions. He apparently showed no concern on that occasion that the receivership might inhibit him from doing such a thing.
Before me, Mr Forster was a very unsatisfactory witness. Frequently argumentative, non-responsive or evasive, he had to be asked repeatedly to answer straightforward questions. He was prone to making long-winded speeches about matters which may be of concern to him in terms of his relationship with the receivers and the Board, but were irrelevant to the injunction application.
Mr Forster also sought to characterise himself as just a busy, self-represented person, by way of justifying various things that he had or had not done. Whilst it is true that he does not have separate lawyers on the record, he has been a solicitor for some 35 years, and practising in litigation for about 20 years. As a practising litigation solicitor, Mr Forster should be well aware that the certification requirements of the Civil Procedure Act 2010 are not to be taken lightly. In the proper basis certificate, he certified amongst other things that each allegation in the defence had a proper basis. And he (not counsel) signed the pleading as the person who had drawn it.
Even accepting that Mr Forster is a busy practitioner, acting for himself, that does not absolve him from the responsibility to take appropriate care in signing pleadings and certificates, or to provide a proper explanation to the court if he has made an important mistake some 44 times.
The Board may apply for an injunction under s 7.2.13(1) of the Act if “a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute” a contravention or attempted contravention of the Act.
Under s 7.2.13(2), the court has power to order that the person do, or refrain from doing, any act or thing.
By reason of s 7.2.13(6), the court’s power to grant an injunction restraining a person from engaging in conduct may be exercised:
(a) whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind; and
(b) whether or not the person has previously refused or failed to do that act or thing; and
(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.
There is no evidence presently before the court that Mr Forster did, in fact, send any accounts to former clients on 15 June 2012. He has denied doing so, and the Board has not produced any evidence to the contrary. Furthermore, on 21 June, a Board investigator spoke to six particular clients, who were named in relevant paragraphs of the defence, and they said they had not received any such bill.
However, I am persuaded that Mr Forster is proposing to engage in conduct that would constitute a contravention of the Act, namely rendering bills to clients for what he regards as unbilled amounts, for the following reasons. First, he conceded before Ross J that he proposed to do so if the receivers and the Board did not behave in accordance with what he regarded as “common sense”; and, it is perfectly clear from his evidence and submissions before me that he believes the receivers and the Board have been behaving in a completely inappropriate fashion, in many different respects.
It is also clear that Mr Forster has had some sort of costs consultant calculate the precise amounts which he says remain unbilled; that is to say, he has the information available to him which could enable him to prepare and send out such bills.[4] Finally, in the absence of any adequate explanation as to what actually occurred, I infer that counsel drew the relevant pleading because Mr Forster had, at some stage, instructed him to the effect that he was proposing to send such bills to clients on or around 15 June.
[4]I accept that the information is also of use to him in the recovery proceeding, and am not suggesting he had the costs consultant prepare it for an improper purpose.
Although it is not necessary for the Board to prove that there is an imminent danger of substantial damage to any person, I am satisfied that there is a potential for real harm to clients of the law practice, were Mr Forster to send such bills to them. The bulk of the clients are former navy personnel, who engaged Mr Forster to pursue personal injury claims against the Commonwealth of Australia, seeking damages for psychological injury (post traumatic stress disorder) arising from the 1964 collision between HMAS Voyager and HMAS Melbourne. The clients are now elderly, and they and their partners have varying physical and mental health issues; they might fairly be described as a vulnerable group of people. I accept that many of them could be distressed to receive a bill from their former solicitor, asserting that they still owe thousands (or, in some cases, hundreds of thousands) of dollars for outstanding legal fees. Some might even feel sufficiently intimidated by such a bill that they would pay some or all of the amount demanded by Mr Forster.
Mr Forster was unable to point to any real harm or prejudice which would flow to him, were he to be enjoined from doing something which he now says he does not want to do anyway.
He did submit that the injunctions were designed to, or would, frustrate him in preparing witness statements in other proceedings in which he is involved. Asked to explain that submission, he made the bald assertion that former clients might not speak to him or assist him by making statements, if they were aware that he had been enjoined from sending them further bills. However, Mr Forster’s former clients are aware that receivers have been appointed to the law practice, and that he is the subject of serious allegations of multi-million dollar trust fund defalcations. In those circumstances, and absent any specific evidence to support his assertion, it seems unlikely that knowledge of these particular injunctions would play any real role in a former client’s decision whether or not to assist Mr Forster in preparing his case against the receivers or the Board. I also note that there is no court order or other legal bar preventing Mr Forster from speaking to any of his former clients, if they wish to speak to him.
Mr Forster also claimed that to grant the proposed injunction would “poison the well” in his other cases, as far as the court is concerned. That is to say, he was concerned that whichever judge hears the trial in the recovery (or any other) proceeding may be influenced against him, by reason of the fact that I have granted injunctions. But there is no reason to think that whichever judge hears such a trial would do anything other than decide the case on the evidence before that judge; or that the judge would not proceed on the basis that whatever findings I have made have been on an interlocutory basis, and without the benefit of a full trial.
The Board is given extensive powers under the Act, for various public policy reasons including the protection of clients. That public interest role is reflected in the fact that, by reason of s 7.2.13(7), the Board is not required to give an undertaking as to damages as a condition of the court granting an interim injunction.
The injunctions which I ordered at the conclusion of the hearing on 26 June 2012 go no further than is necessary or reasonable in the circumstances. In general terms:
(a) They prohibit Mr Forster (directly or through others) from rendering any bills to clients whilst the law practice remains in receivership;
(b) In so far as he may have rendered any bills since the appointment of the receivers, they prohibit him (directly or through others) from taking any steps with respect to such bills;
(c) In the event that he has in fact rendered any such bills, they require him to write to each client to whom he has sent such a bill, informing them to disregard the bill; and
(d) They require him to repay to the client any money that has been sent to him in payment of such a bill.
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