re David Peter Andrew Moen - [2018] SASC 136

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
THE LEGAL PRACTITIONERS ACT 1981 (SA) RE DAVID PETER ANDREW MOEN
[2018] SASC 136
Judgment of The Honourable Justice Nicholson
14 September 2018
PROFESSIONS AND TRADES - LAWYERS - PRACTISING CERTIFICATES
The practitioner gave notice of a show cause event pursuant to section 20AH of the Legal Practitioners Act 1981 (SA) (the Act). The relevant show cause event was the practitioner’s presentation of a declaration of his intention to present a debtor’s petition. The practitioner subsequently presented a debtor’s petition, resulting in his bankruptcy. The practitioner’s financial difficulties arose as a result of a failed investment.
Each of the practitioner, the Law Society of South Australia and the Legal Profession Conduct Commissioner were represented. The Legal Profession Conduct Commissioner proposed a number of conditions for endorsement on the practitioner’s practising certificate. The practitioner submitted that he remains a fit and proper person to be able to continue to practise subject to the proposed conditions.
On 15 May 2018, the Court made orders endorsing conditions on the practitioner’s practising certificate in the terms of draft minutes of order provided by the Commissioner and with the consent of the practitioner.
Held per Nicholson J:
1. Where, following its consideration of a practitioner's show cause event, the Supreme Court is satisfied of fitness to practise subject to certain conditions, the Court has power to order that the practitioner's practising certificate be endorsed to that effect.
2. The practitioner is a fit and proper person to hold a practising certificate subject to conditions endorsed on his practising certificate as set out in paragraph [2] of the reasons for judgment.
Legal Practitioners Act 1981 (SA) s 20AA, s 20AH, s 20AI, referred to.
The Legal Practitioners Act 1981 (SA) Re Roderic Jason Lindquist [2016] SASC 134; In the Matter of Barry John Jenner [2007] SASC 263, considered.

THE LEGAL PRACTITIONERS ACT 1981 (SA) RE DAVID PETER ANDREW MOEN
[2018] SASC 136
Civil: Application
NICHOLSON J.
Introduction

On 15 May 2018, I made orders endorsing conditions on the practising certificate of Mr Moen (the practitioner) as a result of his having given notice of a show cause event pursuant to section 20AH(2) of the Legal Practitioners Act 1981 (SA) (the Act). The orders were made in the terms of draft minutes provided on behalf of the Legal Profession Conduct Commissioner (the Commissioner) and with the consent of the practitioner. The Law Society of South Australia (the Law Society) was represented by counsel at each hearing of this matter and did not oppose the making of the orders in the terms provided by the Commissioner.
The orders were in these terms.
Upon the Practitioner becoming bankrupt on 31 January 2018 and upon the Practitioner providing notice of a show cause event pursuant to section 20AH of the Legal Practitioners Act 1981 ("the Act") and upon the Court being satisfied that the Practitioner is a fit and proper person to hold a practising certificate subject to conditions.
By consent the Court orders that:
1. From the date of this order until the date upon which the Practitioner is discharged from bankruptcy, and pursuant to the Court's inherent jurisdiction to control and discipline legal practitioners, conditions be endorsed upon the Practitioner's current practising certificate, and on any subsequent certificate that may issue to the Practitioner as follows:
1.1     The Practitioner must not practise as a principal, his right of practice being limited to that of an employed practitioner or at the independent bar.
1.2 The Practitioner must not operate a trust account or a controlled money account as defined in Part 1 of Schedule 2 of the Act.
1.3 The Practitioner must not receive, hold, handle or deal in any way with trust money or controlled money as defined in Part 1 of Schedule 2 of the Act.
1.4     The Practitioner must notify the Court, the Commissioner, the Law Society and, if applicable, the South Australian Bar Association in writing within 7 days if he ceases employment as a practitioner with Edge Law or commences alternative employment or at the independent bar.
1.5     The Practitioner must provide such information in relation to his practice of the law and/or employment as may be reasonably required from time to time by the Law Society and/or the Commissioner and, if applicable, the South Australian Bar Association.
1.6     The Practitioner must notify the Court, the Commissioner, the Law Society and, if applicable, the South Australian Bar Association in writing within 7 days if the period of his bankruptcy is extended or shortened, stating the reason(s) why.
2. The Practitioner, the Commissioner and the Law Society shall have liberty to apply to the Court to vary this order.
These are my reasons for making the orders.
Background
On 7 February 2018, the practitioner filed an affidavit providing notice to the Supreme Court of a show cause event pursuant to section 20AH(2) of the Act. The relevant show cause event was the practitioner’s presentation to the Australian Financial Security Authority (AFSA) of a declaration of his intention to present a debtor’s petition, pursuant to section 54A of the Bankruptcy Act 1966 (Cth).[1]
[1] Section 5 of the Legal Practitioners Act 1981 (SA) defines a show cause event, in relation to a person, to include “(b) presenting (as a debtor) a declaration to the Official Receiver under section 54A of the Bankruptcy Act 1966 of the Commonwealth of his or her intention to present a debtor’s petition or presenting (as a debtor) such a petition under section 55 of that Act”.
The declaration was presented to and accepted by AFSA on 31 January 2018. The practitioner filed a debtor’s petition which was accepted by AFSA on 21 February 2018. A trustee in bankruptcy was appointed on 27 February 2018.
Following his admission to practise in South Australia in September 2012 and until 19 February 2018, the practitioner practised in partnership with his wife, operating a criminal law practice under the name Edge Law. On 19 February 2018, the partnership was dissolved and since that date the practitioner has practised as a salaried employee in the practice.
The practitioner was first admitted to practice in Western Australia in August 1994. He practised as a barrister and solicitor and solely as a barrister in Western Australian between 1994 and 2010. In July 2010, the practitioner was admitted to practice in Victoria where he practised as a barrister until 2012.
The practitioner’s bankruptcy
The Court was told that the practitioner’s financial difficulties arose as a result of a failed investment entered into on the advice of an independent accountant.
In the affidavit material read by the practitioner he deposed that, on or around 23 June 2008, he entered into an approved investment scheme run by Gunns Limited pertaining to the forestry industry in Tasmania. In order to fund his investment, the practitioner borrowed funds through MIS Funding No. 1 Pty Ltd (MIS), an entity established to provide funds for investment in the Gunns Limited scheme. The funds were never personally received by the practitioner. The investment scheme failed and the practitioner was unable to repay the funds owed to MIS.
It appears that MIS commenced proceedings against the practitioner in the New South Wales District Court to recover the funds owed. The practitioner became aware of the proceedings and instructed a solicitor in New South Wales to file a defence which occurred on or around 10 June 2011.
In November 2011, the practitioner’s mother, who resides in Canada, suffered a stroke. The practitioner and his wife travelled to Canada on 1 December 2011 to care for his mother, initially intending to visit for a short period. However, they remained in Canada until 26 July 2012 when they returned to Australia.
While the practitioner was in Canada, MIS obtained judgment against him in the amount of $100,854.41. The practitioner became aware of the judgment debt on 7 September 2017 when a bankruptcy notice was served on him. According to the practitioner, the bankruptcy notice “came as a great shock”. He had not received any correspondence in relation to the bankruptcy proceedings prior to this date.
In the period between the filing of his defence in June 2011 and the receipt of the bankruptcy notice in September 2017, the practitioner had not received notice of the judgment against him nor any other correspondence from his solicitors or otherwise in relation to the proceedings. He did not make enquiries in relation to the proceedings during this period and believed that his initial instructions and defence had been sufficient to conclude the proceedings.
Following receipt of the bankruptcy notice, the practitioner instructed solicitors in South Australia to attempt to reach a settlement with MIS with respect to the judgment debt. Eight offers were made by his solicitor to the solicitors for MIS over a period of four months. The last offer was made on 21 February 2018 and the practitioner’s solicitor advised the solicitors for MIS that, in the absence of correspondence in response to that offer, the practitioner’s debtor’s petition would be lodged with AFSA at 5.00pm that day.
According to the practitioner, no response was received from the solicitors for MIS on 21 February 2018 and accordingly the debtor’s position was lodged and accepted by AFSA on that date.
A summary of the practitioner’s financial affairs, received from AFSA on 31 January 2018 in response to the practitioner’s presentation of the Declaration, discloses a liability to MIS of $160,056. The notice also discloses less significant liabilities to the Deputy Commissioner of Taxation and the Child Support Agency.
Material before the Court
In the hearing of this matter, each of the practitioner, the Law Society and the Commissioner were represented by counsel and filed affidavit material in accordance with section 20AH of the Act.
Section 20AH provides as follows:
20AH—Holder of practising certificate—show cause event
(1) This section applies to a show cause event that happens in relation to the holder of a practising certificate.
(2) The holder must provide to the Supreme Court both of the following:
(a) within 7 days after the happening of the event—notice, in the form approved by the Court, that the event happened;
(b) within 28 days after the happening of the event—a written statement explaining why, despite the show cause event, the person considers himself or herself to be a fit and proper person to hold a practising certificate.
(3) If a written statement is provided after the 28 days mentioned in subsection (2)(b), the Supreme Court may accept the statement and take it into consideration.
(4) A notice and written statement provided to the Supreme Court under this section must be served by the holder on the Commissioner and the Society, each of whom may make written representations to the Court in relation to the holder of the practising certificate within the time, and in accordance with the procedure, prescribed by rules of the Court.
The practitioner relied upon four affidavits sworn by the practitioner on 7 February 2018, 1 March 2018, 9 April 2018 and 10 May 2018. He has deposed in detail as to the events that led to his bankruptcy, his conduct since receiving the bankruptcy notice and his present financial position.
The practitioner provided, by way of his second affidavit, a written statement as required by section 20AH(2)(b) of the Act explaining why, despite the show cause event, the practitioner considers himself to be a fit and proper person to hold a practising certificate.
The third and fourth affidavits of the practitioner were filed in response to queries raised by the Law Society and the Commissioner respectively, seeking further information in relation to certain matters raised in the earlier affidavits.
The practitioner also relied upon two references as to his character provided by Mr Kevin Borick QC and Mr Philip Dunn QC.
The Commissioner, in his affidavit sworn and filed 8 May 2018, indicated his “preliminary view” as being that the practitioner’s practising certificate should be subject to certain conditions to continue until the practitioner is discharged from bankruptcy. The conditions proposed by the Commissioner in that affidavit are substantially the same as those ultimately endorsed on the practitioner’s practising certificate pursuant to the orders made on 15 May 2018 in the terms provided by the Commissioner.
The practitioner has indicated his willingness to subject himself to conditions restricting his right to practise. It was not suggested on behalf of either the Commissioner or the Law Society that the Court ought to suspend or cancel the practitioner’s practising certificate.
Consideration
Prior to 1 July 2014, section 49 of the Act provided, inter alia, that an undischarged bankrupt could not, without the authority of the Supreme Court, practise the profession of law. Section 49 expressly conferred power on the Supreme Court to grant an authority to practise on such conditions as thought fit. Following amendments which took effect on 1 July 2014, section 49 now only deals with the situation of a legal practitioner who is a director of an incorporated legal practice during its winding up for the benefit of creditors. The Act no longer expressly provides that a practitioner who is an undischarged bankrupt is not, without authority, entitled to practise. Rather, this situation is now regulated by the show cause regime in Part 3, Division 2B (sections 20AG to 20AI) of the Act. Within that regime there is no express conferral of power to impose conditions on the practising certificate of a practitioner who is required to show cause.
Section 20AH has been set out earlier. Section 20AI is in these terms.
20AI—Refusal, amendment, suspension or cancellation of practising certificate—failure to show cause
(1)The Supreme Court may refuse to issue or renew, or may amend, suspend or cancel, a practising certificate if the applicant or holder—
(a) is required by section 20AG or 20AH to provide a written statement relating to a matter and has failed to provide a written statement in accordance with that requirement; or
(b) has provided a written statement in accordance with section 20AG or 20AH but the Court does not consider that the applicant or holder has shown in the statement that, despite the show cause event concerned, he or she is a fit and proper person to hold a practising certificate.
(2)For the purposes of this section only, a written statement accepted by the Supreme Court under section 20AH(3) is taken to have been provided in accordance with section 20AH.
(3)If the Supreme Court makes a determination under this section, the Court must, as soon as practicable, give the applicant or holder written notice of the determination.
Section 20AI empowers the Supreme Court to, inter alia, “amend … a practising certificate …” but only in the circumstances there outlined, that is, where the practitioner fails to provide a required show cause statement or, having provided such a statement, the court nevertheless is not persuaded that the practitioner is a fit and proper person to hold a practising certificate. For reasons to be explained, I am satisfied that the practitioner in this case is a fit and proper person to hold a practising certificate provided it is subject to certain conditions. A question arises whether, in such a case, section 20AI confers power to impose conditions on the practitioner’s certificate or whether any such power is to be found elsewhere and, if so, where.
I am satisfied that there is power in the Supreme Court to impose conditions on the right of a practitioner, who has been required to show cause, to continue to practise. The situation does not appear to be expressly provided for. However, this conclusion is supported on a number of bases.
First, it makes little sense for section 20AI to give a power to amend where a show cause written statement has not been provided at all or, where provided, it discloses that the practitioner is not a fit and proper person to practise. As a practical matter, the occasion to exercise a power to amend could only arise where the practitioner has complied with his or her show cause obligations and the Court is satisfied of fitness but subject to outstanding concerns that can be satisfactorily addressed by the imposition of appropriate conditions. In other words, paragraph (b) of subsection 20AI(1) should be construed as permitting the Court to amend, that is, impose conditions on, a certificate in the circumstances embraced by paragraph (b) where it is satisfied that the practitioner would be a fit and proper person to practice in accordance with those conditions.
Second, the existence of a power in the Court to make orders endorsing conditions on a practitioner’s practising certificate is to be inferred from section 20AA(1) of the Act. Section 20AA is in the following terms.
20AA—Endorsement of conditions on practising certificates
(1)If, in accordance with this Act, a regulatory authority of this or any participating State makes a determination or order—
(a) imposing conditions on, or requiring the endorsement of conditions on, a legal practitioner's practising certificate; or
(b) varying or revoking conditions on, or requiring the variation or revocation of conditions on, a legal practitioner's practising certificate,
the Supreme Court may record or give effect to the determination or order by revoking the practising certificate currently held by the legal practitioner and issuing the legal practitioner with a new practising certificate in the appropriate form.
(2)A regulatory authority must notify the Supreme Court of the making of a determination or order referred to in subsection (1).
(3)If a determination or order is made imposing, varying or revoking conditions on a practising certificate, the determination or order will be taken to have effect from the date it is made, or from a subsequent date specified in the determination or order, and not from the date of issue of a new practising certificate under this section.
In the Legal Practitioners Act 1981 (SA) Re Roderic Jason Lindquist,[2] I made the following remarks as to the operation of s 20AA of the Act.[3]
Section 20AA contains machinery provisions. It empowers the Supreme Court to record or give effect in certain ways to the making of a determination or order by a regulatory authority of South Australia or of any participating state which serves, inter alia, to impose conditions on or to vary or revoke conditions on a legal practitioner’s practising certificate. The assumption underlying the powers conferred on the Supreme Court by section 20AA is that a regulatory authority has made, “in accordance with this Act”, a determination or an order imposing, varying or revoking practising certificate conditions. It does not, itself, confer power on a regulatory authority to impose conditions or to vary or revoke them.
It is to be observed that the definition of regulatory authority in section 5 of the LP Act includes, in relation to the State of South Australia, the Supreme Court.[4] It follows that the machinery provisions in section 20AA apply where the Supreme Court has made a determination or order imposing, varying or revoking conditions. It is to be inferred from the existence and terms of section 20AA that there is a power, to be found elsewhere, conferred on the Supreme Court, as a regulatory authority, to impose, vary or revoke conditions.
[2] [2016] SASC 134.
[3] [2016] SASC 134 at [14]-[15].
[4] Together with the Legal Practitioners Education and Admission Council (LPEAC), the Law Society, the person holding or acting in the Office of Legal Profession Conduct Commissioner in accordance with the provisions of the Act and the Legal Practitioners Disciplinary Tribunal established under Part 6 of the LP Act.

Finally, a power in the Supreme Court to impose conditions on a practising certificate in the circumstances under consideration will fall within the Court’s inherent jurisdiction, essentially for reasons analogous to those I gave with respect to a related issue in Lindquist.[5]
[5] The Legal Practitioners Act 1981 (SA) Re Roderic Jason Lindquist [2016] SASC 134 at [16]-[27].
The relevant policy consideration underlying the regime requiring practitioners to give notice of a show cause event is the protection of the public and the maintenance of proper standards of conduct in the legal profession. In In the Matter of Barry John Jenner,[6] Debelle J made the following observations.[7]
The jurisdiction of the court to permit a bankrupt to practise must be exercised with considerable circumspection. The overriding consideration must be the public interest, that is to say, the protection of the public. The public confidence in the administration of justice must be maintained. The court must have regard to the interests of those members of the public whose clients will consult the legal practitioner. The court must ensure so far as lies within its power that the practitioner is a fit and proper person to practise notwithstanding the bankruptcy or intended bankruptcy. There is another aspect of the public interest to consider. It is to do what is reasonably possible for the purpose of enabling the practitioner to earn an income so that the practitioner may be in a better financial position to discharge the debts due to creditors.
The fact that a legal practitioner has become bankrupt raises real concerns as to whether that practitioner is a fit and proper person to practise. At the same time, it must be remembered that bankruptcy may result from a wide variety of circumstances ranging from dishonesty through incompetence to simple misfortune. It is necessary, therefore, to examine the circumstances in which the person has become bankrupt for the purpose of determining whether those circumstances disclose conduct which is inconsistent with fitness to practise. The purpose of an inquiry under s 49 is not to discipline the practitioner. The Legal Practitioners Act makes separate provision for discipline of a legal practitioner. The purpose of an inquiry under s 49 is to determine whether, notwithstanding the bankruptcy or intended bankruptcy, the legal practitioner is a fit and proper person to practise.
[6] [2007] SASC 263.
[7] [2007] SASC 263 at [2]-[3]. As set out earlier in these reasons, section 49 of the Act (as it then was) was deleted in 2013 by the Legal Practitioners (Miscellaneous) Amendment Act 2013 (SA) and has in effect been replaced by the insertion of Part 3, Division 2B of the Act to implement the ‘show cause event’ regime.
In circumstances such as arise in the present matter, the protection of the public from any risk that a practitioner in this position might seek to alleviate his or her financial difficulties by, for example, misusing trust account funds or overcharging clients, is an important consideration.
On the evidence before the Court, the practitioner’s financial difficulties are unrelated to his practice as a barrister and solicitor. Counsel for the practitioner submits that the practitioner’s bankruptcy, having arisen as a result of independent but in hindsight flawed accounting advice, falls within Debelle J’s description of misfortune in the passage set out above. The practitioner submits that he has not at any time been reckless in his financial dealings as a practitioner. The other, less significant, liabilities disclosed in the statement of the practitioner’s financial affairs are also unrelated to his practice and the practitioner has provided details of his present management of these liabilities.
The practitioner is 49 years old and has extensive experience as a criminal advocate. The references provided by Mr Borick QC and Mr Dunn QC emphasise the practitioner’s competence, experience and good character. There has been no suggestion of dishonesty nor anything to suggest that the practitioner has not conducted his professional obligations with the necessary competence and integrity.
The practitioner deposes that, as from 19 February 2018 he has had no management role in Edge Law, has not operated a trust account nor had any involvement with the financial management of the practice. The practice trust account is operated and accessed by the practitioner’s wife and the practitioner has no access to the trust account. Further, the nature of the practice conducted by Edge Law is such that it is unlikely that funds, particularly substantial funds, other than those referrable to the securing of anticipated fees will pass through the trust account very often, if at all.
I am satisfied that any risk related to the misuse of client monies can be appropriately addressed by endorsement with the conditions set out above, in particular the conditions restricting the practitioner from dealing with trust money and from operating a trust account.
The practitioner submitted that the evidence before the Court demonstrates his fitness to practise, both at a professional and personal level, and that he remains a fit and proper person to be able to continue to practise subject to the conditions. I accept that submission.
Counsel for the Commissioner and the Law Society raised some concerns at the hearing on 15 May 2018 as to the practitioner’s failure to remain informed as to the progress of the MIS proceedings. However, counsel for the Commissioner submitted that these concerns were not such that Commissioner considered that the practitioner was not a fit and proper person to hold a practising certificate and counsel for the Law Society did not oppose the orders sought.
The orders made require the practitioner to apprise the Court, the Commissioner and the Law Society of matters relating to his employment and his bankruptcy. The practitioner, the Commissioner and the Law Society have liberty to apply to vary the orders should it be seen as necessary to do so.
It is for these reasons I was satisfied, on the evidence before the Court, that the practitioner was a fit and proper person to hold a practising certificate subject to the conditions set out above and that it was appropriate to make the orders as made.