Re Wan

[1996] QCA 61

SUPREME COURT OF QUEENSLAND

Brisbane	Appeal No. 243 of 1995
[Qld Law Society v. Wai Ying Leung Wan]

QUEENSLAND LAW SOCIETY INCORPORATED

Appellant

v.

WENDY WAI YING LEUNG WAN

Respondent

Fitzgerald P. Mackenzie J.

Helman J.

Judgment delivered 22/3/1996 made.

APPEAL ALLOWED.

1.         The order of the Chamber Judge is set aside.

2.         The summons is dismissed with costs to be taxed.

3.         Leave nunc pro tunc to proceed is refused.

4.         The respondent is ordered to pay the appellant's costs of and incidental to the appeal to be taxed.

5. Upon the respondent's application, an indemnity certificate in respect of the appeal is granted pursuant to s.15 of the Appeal Costs Fund Act 1973.

CATCHWORDS: LEGAL PRACTITIONERS - LEGAL PRACTITIONERS FIDELITY GUARANTEE FUND - s.25(1) and s.25(6) Qld Law Society Act 1952 - interpretation - whether leave is needed to file a summons under s.25(6) for a hearing before a Judge in Chambers.

Counsel:	P.A. Keane Q.C. for appellant R.I. Hanger Q.C. and D.K. Smith for respondent
Solicitors:	Corrs Chambers Westgarth for appellant Allens for respondent

Hearing date:21 February 1996

IN THE COURT OF APPEAL	[1996] QCA 061
SUPREME COURT OF QUEENSLAND	Appeal No. 243 of 1995
Brisbane
Before	Fitzgerald P. Mackenzie J. Helman J.

[Qld Law Society Inc. v. Wan]

BETWEEN:

QUEENSLAND LAW SOCIETY INCORPORATED

(Respondent) Appellant

AND:

WENDY WAI YING LEUNG WAN

(Applicant) Respondent

REASONS FOR JUDGMENT - FITZGERALD P.

Judgment delivered 22/03/1996

The respondent, Mrs Wan, was defrauded by a solicitor and his son and has lost a lot of money. A

material part of the misconduct was carried out by the solicitor and his son through their company,

Dotwell Pty Ltd, which is now in liquidation. The loss of the money by Mrs Wan was caused by advice

which she was given on business migration and investments. Further, we were told from the Bar table,

that she has expended the extraordinary sum of more than $300,000 in legal costs.

For some reason which is not immediately apparent, Mrs Wan’s claims have been split and pursued in

separate proceedings. She has succeeded in obtaining a judgment for some of the money she had lost

in the Federal Court of Australia against the solicitor, his son and Dotwell, and an appeal was subsequently dismissed. She has also sued a bank in the District Court. The latter claim relates to a

cheque for $165,000 which was to be used to purchase a property; although drawn in favour of the

solicitor’s trust account it was paid into, and credited to, Dotwell’s account with the same bank. In her

action against the bank, Mrs Wan claims for conversion and/or money had and received to her use but

the bank has raised defences and it will apparently be some time before the action between Mrs Wan

and the bank is ready for trial.

The Queensland Law Society Incorporated conducts the Legal Practitioners’ Fidelity Guarantee Fund

which is broadly a reimbursement scheme for clients of dishonest solicitors: see Part 3 of the

Queensland Law Society Act 1952. In general terms, the Fund, which is administered by the Council

of the Society (s. 17), is required to be “held and applied for the purpose of reimbursing persons who

may suffer pecuniary loss through stealing or fraudulent misappropriation committed by a practising

practitioner, or by the practising practitioner’s clerk or servant, of any money or other property

entrusted to the practising practitioner or to the practising practitioner’s clerk or servant in Queensland

(a) in the course of the practising practitioner’s practice; or (b) on account of any trust of which the

practising practitioner is the sole or a joint trustee; or (c) on account of any trust of which the practising

practitioner is the sole or a joint trustee and in respect of which he or she acts as a practising

practitioner.” (sub-s. 24(1)).

It is unnecessary for present purposes to undertake a detailed analysis of the Queensland Law Society

Act or Part 3. However, some points should be noted. There is a limitation period for notice to be

given of a claim against the Fund (sub-s. 24(3)), and every action against the Society in relation to the Fund must, “subject to this Act and the rules made thereunder”, be brought in the Supreme Court (sub-

s. 24(2)), with “court” being defined in s. 3). Further, in any action or other proceeding brought against

the Society in relation to the Fund, all defences which would have been available to the practitioner in

relation to whom the claim arose shall be available to the Society (s. 26), and, upon payment out of the

Fund of moneys in settlement, in whole or in part, of a claim under Part 3 arising from the act or

omission of a practitioner or a clerk or employee employed in relation to the practitioner’s practice, the

Society is subrogated, to the extent of that payment, to all the rights and remedies of the claimant against

the practitioner or clerk or employee or any other person in respect of that act or omission (sub-s.

27(1)). By sub-s. 27(2), where the Society is subrogated under sub-s. 27(1), it may exercise the rights

and remedies in its own name or in the name of the claimant who shall, upon request by the Society,

provide all necessary information and documentation and give all necessary assistance to enable the

Society to exercise all rights and remedies subrogated to it by virtue of the section. However, by sub-s.

27(3), the Society must indemnify such a claimant against any costs awarded against the claimant in any

proceedings brought by the Society in the name of the claimant. Apart from the provision of immediate

relevance, it remains to mention only sub-s. 27(2)(c) which provides that moneys recovered by the

Society in the exercise of its rights of subrogation are to be paid into the Fund.

So far as presently material, s. 25 of the Queensland Law Society Act provides as follows:

“Council may settle claims without action
25.(1) The council may receive and settle any claim against the fund at any time after
the commission of the stealing or fraudulent misappropriation in respect of which such
claim arose, but no person shall be entitled, without leave of the council, to commence
any action or other proceeding against the society in relation to the fund unless and until
the claimant has exhausted all relevant rights of action and other legal remedies available
against the practitioner in relation to whom the claim arose and all other person liable
in respect of the loss suffered by such claimant.
(1A) However, any person who has been refused the leave of the council as aforesaid
may apply to a judge in chambers against the refusal by the council of such leave, and
the judge may make such order as the judge may deem fit.
Limitations of right of action to recover moneys from fund
(2) Subject to subsection (3), no person shall be entitled to recover from the society
out of the fund by action or other proceeding as aforesaid an amount greater than the
amount of the actual pecuniary loss suffered by the person less the amount or value of
all moneys or other benefits received or receivable by the person from any source other
than the fund in reduction of such loss.
(3) In settling any claim against the fund pursuant to this section, the council may in its
absolute discretion pay to the claimant out of the fund, in addition to the amount to

which the claimant is entitled pursuant to subsection (2) -

(a)	interest on such part of the claim, for such period and at such rate as the council may determine;
(b)	such costs and expenses as the council may consider have been reasonably incurred by the claimant in making and proving the claimant’s claim against the fund.

...
(6) A person who has made a claim under this Act against the fund and who is
dissatisfied with the decision of the council in respect of the claim may apply to the
Supreme Court or a judge thereof for the determination in a summary manner of any
question of law or of fact arising under the claim and for a declaration of the rights of
the claimant.
(7) The court or a judge shall not be bound to determine any such question if there is
any substantial dispute of fact or if for any other reason in its, his or her opinion, it ought
not be determined in a summary manner but may direct that the applicant proceed by

action against the society.”

Just as she will be obliged to satisfy various requirements to succeed in her District Court action against

the bank, Mrs Wan cannot succeed in a claim against the Fund unless certain conditions are satisfied.

That is obvious from, for example, the limited categories of losses for which reimbursement may be

sought from the Fund, to which reference has already been made. As I understand the present appeal,

the Society disputes whether all conditions of its liability have been satisfied; for example, it disputes

whether the solicitor’s son was, relevantly, his clerk or employee. Mrs Wan was advised of the

Society’s attitude on 27 June 1995. Her response has been to start a still further action, this time against the Society, a step which she took without its leave.

Perhaps understandably sympathetic to Mrs Wan, a Chamber Judge made the following orders:

“IT IS ORDERED THAT:

1.          The question of whether the Bank Cheque of $165,000 handed by the applicant to Mr Randall McDonald was received by him as servant or agent of Donald Robert McDonald be determined.

IT IS DIRECTED THAT:

1.          Whether the loss of the $165,000 alone through stealing or fraudulent misappropriation committed by the practitioner or by his clerk/servant be determined on affidavits.

2.          The applicant file and serve any affidavits within 10 days and that any affidavits in response be filed within 14 days of receipt of the applicant’s affidavits.

3.          Upon the solicitors for the applicant and the respondent notifying the Registrar that the exchange of affidavits has been completed the matter be placed on the Callover List with priority.

4.          Costs can be reserved to abide the outcome of the determination of the point.”

The Society has appealed. Although the respective tactics of the parties are not clear, it is possible that,

while Mrs Wan is seeking the speediest and most efficacious recovery of as much of her loss as

possible, the Society is anxious to ensure that the Fund functions as a secondary rather than primary

source of reimbursement, with other claims pursued first and the Society required to pay and exercise

its rights of subrogation only if an unfortunate client has otherwise failed in his or her claims to recovery.

Which, if either, of these approaches, in relation to each of which legal costs are obviously a material

factor, is preferable in point of policy, is not a matter for us to comment upon. Our only task is to

construe s. 25.

The first portion of sub-s. 25(1) seems directed to permitting the Council of the Society to accept and

compromise claims even if liability has not been established. In contrast, if the Council chooses to adopt a harder line - which might often be prudent or understandable - a claimant is expected to pursue other

remedies first before seeking reimbursement from the Fund: see sub-ss. 25(1), (2) and (3). Until then,

an “action or other proceeding against the society in relation to the fund” cannot be commenced

“without leave of the council” (sub-s. 25(1)), or, if leave is refused by the Council, by order of a judge

(sub-s. 25(1A)). It was not suggested before us on behalf of the Society that leave could not be

granted nunc pro tunc.

The relationship between sub-ss. 25(1A) and (6), which lie at the crux of the present dispute, is not

entirely clear. One decision of the Council with which a person who has made a claim against the Fund

might be dissatisfied is a decision to refuse leave to commence an action or other proceeding against

the Society in relation to the Fund. However, orthodox methods of construction suggest that the

claimant’s remedy for such a decision is to be found in sub-s. 25(1A). Sub-section 25(6) is, in my

opinion, concerned rather with a decision by the Council which will ordinarily have been made at an

earlier time, i.e., not to “receive and settle” a claim satisfactorily to the claimant; in effect, to refuse the

claim, at least for the time being. If leave to sue is given by the Council (sub-s. 25(1)) or a judge (sub-s.

25(1A)), an action or proceeding may be brought. What sub-s. 25(6) does is provide a means for the

summary determination of any specific legal or factual questions in lieu of a full-scale action, while sub-s.

25(7) indicates that such an action should be required if a summary proceeding is unsuitable. I can

identify no sufficient reason to conclude that, where it might be utilised, sub-s. 25(6) makes the material

portion of sub-s. s25(1) or sub-s. 25(1A) inapplicable.

There is no obvious reason why an application could not be brought under both sub-ss. (1A) and (6) in an

appropriate case, seeking leave to bring a proceeding against the Society for the summary determination of

specific factual legal questions. An application under sub-s. 25(1A) however might be unnecessary because

of a grant of leave by the Council, or an application under either or both sub-ss. 25(1A) and (6) might be

inappropriate, because of the nature of the dispute, with the claimant able, if leave is obtained under sub-ss.

25(1) or 25(1A), to proceed under sub-ss. 25(1) and (7). In each case, what is called for will depend on

the circumstances and such policies as can be gleaned from the material portions of the Act.

Although there are perhaps some contrary indications, my firm impression is that the Society is not intended

to operate the Fund as an insurer in the ordinary sense, indemnifying the “client” or “claimant” and assuming

responsibility at an early stage, but is meant to provide a source of ultimate recourse if other avenues of

recovery have proved inadequate. This overall policy will best be effectuated if the legislative silence

operates generally in the manner which I have suggested.

What I have said to this point is generally consistent with the joint judgment of Mackenzie and Helman JJ.

I am also in general agreement with their Honours’ reasons concerning why, in the present case, Mrs Wan

should be left to pursue her action against the bank rather than permitted to proceed immediately against the

Society in relation to the Fund. It is unnecessary for me to consider what view I would have adopted had

a suggestion been made that the District Court action against the bank be removed to the Supreme Court

and Mrs Wan was permitted to join the Society in that action, with the opportunity for indemnity or

contribution notices between the other parties.

In the circumstances, I agree with the orders of Mackenzie and Helman JJ.

IN THE COURT OF APPEAL

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane	Appeal No. 243 of 1995
Before	Fitzgerald P. Mackenzie J. Helman J.

[Qld Law Society v.Wai Ying Leung Wan]

QUEENSLAND LAW SOCIETY INCORPORATED

Appellant

v.

WENDY WAI YING LEUNG WAN

Respondent

JUDGMENT - MACKENZIE AND HELMAN J.J.

Judgment Delivered 22 March, 1996

The respondent was successful in an action in the Federal Court and on appeal to the Full Court

of the Federal Court against Donald Robert McDonald, a solicitor, and his son Ranald Murray

McDonald who was, with his father, a director of Dotwell Pty Ltd which engaged in advising on

business migration and other matters. The company is now in liquidation. For present purposes it is

sufficient to state that the present proceedings have their beginning in transactions, one of which involved

Mrs Wan giving Ranald McDonald a cheque for $165,000 in the expectation that it would be paid to

the trust account of Donald McDonald carrying on business as a solicitor as McDonald Partners. The

cheque was drawn to the order of McDonald Partners Trust Account. Notwithstanding this, the following day the cheque was deposited to the account of Dotwell Pty Ltd with Westpac Banking

Corporation, Brisbane, and the proceeds credited to that account by Westpac. Having been unable

to recover from the judgment debtors in the Federal Court action the respondent commenced an action

against Westpac in the District Court for recovery of sums including the $165,000 alleging conversion

or alternatively that it was moneys had and received to her use. It will be some time before this action

is ready for trial.

Against this background the respondent made a claim against the Legal Practitioners' Fidelity

Guarantee Fund. Insofar as the claim related to the $165,000 cheque it was rejected by the council of

the Queensland Law Society Incorporated. It is common ground that it is in issue whether Ranald

McDonald was the agent of the solicitors and whether his conduct amounted to "stealing or fraudulent

misappropriation committed by a practising solicitor or by his clerk or servant" (s.24 Queensland Law

Society Act 1952). The respondent was advised on the 27 June 1995 that in the view of the council

the claim did not fall within the scope of s.24 (1).

The present appeal concerns an order of the Chamber Judge that those questions be tried upon

affidavit and consequential orders made on a summons seeking, inter alia, a declaration that the

respondent should be reimbursed out of the Legal Practitioners Fidelity Guarantee Fund in respect of

the $165,000 and other moneys representing costs. The grounds of appeal essentially allege that the

Chamber Judge erred in failing to conclude that leave of the council was necessary to bring the

summons. Leave had in fact not been sought or granted but it had been contended on behalf of the

respondent that it was not required where an application was made under s.25(6).

The Legal Practitioners Fidelity Guarantee Fund is established by s.12(1) of the Queensland Law Society Act. The fund is vested in the Society and is to be held in trust of the purposes in the Act (s.12 (2)). Subject to a power of delegation, the fund is to be administered by the council of the society

(s.17). Section 24, so far as is relevant for present purposes provides:-

"24.(1) Subject to the provisions of this Act, the fund shall be held and applied for the purpose of reimbursing persons who may suffer pecuniary loss through stealing or fraudulent misappropriation committed by a practising practitioner, or by the practising practitioner's clerk or servant, of any money or other property entrusted to the practising practitioner or to the practising practitioner's clerk or servant in Queensland

(a) in the course of the practising practitioner's practice;"

Section 24 (2) is as follows:-

"(2)Every action against the society in relation to the fund shall, subject to this Act and the

rules made thereunder, be brought in the Court."

Section 25(1) contains two elements. The first is that the council may receive and settle any

claim against the fund at any time after the commission of the stealing or fraudulent misrepresentation

in respect of which the claim arose. The second is that no-one may without leave of the council

commence "any action or other proceeding" against the Society in relation to the fund unless and until

the claimant has exhausted all relevant rights of action and other legal remedies available against the

practitioner in relation to whom the claim arose and all other persons liable in respect of the loss suffered

by such claimant. The words "or other proceeding" were inserted by the Queensland Law Society

Amendment Act 1974 which also inserted s.25(6) and (7). Those subsections provide a summary

procedure for determining questions of law and facts and for declarations of the rights of claimants,

subject to the court's discretion, by virtue of s. 25 (7), not to do so if there is a substantial dispute of fact

or if the court decides for some other reason that it ought not do so. Section 25(6) provides as

follows:-

"(6) A person who has made a claim under this Act against the fund and who is dissatisfied with the decision of the council in respect of the claim may apply to the Supreme Court or a Judge thereof for the determination in a summary manner of any question of law or of fact arising under the claim and for a declaration of the rights of the claimant."

Reference must also be made to s.25(1A) which authorises a person who has been refused leave

by the council to apply to the Chamber Judge.

The appellant submitted that the Chamber Judge should have found that an application under

s.25(6) is a "proceeding" against the appellant in relation to the fund and that the natural construction

of s.25(6) is that it is intended to facilitate summary proceedings in appropriate cases but only where

leave has been obtained under s.25(1). It was submitted that a consequence of leave not being

necessary would be that the evident purpose of s.25(1) of restricting proceedings to obtain

reimbursement out of the fund until all other remedies had been exhausted would be defeated.

The respondent submitted that as a claimant against the fund she was dissatisfied with a decision

of the council on the substantive ground that she was not within s.24 and was entitled without leave of

the council to apply to the Supreme Court for a determination of her entitlements. It was submitted that

the Chamber Judge was correct in interpreting s.25(6) as being independent of s.25(1).

The appellant's construction of s.26 is to be preferred. Section 25(1) contemplates receipt of

claims by council which it may settle at any time. Although it is not specifically stated there can be no

doubt that it could reject claims if, for example, a basis of entitlement had not been made out. There

is also no reason to suppose that council might not decide that a claim should be allowed but in a lesser

sum than that claimed. This is a process which allows questions of payment from the fund to be

determined without the need for legal proceedings to be commenced with respect to the subject matter

of the claim. Prior to the insertion of ss.25(6) and (7) a person whose claim had been decided by

council had no remedy, if dissatisfied, except by way of commencing an action. Leave of the council

was necessary to commence such action unless, having been refused, an application to the Chamber
Judge was successful (proviso to s.25(1), now cf present s.25(1A)).

The contemporaneous creation of a summary procedure by s.25(6) and (7) and the insertion in

s.25(1) of the words "or other proceeding" is a clear indication of the intention to subject an application

under s.25(6) to the same restrictions as an action. The proper construction of the relationship between

s.25(1) and (6) is that leave of council must be obtained to bring proceedings in the form of an

application under s.25(6) unless and until the claimant has exhausted all relevant rights of action and

other legal remedies available against the practitioner in relation to whom the claim arose and all other

persons liable in respect of the loss suffered by the claimant. A claimant under s.25(1) who is refused

such leave is protected from the consequences of an unjustifiable refusal by s.25(1A). An application

under s.25(1A) may be brought without leave of the council.

The respondent submitted, in the event that the Chamber Judge's view was found to be wrong,

that leave nunc pro tunc to proceed should be granted. It was submitted that it was appropriate to

allow the matter to proceed in accordance with the Chamber Judge's orders notwithstanding the

existence of the proceedings against Westpac. It was submitted that the respondent should not be put

to further trouble and expense by pursuing the action if the questions governing the right to

reimbursement from the fund could be easily resolved in summary proceedings. As against that, s.25

demonstrates that the fund is intended to be a place of last resort where a relevant loss cannot be

reimbursed from others who are liable in respect of it. Ordinarily it is appropriate to observe the policy

of the legislation.

One other matter which concerns the need to obtain leave rather than the granting of leave to

proceed is a submission that the action against Westpac is not a right of action against a person liable

in respect of the loss suffered by the complainant. By virtue of s.24(1) the fund is held and applied for the purposes of reimbursing persons who may suffer pecuniary loss through stealing or fraudulent

misappropriation of money entrusted to a practising practitioner or his clerk or servant in the course of

the practising practitioner's practice. The "loss" referred to in s.25(1) is that loss. The question is

whether Westpac is a person liable in respect of that loss. It is unnecessary for the purpose of deciding

this case and undesirable, because of the variety of circumstances which may occur, to attempt to define

the limits of s.25(1). However, where it is alleged that depositing the cheque in the Westpac account

and the subsequent crediting of the proceeds to that account is the means by which the stealing or

misappropriation occurred and it is alleged that Westpac is civilly liable to the appellant for facilitating

in this way the stealing or misappropriation which caused the loss, Westpac is a person liable in respect

of the loss suffered by the claimant within the meaning of s.25(1) if the allegations against it are proved.

Leave to commence proceedings under s.25(6) was therefore necessary but was not obtained.

For the reasons above the appeal is allowed. The order of the Chamber Judge is set aside. The

summons is dismissed with costs to be taxed. Leave nunc pro tunc to proceed is refused. The

respondent is ordered to pay the appellant's costs of and incidental to the appeal to be taxed. Upon

the respondent's application, an indemnity certificate in respect of the appeal is granted pursuant to s.15

of the Appeal Costs Fund Act 1973.