Rodney Naumburger in his capacity as Executor of the Estate of the late Harry Norman Freedman v Victor Berger

[2021] NSWSC 903

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Rodney Naumburger in his capacity as Executor of the Estate of the late Harry Norman Freedman v Victor Berger [2021] NSWSC 903

Hearing dates:

8 - 11 February 2021

Date of orders:

28 July 2021

Decision date:

28 July 2021

Jurisdiction:

Equity

Before:

Rees J

Decision:

Judgment for plaintiffs.

Catchwords:

PARTNERSHIPS – law firm – partner collects monies from client despite agreement with partners to write off fees charged in breach of Legal Profession Act – partnership dissolved by agreement – action against partner for misappropriated funds – partner keeps fees from clients – partner uses partnership monies without consent to pay for personal expenses and his wife’s salary – partner keeps monies from sale of premises – breach of fiduciary duties and failure to account.

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 56-58, 100

Legal Profession Act 1987 (NSW) ss 208J, 208KA-208NC

Legal Profession Act 2004 (NSW) ss 316, 548

Legal Profession Uniform Law Application Act 2014 (NSW) ss 70, 71

Partnership Act 1892 (NSW) ss 19, 24, 28, 29

Probate and Administration Act 1898 (NSW) s 61

Trade Practices Act 1974 (Cth)

Uniform Civil Procedure Rules 2005 (NSW) r 36.15

Cases Cited:

A Solicitor v Council of the Law Society of New South Wales [2013] NSWSC 921

Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461

Apand Pty Limited v The Kettle Chip Co Pty Ltd (1994) 52 FCR 474

Berger v Council of the Law Society of NSW (No 2) [2013] NSWSC 1131

Berger v Council of the Law Society of NSW [2013] NSWCA 278

Berger v Council of the Law Society of NSW [2013] NSWCA 336

Berger v Council of the Law Society of NSW [2013] NSWSC 1080

Berger v Council of the Law Society of NSW [2019] NSWCA 119

Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384

Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58

Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17

Calandra v Murden [2015] NSWCA 231

Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445; [2011] VSC 184

Chan v Zacharia (1984) 154 CLR 178

Counsel of the Law Society of NSW v Berger (No 2) [2018] NSWCATOD 4

Creak v James Moore & Sons Pty Ltd (1912) 15 CLR 426; [1912] HCA 67

Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084

Doyle v Hall Chadwick [2007] NSWCA 159

Fabre v Arenales (1992) 27 NSWLR 437

Frumar v The Owners – Strata Plan No. 36957 [2010] NSWCA 172

Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336

Huntington Copper Co v Henderson (1877) 4 R 294

Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23

In the matter of Courtenay House Capital Trading Group Pty Ltd (in liq) and Courtenay House Pty Ltd (in liq) [2018] NSWSC 404; (2018) 125 ACSR 149

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Law Society of NSW v Berger (No 1) [2017] NSWCATOD 137

Levy v Watt [2014] VSCA 60; (2014) 308 ALR 748

Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 510

McKensey v Hewitt (Supreme Court of New South Wales, 15 October 1997, unrep)

Patdith Services Pty Ltd v Mitronics Corporation Pty Ltd [2016] FCCA 1611; (2016) 310 FLR 86

Patdith Services Pty Ltd v Mitronics Corporation Pty Ltd [2016] FCA 1315

Payne v Parker [1976] 1 NSWLR 191

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134

Ronchi v Portland Smelter Services Ltd [2005] VSCA 83

Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98

Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24; (2019) 19 BPR 39,153

Wright v Lemon (No 2) [2021] WASC 159

Texts Cited:

Wigmore on Evidence (3rd ed, 1940), vol. 2

Category:

Principal judgment

Parties:

Rodney Naumburger in his capacity as Executor of the Estate of the late Harry Norman Freedman (First Plaintiff)
Adrian Rudy Freedman in his capacity as co-trustee of the MAHD MBBF Trust (Second Plaintiff)
Ty Matthew Freedman in his capacity as co-trustee of the MAHD MBBF Trust (Third Plaintiff)
Victor Berger (Defendant)

Representation:

Counsel:
Mr D Meyerowitz-Katz (Plaintiffs)
Mr V Berger (In Person) (Defendants)

File Number(s):

2013/327799

Judgment

1. HER HONOUR: This matter concerns the dissolution of a firm of solicitors known as Milne Berry Berger & Freedman (MBBF), being a partnership between the late Harry Freedman and the defendant, Victor Berger.

2. The first plaintiff, Rodney Naumburger, is the executor of Mr Freedman's estate. The second and third plaintiffs, Adrian and Matthew Freedman, are Mr Freedman's sons and trustees of the MAHD MBBF Trust, which owned Mr Freedman's share of the partnership. Mr Berger's share of the partnership was owned by the Berger MBBF Trust, of which Mr Berger is trustee. Mr Berger is sued both in his personal capacity and as trustee of the Berger MBBF Trust.

3. The plaintiffs seek relief in respect of Mr Berger’s appropriation of funds belonging to the partnership or Mr Freedman, being monies retained from the sale of office premises, fees collected from clients after dissolution but not paid into the partnership’s bank account, the use of partnership Bartercard points for the personal purchase of a property and paying a salary to Mr Berger’s wife.

SUMMARY

4. The plaintiffs are entitled to the relief sought. As will be seen, Mr Berger fell out with his partners in June 2011, when they objected in the strongest terms to him recording work in progress (WIP) and disbursements in respect of an elderly client, Mrs Domabyl, without having made a costs disclosure or entered into a costs agreement. Some of the tasks being attended to by Mr Berger were of a legal nature; most were not. Whilst Mr Berger acknowledged that Mrs Domabyl would be under the belief that she was not being charged, Mr Berger refused his partners’ request that he meet with Mrs Domabyl and regularise the matter as, if he told her how much she owed the firm (then some $76,000), she would likely withdraw her instructions and remove Mr Berger as executor of her Will.

5. The partners sought advice from the Law Society of New South Wales and, in September 2011, extracted a reluctant agreement from Mr Berger to write off all WIP in the Domabyl matter (the Write Off Agreement), in the absence of which the partnership would have been terminated. In breach of the Write Off Agreement and unbeknownst to his partners, Mr Berger continued to record time on the Domabyl matter, adding a further $100,000 in WIP.

6. In June 2012, also unbeknownst to his partners, Mr Berger rendered an invoice – not in the firm’s standard format nor recorded on its accounting system – to Mrs Domabyl’s family for $176,800.94. In his capacity as Mrs Domabyl’s attorney, Mr Berger then proceeded to sell Mrs Domabyl’s residence and arrange for $154,000 of the proceeds of sale to be paid to himself personally and the balance of the proceeds of sale to be paid into MBBF’s trust account. Mr Berger directed that the fees be paid to himself rather than the firm as he did not want Mr Freedman to know about it. Mr Berger had no doubt that his partners would tell him that he was not entitled to the money.

7. Still unaware of these events, in December 2012 the partners agreed to terminate the partnership (the Dissolution Agreement), bill their files, recover the fees and deposit the fees into a partnership bank account for the payment of creditors. As preparations for dissolution continued, Mr Berger also continued to transfer monies from Mrs Domabyl’s trust account, including to his son-in-law. In April 2013, MBBF’s trust account auditors detected the transfers, which ultimately brought the invoice which Mr Berger had rendered to Mrs Domabyl’s family to light. Mr Berger commenced proceedings against the auditors seeking to restrain them from continuing to conduct the audit.

8. Law Society investigations ensued and Mr Berger’s practising certificate was suspended. The partnership was terminated. The office premises in Gladesville were sold. Mr Berger took care of the conveyancing. Mr Freedman owned half of the property, but Mr Berger kept Mr Freedman’s share of the deposit and deducted an amount from Mr Freedman’s share of the net proceeds of sale for legal fees, notwithstanding the absence of a fee agreement or invoice. Mr Berger said he kept the money to ‘protect himself’. Where money has been stolen, it is trust money in the hands of the thief: Black v S Freedman & Co (1910) 12 CLR 105. As such, Mr Berger holds these monies on trust for Mr Freedman.

9. After these proceedings commenced, without the knowledge or consent of his former partners, Mr Berger applied on behalf of MBBF for the costs in the Domabyl matter to be assessed. The respondent to the application was the Estate. Mr Berger thus appeared on both sides of the record, being for the partnership and, as executor, for the Estate. He professed that he did not perceive that he was then acting in a position of conflict of interest, “I personally don’t comprehend what I should have done different to what I did. I’m happy to be enlightened … . I’m truthfully trying to understand the concept, and I’m just struggling.” He made no objection to the costs on behalf of the Estate. The costs assessor allowed the costs in full.

10. After Mr Freedman’s unexpected death, Mr Berger registered the certificate of determination of costs in the Domabyl matter in the District Court of New South Wales and garnisheed MBBF’s bank account, depositing the funds to a bank account of his company. He did so without the knowledge or consent of the plaintiffs. In his affidavit in support of the application for a garnishee order, Mr Berger affirmed made no reference to the fact that the fees were payable by the Estate of Mrs Domabyl to the partnership, nor that the bank account in respect of which the garnishee order was sought was the partnership’s account. Nor did Mr Berger refer to the fact that an order had been made in this Court that fees recovered by the partners be paid into the partnership account, nor that distribution of the funds in the account were the subject of these proceedings. Ironically, he used the funds to pay his legal costs of the disciplinary proceedings brought against him in relation to the Domabyl matter.

11. Having breached his fiduciary duties and thereby made a secret profit, Mr Berger is obliged to account to his fiduciary as to all of the fees: section 29 of the Partnership Act 1892 (NSW); Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 144-5 per Lord Russell; Chan v Zacharia at 198 per Deane J. The beneficiaries of Mrs Domabyl’s Estate may be entitled to the monies, or at least some of the monies, given the circumstances in which the certificate was obtained and judgment entered. This judgment will be provided to the beneficiaries in the event that they wish to make an application by interpleader for the funds, or part of the funds.

12. Contrary to the Dissolution Agreement, Mr Berger kept more than $500,000 in fees collected from clients of MBBF. He also used the partnership’s Bartercard Account to pay a deposit on a personal property purchase and paid his wife a salary for eleven years without Mr Freedman’s consent. He is obliged to account for these monies.

WITNESSES AND DOCUMENTS

13. The plaintiffs read two affidavits affirmed by Mr Freedman in October 2013. In addition, the plaintiffs relied on documentary evidence.

14. The defendants read several affidavits by Mr Berger and also relied on documentary evidence. A large portion of the evidence relied upon by Mr Berger was admitted subject to relevance. On review, much of this evidence appeared to relate to a cross-claim and related proceedings brought by Mr Berger’s companies, Patdith Services Pty Limited and Ahtram Pty Limited, in the Local Court of New South Wales but transferred to this Court. On 4 June 2019, Ward CJ in Eq granted leave for Mr Berger to discontinue the cross-claim and related proceedings. This judgment does not canvass this material unless it is relevant to the issues identified by the current pleadings, being the Further Amended Statement of Claim filed on 16 July 2019 (with a minor amendment made on 11 February 2021, without objection) and the Defence filed on 8 February 2021.

15. Mr Berger was cross-examined at length. He was a most unsatisfactory witness. Mr Berger presented as a softly spoken older gentleman but who raised his voice significantly from time to time. He gave evidence in a smooth, sometimes incoherent, patter, interspersed by insulting and acerbic remarks. He was argumentative, prone to speeches and offered self-serving comments where possible. He gave improbable explanations. His evidence was frequently disingenuous. He gave answers at odds with documents in front of him. Mr Berger blamed any errors or inconsistencies on others, including his secretary. I should say that Mr Berger’s demeanour improved on the morning of day three of the trial, when he made reasonable concessions, although his explanations remained difficult to accept. This did not last beyond the morning tea adjournment.

16. Mr Berger proved an evasive and elusive witness who led the plaintiffs’ counsel a merry dance. As one of his former partners, Mittu Gopalan, noted in a contemporaneous email, “when you have an objective to merely stall things; create diversions; and attempt to wear people down, such base behaviour as demonstrated by you is to be expected.” Mr Berger took every opportunity to make accusations of improper conduct by the plaintiffs or the plaintiffs’ lawyers. He appeared unperturbed by those who disagreed with him, including the Court of Appeal. Mr Berger was immune from criticism and proceeded undeterred. He was insightless. Mr Berger would say whatever he thought would assist him, without regard to its truth or falsity. I ultimately did not accept his evidence unless it was corroborated by a contemporaneous document, the evidence of another reliable witness, or evidence given against his own interest.

Jones v Dunkel

17. Mr Berger made a number of complaints regarding the absence of sworn evidence from the plaintiffs. In turn, the plaintiffs submitted that their access to the records of the partnership was limited, whilst Mr Berger’s access was unlimited, and any failure by Mr Berger to tender a document in support of his evidence or defence to a claim – notwithstanding the large amount of documentary material which Mr Berger did tender – would lead the Court to draw an inference that such documents as were available to Mr Berger would have not assisted the defendants: Jones v Dunkel (1959) 101 CLR 298 at 320; [1959] HCA 8.

Principles

18. In what follows, I have drawn heavily on Levine J’s elegant summary of the principles in Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 510 at [92] and following. The rule in Jones v Dunkel is that the unexplained failure by a party to give evidence, call witnesses or tender documents may in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted that party’s case. The rule does not permit the Court to infer that the uncalled evidence would have been damaging, nor to fill gaps in the evidence: Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084. If the failure to call the evidence is explained, the inference cannot be drawn. In Ta Lee Investment Pty Ltd v Antonios [2019] NSWCA 24; (2019) 19 BPR 39,153, it was sufficient explanation that the plaintiff no longer spoke to the missing witness: at [118], [137] per Bathurst CJ, Beazley P and Macfarlan JA. The witness may be “hostile”: Payne v Parker [1976] 1 NSWLR 191 at 202 per Glass JA. It may be the case that the witness would not be expected to co-operate by way of prior consultation or providing a proof of evidence, and a party is not obliged to call a witness ‘blind’ in order to avoid the inference being drawn against them: Fabre v Arenales (1992) 27 NSWLR 437 at 449-450 per Mahoney JA.

19. Before drawing the inference, the missing witness must be a person who it would be natural for one party to call; the witness might be regarded as “in the camp” of one party or “a witness likely to be friendly to the interests of the party”: Payne v Parker at 201-202 per Glass JA; Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343 per Kirby P with Mahoney and Clarke JJA agreeing. If the witness is equally available to both parties, the condition for drawing the inference usually stands unsatisfied: Payne v Parker at 202.

20. The inference may also be drawn in respect of the absence of documentary evidence to support a party’s case, where the party might be expected to be in possession of documents to corroborate their account: Jones v Dunkel at 320 per Windeyer J, citing with approval Wigmore on Evidence (3rd ed, 1940), vol. 2, page 162: “The failure to bring before the tribunal some circumstance, document or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party …”; Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 at [134] (Callinan J); Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 at [44] (Eames JA, with whom Buchanan JA agreed); Challenger Property Asset Management Pty Ltd v Stonnington City Council (2011) 34 VR 445; [2011] VSC 184 at [131]–[132] (Croft J); Sino-Resource Imp & Exp Co Ltd v Oakland Investment Group Ltd [2018] QSC 98 at [112] (Henry J).

Inferences in respect of witnesses

21. A non-equity partner of the partnership, Ms Gopalan, was not called. The plaintiffs accepted that she would have been Mr Freedman’s witness to call were he still alive and they still in partnership. However, since Mr Freedman’s death, the plaintiffs submitted that Ms Gopalan was by no means a witness who could be described as in the plaintiffs’ “camp”: Ms Gopalan washed her hands of the partnership on 6 April 2016; documents tendered by Mr Berger regarding his attempts to obtain documents from Ms Gopalan made clear that she was assisting neither party in this proceeding.

22. Having now reviewed all of the material relied upon by the parties, I agree that Ms Gopalan is not a person who it would be natural for the plaintiffs to call as being “in the camp” of the plaintiffs or “a witness likely to be friendly to the interests of the party”. Since Mr Freedman’s death, Ms Gopalan has sought to distance herself from the former partnership. Mr Berger has been incessant in his communications to Ms Gopalan in the years which followed, prompting her to threaten to obtain an apprehended violence order. Ms Gopalan’s appetite to have anything to do with these proceedings is, I expect, nil. I draw no inference from her absence from the witness box.

23. Mr Berger complained that the plaintiffs themselves did not come forward to give evidence, nor Ms Glass, Mr Freedman’s former wife and the plaintiffs’ present solicitor in this matter, nor Mr Stanford, the plaintiffs’ former solicitor. The plaintiffs submitted that this did not give rise to any adverse inference. The first plaintiff did have some involvement in the matters the subject of the dispute, insofar as he acted as the accountant for MBBF. However, there was no reason to infer that his evidence would have elucidated any matters in issue. There were no allegations with respect to poor record-keeping or the like. The second and third plaintiffs had no connection at all with any of the matters in this proceeding save for being Mr Freedman’s children and having been appointed as the trustees of the MAHD MBBF Trust after his death. There was no reason for the Court to conclude that their evidence would have had any significance.

24. The plaintiffs submitted that Mr Stanford only became involved in the matter after Mr Freedman’s death. His involvement was limited to working with Mr Berger to collect certain debts, as well as being the plaintiffs’ solicitor on the record in the proceedings. To the extent that his communications with Mr Berger and other persons regarding the debt collections were relevant, the communications were amply recorded in the correspondence in evidence. There was no basis to conclude that his evidence would have been of any further assistance. The only issue in relation to which Ms Glass’ evidence could have had any significance was in respect of Mr Berger’s discontinued cross-claim. Accordingly, the failure to call Ms Glass was of no moment.

21. I agree for the reasons advanced by the plaintiffs. The issues of accounting in these proceedings largely involve the records maintained by Mr Berger since the partnership dissolved. Nor is it necessary, in order to avoid a Jones v Dunkel inference, for a party to call an unnecessary witness: Apand Pty Limited v The Kettle Chip Co Pty Ltd (1994) 52 FCR 474 at 490. It is not clear to me what these witnesses would have been able to say relevant to the issues I have to determine.

Inferences in respect of documents

26. The sheer volume of documents relied upon by Mr Berger – both relevant and, more often, irrelevant – together with Mr Berger’s superior access to the records of the partnership when compared with the limited and disjointed access enjoyed by the plaintiffs does lead me to draw an inference that, where Mr Berger failed to tender a document in support of his evidence or defence, such documents as are available to him would not have assisted him. This inference is particularly important where Mr Berger said that he had already accounted to the partnership for particular items but no bank statement, accounting entry or contemporaneous document corroborated his evidence.

FACTS

27. A review of these pleadings reveals that the parties agree on a significant number of facts and principles.

The partnership

28. Mr Freedman and Mr Berger were solicitors. From 1997 until 2010, Mr Freedman and Mr Berger conducted a legal practice known as “Milne Berry & Berger” (MBB) in partnership.

29. In 2000, Mittu Gopalan joined the firm and, in 2008, became a non-equity partner. The partnership continued thereafter as MBBF, with Mr Freedman as trustee of the MAHD MBBF Trust and Mr Berger as trustee of the Berger MBBF Trust as equity partners and Ms Gopalan as a salaried partner.

30. From 1 March 2002 on, Mr Berger also caused a weekly wage to be paid by MBBF to his wife. I will return to this at [246].

31. The firm operated from its main office in the city and an office in Gladesville. Both office premises were owned by Mr Freedman and Mr Berger, either in their own names or through corporate entities. I will return to the Gladesville property at [154].

32. The firm had three practice groups. Mr Freedman conducted the family law section and most of the litigation practice. Ms Gopalan conducted a debt recovery practice. According to Mr Freedman, Mr Berger operated virtually his own practice, which included the conveyancing department, various litigation matters and primarily commercial and property matters. Prior to the dissolution of the partnership in June 2013, Mr Freedman said that Mr Berger had very little work which was income-producing: his conveyancing transactions were his personal matters; some of the large files he was working on were matters of a personal nature.

Partnership obligations

33. There is no evidence that a written partnership agreement existed. Accordingly, as the plaintiffs submitted and Mr Berger did not demur, the partnership was governed by the general law of partnership, as modified by the Partnership Act 1892 (NSW), and subject to any variation, whether express or inferred from a course of dealing: Partnership Act section 19; Chan v Zacharia (1984) 154 CLR 178 at 196 (Deane J). Both equity partners were jointly and severally liable for all the debts and obligations of the firm (Partnership Act, sections 9, 10 and 12). Both were entitled to share equally in the capital and profits, and liable to contribute equally to the losses: Partnership Act section 24(1)(1).

34. There was no dispute that Mr Berger owed fiduciary obligations under the partnership agreement to Mr Freedman (and his successors) to act in good faith and in the best interests of the partnership; not to use his position as partner to obtain a benefit for himself or another person, without the fully informed consent of Mr Freedman; and not to use his position as partner to cause detriment to Mr Freedman, without the fully informed consent of Mr Freedman. The same obligations were owed by Mr Freedman to Mr Berger. The partners were in a fiduciary relationship and, as such, owed reciprocal fiduciary obligations: Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384 at 407-408 (Dixon J).

35. One consequence of the fiduciary relationship was that each partner was liable to account to the other partner for any benefit or gain obtained or received in circumstances where a conflict or significant possibility of a conflict existed between the partner’s fiduciary duty and the partner’s personal interest; or by reason of the partner’s fiduciary position or of opportunity or knowledge resulting from it: Chan v Zacharia at 199 (Deane J).

36. There was no dispute that, under the partnership agreement, Mr Berger was obliged to diligently maintain the time recording records of the partnership to reflect work properly performed by him and staff under his supervision and control; to issue, in a timely manner, tax invoices on behalf of the partnership for fees for legal services provided to, and for disbursements incurred on behalf of, clients of the partnership in respect of matters under his control; to seek payment from clients in respect of tax invoices issued by the partnership in respect of matters under his control; to account to the partnership and to deposit into the appropriate partnership bank account all monies received from clients; to render true accounts and full information of all things affecting the partnership to Mr Freedman; and to account to the partnership for any benefit derived by Mr Berger without the consent of Mr Freedman from any transaction concerning the partnership, or for any use by Mr Berger of the partnership property, name, or business connexion.

37. There was no dispute that, under the partnership agreement, Mr Berger was obliged to comply with the Solicitors Rules issued from time to time by the Law Society of New South Wales; comply with undertakings given to the Law Society; take proper care in the conduct of client matters and properly act in the interests of clients in respect of their matters under his control and in respect of staff acting on and conducting client matters under his control; not to ‘over service’ clients when providing legal services to clients; not to ‘over charge’ clients in respect of legal services provided; and to conduct clients’ matters consistent with his overarching obligation to the court under sections 56 to 58 of the Civil Procedure Act 2005 (NSW).

Acting for Mrs Domabyl

38. The seeds of destruction of the partnership were sown in early 2005, when Mr Berger acted for a client named Mrs Domabyl, preparing her Will. Mr Berger was the responsible partner for Mrs Domabyl’s file. Whilst Mr Berger gave Mrs Domabyl a quote for some $2,000, he did not provide a costs disclosure or enter into a costs agreement. Mr Berger said, “as I understand it, in those circumstances, no costs agreement is required.” How Mr Berger could say this given subsequent disciplinary proceedings in respect of the Domabyl matter is unfathomable.

39. In May 2007, Mr Berger wrote to Mrs Domabyl, advising that he would be willing to be paid fees and disbursements for the work he was doing for her from her Estate. In 2007, Mr Berger was appointed by Mrs Domabyl as her attorney. Mr Berger said that Mrs Domabyl’s former husband lived in Prague, “her son had abandoned her” and her daughter only “rang her from LA”.

40. In 2008, Mr Berger was issued a caution by the Office of the Legal Services Commissioner of NSW for taking instructions from a client when she lacked capacity to give instructions. In March 2009, after a disciplinary investigation regarding a complaint against Mr Berger, he gave an undertaking to the Legal Services Commissioner to comply with his statutory obligations to disclose the basis of his costs in all matters in which he was retained. Mr Berger said these two matters “arose from a practice I had in those kinds of cases to wait until I knew where the matter was heading, and that’s the reason those two occurred as they did.”

41. On 13 July 2009, Mr Domabyl executed her Will, appointing Mr Berger and Michael Green as executors. Mr Green was an accountant and Mr Berger’s colleague of many years.

Bartercard points

42. The partnership had a “Bartercard” account and could earn or be paid “Bartercard” points and use those points in accordance with the “Bartercard” system, as operated by Bartercard Services Pty Limited. From time to time, MBBF accepted Bartercard points in lieu of fees for services to clients, at the rate of 1 point for each dollar of fees.

43. In January 2009, Mr Berger purchased a property in Pitt Street, Sydney. He paid the deposit by transferring Bartercard points from the partnership’s Bartercard account to the vendor. More specifically, on 27 November 2008, 34,600 Bartercard points were transferred from the partnership’s Bartercard account to the vendor of the property, incurring trade fees, cash fees and GST of $2,473.90. On 19 December 2008, a further 34,600 points was transferred to the vendor of the property, incurring the same trade fees, cash fees and GST. On 21 January 2009, the property was transferred to Mr Berger in consideration for $346,000.

44. The parties agree that Mr Berger’s use of the partnership’s Bartercard points to pay the deposit for the purchase of the property was done in his capacity as a partner and for Mr Berger’s own personal benefit. I will return to the Bartercard points at [240].

Partners become concerned

45. In early 2011, Mr Freedman raised concerns with Mr Berger in relation to the fees accruing on Mrs Domabyl’s file, including that substantial WIP was being recorded but Mr Berger had not issued a costs agreement, notwithstanding Mr Berger’s undertaking to the Legal Services Commissioner.

46. Mr Berger agreed that he did not discuss the matter with Mrs Domabyl at the time, despite his partners having raised the issue with him, because he thought that she would terminate his retainer.

A.   I was concerned because of her character that she would end up with nobody looking after her. … Out of anger, she would say things that, I guess, subsequently she might regret, because she had no‑one else at that time to take care of her and I knew that she appreciated what I was doing, and I knew that the family appreciated what I was doing. And she would have no‑one at all.

…

Q.   As a very intelligent, strong-minded woman, your impression was that if you gave her a cost disclosure, she may become angry and terminate the retainer, or break off the relationship with you?

A.   Yes.

Q.   And that was why you didn’t issue the costs disclosure, despite your partners continuously asking you to do so?

A.   Yes. …

47. Mr Freedman also became concerned that there were regular complaints being lodged against the firm by Mr Berger’s clients in respect of overcharging and failing to issue costs agreements or updated costs agreements. There were perhaps a dozen matters where fees charged by Mr Berger were lodged for a costs assessment and substantial reductions were made by the costs assessor. On a number of occasions, not only did the assessments significantly reduce the amount of fees payable by the client, but the firm became obliged to pay the filing fees and the assessor’s costs. Despite discussion, these issues continued unresolved. Certainly, emails between the partners at this time indicate that relations were poor.

A partners’ meeting

48. In June 2011, a partners’ meeting was held. The agenda included Mr Freedman’s “real concern” caused by three costs assessments that had come into the office that day. Mr Berger had not issued a costs agreement in the matters and a significant amount of fees had been disallowed on assessment. In addition, critical remarks had been made about the firm in respect of its failure to make proper disclosure.

49. At the meeting, Mr Freedman and Ms Gopalan raised their concerns about the Domabyl matter. According to Mr Freedman’s later email of 26 September 2011:

You asked, “what do you want me to do?” I said you should go and meet with her and tell her what you understood the fee arrangement to be, (or words to that effect). Your reply was, “if I do that she will withdraw instructions, is that what you want?” I said I don’t care.

I left this meeting on the understanding that from that point on you would not charge for your time.

50. Mr Berger denied saying the words attributed to him in Mr Freedman’s email but agreed that, by this time, Mr Freedman had made it quite clear that he was concerned about the way that Mr Berger was charging Mrs Domabyl.

Getting advice

51. On 20 June 2011, Mr Freedman suggested to Mr Berger that they get advice from a member of a Law Society committee, Richard Gulley, in respect of Mrs Domabyl, being an issue about which they were in “serious disagreement”. Mr Freedman expressed the opinion, which he noted Mr Berger did not share, that the failure to disclose in these circumstances breached the Legal Profession Act 2004 (NSW) and may amount to professional misconduct. Mr Freedman proposed that they give Mr Gulley some background facts, including:

[Mrs Domabyl] does not know that there will be charges made against her estate for … legal services of an amount at present $76K. … If you did inform her of what she owes us she is likely to withdraw her instructions (subject to capacity) and also remove you as executor

52. Mr Freedman wrote to Mr Berger that he believed that, as executor, Mr Berger had a duty to the beneficiaries of Mrs Domabyl’s Estate not to pay fees unless the costs had been assessed. The costs of assessment would be payable by the firm given the absence of any costs disclosure, and Mr Freedman expected that significant WIP would be written off.

I have raised all of these issues with you previously … You have on each occasion disagreed with my interpretation …

I feel that the financial position and reputation of our firm is at risk, and the consequences are all so foreseeable … I feel terribly sorry for an old lonely demented woman, who does not know what is going on. Your time recording indicates that you have spent a huge amount of time with her, dozens and dozens of visits yet for all the goodness that that achieves, you have felt that you do not want her to know you are charging for these efforts, the ironic thing is that had you told her in the beginning she may well have been prepared to accept the cost and there would be no argument. Instead, the inference arises that you did not want her to know

53. In about August 2011, Mr Berger was issued with another caution by the Legal Services Commissioner for failure to disclose a substantial change to an estimate given in the initial costs agreement with a client, in contravention of section 316 of the Legal Profession Act 2004 (NSW).

54. Mr Berger agreed to seek Mr Gulley’s advice. On 8 September 2011, Mr Gulley provided his opinion in respect of Mrs Domabyl: the requirements of the Legal Profession Act 1987 (NSW) had not been complied with, where failure to comply was capable of being unsatisfactory professional conduct or professional misconduct; the responsibility to disclose rested with Mr Berger; the costs could be assessed, and Mr Gulley had no doubt that the firm would be liable for the costs of any assessment, “I would imagine the beneficiaries would be pressing for this to happen.”

Write Off Agreement

55. On 23 September 2011, Mr Freedman and Ms Gopalan wrote a letter to Mr Berger regarding Mrs Domabyl. The letter was not given to Mr Berger but nonetheless reflected Mr Freedman and Ms Gopalan’s views at the time. According to the letter, they had spoken with two members of the Law Society, who considered the matter to be extremely serious and had suggested two options. First – being the option preferred by Mr Freedman and Ms Gopalan –the firm waive all charges presently recorded in the Domabyl matter and Mr Berger stand aside as her executor, with Mr Berger to return any monies that he had received from her, either as a gift or as fees that had been charged and paid. Second, if Mr Berger did not agree, the partnership should be terminated.

56. The partners met that day to discuss the Domabyl matter. Mr Berger accepted that Mr Freedman and Mrs Gopalan told him that he had to issue a costs agreement to Mrs Domabyl or the WIP recorded on Mrs Domabyl’s file would have to be written off. According to Mr Berger, Mr Freedman said, “How would you feel if your name appeared in the newspaper as having charged a demented old lady fees without disclosing it to her? And you would be sitting in a synagogue; think about how Judy and your children would feel in synagogue if people saw that in the paper that day.” According to Mr Freedman’s later email, at the meeting, “We agreed on Friday [23 September 2011] that the charges would be written off. I felt relieved”.

57. On Sunday, 25 September 2011, Mr Berger sent an email to Mr Freedman agreeing that it was likely that he had not made proper disclosure. Further:

I do not cavell [sic] with the proposition that she, in her state of mind, would be under the belief she was not being charged.

However, as to the suggestion that the claim for fees be reversed, Mr Berger said he was unhappy that the Estate not pay fees at all and suggested that the costs be assessed, but at a lower hourly rate than his usual rate.

58. On Monday, 26 September 2011, Mr Freedman replied that Mr Berger’s proposition was not acceptable, “because the impropriety has not been eliminated.” Mr Freedman considered that charging Mrs Domabyl “without explaining to her that she or her estate will be charged is simply morally and legally wrong.” Mr Freedman expressed concern that he and Ms Gopalan would be liable to a charge of misconduct on being aware of the situation and not acting appropriately. He considered that Mr Berger’s actions may be fraudulent and possibly criminal, noting “I feel too strongly that what has occurred is wrong [and] I do not wish to benefit from it … Either you agree to write off the charges and clearly document that” or provide written advice from the Law Society confirming that Mr Freedman and Ms Gopalan would not be liable for any sanction. “If you can’t or won’t do that then I do not see that we can continue in Partnership and run the risk of being prosecuted and/or sued.”

59. Mr Berger did not budge from his proposal and suggested they seek a second opinion. Mr Freedman did not agree, and suggested Mr Berger seek a ruling from the Law Society on the matter, noting:

… the impropriety in continuing to charge Mrs Domabyl when she doesn’t know you are doing so is still something that I find unacceptable. I also believe you should have a conversation with her and tell her what you are doing. I don’t know her state of mind but at least you will be seen to be trying to bring it to her attention

In any event I thought we had an agreement on Friday and I don’t see why we are having to re-canvas the issue again.

What is being done here is simply wrong …

60. Ms Gopalan responded likewise, confirming that, at the meeting on 23 September 2011, Mr Berger had confirmed that he would “waive all the fees charged to date in this file considering that there is no costs agreement”. Ms Gopalan noted that, when they met on 23 September 2011, “we were quite up front and asked you to waive the entire WIP amount relating to this file. You immediately agreed to it and it is truly disappointing and disheartening to receive this email since.”

61. On 29 September 2011, Mr Berger emailed his partners advising that he was not changing what had been agreed on 23 September 2011 but continued, “I am willing to act on the agreement and simply for my own interests take opinions. If that is how this should be left I accept that though suggest on her death I see if I can negotiate something for us.” As a portent of things to come, on 30 September 2011, Mr Berger emailed his partners again, denying that he had said the matters attributed to him at the meeting on 23 September 2011, “but say in brief I have not changed my position as to the[re] having been a majority decision which I accepted even though I did not agree with it.”

60. In a further effort to extract clarity, on 1 October 2011, Mr Freedman emailed Mr Berger, noting that he had read all of the recent emails passing between the partners.

I choose not to comment on any issue other than what we have all agreed last Tuesday re domabyl, and that was th[at] the partnership agreed that all billable wip is to be written off and no further billable time is to be recorded

I record that you did not agree with this personally but accepted that for the concerns that mittu and I expressed, this was the partners decision

Please confirm so I can maintain a record of this decision

63. Mr Berger promptly responded:

Agreed!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

64. Three minutes later, Mr Berger again emailed: (emphasis added)

The firm has decided any further work is not to be billed and past work written off. I ask that the time be recorded.

There was no reply. Mr Berger accepted that, by the exchange of emails on 1 October 2011, Mr Freedman and Mr Berger agreed that all billable WIP on Mrs Domabyl’s file would be written off (Write Off Agreement).

65. It is clear from these emails that, at a meeting with his partners on 23 September 2011, Mr Berger agreed to write off the fees in the Domabyl matter, then sought to re-negotiate the matter but ultimately accepted what had been agreed. It is plain that, had he not agreed, Mr Freedman and Ms Gopalan would have proceeded to terminate the partnership, including because they were concerned as to their personal exposure resulting from Mr Berger’s conduct.

66. Notwithstanding the Write Off Agreement and unbeknowns to his partners, Mr Berger never relinquished the prospect of negotiating a payment with Mrs Domabyl’s Estate in the future. In cross-examination, Mr Berger said, “I had always maintained that I was prepared to write-off when it was at later stages but keep the records so I could bill them afterwards.” Mr Berger said he did not express any intention to charge the client for the fees and write them back, but said that this was understood. “It’s not being billed at the time that it’s recorded, but it’s recorded for future use.”

67. Mr Berger soon breached the Write Off Agreement. On 16 January 2012, Mrs Gopalan sent an email to Mr Berger and Mr Freedman, “Any reason, why wip is being recorded in this file [Domabyl] in spite of what was agreed? $5,752 is the outstanding WIP after having written off $113,000 plus.” On 23 January 2012, Mr Berger replied, “Was in error”. It was no error; Mr Berger recorded an additional $100,000 in WIP after the Write Off Agreement. Mr Berger’s insistence on recovering these fees from Mrs Domabyl’s Estate notwithstanding the Write Off Agreement proved his undoing, leading to the end of the partnership and, ultimately, his legal career.

68. On or about 15 March 2012, Mr Berger gave a further undertaking to the Legal Services Commissioner that he would comply with his statutory obligations to disclose the basis of costs in all matters in which he was retained.

Sending a bill anyway

69. On 5 June 2012, notwithstanding the Write Off Agreement, Mr Berger wrote to Mrs Domabyl’s ex-husband and son on the firm’s letterhead, noting that he had been handling Mrs Domabyl’s affairs for some time, which had involved him in a considerable variety of work which had not normally been his practice to do other than if he was called upon to do so by an elderly relative or friend. Mr Berger enclosed a schedule covering the period from 19 March 2009 on “prepared in accordance with the records we must keep according to the obligations of the Legal Professions [sic] Act to record the date of each item of work and the description.” Fees and disbursements, including GST, totalled $176,800.94. Whilst acknowledging that some of the work could have been done by a person at lower rates, Mr Berger suggested in his letter that the person had to be someone “abreast of all issues and able to respond to her on the spur of the moment. Not least, although she had confidence in me, I came to be familiar with the lash of her tongue.”

70. The ex-husband and son’s views were sought on how much of the fees and disbursements should be paid, “we would be prepared to wait until the death of Mrs Domabyl … [but n]ow that she has liquidated her assets she has substantial funds which do not put in doubt the ability to provide for her for the rest of her life, we would prefer to be relieved of carrying outstanding fees and disbursements.”

71. The distinct impression conveyed by Mr Berger’s letter was that the firm was entitled to payment, including by reason of the Legal Profession Act. This was a remarkable thing to suggest when Mr Berger had the benefit of Mr Gulley’s opinion and the forthright views of his partners to the contrary and, further, that he had agreed with his partners not to charge Mrs Domabyl at all.

72. Mr Berger agreed that Mrs Domabyl was no long able to comprehend such a matter. Nor did he communicate with the beneficiaries of Mrs Domabyl’s Estate.

73. The enclosed fee schedule contained details of tasks for which Mr Berger sought payment, being often not of a legal nature, such as calling Mrs Domabyl each day to see how she was; telephone calls to her doctors, her bank (regarding missing bank statements) and attending to payment of her bills. Charges were made for calling Foxtel to get Mrs Domabyl’s telephone fixed ($420); “conference with you to your current state of health and relationships” ($375); discussing whether Mrs Domabyl should have an operation ($90); discussing her admission to hospital and whether to tell her son ($112.50); telephone call from Mrs Domabyl asking him not to let her son know if she died ($150); urging Mrs Domabyl to go into a nursing home ($787.50); cleaning out her retirement village and making arrangements to transfer her to hospital ($2,100); attendance at the retirement village to collect her clothes ($300); attending at the retirement village for her jacket then the hospital for her discharge and taking her back to the retirement village ($1,537.50); on finding Mrs Domabyl in the bathroom having fallen over the previous night, calling an ambulance and attending hospital ($1,800). Some legal work also appears to have been done, including drafting codicils to her Will. Some tasks appear to have related to Mr Berger’s role as attorney.

74. Mr Berger explained, “But it was in that period that the husband and the son were wanting to persuade me to have her euthanised …”.

75. On 22 June 2012, Mr Berger issued a tax invoice in the Domabyl matter for $176,800.94. Mr Berger forwarded the tax invoice to Mrs Domabyl’s ex-husband and son under cover of a letter on the firm’s letterhead. A response was sought to the letter of 5 June 2012. Again, the representation was made that the law firm was entitled to payment of the fees, in circumstances where Mr Berger well knew that it was not.

76. Mr Berger agreed that he did not tell his partners that he was issuing an invoice in the Domabyl matter nor tell them afterwards that he had done so but maintained, “All the procedures were followed with these bills as with any other bills.” This was untrue. According to Mr Freedman, the invoice was not in the firm’s standard format (that certainly appears to be the case), did not have a tax invoice number, an account number or the firm’s Australian Business Number and was not recorded in the firm’s records. Mr Berger blamed the difference on his office staff, “I didn’t engage in – the secretaries would determine it, and the office manager supervising, as to what form things took in the area of accounting.”

77. Although the invoice did not have an invoice number, as would ordinarily be generated if the invoice was issued using the LEAP system used by the firm, Mr Berger did not agree that the invoice had been issued outside the LEAP system. “It was in the LEAP system, as far as I’m aware.” This is unlikely. It is more likely that Mr Berger prepared the invoice outside the firm’s standard billing records as he apprehended that his partners would be ill-pleased to find that, contrary to his agreement with his partners not to charge any fees in the matter, he was proceeding to do just that.

Obtaining payment of the bill

78. On 31 August 2012, Mr Berger caused Mrs Domabyl’s residence to be sold using his power of attorney. Mrs Domabyl did not then have the capacity to give, and did not give, instructions to Mr Berger in relation to the sale of her residence. On 3 October 2012, the purchaser’s solicitors sent a letter to MBBF enclosing the transfer and requesting it be executed and returned.

79. On 4 October 2012, Mrs Domabyl passed away. Pursuant to section 61 of the Probate and Administration Act 1898 (NSW), all of Mrs Domabyl’s real and personal estate was deemed to be vested in the NSW Trustee until probate was granted. Her death also had the effect that the power of attorney ceased to have effect. Mr Berger said that he did not know that Mrs Domabyl had died until 5 October 2012 “but I signed the transfer on 4 October, and instructed my secretary to do what you would normally do [with] it.” On 9 or 10 October 2012, Mr Berger wrote to the purchaser’s solicitors enclosing the certificate of title and the registered power of attorney under which Mr Berger had signed the transfer.

80. On 11 October 2012, Mr Berger provided cheque directions to the purchaser’s solicitors including:

1. a bank cheque in favour of Mr Berger for $154,000;

2. a bank cheque in favour of MBBF for $6,624.49; and

3. the balance of the proceeds of sale, being $188,805.72, to be paid into MBBF’s trust account.

Mr Berger did not tell Mrs Domabyl’s ex-husband or son that he was directing monies to himself. Mr Berger’s partners had no idea.

81. On 12 October 2012, the sale of Mrs Domabyl’s residence completed. The monies were paid in accordance with the cheque directions, including $154,000 to Mr Berger personally. Mr Berger agreed that there was no invoice issued to Mrs Domabyl at that time, either in his capacity as her solicitor, attorney or executor, for $154,000. Mr Berger said that he directed that the fees be paid to himself rather than the firm as Mr Freedman had disavowed any entitlement to the costs and Mr Berger did not want Mr Freedman to know about it. Mr Berger had no doubt that his partners would tell him that he was not entitled to the money.

Dissolution Agreement

82. By November 2012, discussions were underway between the partners to “split”. Mr Freedman and Ms Gopalan remained unaware of Mr Berger’s recent sale of Mrs Domabyl’s property and payment of part of the proceeds of sale to himself and the firm.

83. The partners met on 4 December 2012 and agreed to terminate the partnership. Mr Freedman and Mr Berger agreed that, on dissolution (Dissolution Agreement):

1. all files should be billed for all WIP recorded;

2. the team responsible for each matter would take steps to recover fees and would pursue debtors; and

3. all recovered fees would be deposited into a joint MBBF bank account for the payment of creditors.

84. It was initially agreed that the partnership would be terminated on 31 December 2012, but Mr Berger pushed the dissolution back until 31 March 2013 and it was not until June 2013 that the termination ultimately took effect.

85. The parties agreed that, under the partnership agreement, the Dissolution Agreement and section 28 of the Partnership Act, the partners were bound to render true accounts and full information of all things affecting the partnership to their partner and successors (including the plaintiffs). Mr Berger accepted that he owed fiduciary obligations to Mr Freedman under the Dissolution Agreement as he had under the partnership agreement (described at [34]-[35]).

86. As the plaintiffs submitted, and Mr Berger did not demur, the fiduciary relationship between Mr Berger and Mr Freedman continued after the dissolution of the partnership, in that each partner “remained under a fiduciary obligation to co-operate in and act consistently with the agreed procedure for the realization, application and distribution of partnership property”: Chan v Zacharia at 197 (Deane J).

Transferring funds from Mrs Domabyl’s trust account

87. On the same day as the Dissolution Agreement, Mr Berger caused $1,540.92 to be transferred from the MBBF trust account, where it had been held to the order of Mrs Domabyl, to the MBBF office account.

88. On 25 January 2013, Mr Berger caused $20,000 to be transferred from Mrs Domabyl’s trust account to his son-in-law. Mr Berger agreed that this was another example of directing payment to himself without informing Mr Freedman or Ms Gopalan. He did this because he knew that his partners would say that he was not entitled to the money and he believed himself to be entitled to take money because he thought that Mr Freedman owed him something.

89. As preparations for the dissolution of the partnership progressed, on 28 March 2013 Mr Freedman noted in an email to Mr Berger, “You have $729,000 in unbilled wip not taking into account what you have written off in say Domabyl which was around $150,000 as I recall …”. This email confirms that Mr Freedman was then unaware that the Write Off Agreement had not been observed.

Trust account audit

90. In April 2013, the firm’s external accountants, Myers & Naumburger Services Pty Ltd, commenced their annual audit of MBBF’s trust account. Myers & Naumburger had acted as the firm’s accountants and auditors for some 15 years. On 12 April 2013, the auditors sent an email to Mr Freedman, Mr Berger and Ms Gopalan requesting information about the $20,000 paid from the Domabyl trust account to Mr Berger’s son-in-law. This prompted a query from Mr Freedman as to how this payment had occurred.

91. Mr Berger advised Mr Freedman that Mrs Domabyl’s family had agreed that the firm’s fees be paid for the work Mr Berger had done before Mrs Domabyl died. “The monies over which you objection to receive any of and declined my offers of payment when oi collected same. I have received the bulk of the money form the estate. I have the records and you are welcome to see them.” (typographical errors in original)

92. Mr Freedman responded that this was “extremely disturbing”. Further, “You did not inform me and I assume you did not inform Mittu either, as partners of the firm that this was being done, and we would only have been made aware because of [the] audit.” Mr Freedman noted, “I cannot see any account issued with respect to legal fees being issued … and in any event the legal services were provided by the firm and therefore ought to be paid to the firm.” (This is consistent with the evidence, earlier canvassed, that Mr Berger did not enter the invoice into the firm’s LEAP system at the time.)

93. Whilst Mr Freedman noted that Mr Berger said that the family had agreed to pay the firm’s fees, “it is not up to the family but rather those who would be deprived of that amount by you taking it, namely the beneficiaries.” Mr Berger’s confirmation was sought that the beneficiaries had given their informed consent:

By informed I mean, did you explain to them that you did not issue a proper costs agreement … Did you explain that the estate had the right and entitlement to have any account for legal services assessed? And did you inform them that you had no conversation with Mrs Domabyl in which you told her that all your visits and all your phone calls etc were being charged for?

94. Mr Freedman also referred to the Write Off Agreement, noting “On no occasion did I agree, nor do I recall Mittu agreeing that you could or would charge for legal services. You were not entitled to do so and you should not do so. … You agreed that you would not charge legal fees, and I (and I assume Mittu) relied on that assurance and did not take the matter further …”.

95. In an email in reply, Mr Berger agreed that he did not inform Mr Freedman or Ms Gopalan of the $20,000 payment but contended that his partners had persuaded him to “defer claiming the fees, but [I] never said I would not claim them”. He otherwise disagreed with Mr Freedman.

96. On 22 April 2013, Mr Berger transferred a further $14,341.55 from the Domabyl trust account to the MBBF office account. Mr Berger agrees that the monies were transferred without any legal authority.

97. On 29 April 2013, Mr Freedman sent an email to Mr Berger, noting that his answers regarding the trust account issues were unsatisfactory, “you have established a history of taking financial advantage of elderly, infirmed and isolated elderly women for your personal financial advantage just leaves me flabbergasted and disgusted.” On 5 May 2013, Mr Berger replied that he had never agreed that he would not claim the fees and made no secret of this. This was obviously untrue.

98. On 9 May 2013, the auditors again requested information from Mr Berger in respect of the $20,000 withdrawal from the Domabyl trust account. Mr Berger forwarded his earlier emails with Mr Freedman on the subject. On 13 May 2013, the auditors noted that their interpretation of the emails between Mr Berger and Mr Freedman was “no authority was in place to support withdraw[a]l of the various trust monies queried” but sought written confirmation prior to finalising the auditor’s report to the Law Society. Written confirmation was not forthcoming. Instead, Mr Berger advised the auditors on 16 May 2013 that he did not agree with them.

99. Mr Freedman pressed his partner to produce documentation, noting that he had been through the files, “I could see no account for $20000 in Domabyl which was your explanation for taking the money out of the trust account for ‘your legal fees’”. Ms Gopalan asked the auditors to advise when the deadline for their report was to be lodged and Mr Berger asked her to “Please cease such communications. … It is improper …”

100. On 27 May 2013, Mr Berger finally provided his partners with the invoice in the Domabyl matter, referred to at [75]. Mr Berger also disclosed that he had taken a further $150,000 from the proceeds of sale at the time of settlement.

101. On 28 May 2013, Mr Berger sought Mr Freedman’s agreement to terminate the appointment of the auditors, failing which Mr Berger advised that he would seek injunctive relief from the Court. Mr Freedman declined to terminate the appointment of the auditors, “It seems to me our auditors have been extremely thorough and professional in their duties disclosing transactions that you have not advised your partners of.”

Law Society investigation

102. On 29 May 2013, Mr Berger commenced proceedings against the auditor and obtained an order restraining continuation of the audit. Following that order, and as a consequence of communications between the auditors and the Law Society, the Law Society appointed a trust account inspector, Jim Sofiak, who attended MBBF’s offices for two weeks and prepared a report.

103. On 17 June 2013, Mr Sofiak provided his report to the Law Society. Mr Sofiak concluded inter alia that there was a deficiency in the MBBF trust account of $205,258.86 which had been wrongfully remitted out of the trust account by Mr Berger. Mr Sofiak recommended that Mr Berger’s practising certificate be suspended immediately and a receiver be appointed to the practice.

End of partnership

104. In light of Mr Sofiak’s recommendation, on 20 June 2013, Mr Freedman sent a notice to Mr Berger dissolving the partnership on and from 21 June 2013. The parties agree that the partnership was dissolved as from 21 June 2013. On 21 June 2013, Mr Berger paid $205,258.86 into the MBBF trust account, being the deficiency identified in Mr Sofiak’s report.

105. Mr Berger continued to practise after the dissolution under the name “Milne Berry & Berger” (MBB).

106. On 1 July 2013, the Law Society resolved to suspend Mr Berger’s practising certificate under section 548 of the Legal Profession Act and to appoint Richard Flynn as Manager of MBBF’s trust account. On 5 July 2013, Mr Berger commenced proceedings appealing the Law Society’s decision. Mr Berger sought a stay of the decision and, on 11 July 2013, a stay was granted: A Solicitor v Council of the Law Society of New South Wales [2013] NSWSC 921 per Schmidt J. On 19 and 22 July 2013, an expedited hearing of Mr Berger’s appeal against the Law Society’s decision was heard by
     Beech-Jones J.

Sale of the Gladesville property

107. The Gladesville office was in Victoria Road, Gladesville. The property was owned by Mr Freedman and Berfox Pty Ltd as tenants in common in equal shares. Berfox was Mr Berger’s company. In about June 2013, Mr Freedman and Berfox appointed a real estate agent to sell the property. The conveyancing transaction was to be handled by Mr Berger under his new firm name, MBB. Mr Freedman received no cost disclosure in respect of the transaction, nor was there any discussions in relation to what charges might be made for that service.

108. The parties agree that Mr Berger was to provide directions and settlement instructions to ensure payment to Mr Freedman, or in accordance with Mr Freedman’s directions, of 50% of the balance proceeds of sale on completion of the sale and on release of the deposit. The parties agree that the deposit belonged to Mr Freedman and Berfox in equal shares; they were each entitled to half.

109. In July 2013, the property was sold at auction for $1,120,000.00. A deposit of $112,000 was paid. Mr Freedman assumed that the deposit was held by the real estate agent. Mr Freedman later learned from the agent that, although the agent usually held deposits, “after you left the auction Victor said to me that you and he had agreed that the deposit would be released to him.” Mr Freedman had not, in fact, agreed for the deposit to be paid to Mr Berger. Mr Berger agreed that he received the deposit and kept it, and it is something he has to account for. I will return to this at [154].

110. On 14 August 2013, Beech-Jones J dismissed Mr Berger’s appeal and discharged the stay: Berger v Council of the Law Society of NSW [2013] NSWSC 1080. On 15 August 2013, the orders discharging the stay were stayed pending an appeal by Mr Berger to the Court of Appeal: Berger v Council of the Law Society of NSW (No 2) [2013] NSWSC 1131 per Beech-Jones J. On 28 August 2013, Barrett JA extended the stay until the hearing of the appeal: Berger v Council of the Law Society of NSW [2013] NSWCA 278.

Recovering fees for the partnership

111. At the date of dissolution, the partnership had unbilled WIP of $1,360,125.33 and debtors of $1,450,226.37. When MBBF ceased practice on 21 June 2013, Mr Freedman and Ms Gopalan sent out invoices to their clients. Within about three months, approximately $163,000 had been collected and paid into MBBF’s bank account for the payment of invoices. However, for Mr Berger’s matters, Mr Freedman ascertained that only about $42,000 had been paid into MBBF’s account. In fact, Mr Berger was depositing (at least some) clients’ payments into a Westpac bank account in his name (Berger’s Account).

112. On 12 September 2013, Mr Freedman sent Mr Berger a memorandum, requesting that Mr Berger chase up his debtors and report on the likelihood of recovery. On 16 September 2013, Mr Freedman followed up Mr Berger for a reply. About a week later, Mr Freedman discovered that one of Mr Berger’s clients, Mrs Abrahams, had paid an invoice but the monies had not been deposited into MBBF’s trust account. Mr Freedman confronted Mr Berger and asked where the money had been paid; Mr Berger did not respond.

113. On 20 September 2013, Mr Berger replied to Mr Freedman’s correspondence, suggesting that Mr Freedman and Ms Gopalan “ha[d] been hiding money from me”. Mr Berger advised:

To protect myself, as you do not appear disposed to meet you[r] obligations to me … I have had to take the initiative to recover monies due to me by you. I have deposited:

-   The deposit re Gladesville $112,000;

-   The following payments received from the following clients for outstanding MBBF fees [totalling $187,347.12] … to an account titled “MBB adjustment to MBBF” …

114. Mr Berger stated that he intended to offset against these monies any sums which he regarded as owing to him. “I INTEND TO CONTINUE THIS PRACTICE UNTIL I BELIEVE I HAVE ADEQUATELY PROTECTED MYSELF. I have always made it clear I am willing to give you half of Domabyl. I stand by that and will adjust for that once you accept + interest from date I receive same.” Perhaps ironically, Mr Berger invited Mr Freedman and Ms Gopalan “to come clean”. Mr Freedman responded that he was, “reeling at your admission of your theft”.

Completion of sale of Gladesville property

115. On reading Mr Berger’s email of September 2013, it came to Mr Freedman’s attention – and surprise – that Mr Berger had collected the deposit for the Gladesville property. Mr Freedman called Mr Berger and asked for 50% of the deposit paid on the Gladesville property and Mr Berger said, “No, you are not getting it, we will have to adjust everything.”

116. On 25 September 2013, Mr Berger sent a settlement adjustment sheet to the purchasers’ solicitors in preparation for settlement on 27 September 2013. On 26 September 2013, Mr Freedman sent an email to a member of staff attending to the settlement, advising, “[Mr Berger] has kept all the deposit money so there needs to be an adjustment, so that needs to be taken into account.” Mr Freedman also emailed Mr Berger, recording Mr Berger’s refusal to release Mr Freedman’s share of the deposit money to him:

I record that you only advised that you had taken the whole of the deposit last Friday after I caught you out having kept fees from Abrahams owing to MBBF.

117. The member of staff attending to the settlement suggested that the deposit be placed in the trust account, but Mr Berger did not agree. Mr Berger sent cheque directions to the purchaser’s solicitors, including $139,562.97 in favour of Mr Freedman and $142,230.46 in favour of Mr Berger. Mr Berger agreed that the discrepancy was referrable to legal fees. Mr Berger agreed he had no costs agreement with Mr Freedman. It was suggested to him that no invoice was issued in respect of these fees, “Well, I don’t know. I have to check.” Settlement of the sale occurred on 27 September 2013.

118. On 8 October 2013, the Court of Appeal refused Mr Berger’s application for leave to appeal: Berger v Council of the Law Society of NSW [2013] NSWCA 336. Mr Berger’s practice was thereafter conducted by his cousin, solicitor Tibby Morgenstern.

These proceedings

119. On 15 October 2013, Mr Freedman’s solicitors sent a letter of demand to Mr Berger. Mr Berger was unrepentant. Mr Freedman commenced these proceedings on 30 October 2013. In support of the Summons, Mr Freedman swore an affidavit in which he described that, as a consequence of Mr Berger having retained some $187,000 of client payments, the partnership had insufficient funds to pay remaining creditors. While Mr Berger implied that he had used the funds, at least in part, to pay creditors of the partnership, Mr Berger had not provided details in respect of such payments despite Mr Freedman’s repeated requests.

120. On 6 December 2013, the Court noted that the parties had agreed and undertaken to each other:

(a)    … that on and from 6 December 2013, they shall place all moneys received by either of them in respect of the former partnership … the subject of these proceedings, into MBBF’s Westpac account;

…

(c)   that the monies received into the MBBF Westpac account are to be used to pay liabilities, expenses and debts payable by MBBF to creditors of the former partnership …

(d)   on or before 18 December 2013, each party will provide to the other a summary of monies received by either of them in respect of MBBF or expended by them on account of debts and liabilities payable by MBBF in the period from 21 June 2013 and continuing. …

121. On 7 February 2014, by consent, Ball J made an order that Mr Berger provide the plaintiff with a summary of all monies received by him in respect of the partnership from 21 June 2013 and continuing, and an account of debts and liabilities paid by him on account of debts and liabilities payable by the partnership from 21 June 2013 and continuing.

122. Whilst a vast amount of correspondence ensued with Mr Berger over the following years, which I have now read, it does not appear that Mr Berger ever gave a straight, comprehensive answer as to the fees which he had collected or expenses that he had paid.

Domabyl costs assessment

123. Solicitors for the beneficiaries of Mrs Domabyl’s Estate, Prentice Jarvin, continued to correspond with Mr Morgenstern, although the correspondence in evidence is incomplete. It would appear from this correspondence that, on 21 June 2013, MBBF rendered two invoices in the Estate of Mrs Domabyl. Subsequent invoices were rendered by MBB for its fees in relation to administration of the Estate.

124. On 22 November 2013, Mr Berger referred an application for assessment of costs in relation to Mrs Domabyl’s file to a costs assessor of the Court. The costs applicant was the partnership and the costs respondent was the Estate. Whilst Mr Berger purported to file the application on behalf of the partnership, he did so without the knowledge or consent of Mr Freedman or Ms Gopalan. Mr Berger agreed that, although the applicant on the costs assessment was the partnership, Mr Freedman at no stage consented to Mr Berger conducting a costs assessment on his behalf.

125. Mr Berger agreed that he conducted the application on behalf of himself and Mr Freedman as the applicant and also represented the respondents, the executors of the Estate, being himself and Mr Green. Mr Berger did not accept that he thereby placed himself in a position of conflict of interest, “I personally don’t comprehend what I should have done different to what I did. I’m happy to be enlightened …” When it was suggested that Mr Berger should have stepped out of the position of conflict by having another person appointed in his place, “Who? I’m truthfully trying to understand the concept, and I’m just struggling.” Mr Berger did not tell Mr Green that it was inappropriate for Mr Berger to act for both the costs applicant and the costs respondent, nor did he consider that it was inappropriate to so act.

126. The plaintiffs submitted that Mr Berger had no authority to apply for the costs assessment on behalf of the partnership and it was improper for him to act as both costs applicant and costs respondent. In doing so he breached his obligations to Mr Freedman and to the beneficiaries of Mrs Domabyl’s estate. I agree.

127. On 19 December 2013, Prentice Jarvin noted that Mr Morgenstern had lodged three bills for assessment and estimated further fees to date. The solicitors requested copies of the assessments of the costs for which bills had already been filed, and to arrange assessment of Mr Morgenstern’s further costs and disbursements, noting their client’s principal concern was to finalise the administration of the estate as soon as possible without incurring unnecessary costs. On 4 February 2014, Prentice Jarvin wrote again. In respect of costs, Prentice Jarvin noted that it had been more than four months since itemised bills had been lodged with the Court and “our clients would prefer to wait for the assessments”. Copies of the costs assessments received to date were again sought.

128. On 14 February 2014, the costs assessor wrote to Mr Berger in his capacity as executor of the Estate of Mrs Domabyl, inviting objections from the Estate as costs respondent. Mr Berger did not raise any objections to any of the costs. Nor, so far as Mr Berger was aware, Mr Green did not take any active steps in relation to the costs assessment.

129. On 12 June 2014, a certificate of determination of costs was issued in the Domabyl matter in the sum of $176,800.74. The certificate of determination was accompanied by a statement of reasons, of which only page five is in evidence. The costs assessor noted that the costs applicant did not make disclosure to the costs respondent as required by the Legal Profession Act 2004 (NSW). Further:

The application for assessment of costs is to be determined in accordance with the requirements of the 1984 legislation. Pursuant to section 367 of the Act I am only empowered to determine the reasonableness of the costs that are expressly disputed in the objections. Costs which are not expressly disputed must be allowed (O’Connor v Fitti [2000] NSWSC 540).

On 14 February 2014 I forwarded a notice to the Costs Respondent being the executors of the estate c/- 16/337 New South Head Road, Double Bay NSW 2028. In that letter I invited objections from the Costs Respondent. I received no objections.

I also note that no objections were provided to me with the application. I take notice of the procedure provided for in the Legal Profession Act which involves the Manager, Costs Assessment giving a copy of the application to the Costs Respondent prior to the matter being assigned to me and allowing the Costs Respondent to file objections.

In the absence of any objections from the Costs Respondent and noting the decision in O’Connor v Fitti referred to above, there appears to be no disputed costs in this matter and accordingly I have confirmed the costs referred to in the tax invoice.

Section 317 of the 2004 Act sets out the effects of a failure of a law practice to disclose. In particular, section 317(4) provides that if a law practice does not disclose to a client anything required by the Division to be disclosed, then, on assessment of the relevant costs, the amount of the costs may be reduced by amount considered by the Costs Assessor to be proportionate to the seriousness of the failure to disclose. I have therefore turned my mind to whether or not there should be any reduction in the costs as a result of the non disclosure required under the 2004 Act. I have formed the view that there should be no reduction in the costs. I consider the hourly rates to be reasonable for the work undertaken. The deceased was aware that legal costs were being incurred and would continue to be incurred for the services provided by the Costs Applicant. Disclosure in relation to costs concerning the conveyancing matter had been made on 22 August 2005. Although that was some three and a half years prior to the commencement of work in March 2009, the material provided to me indicates that the deceased was an intelligent woman who was knowledgeable in her own affairs and by reason of earlier correspondence was well aware that legal costs would be charged and the general proportion of those costs.

130. Obviously, the only material which the costs assessor had before them to draw the conclusions in the final paragraph was material supplied by Mr Berger.

131. On 13 June 2014, Mr Morgenstern forwarded the certificate of determination to Prentice Jarvin, advising that Mr Green would be telephoning to arrange a without prejudice discussion to resolve outstanding issues relating to the retention sum and determination of legal costs, commission and other expenses. “Mr Green will be authorised to represent he and Mr Berger as Executors and this firm as to outstanding fees of this firm …”

132. On 16 June 2014, Mr Freedman wrote to Mr Morgenstern, advising that he had been informed that Mr Berger had made an application for the assessment “of ‘legal costs’ he proposes charging the Domabyl Estate which are the charges questioned by the Supreme Court and the Law Society” and sought confirmation as to the position. Mr Freedman advised that any costs assessed were to be paid to the partnership, noting that orders made by the Court in these proceedings required Mr Berger to ensure that all monies received for legal services during the partnership were to be paid into the partnership’s bank account. It is apparent from Mr Freedman’s letter that he had no prior knowledge of the costs assessment made by Mr Berger in the partnership’s name.

133. On 17 June 2014, a “without prejudice” meeting took place at the offices of Prentice Jarvin at which it was agreed that the Estate would pay $223,000 in settlement of all costs billed prior to 28 February 2014. On 24 June 2014, Mr Berger sent Mr Freedman and Ms Gopalan a draft letter to Mr Flynn, advising that the executors of Mrs Domabyl’s estate would be making a distribution to beneficiaries on 25 June 2014. The executors had agreed to pay $223,000 in full settlement of bills rendered by the partnership totalling $234,772.64, leaving a shortfall of $11,772.62. The letter proposed that the shortfall be apportioned between MBBF and MBB, with various adjustments, and the monies be paid out to the partners accordingly. Mr Freedman replied, “I believe that any money payable to MBBF should be paid into MBBF and used to pay creditors of MBBF”.

134. On 26 June 2014, Mr Morgenstern sent a letter to Mr Flynn along the lines proposed, setting out the suggested apportionment and adjustments and seeking Mr Green’s assistance to resolve the dispute between the partners so that the funds could be paid out. No reply is in evidence; obviously Mr Flynn did not action Mr Berger’s request.

Mitronics litigation

135. Mitronics Corporation Pty Ltd was a printing company which had an agreement with Patdith to supply photocopiers. Finance was provided by Capital Finance Australia Pty Ltd, and Mr Berger gave a personal guarantee in respect of Patdith’s obligations under the finance agreement. On 20 September 2013, by consent, Capital Finance obtained judgment against Patdith and Mr Berger in the Local Court for $74,879.64 but agreed not to enforce the judgment provided Patdith and Mr Berger prosecuted proceedings then on foot against Mitronics and Capital Finance, seeking relief under the Trade Practices Act 1974 (Cth).

136. On 6 April 2014, Mr Freedman and Mr Berger signed Binding Heads of Agreement addressing various aspects of the dissolution of the partnership, including that the assets of the partnership would be applied to pay specified creditors and an accountant would be appointed to collect the balance of the assets of the partnership to pay all partnership creditors. In respect of Mitronics, it was agreed that the assets would be used to pay an estimated $87,000 “being a judgment for costs against Mr Berger and Patdith”. Presumably, the judgment arose from the Local Court proceedings. In addition, it was agreed that the liability of Mr Berger and Patdith to Mitronics and Capital Finance, if any, was “a joint liability of their partnership and Freedman will contribute equally to the liability including but not limited to the costs of defending [Mitronics’ claim] and prosecuting the claim of Patdith … against Mitronics presently proceeding in the Federal Court of Australia".

137. Mr Morgenstern transferred funds collected for MBBF to pay outstanding counsel’s fees in the Mitronics matter. Mr Morgenstern had collected fees on two of Mr Berger’s files, being Lewis and Valore. On 1 December 2014, a journal entry was made in the Lewis ledger account, transferring $3,017.63 “re paymnt of Rodney Brenders fees re Mitronics matter – MBBF”. Likewise in the Valore ledger, on 1 December 2014, $2,525.87 was transferred “re paymnt of Rodney Brenders fees re Mitronics matter – MBBF”.

138. Mr Berger said that he did not tell Mr Freedman that he was using these funds to pay counsel’s fees in the Mitronics matter, “He just refused to fund the proceedings at some time through the course of the Federal Proceedings. He just didn’t provide the funds.” I will return to this at [207] and [216].

Mr Freedman dies

139. On 7 April 2015 Mr Freedman died unexpectedly.

140. On 21 July 2015, Ahtram opened a bank account with the Commonwealth Bank entitled “Adjustment MBB with MBBF” (Ahtram’s Account). On 25 August 2015, $25,516.41 was deposited into this account. As will be seen at [231], these were fees collected by Mr Berger in the Spinak matter. On 13 October 2015, funds were transferred from Ahtram’s Account in payment of Mitronics expenses. It appears that thereafter Mr Berger deposited at least some of the fees collected from MBBF’s clients into Ahtram’s Account and also made payments from the account in respect of some of Mr Berger’s files, including cost assessor’s fees.

141. In disciplinary proceedings before the Civil and Administrative Tribunal of New South Wales (NCAT), Mr Berger said that the money in Ahtram’s Account “now forms part of the pool of monies in dispute on accounting of the assets of the former MBBF partnership …” When cross-examined in the NCAT proceedings, Mr Berger said he was not holding the monies in trust pending a decision in these proceedings, nor holding it separately for the purposes of the dispute rather than for himself but said, “No. It was for my discretion I was holding it.” In these proceedings, Mr Berger explained, “Well, by that, I mean I had to approve what was going to happen.”

Abrahams (14974)

173. On 18 June 2013, the firm issued an invoice to the client for $8,553.60. According to the aged debtors report, $10,297.10 was owed on this matter as at 30 June 2013.

174. On 14 August 2013, according to MBB’s general ledger in respect of the “MBB Adjustment Account”, $8,553.60 was paid by the client. On 20 September 2013, Mr Berger advised Mr Freedman that $8,553.60 had been received for this client and deposited “to an account titled ‘MBB adjustment to MBBF”. Although the bank statements in evidence for Berger’s Account do not extend to the date of payment on 14 August 2013, it is likely that this is the account to which Mr Berger was referring.

175. On 5 November 2013, according to MBB’s general ledger in respect of the “MBB Adjustment Account”, a further $1,420.65 was paid, with (partial) narration, “#14974 Biordi”. The monies were deposited to Berger’s Account. Although the deposit referred to the same matter number, Mr Berger did not agree that it was a payment in respect of the same matter. I think Mr Berger was right. As at 30 June 2013, client Biordi owed $1,420.65 in respect of matter number 14979, being one of Mr Berger’s files. Either way, the money deposited by Mr Berger to his account was in respect of monies owed to the partnership and for which he is obliged to account.

Ambrousian (15179)

176. On 20 September 2013, Mr Berger advised that $2,659.70 had been received for this client and deposited “to an account titled ‘MBB adjustment to MBBF’”, which I take this to be a reference to Berger’s Account.

177. Whilst Mr Berger later suggested, in his Defence and during cross-examination, that the monies had been paid into MBBF account, MBBF’s Office Receipts ledger did not record such a receipt. Mr Berger blamed this on staff and did not agree that the funds were not paid to the partnership, “I rely upon my ledger.” I expect that Mr Berger’s statement to Mr Freedman on 20 September 2013 more likely indicated the correct position at the time and subsequent accounting records to do not suggest otherwise. Mr Berger is obliged to account for these monies to the plaintiffs.

Arden (14810)

178. According to the aged debtor’s report as at 30 June 2013, this client owed $4,354.35. On 12 September 2013, Mr Freedman included an invoice to Arden for $4,300 in his memorandum, “MBBF Outstanding Costs”.

179. On 5 October 2017, following a meeting with the plaintiff’s then solicitor, Mr Stanford, Mr Berger advised by email that this account had been paid “VB recovered since and he paid disbs.” Mr Berger agreed, “It’s one of the items that I have to account for.”

Armstrong (14440 and 14998)

180. On 20 September 2013, Mr Berger advised that $4,405.08 had been received for this client for matter number 14440 and $1,884.30 had been received for matter number 14998 and deposited “to an account titled ‘MBB adjustment to MBBF’”, which I take this to be a reference to Berger’s Account.

181. On 25 September 2013, according to MBB’s general ledger in respect of the “MBB Adjustment Account”, $3,780.09 was paid for matter number 14440. These monies were deposited to Berger’s Account with the narration, “14440 Armstrong”.

182. In his defence and evidence, Mr Berger only accepted an obligation to account for the payment received on 25 September 2013, saying the earlier acknowledgement of receipt was an error. It seems unlikely that Mr Berger would have acknowledged receipt of monies unless he had actually received them. Thus I find that Mr Berger received payments on both 20 September 2013 and 25 September 2013, and must account to the plaintiffs for these monies.

Cao (14731)

183. The Invoices Report indicated that, as at 29 May 2013, two invoices remained outstanding in this matter, totalling $39,745.50. According to the aged debtor’s report as at 30 June 2013, this client owed $59,443.72. According to Mr Freedman’s memorandum of 12 September 2013, $60,000 was then owing by this client.

184. On 16 September 2013, Mr Berger advised that the costs were being assessed and a caveat had been placed on title. On 17 October 2013, Mrs Berger telephoned the client who said he had spoken to Mr Berger, “it is undisputed he does not have to pay it.”

185. On 13 July 2015, a certificate of determination of costs was issued in respect of MBBF’s fees rendered to this client, assessing costs at $67,688.25, of which the assessor noted that $12,248.64 had been paid, leaving $55,439.61 owing. I assume that the fact that the assessed costs exceeded MBBF’s outstanding invoice relates to post-dissolution invoices rendered by MBB.

186. On 5 October 2017, Mr Berger advised the plaintiffs’ solicitors that the account had been paid, “VB recovered since and he paid disbs.” Mr Berger agreed that he was paid monies and said he reduced the amount to be made for the sake of resolving the matter. Having done so, he withdrew the caveat lodged on the title of property owned by the client. In the absence of any documentary evidence adduced by Mr Berger to support the suggestion that he had accepted less than the full amount, I find that Mr Berger recovered MBBF’s outstanding fees in full, being $59,433.72.

187. According to the bank statements for Ahtram’s Account, $2,252.25 was paid for an assessment fee in this matter on 28 September 2015. On 13 April 2016, $2,000 was paid from Ahtram’s Account to refund a barrister in this matter. The evidence does not reveal whether the barrister’s fees were charged in respect of the conduct of the matter pre-dissolution by MBBF or post-dissolution by MBB. In the absence of evidence, I am not prepared to allow this disbursement but will reduce the amount for which Mr Berger is obliged to account by $2,252.25 for the costs assessor’s fees paid. The net amount is $57,181.47.

Carrabs (14879)

188. According to the aged debtor’s report as at 30 June 2013, this client owed $2,011.35. According to Mr Freedman’s memorandum of 12 September 2013, the client then owed $2,000. On 17 October 2013, Mrs Berger telephoned the client who said she will be calling Mr Berger “as she does not believe she should be paying it.”

189. In his Defence, Mr Berger pleaded, “$2,011.34 was paid to MBB. To be adjusted. Was result of threat of costs the defendants will incur and our filing for assessment. Filing fees paid are to be adjusted as well.” Mr Berger agreed that the $2,011.34 was an amount that he had to account for. In the absence of any evidence as to what the adjustment is, or the filing fee paid, Mr Berger should account for the full amount.

Casey (14408)

190. According to the aged debtor’s report as at 30 June 2013, this client owed $9,906.11. On 12 June 2013, Mr Berger signed a proof of debt in the client’s bankruptcy in respect of unpaid legal costs of $11,055.42.

191. In his Defence, Mr Berger pleaded, “See ledger as invoiced $11,673.71. To be adjusted. Adjustments for disbursements in favour of Victor Berger.” Mr Berger was evasive as to whether he had received any monies from the client, “I’ll have to look at that matter … I’ll check the ledger.”

192. The evidence in respect of whether this client paid is slight. As the client was bankrupt, it is possible that the trustee in bankruptcy made a distribution, including to MBBF, in respect of its unpaid fees but there is no evidence either way and I am unwilling to speculate. I am not satisfied on the balance of probabilities that Mr Berger collected fees in respect of this client, nor for that matter that Mr Berger paid disbursements in respect of the matter.

Jewish House (14295)

193. On 20 September 2013, Mr Berger advised that $14,000 had been received for this client and deposited “to an account titled ‘MBB adjustment to MBBF’”, which I take this to be a reference to Berger’s Account.

194. On 19 November 2013, $1,240.77 was deposited to Berger’s Account for Jewish House. A corresponding entry was made in MBB’s general ledger, “MBB Adjustment Account”. In contrast, on 9 February 2018, Mr Berger advised the plaintiffs’ solicitor that the fees in respect of this matter had been “waived”.

195. In his Defence and evidence, Mr Berger accepted an obligation to account to the partnership for only $1,240.77. Again, I think it unlikely that Mr Berger would have acknowledged receipt of $14,000 to Mr Freedman if he had not, in fact, received the monies. He is obliged to account to the plaintiffs for both receipts totalling $15,240.77.

Johnson (14845)

196. In matter 14845 fees were rendered on 11 June 2013 in the sum of $8,938.60. According to the aged debtor’s report as at 30 June 2013, this client owed $8,938.60.

197. According to a matter ledger, the fees were paid by the client in two instalments, $6,298 on 28 January 2014 and $2,000 on 30 May 2014. On 5 October 2017 and 9 February 2018, Mr Berger advised the plaintiffs’ solicitor that this matter had been “[p]aid”.

198. When it was suggested to Mr Berger that these receipts were not deposited into MBBF’s bank accounts, Mr Berger blamed this on his secretary and the administrative staff assisting Mr Freedman and Ms Gopalan in their new firm. I do not accept his explanation. He is obliged to account for the money.

Kisnerman (14566)

199. According to the aged debtor’s report as at 30 June 2013, this client owed $93,737.06. On 21 August 2013, 7 October 2013 and 15 January 2014, three further invoices were issued to Mrs Kisnerman in respect of a dispute, totalling $26,858.05, which I assume concerned further work done by Mr Morgenstern for this client.

200. According to MBB’s general ledger in respect of the “MBB Adjustment Account”, on 5 November 2013, $40,000 was paid in respect of this matter. The monies were deposited to Berger’s Account. Mr Berger agreed that he was obliged to account to the partnership for the $40,000.

201. On 30 August 2016, $990 was paid from Ahtram’s Account for the costs consultant in this matter. On 12 September 2016, a certificate of determination of costs was issued in respect of this client. Nil costs were payable. The partnership was ordered to pay the assessor’s costs of $1,925. On 5 October 2017, Mr Berger advised the plaintiffs’ solicitors that the matter was “in course of assessment and recovery”.

202. On 12 December 2017, Mr Berger filed a further application for assessment which included, at least in part, invoices rendered post-dissolution. On 31 May 2018, a further costs assessment was issued in the Kisnerman matter, again assessing the amount payable as nil. In her reasons, the costs assessor noted: (emphasis added)

… the Respondent has produced evidence of payments made to the Applicant personally from 21 October 2013 to November 2015 exceeding $60,000. This sum is well in excess of the $24,460.35 claimed in this assessment so that the Respondent would have no liability remaining to the Applicant anyway.”

203. Mr Berger agreed that the costs assessor correctly stated the position but did not agree that those funds ought to have been paid to the partnership. I do not agree. Mr Berger is obliged to account to the partnership for the $40,000 collected on 5 November 2013 and the further payments made by the client personally thereafter, in total, “exceeding $60,000”. I will use the figure of $60,000. I will allow the amounts paid from Ahtram’s Account for the costs consultant, resulting in a net amount of $59,010. Whilst MBBF was ordered to pay the assessor’s costs of $1,925, there is no evidence that Mr Berger did so.

Lambrou (14530)

204. According to the aged debtor’s report as at 30 June 2013, this client owed $1,396.60. On 3 September 2013, $1,000 was paid into Berger’s Account and recorded accordingly in MBB’s general ledger, “MBB Adjustment Account”.

205. On 20 September 2013, Mr Berger advised that $1,000 had been received for this client, being an “instalment payment”, and deposited “to an account titled ‘MBB adjustment to MBBF’”. Mr Berger should account for the $1,000 received.

Lewis (11891)

206. According to the aged debtor’s report as at 30 June 2013, this client owed $3,227.63. According to Mr Morgenstern’s ledger for this matter, the client paid $100 on 15 August 2014, $2,000 on 20 October 2014 and $1,017.63 on 4 November 2014. That is, all but $110 was paid.

207. On 1 December 2014, a journal entry was, transferring $3,017.63 for “re paymnt of Rodney Brender’s fees re Mitronics matter – MBBF”. Whilst it was put to Mr Berger in cross-examination that Mr Freedman had told Mr Berger that he wanted no further part in the Mitronics litigation, the Binding Heads of Agreement referred to at [1] obliged Mr Freedman to contribute equally to the costs of the litigation. As such, Mr Berger is not obliged to account for this receipt as it was applied to a partnership expense.

McArdle (11165)

208. According to the aged debtor’s report as at 30 June 2013, this client owed $153,516.82.

209. On 30 August 2013, $76,640.99 was paid into Berger’s Account and recorded accordingly in MBB’s general ledger, “MBB Adjustment Account”. On 16 September 2013, Mr Berger advised Mr Freedman that the client had paid. On 20 September 2013, Mr Berger advised that $149,120.33 had been received “out of which barristers fees and other creditors to be paid” and deposited “to an account titled ‘MBB adjustment to MBBF’”.

210. In evidence, Mr Berger said the figure in the email was a mistake. “I copied that from the bookkeeper … I took that information from something she gave me. Subsequently found it was wrong … [T]he figure [paid was] 76,640.99 … [the figure in my email] was the wrong figure.” Certainly, the figure in the email did not align with the deposit recorded in Berger’s Account. But it was no mistake.

211. On 1 October 2013, in response to an email from the accounts department of Mr Freedman’s new firm requesting payment of the outstanding account, the client (who appears from the email to have been a solicitor with their own firm) advised that she had received a payment of $210,000 as settlement of her matter,

“Mr Berger paid me $61,000 and kept the rest. You thus got $149,000”.

212. Mr Freedman said that Mr Berger managed to negotiate a situation whereby he received settlement monies in the matter, deducted his fees and sent the balance of the payment to the client.

213. There being no reason to doubt the veracity of the client’s email of 1 October 2013, I find that Mr Berger did obtain payment in full from the client by deducting the partnership’s fees from the settlement monies but only disclosed having received half of the amount to Mr Freedman. He should account for the whole amount.

McMillan (14793)

214. In his Defence, Mr Berger pleaded that the client had been invoiced $20,597.93 of which $18,745.58 had been paid. As to where the money had been paid, Mr Berger said, “I would have to rely upon the ledger. I would have to look at the ledger and see what it says. … [M]y recollection is it was paid to [the partnership]. But I’ll have to check that again.” The payment is not in fact recorded in MBBF’s bank accounts. I find that Mr Berger received the money and is obliged to account to the partnership for that receipt.

Mollica / Valore (12570)

215. According to the aged debtor’s report as at 30 June 2013, this client owed $4,911.42. Matter number 12570 saw payments by the clients received on 19 August 2014 ($49,684) and 9 September 2014 ($946.72) of which the bulk was transferred into the partnership’s overdraft account. On 1 December 2014, $2,525.87 was transferred “re paymnt of Rodney Brenders fees re Mitronics matter – MBBF”.

216. As for Lewis, the Binding Heads of Agreement referred to at [1] obliged Mr Freedman to contribute equally to the costs of the Mitronics litigation. As such, Mr Berger is not obliged to account for $2,525.87 as it was applied to a partnership expense.

Naderi (14927)

217. According to the aged debtor’s report as at 30 June 2013, this client owed $2,818.74. On 17 October 2013, Mrs Berger telephoned the client, who advised that they were not paying and had made a complaint to the Law Society.

218. On 28 November 2013, according to MBB’s general ledger in respect of the “MBB Adjustment Account”, $2,112 was paid in respect of the matter. Mr Berger agreed that his Defence should be read as acknowledging that this was an amount that he needed to account for.

Nothman (15009)

219. On 25 September 2013, according to MBB’s general ledger in respect of the “MBB Adjustment Account”, $1,730.90 was paid in respect of the matter. The monies were deposited to Mr Berger’s Account. Mr Berger agreed, “In that case, I have to account for it.”

Pan Macedonian Greek Brotherhood (13149)

220. The firm rendered a series of invoices in this matter in 2010 and 2011 which, according to the Matter Ledger, went on a costs assessment. On 17 September 2013, $9,000 was deposited to Berger’s Account for this matter and recorded accordingly in MBB’s general ledger, “MBB Adjustment Account”. Mr Berger said, “This ledger is a ledger of money that I’ve acknowledged I should account for.” As such, Mr Berger should account to the partnership for this amount.

Pilowsky (14699)

221. According to the aged debtor’s report as at 30 June 2013, this client owed $1,726.45. On 20 September 2013, Mr Berger advised that $1,726.45 had been received for this matter and deposited “to an account titled ‘MBB adjustment to MBBF’”, which I take this to be a reference to Berger’s Account.

222. Mr Berger now says that, when he checked his records, he found this was an error. I think it is more likely that Mr Berger would not have acknowledged receipt of the sum unless he had in fact received it at the time. His subsequent denial, in the absence of a contemporaneous document, does not persuade me that it was a mistake. He is obliged to account for the receipt.

Redman (14108)

223. According to the aged debtor’s report as at 30 June 2013, this client owed $135,021.51. On 16 September 2013, Mr Berger advised that he had arranged with the client to pay $50,000 once an issue with a Deed of Settlement was rectified, then $3,000 per month with the balance to be paid in about June 2014.

224. On 28 October 2015, $3,112.74 was paid from Ahtram’s Account for the Redman assessment fee. Presumably, the party to the settlement with Redman required the partnership’s fees in the matter to be assessed.

225. On 30 November 2015, $124,221.54 was deposited into Ahtram’s Account by Clayton Utz. Mr Berger acknowledged that he was obliged to account for this sum. However, it appears that Mr Berger paid the costs assessor’s fees, and so he should account for the net amount, being $121,108.80.

Senes (906 and 15167)

226. According to the aged debtor’s report as at 30 June 2013, this client owed $7,424.67 in matter number 906 and $4,868.60 in matter number 15167.

227. On 23 October 2013, monies were deposited into Berger’s Account for the 906 matter, being $4,144.42 and $1,518.22 (totalling $5,662.64) and recorded accordingly in MBB’s general ledger in respect of the “MBB Adjustment Account”. According to MBBF’s Office Receipts ledger, payments were received in respect of matter 906 totalling $4,607.18 from 12 May 2014 to 18 August 2014. This leaves $1,055.46 to be accounted for in respect of matter 906.

228. On 9 November 2018, Mr Berger advised the plaintiffs’ solicitors that the client’s account in matter number 15167 was “PAID TO ME”. Mr Berger agreed that, based on this email, if he wrote this in the email it was because the monies had been paid to him.

229. Mr Berger said that his Defence should be understood as an acknowledgement that, for matter 906, he needed to account for $1,518.20. However, it appears that he is obliged to account for all of the funds received less amounts already remitted to MBBF’s office account, that is, $5,923.66.

Spinak (14962)

230. According to the aged debtor’s report as at 30 June 2013, this client owed $21,432.54.

231. According to the bank statements for Ahtram’s Account, $25,516.41 was deposited into the account on 25 August 2015. On 5 October 2018, Mr Berger informed the plaintiffs’ solicitor that, of the sums which he had received in relation to the partnership, $25,516.41 had been received in respect of Spinak on 25 August 2015. This indicates that the deposit related to this matter.

230. On 14 September 2015, $6,000 was paid out of Ahtram’s Account with the narration “PartVBreSpinak”. Given that the deposit to the Ahtram Account exceeded the amount owing to the firm, it appears that the $6,000 payment was a disbursement in the Spinak matter, such as counsel’s fees.

231. On 5 October 2017, Mr Berger informed the plaintiffs’ solicitor that this client had paid. “VB recovered since and he paid disbs.” Assuming in Mr Berger’s favour that the $6,000 was a disbursement on the matter, he should account to the partnership for the balance, being $19,516.41.

Turbett (15232)

234. On 20 September 2013, Mr Berger advised that $3,271.66 had been received for this client and deposited “to an account titled ‘MBB adjustment to MBBF’”, which I take this to be a reference to Berger’s Account. Mr Berger said in evidence that this was an error. I do not accept his evidence. He should account for the amount received.

Unknown (14…)

235. In the MBB general ledger account, “MBB Adjustment Account”, a cash receipt of $3,000 is recorded on 2 October 2013 with the narration “received re #14”. Obviously, the full narration recorded in the accounting system, which appears to be MYOB, does not appear on the print-out in evidence and the file number is not known. Mr Berger said, “This ledger is a ledger of money that I’ve acknowledged I should account for.” As such, Mr Berger should account to the partnership for this amount.

Zernelis (13806)

236. According to the aged debtor’s report as at 30 June 2013, this client owed $5,534.64. On 5 October 2017, Mr Berger informed the plaintiffs’ solicitor that this client had paid. “VB recovered since and he paid disbs.” Mr Berger said that his Defence in respect of this claim should be read as acknowledging that the amount was payable by him.

237. Mr Berger’s actions in collecting fees owed to the partnership but not depositing the fees into the partnership’s bank account for the payment of creditors was in breach of the Dissolution Agreement (see [83]) and in breach of the fiduciary obligations which Mr Berger accepted that he owed (see [85]). He is obliged to account to the plaintiffs for these funds.

238. In total, Mr Berger is obliged to account for $511,230.88. From this, I have deducted $15,181.75 being, by my calculations, disbursements paid by Mr Berger in the Mitronics litigation from either Berger’s Account or Ahtram’s Account, leaving a net amount of $496,049.13. Having collected these monies in breach of the Dissolution Agreement and his fiduciary obligations to Mr Freedman, Mr Berger holds these monies on trust for the partnership.

239. The plaintiffs submitted that, of the $148,313.09 presently held in various bank accounts associated with MBBF, half would ordinarily belong to Mr Berger and half to the second and third plaintiffs. The plaintiffs submitted that the entirety of these funds should be paid to the second and third plaintiffs and offset against the amount otherwise payable by Mr Berger. This approach has much to commend it. Of the $148,313.09 in MBBF’s bank account, Mr Berger is entitled to half, that is, $74,156.54. Of the monies which Mr Berger is obliged to account to the partnership, he and the plaintiffs are each entitled to $248,024.56. If the plaintiffs retain the whole balance of MBBF’s bank accounts, then Mr Berger is obliged to account to the plaintiffs for $173,868.02.

Bartercard points

240. The parties agreed that Mr Berger transferred 69,200 Bartercard points from the MBBF Bartercard account to the vendor of the Pitt Street property. Mr Berger’s transfer incurred a trade fee of $692.00 and a cash fee of $3,806.00.  The parties agreed that Mr Berger’s use of the MBBF Bartercard points was done in his capacity as a partner and for Mr Berger’s own personal benefit. The defendants disputed that this was a breach of the partnership agreement or any fiduciary obligation but agreed that Mr Berger is liable to account to the plaintiffs for the Bartercard points and all profits derived from the use of those points “and have done so”.

241. On 26 September 2011, Mr Freedman sent an email to Mr Berger, listing a number of issues which he had been attempting to address concerning Mr Berger’s practices including, “The Bartercard points you took to buy yourself a property”. The suggestion that Mr Berger “took” the Bartercard points implies that Mr Freedman did not know, or at least did not agree, to Mr Berger using the Bartercard points for this purpose. Mr Berger said that Mr Freedman “absolutely knew” about the transfer of the Bartercard points.

242. On 29 April 2013, Mr Freedman sent an email referring to “your taking of the barter card points for your personal use”. Mr Berger replied that he had offered a fair way to balance it, but Mr Freedman did not want to solve anything. I take this to mean that Mr Freedman did not accept Mr Berger’s proposal.

243. Mr Berger explained that the “fair way” was that Mr Freedman could have credits of continued use of Bartercard to equalise the matter but “he chose not to”. Further, “I told him I would use the Bartercard points. And we could adjust that with future Bartercard points.” When it was suggested that Mr Berger had not subsequently made such an adjustment, he said, “Because he didn’t want to. This is kind of money. If you don’t use it, you lose it. So you’ve got to use the services of other people. So he didn’t want to do it anymore, Bartercard, but I made the offer to him.”

244. Mr Berger has used a partnership asset for his personal benefit. I infer from Mr Freedman’s two emails that Mr Freedman did not agree to Mr Berger doing so. Mr Berger is obliged to account to the partnership for his use of the partnership’s assets. It is clear that the means of accounting proffered by Mr Berger was not accepted by Mr Freedman at the time, nor actioned by the partners. Nor was it for Mr Berger to dictate the manner in which he would account.

245. Mr Berger used each Bartercard point for $1, being a $69,200 deposit on the property together with Bartercard fees of $4,498, totalling $73,698. As I understood the evidence, given the passage of time, the partnership no longer has a Bartercard account into which these funds could be returned. Consequently, Mr Berger should account for the monies. Mr Berger having had the use of the funds since 2008, he should also compensate the partnership by paying interest on the partnership’s asset which he has used for his benefit. Taking the same approach in respect of the Bartercard points as I have for the client fees collected by Mr Berger, he need only account for half of the Bartercard points and fees, being $36,849.

Wife’s wage

246. The parties agree that, from 1 March 2002 to 24 June 2011, Mr Berger caused weekly payments to be made by MBBF to his wife, totalling $70,615. The defendants deny that Mrs Berger was not an employee and did not perform any services for the law firm, or that the payment of wages to Mrs Berger was in breach of the terms of the partnership and Mr Berger’s fiduciary obligations. Mr Berger denies that he is liable to account to the plaintiffs for the payments to his wife.

247. It was suggested to Mr Berger that his wife never worked for the partnership, “Well, she did things from time to time that I would ask her to do …” He agreed that his wife did not have an employment agreement with the firm, attended the offices infrequently and visited “very few times”. It is clear that Mrs Berger was not an employee of MBBF.

248. Mr Berger said that his wife was paid on the advice of the firm’s previous accountant until Mr Naumburger became the firm’s accountant and advised that this should be discontinued. Mr Berger’s explanation does not make sense as Mr Naumburger became the accountant for the partnership in 1997 and Mr Berger did not begin paying a salary to his wife until some years later.

249. In any event, Mr Berger said he assumed that the payments had stopped, but did not check and later discovered that the payments had continued. The cross-examination continued:

Q.   Well, Mr Berger, I suggest that nothing was ever repaid?

A.   I did repay it.

Q.   Well, you haven’t put on any evidence?

A.   I have.

Q.   There’s no document showing the repayment, is there?

A.   There was no need. I went to - it was paid to my manager …. And I went to the bookkeeping section of the office and together it was paid by transfers from different places to, to the firm.

250. On 29 April 2013, Mr Freedman sent an email to Mr Berger referring to “your receiving wages for Judy which were never agreed to nor refunded”. Mr Berger responded, “I have repeatedly told you that it was repaid as soon as the error was revealed …” On 10 September 2015, Mr Berger informed Mr Naumburger that he had repaid Judy’s wages. There being no documentary evidence to corroborate Mr Berger’s assertion that he had repaid his wife’s wages, I find that he has not and, having used the partnership’s asset without the agreement of his partner, must account for those monies with interest. Taking the same approach as for the client fees and Bartercard points, Mr Berger need only account for half of these monies, being $35,307.

ORDERS

251. For these reasons, I make the following orders:

1. Declare that the partnership formerly conducted by the late Mr Harry Norman Freedman in his personal capacity and/or as trustee for the MAHD MBBF Trust and by defendant, in his personal capacity and/or as trustee for the Berger MBBF Trust, under the name and style Milne Berry Berger Freedman (the “Partnership” & “MBBF”) was dissolved as from 21 June 2013.

Gladesville property

2. Declare that the defendant holds on trust for the first plaintiff the amount of $57,337.75 from the balance of the proceeds of sale of the Gladesville property.

3. Order the defendant to account to the first plaintiff in the amount of $57,337.75.

Domabyl monies

4. Declare that the defendant, in:

1. rendering an invoice in the Domabyl matter on 22 June 2012;

2. applying for an assessment of costs in the Domabyl matter on 22 November 2013;

3. registering the certificate of determination of costs so obtained in the District Court of New South Wales on 20 November 2015; and

4. seeking a garnishee order in respect of the judgment so obtained, against the Partnership’s trust account known as “The Milne Berry Berger Freedman Law Practice Trust Account” held with Macquarie Bank, Account Number 3018-58270 (the “Partnership Trust Account”),

derived a benefit without the consent of his partner, and in breach of his fiduciary obligation to, the late Mr Harry Norman Freedman in his personal capacity and/or as trustee for the MAHD MBBF Trust.

5. Order the defendant to account to the Partnership by paying $178,748.07 into Court.

6. Direct the plaintiffs’ solicitors to provide a copy of this judgment to Prentice Jarvin Solicitors within seven days, with a request that a copy of the judgment be provided to the beneficiaries of the Estate of the late Mrs Domabyl in the event that the beneficiaries wish to interplead in respect of the funds paid into Court under Order 5.

Other client fees

7. Declare that the defendant, in retaining costs due, owing and payable to the Partnership acted in breach of his fiduciary obligation to the late Mr Harry Norman Freedman (deceased) in his personal capacity and/or as trustee for the MAHD MBBF Trust.

8. Declare that the defendant holds fees payable to the Partnership on trust for the Partnership.

9. Order the defendant to account to the Partnership by paying $173,868.02 to the second and third plaintiffs.

10. Order that any funds in bank accounts in the name of MBBF, including the Partnership Trust Account, be paid to the second and third plaintiffs.

Bartercard points

11. Declare that the defendant, in using Bartercard points belonging to the Partnership for his personal use, acted in breach of his fiduciary obligation to the late Mr Harry Norman Freedman (deceased) in his personal capacity and/or as trustee for the MAHD MBBF Trust.

12. Declare that the defendant holds $36,849 on trust for the Partnership.

13. Order the defendant to account to the Partnership in the amount of $36,849 by paying these monies to the second and third plaintiffs.

Wife’s salary

14. Declare that the defendant, in using funds belonging to the Partnership to pay a salary to his wife without the agreement of his partner, acted in breach of his fiduciary obligation to the late Mr Harry Norman Freedman (deceased) in his personal capacity and/or as trustee for the MAHD MBBF Trust.

15. Declare that the defendant holds $35,307 on trust for the Partnership.

16. Order the defendant to account to the Partnership by paying $35,307 to the second and third plaintiffs.

Judgment, interest and costs

17. Judgment in favour of the first plaintiff in the sum of $57,337.35.

18. Judgment in favour of the second and third plaintiffs in the sum of $246,024.02.

19. Direct the plaintiffs, within 7 days, to provide calculations of the interest payable on amounts to be paid by the defendant under Orders (3), (5), (9), (13) and (16) calculated in accordance with section 100 of the Civil Procedure Act 2005 (NSW).

20. Defendant to pay the plaintiffs costs of the proceedings.

21. In the event that the plaintiffs seek a variation of Order 20:

1. Direct the plaintiffs to file and serve any affidavits and submissions within 14 days.

2. Direct the defendant to file and serve any affidavits and submissions within 14 days thereafter.

3. Any such application will be determined on the papers.

22. Parties to notify any errors or omissions in these orders within 7 days.

23. Stand the matter over before Rees J on 21 October 2021 for directions in respect of further progress under Order 6, with liberty to apply.

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Amendments

28 July 2021 - Order (18) - amount amended to $246,024.02.

28 July 2021 - Amendment to representation on Coversheet.