THE LEGAL PRACTITIONERS ACT 1981 (SA) RE ANDREW LEY JORDAN - [2005] SASC 367

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules: Civil)
THE LEGAL PRACTITIONERS ACT 1981 (SA) RE ANDREW LEY JORDAN
Judgment of The Honourable Justice Layton
23 September 2005
PROFESSIONS AND TRADES - LAWYERS - MISCONDUCT, UNFITNESS AND DISCIPLINE
Application pursuant to s 49 Legal Practitioners Act 1981 for authority to practise as a legal practitioner following brankruptcy - bankruptcy proceedings on petition by Australian Taxation Office - applicant failed to lodge tax returns and accumulated tax debts - Law Society opposed application on grounds that applicant not fit to practise - consideration of factors to be taken into account in exercise of discretion to grant authority to practise pursuant to s 49 - protection of the public and integrity of profession of primary concern - also whether applicant deliberately and intentionally failed to lodge tax returns - whether conduct shows applicant is not a fit and proper person to practise law - section 49 application distinguished from disciplinary proceedings - not necessary to determine whether applicant engaged in unprofessional conduct - Application granted upon undertakings being given and subject to conditions.
Legal Practitioners Act 1981 s 49, s 86; Legal Profession Act 1987 (NSW) s 38, referred to.
Cameron v Bar Association of New South Wales (2002) 49 ATR 288; New South Wales Bar Association v Cummins (2001) 52 NSWLR 279; Wardell v New South Wales Bar Association (2002) 50 ATR 302; New South Wales Bar Association v Stevens [2003] NSWCA 228; New South Wales Bar Association v Stevens [2003] NSWCA 95; New South Wales Bar Association v Somosi (2001) 48 ATR 562; New South Wales Bar Association v Young [2003] NSWCA 228, discussed.
In the Matter of the Legal Practitioners Act 1981: Re Leo John Reynolds (2002) 221 LSJS 105, considered.

THE LEGAL PRACTITIONERS ACT 1981 (SA) RE ANDREW LEY JORDAN
[2005] SASC 367
Civil

LAYTON J: This is an application by Andrew Ley Jordan (“the applicant”) pursuant to s 49 of the Legal Practitioners Act 1981 (SA) (“the Act”) for authority to practise as a legal practitioner following bankruptcy.
The applicant was represented by senior counsel Ms Frances Nelson QC. The Law Society of South Australia (“the Law Society”) which opposed the application, was represented by Mr Hugh Abbott. There was also an initial appearance by counsel on behalf of the Legal Practitioners Conduct Board (“the Board”), but later the Board indicated that it did not intend to take any further part in the hearing.
This is the second time the applicant has been bankrupt. It is the third time the applicant has applied for an order under s 49 of the Act, which includes one occasion in which he sought a variation of a previous order. These matters are set out hereafter.
Evidence Before the Court
The following affidavits were relied upon as evidence in support of the application:
§ Andrew Ley Jordan of 9 June 2005 and 4 July 2000, which depose to his personal background and circumstances leading up to the present application and the undertakings he gives to support the orders sought.
§ David Monfries Davidson of 9 June 2005 and 4 July 2005, which depose to his preparedness to employ the applicant as well as undertakings to support the orders sought by the applicant.
§ Andrew Paine of 4 July 2005, which deposes to his preparedness as the applicant’s accountant, to prepare and lodge the applicant’s income tax returns in a timely fashion.
§ David Peacock of 13 April 2005, Vickie Ann Chapman of 9 June 2005, David Cameron Burrell of 9 June 2005 and Janet Belchamber of 9 June 2005. Each of these legal practitioners deposed to their knowledge of the applicant and to his reputation within the legal profession.
In addition, the following legal practitioners gave sworn testimony as to the applicant’s character and reputation in support of the application at the hearing on 3 August 2005:
§Stewart Hamilton Lindsay
§David Whittle
Two letters were tendered, namely a letter from Denise Watkins of the Law Society to counsel for the applicant dated 20 June 2005 which was tendered by consent of the Law Society and a letter from the applicant to his counsel in response, dated 28 June 2005. (Exhibit A1)
The factual material contained in the above documents and oral testimony was not challenged, although the Law Society drew different inferences from the material than did the applicant.
The Applicant’s Background
The applicant is aged 56 years, married to his present wife since 1983. They have one child together and each have two children from previous marriages. Their children are adults and no longer financially dependent. Mrs Jordan has not worked for the past thirty years and as a result relies solely on the applicant’s income. The applicant is a barrister and solicitor. He was admitted to the practise of law on 2 March 1976. He holds a current practising certificate. He has worked predominantly in the family law jurisdiction throughout his career.
After being articled in an Adelaide firm and then practising in partnership, the applicant became a sole practitioner for a period of 12 months between 1987 and 1988. He then practised in partnership again until 1990 at which point he recommenced practise on his own in a new office building.
In July 1993 the applicant ceased practising on his own and became a salaried solicitor. He did so for financial reasons, stating in his affidavit of 9 June 2005 that he had accumulated a number of substantial debts, including a large bank overdraft, unpaid tax, he was renting expensive office premises and had a number of substantial and irrecoverable book debts. The family home, registered solely in his wife’s name, was sold to repay the secured debts. In about 1993, his accountant lodged outstanding tax returns on his behalf for the financial years 1991, 1992 and 1993 (T10) which resulted in a significant tax debt to the Australian Taxation Office (“ATO”). The applicant commenced fortnightly repayments of this debt to the ATO on 21 April 1994. By 19 February 1996 he had repaid a total amount of $71,853. Negotiations commenced with the ATO to permit the applicant to pay a lump sum of $70,000 (borrowed from his then employer) in full satisfaction of the tax debt. The Deputy Commissioner ultimately refused to ratify any such agreement and served the applicant with a bankruptcy notice. It was agreed between the applicant and the ATO that he would file his own petition for bankruptcy.
In anticipation of his imminent bankruptcy, the applicant made his first application to the Supreme Court pursuant to s 49 of the Act. On 15 October 1998, he was granted permission by an order of Judge Burley to continue to practise law in his current employment, subject to certain conditions, which included being an employed solicitor under supervision of a practitioner. Subsequently, on 30 October 1998, the applicant was declared bankrupt as a result of his own petition.
The order of Judge Burley was subsequently varied by Justice Martin on 9 July 1999 as a result of a second application made by the applicant pursuant to s 49 of the Act. The varied order allowed the applicant to change employment from being an employed solicitor under supervision and instead practise solely as a barrister.
During the above period of time, the applicant’s income was assessed by the Official Trustee. Appropriate payments were made to his bankrupt estate between 30 October 1998 and 31 October 2002 totalling $80,706.45. He was discharged from bankruptcy on 11 February 2002.
Current Proceedings
These current proceedings, being the third application made by the applicant pursuant to s 49 of the Act, arise out of further bankruptcy proceedings. In this instance it was on the petition of the ATO. The applicant was declared bankrupt on 6 December 2004.
During the time that the applicant was making payments to the Official Receiver for his past debts, he failed to lodge tax returns for the financial years 2000 and 2001. After his discharge from bankruptcy, he further failed to lodge tax returns for the financial years 2002 and 2003 when they were due. It is unclear on the evidence whether he also initially failed to file a tax return for the financial year 1999; this being the year following the first bankruptcy which had resulted in the first application of his applications under s 49. The applicant’s 2000, 2001 and 2002 tax returns were eventually lodged simultaneously in July 2003, and his 2003 tax return was lodged in July 2004.
In his affidavit of 9 June 2005, the applicant deposed that he was aware of his increasing tax liability and stated that he failed to lodge the tax returns because he knew he did not have the funds to pay the tax owed. However, notwithstanding that financial dilemma, in April 2003 the applicant either “loaned” money or “invested” funds in a company owned by a friend and legal colleague, Mr Jarell, in the amount of $225,994.86. This was used to establish a nightclub. There is conflicting evidence provided by the applicant such that the exact nature of the financial arrangement is unclear, as is the precise amount which he contributed. This financial arrangement is discussed in greater detail hereafter. The nightclub was unsuccessful and never made a profit.
The applicant was prosecuted for failing to lodge some of his outstanding tax returns and for failing to supply particulars requested by the ATO. The date and the precise content of the charges laid, are not available on the evidence. It is also unclear on the evidence which, if any, tax returns were lodged prior to the relevant charges being laid. The applicant’s outstanding tax returns, as indicated above, were eventually lodged prior to the summons being dealt with by the Court. He pleaded guilty and was subsequently convicted of failing to furnish his 2003 tax return and failing to give information to the Commissioner for which he was fined a total of $5,838, which he is currently paying off in instalments.
As a result of the applicant’s failure to furnish the relevant tax returns in a timely manner, he again incurred a substantial tax debt. Negotiations with the ATO to settle the tax debt in full were unsuccessful. Ultimately the offers made by the applicant to repay the debt were rejected by the ATO. On 6 December 2004 the applicant was declared bankrupt for the second time on the petition of the ATO and a trustee was appointed. By then he had incurred a tax liability of $510,595.24 which included $133,769.24 in interest and penalties over the financial years to 2004. No other debts had been incurred. The applicant ceased practising law on 4 December 2004.
The Financial Arrangement
The circumstances of the financial arrangement with Mr Jarell and what conclusions I should draw on the evidence before me, were significant matters relied on by counsel for the respondent. The evidence on this topic is contained in three documents, namely an affidavit of the applicant, an exhibit to that affidavit and finally a letter written by the applicant to his counsel in response to questions asked of him by the Law Society.
In paragraph 11 of his affidavit dated 9 June 2005 the applicant states that he gave money to Mr Jarell from his cash flow in order to “assist him financially (personally and with a business venture undertaken by a company he owned called The Jen Group Pty Ltd)”. Later in that same paragraph the applicant refers to those monies advanced as ‘my investment’. The affidavit also deposes that a dispute arose between the applicant and Mr Jarell as to the exact nature of the advances that had been made which was never resolved. Mr Jarell now resides outside of the jurisdiction and his whereabouts are not known.
On 4 January 2005 the applicant filed a Statement of Affairs (“the Statement”) with his appointed trustee (being Exhibit A to the affidavit of the applicant sworn 9 June 2005).
Under part D of the Statement in answer to Question 45 which asked “Have you been a director or had a management role in a company at any time in the last 5 years?”, the applicant answered “Yes”. The applicant then provided the following information:
Company Name  Jen Group P/L
Trading Name  E & I Lounge
Nature of company activity           Nightclub
In answer to the question “Does the company owe you any wages, loans or any other money?”, the applicant responded in the affirmative and gave details being “loan A/c (jointly with spouse) $E 150,000”.
In answer to the question “Do you own, or have you at any time during the last 5 years owned any shares in this company?”, the applicant responded in the affirmative and indicated that the number of shares was “37.5%”.
In Part E of the Statement, in answer to the question “Do you own, or are you entitled to any shares, options, rights, convertible notes or other securities?”, the applicant indicated that he and his spouse own 37.5% of the shares in Jen Group P/L. He further indicated that the shares have not been issued, that they were acquired in April 2003 and have a current market value of nil. In a hand written note at the back of the Statement, the applicant provides some further details of the apparent shareholding. Relevant extracts are as follows:
In early 2003 I, jointly with my wife, became involved in the establishment known as E&I Lounge at 279A Hindley Street, Adelaide.
Derron Jarell suggested it to me. He had a company called JEN GROUP P/L of which he was the sole director and shareholder. He holds 37.5% of the shares on trust for my wife and I.
I have put in about $150,000 which I expected to be recorded as a loan account.
And later in the same note he states:
He (Jarell) is now saying that the money that Maria and I put in was not a loan but was “paying equity”…
On 20 June 2005 a letter was sent by the Director of Professional Standards of the Law Society to the applicant’s counsel, requesting information about the financial arrangement with Mr Jarell in the following terms:
Precisely how much money did Mr Jordan personally invest with the Jen Group? It is noted that he describes it as an investment by his wife and himself. Please provide a copy of any further disclosure made to the Trustee other that the statement of affairs attached to the affidavit.
In response a letter was sent by the applicant to his counsel dated 28 June 2005 (Exhibit A1). In that letter the applicant refers to the advance again as an “investment” which “falls into two basic categories, the first is money paid over and the second is chattels purchased”. The total sum invested was $225,994.26 and commenced in May 2002. The letter describes money paid over as being “lost” and states that the chattels which were paid for by the applicant and his wife by “AL & ML Jordan cheques” are the subject of proceedings in the Magistrates Court with the landlord of the nightclub over ownership of the chattels. The letter also indicates that his trustee had indicated that he would be “seeking half of the net amount recovered” and that copies of the draft accounts of Jen Group P/L were available if they were required.
In my view the above information is lacking appropriate detail. There is a lack of clarity as to whether the financial arrangement was a “loan” to personally assist a friend or whether it was an “investment” from which the applicant and his wife hoped to profit. In spite of the request made by the Law Society there was still no indication given as to the amount of the cash advance as distinct from the amount used to purchase chattels; further there is no specificity as to what proportion of the overall financial arrangement was provided by the applicant as distinct from the contribution given by the applicant’s wife.
The Respondent’s Argument
As indicated above, the Law Society opposes the application by the applicant for authority to practise law as a bankrupt. Counsel for the respondent submitted four major points in support of its argument.
The first is, that in granting the applicant authority to practise, the Court would effectively be holding him out as a fit and proper person to practise. It was submitted that as a result of the circumstances discussed hereafter, the Court could not be sufficiently satisfied of the applicant’s fitness to practise and that consequently this application should be refused.
Second, the respondent submits that the protection of the public and the maintenance of the integrity of the profession are matters of primary concern.[1] In support of this submission, the respondent relies on New South Wales case law, discussed below. The crux of the respondent’s case on this point, is that a repetitive failure to lodge tax returns with the intention of evading one’s legal and civic obligations may constitute unprofessional conduct and demonstrate that a practitioner is unfit to practise.[2] According to the respondent it can be inferred from the evidence before this Court that the applicant deliberately and intentionally failed to lodge the tax returns so as to evade his obligations to pay tax and that this amounts to serious unprofessional conduct which the Court must take account of in the exercise of its discretion to grant or refuse authority under s 49 of the Act.
[1] In the Matter of the Legal Practitioners Act 1981: Re Leo John Reynolds (2002) 221 LSJS 105 [25].
[2] New South Wales Bar Association v Cummins [2001] 52 NSWLR 279 [16] – [20]; New South Wales Bar Association v Somosi (2001) 48 ATR 562 [75].
Third, it was submitted that such a deliberate concealment of one’s income by failing to lodge tax returns may indicate a lack of integrity[3] which is relevant to a practitioner’s fitness to practise.
[3] New South Wales Bar Association v Young [2003] NSWCA 228 [11], [15], and [16].
Finally, it was submitted that the applicant was fully aware of his tax obligations and of his rapidly increasing tax liability from 2000 to 2004. He made a deliberate choice during this period, (stating it neutrally) to advance a considerable sum of money to a colleague for use in a business venture rather than using the monies to pay his tax. These circumstances existed against the backdrop of an earlier bankruptcy in 1998, which was also caused by a failure to meet his tax obligations.
The Applicant’s Argument
Counsel for the applicant, essentially submits, first, that the applicant is a practitioner of the highest professional standard and integrity as demonstrated by the affidavit material and the oral testimony of witnesses as to character.
Secondly that he had no intention of permanently evading his tax obligations and, in fact, voluntarily instructed his accountant to lodge his outstanding tax returns.
Thirdly, counsel for the applicant distinguishes this case from the New South Wales decisions put forward by the respondent. It was submitted that the cases cited generally involved barristers who had never filed tax returns, or had not paid tax for substantial periods of time. It was also highlighted that New South Wales operated under a different legislative scheme to that of South Australia.
Fourthly, in partial defence of the applicant’s failure to submit his tax returns and pay his tax between October 1998 and February 2002, counsel for the applicant submitted that the applicant had received inadequate legal advice as to the priority which he should have given to payment of his current tax liabilities rather than to his past liabilities. Throughout the period outlined above the applicant, on legal advice, was making substantial payments into his bankrupt estate. These payments were, in effect, payment in relation to tax for the years 1991 to 1993. His counsel submitted that legally he was required to pay his current tax liabilities in priority to any such payments into his estate, and in not doing so the applicant was significantly disadvantaged. She asserted that if the applicant had been given correct legal advice, he would have paid his current tax liabilities in priority to payments to his bankrupt estate and as a result he would not have become bankrupt a second time.

Fifthly, in relation to the cash advances to Mr Jarell made by the applicant in 2003, the applicant’s counsel submitted that the advances made by the applicant were in the nature of an “unsecured loan” and not an “investment”, as alleged by the respondent. Counsel for the applicant submitted that the applicant was “commercially extremely naïve,” and to advance such an unsecured loan to a professional colleague was foolish but not dishonest. It was submitted that the cash advance was only short-term and the money was eventually to be used to pay his tax liabilities. Counsel for the applicant indicated that the disclosure of the advance and its categorisation was immaterial for taxation purposes as it amounted to a capital loss and not a deductible expense.
Sixthly, counsel for the applicant asserted that, if the applicant was to be given authority by the Court to practise under the conditions proposed by the applicant in conjunction with the Law Society, he simply could not re-offend. The conditions proffered to the Court would require him to work as a salaried solicitor where tax is withheld in the ordinary course of employee and employer arrangements. Other conditions included that the applicant must not receive or deal with money paid by his employer’s clients; he must comply with the reasonable directions of his trustee in bankruptcy; and he must retain the services of Mr Paine, a Chartered Accountant, to manage his financial affairs whilst he remains an undischarged bankrupt. The applicant acceded to an additional condition required by the Court, namely that all payments to his bankrupt estate be made directly by his employer from his salary.
Finally, in reply to the submissions of the Law Society, the applicant’s counsel emphasised that this hearing is not and should not be characterised as a disciplinary proceeding. Whilst information was proffered by counsel for the Law Society from the bar table to the effect that The Legal Practitioners Conduct Board was to commence an investigation of the applicant’s conduct, such an investigation is not before this Court.
Adequacy of Evidence before the Court
The evidence proffered by the applicant which was before the Court was unsatisfactory. It was deficient in the following respects:
·There is a lack of clarity about important aspects of the practitioner’s failure to lodge tax returns; when this deficiency was remedied; the precise nature of the charges laid against him and the chronology of each of these events.
·The applicant’s disclosure of the circumstances surrounding the financial arrangement with Mr Jarell is unsatisfactory for the reasons already discussed.
·Whilst the applicant states that his financial problems were “exacerbated by excessive gambling” and that he no longer gambles, there are no further particulars as to the extent of his gambling, its effect, and when he gave it up.
The Authorities
The authorities relied upon by the Law Society in support of its submissions were largely New South Wales decisions. New South Wales, however, operates under a different legislative scheme to South Australia. The cases cited concern practitioners who had failed to lodge tax returns or had become bankrupt in circumstances related to the failure to lodge tax returns and pay tax. There were two processes by which the Supreme Court in NSW dealt with the issues.
First, the process involved the taking out of a summons under the inherent jurisdiction of the court to “discipline” legal practitioners by seeking an order for removal of a practitioner from the Roll of Legal Practitioners on the basis that the practitioner has been guilty of “unprofessional conduct” and is “not a fit and proper person” to remain on the Roll.
The second process, in circumstances concerning bankruptcy, involved an appeal from a decision of the Bar Council of NSW or the Law Society Council of NSW to cancel a practising certificate.
Under s 38FC of the Legal Profession Act1987 (NSW) (“the NSW Act”):
(1)A Council [Bar Council or Law Society Council] must refuse to issue, or must cancel or suspend, a practising certificate if:
(a) the Council is aware that the applicant for or holder of the practising certificate has, since being admitted as a legal practitioner committed an act of bankruptcy or been found guilty of an indictable offence or a tax offence, and
(b) the Council considers that the act of bankruptcy, indictable offence or tax offence was committed in circumstances that show that the applicant or holder is not a fit and proper person to hold a practising certificate.
The decision of the Council is appealable to the Supreme Court under s 38B of the NSW Act. The Court hears the matter de novo and must decide for itself whether the act of bankruptcy was committed in circumstances such as to show that the bankrupt practitioner is not a “fit and proper person” to hold a practising certificate.[4]
[4] Cameron v Bar Association of New South Wales (2002) 49 ATR 288 [6].
In South Australia, the provisions are different. The Act contains a separate code for disciplinary proceedings being conducted either by the Legal Practitioners Conduct Board or the Legal Practitioners Disciplinary Tribunal in relation to alleged unprofessional or unsatisfactory conduct by practitioners. Such conduct may come before this Court if there is an appeal against the decision of the Tribunal or alternatively if the Tribunal recommends, after conducting its own inquiry, that disciplinary proceedings be commenced in this Court against a practitioner. This is the usual process which is followed rather than relying on any inherent jurisdiction of this Court.
The Act also contains a specific section with regard to bankruptcy of a practitioner. Section 49 of the Act is in the following terms:
(1) A legal practitioner-
(a) who has become bankrupt or subject to a composition or deed of arrangement or assignment with or for the benefit of creditors;
…
must not, without the authority of the Supreme Court, practise the profession of the law.
Maximum penalty: $10,000
(1a) Authority may be granted under this section on the application of a legal practitioner who is or is about to become bankrupt…
(2)The Supreme Court may grant an authority under this section on such conditions as it thinks fit.
(3)A legal practitioner must not contravene or fail to comply with any condition of an authority granted by the Supreme Court under this section.
It is important to bear in mind these differences between the South Australian and New South Wales legislative frameworks when considering the NSW cases relating to failure to lodge tax returns and failure to meet tax obligations. This is because the focus of the NSW courts is on whether a person is fit to practice and whether there has been unprofessional conduct as can be seen by the following cases.
The NSW cases cited by counsel for the Law Society are, in a general sense, examples of far more florid breaches of taxation requirements than the case of this practitioner.
In the case of New South Wales Bar Association v Cummins[5] a summons was issued by the Bar Association under the inherent jurisdiction of the court seeking removal of the practitioner from the Roll of Practitioners as well as declarations of unprofessional conduct and unfitness to practise. The barrister had failed to lodge tax returns for 38 years. The Court found that the practitioner “was perfectly capable of conducting his personal and financial affairs – as a practitioner, director, investor, manager – save in one respect. He never performed his duties as a citizen and taxpayer.”[6] The Court concluded that his failure to do so over such a long period of time was so serious as to amount to unprofessional conduct and demonstrate unfitness to practise. There was a detailed analysis of the case law concerning the obligations of the legal profession and the need for the public to be able to have confidence in practitioners both generally as well as in the relationship of trust between the practitioner and clients.
[5] (2001) 52 NSWLR 279.
[6] Ibid at [16].
The case of New South Wales Bar Association v Somosi[7] concerned a summons issued by the Bar Association under the inherent jurisdiction of the court seeking removal of the practitioner from the Roll of Practitioners as well as declarations of unprofessional conduct and unfitness to practise. The barrister had consented to removal from the Roll but sought to appeal from the declaration that he had been guilty of unprofessional conduct. The barrister had failed to lodge taxation returns or pay income tax for 17 years and had been convicted for breaches of taxation law as a consequence of this failure. Judgement in the matter was handed down by the Court of Appeal on the same day as the decision in Cummins. The Court relied on its reasoning in Cummins and concluded that the declaration of unprofessional conduct was appropriate and it had no difficulty, in the absence of anything to the contrary in the practitioner’s evidence, of drawing the obvious inference that his failure to comply with his obligations over that period of time was deliberate and was intended to avoid taxation.[8]
[7] (2001) ATR 562.
[8] Ibid at [78].
Cameron v Bar Association of New South Wales[9] was an appeal against the cancellation of a practitioner’s practising certificate by the Bar Association of NSW under s 38FC of the NSW Act. In that case the plaintiff had consistently either failed to pay, or had underpaid, his tax over a total period of approximately 15 years. The trial Judge characterised the plaintiff’s conduct as “more than mere incompetence in the management of his own affairs”[10] and concluded that he had been deliberately dishonest and was therefore not a fit and proper person to practise the law.
[9] (2002) 49 ATR 288.
[10] Ibid at [44].
In the case of Wardell v New South Wales Bar Association[11] there was an appeal by a barrister against the cancellation of his practising certificate by the Bar Association of NSW under s 38FC of the NSW Act. The barrister was held by the Court not to be fit and proper to practise as a result of his failure to pay his tax for a period of 12 years, despite earning a substantial income and spending this income on what the Court described as “discretionary lifestyle pursuits”, which included annual overseas holidays, luxury cars and gambling. The Court in this instance held that the barrister had not consciously decided not to pay his tax, but that he had shown “such a reckless disregard for his obligations as to amount to an intention to avoid them”[12] and that in the “minds of right thinking people in our community”[13] he was not a fit and proper person to hold a practising certificate.
[11] (2002) 50 ATR 302.
[12] Ibid at [45].
[13] Ibid at [42].
In New South Wales Bar Association v Stevens,[14] the facts concerned an appeal from a grant of stay pending appeal against the cancellation of a practitioner’s practising certificate by the Bar Association of NSW under s 38FC and s 38FD[15] of the NSW Act. The barrister had failed to lodge tax returns and to pay income tax for almost 20 years and had been defending recovery proceedings by the ATO and had also been convicted of failure to give information. His tax liabilities amounted to a sum in excess of $1.4 million. The Court, in considering the appeal from the order for stay, emphasised the importance of protection of the public and the requirements expected of a practitioner which it had enunciated in the Cummins case.
[14] [2003] NSWCA 95.
[15] Section 38FD requires a practitioner to notify certain matters.
The case of New South Wales Bar Association v Young,[16] concerned an application by summons issued by the Bar Association under the inherent jurisdiction of the Court seeking removal of the practitioner from the Roll of Practitioners. The barrister, who was highly successful, had failed to lodge income tax returns for 16 years, had not paid any income tax for 20 years and was now destitute and bankrupt. Following the cases of Cummins and Somosi, the Court decided, notwithstanding the agreed facts that the barrister did not indulge in a lavish lifestyle with high levels of discretionary expenditure and was experiencing sad domestic circumstances, that his deliberate concealment of income displayed a lack of integrity such that his long-standing failure to lodge returns demonstrated that he was not a fit and proper person to practise and should be removed from the Roll.
[16] [2003] NSWCA 228.
In another case in NSW, New South Wales Bar Association v Stevens,[17] brought by the Bar Association under the inherent jurisdiction of the court, the facts concerned a barrister who had not lodged tax returns or paid income tax for close on 20 years. The Court accepted evidence of contrition and considered details of the barrister’s personal circumstances, but following the decisions and reasoning in the cases of Cummins and Young, concluded that the history of failure to lodge returns demonstrated a lack of integrity and a failure of the barrister in his legal and civic responsibilities such that his removal from the Roll was appropriate, as were declarations that his conduct amounted to unprofessional conduct and that he was unfit to practise.
[17] [2003] NSWCA 261.
Summary of Principles and Relevance of Case Law
These NSW cases demonstrate that the failure to lodge tax returns and pay tax over a long period of time, especially if associated with dishonesty, tax evasion and lavish lifestyle, is such a breach of the civic and legal responsibilities owed by practitioners to the public, that it amounts to unprofessional conduct and indicates unfitness to practise. It is not bankruptcy per se, which could be said to amount to unfitness to practise or unprofessional conduct. As indicated earlier, the major consideration in these cases is the characterisation of the conduct and whether it amounts to unfitness to practise or unprofessional conduct.
That does not mean that in the absence of a specific statutory requirement in s 49 of the Act to consider fitness to practise, such as exists in s 38FC in the NSW Act, indicates that this factor is irrelevant or is to be disregarded. It is clearly relevant to consider the circumstances surrounding the bankruptcy in order to decide whether the authority to permit practise should be granted to the practitioner. Such consideration would include whether those circumstances reveal that the practitioner is unfit to practise. However, this is not the primary focus and in considering whether authority should be given pursuant to s 49, the major concern is the protection of the public and assurance to the public of the integrity of the profession having regard to the circumstances of the bankruptcy. It is not a disciplinary mechanism.
As Gray J in Re Reynolds enunciated in relation to s 49:[18]
Section 49 of the Act is intended to provide protection to the public. It ensures that bankrupt practitioners only practise with the authority of the Supreme Court on such terms as the court considers appropriate. The interests of the public and the maintenance of the integrity of the profession are matters of primary concern.
[18] In the Matter of the Legal Practitioners Act 1981:Re Reynolds (2002) 221 LSJS 105 [25].
Justice Gray also said:[19]
Bankruptcy has the potential to arise in many different circumstances. It may result for example from incompetence, poor decision making, misfortune, addiction, being over zealous with financial commitments, greed and financial ambition, dishonesty or unsatisfactory or unprofessional conduct. Bankruptcy may be suggestive of any or all of the above factors and may involve aspersions on the practitioner’s character. It may indicate that a practitioner is not competent or suitable to continue to practise as a legal practitioner. These matters are likely to affect the way in which the practitioner is viewed by their clients and the public.
[19] Ibid at [26].
I agree, with respect, with Gray J’s elucidation of these matters but I emphasise that the sentence “It may indicate that a practitioner is not competent or suitable to continue to practise as a legal practitioner” should be read in its context. This sentence should not, in my view, be interpreted as requiring the Court on the hearing of an application pursuant to s 49, to embark on a general consideration of fitness of a practitioner such as may arise in matters before the Legal Practitioners Conduct Board or the Legal Practitioners Disciplinary Tribunal in relation to unprofessional or unsatisfactory conduct under the Act.
In this case I am only concerned with bankruptcy and an application made pursuant to s 49. I am not considering disciplinary proceedings for unprofessional or unsatisfactory conduct which is properly the subject of consideration in South Australia, by the Legal Practitioners Conduct Board or the Legal Practitioners Disciplinary Tribunal.
I am also not exercising any inherent jurisdiction of the court, such as in NSW, for removal from the Roll of Practitioners for unprofessional conduct or for not being a fit and proper person to be on the Roll of Practitioners.
Further, unlike s 38FC of the NSW Act, in an application pursuant to s 49 of the Act;
·there has been no initial consideration of the matter by another body and the matter does not come before the Court by way of appeal;
·in the absence of the Court granting authority permitting practise, there is an automatic restriction on the right of a practitioner to practise as soon as a practitioner becomes bankrupt;
·there is no statutory provision specifically requiring the Court to be satisfied that the bankrupt practitioner is fit to practise.
Conclusion
I accept the evidence proffered by the witnesses as to character that the practitioner enjoys considerable respect within the profession for his integrity when dealing with his clients and his dealings with the profession.
I also accept that the practitioner did not deliberately embark on a course of conduct to purposefully to evade his tax obligations and tax payments over a long period of time.
I also accept that the practitioner voluntarily instructed his accountant to address his outstanding tax returns prior to prosecution for his recent failure to furnish returns.
I note that the recent transgression for failure to lodge returns was for a period of four years. This of course was in the context of his earlier transgressions which had led to his first bankruptcy.
I also accept the submission by counsel for the applicant that the practitioner may have been better advised to give priority to paying his ongoing tax commitments rather than to make all his payments into his bankrupt estate. At the same time, I note that the tax liability for the financial years 1999 - 2004, excluding interest and penalties, amounted to at least some $377,000 and that the amount paid to the estate between October 1998 and October 2002 was only some $80,000. There would have been a significant shortfall in any event even if all his payments to the bankrupt estate had been directed to paying current tax liabilities.
I also note that the taxable income of the applicant over the period 1999 - 2004 averaged about $200,000 per year (Exhibit A1). There is no information before me as to how this income was used when he was not paying any tax on its receipt. There is a reference in the affidavit of the applicant to “excessive gambling (in which I no longer engage)”, but no further detail. There is no information before me which suggests that the applicant has used his income for lavish “discretionary lifestyle pursuits” and no submission to this effect was made on behalf of the Law Society.
I also accept that the reason for the failure of the practitioner to lodge tax returns was his realisation that he was not able to meet his tax obligations and that he had “developed a mental block about the issue of unpaid tax.”(Affidavit of applicant sworn 9 June 2005 [11].)

In relation to the financial arrangement with Mr Jarell, by reason of the inadequacy of the evidence before me, I am unable to be definitive in my findings. It would appear that the arrangement was more than simply helping out a friend in need with a loan, it was more in the nature of an investment in a nightclub enterprise with a friend for mutual benefit and hopeful profit. The amount involved was considerable and again in the absence of more particular evidence, an inference could be drawn that half of that amount was contributed by him, namely around $112,997. I am unimpressed by the lack of clarity on this important issue when the applicant knows the details.
If it was a matter of bankruptcy brought about by failure to file tax returns for four years and the inability to pay the tax outstanding as required due to poor decision-making, unfortunate advice and previous excessive gambling, I consider that these factors would not in the circumstances of this case cause me to refuse the application authorising the practitioner to practise. I consider that the interests of the public would be adequately protected by the proffered undertakings and conditions of practice with supervision. My concern is the additional effect of the financial arrangement in which the applicant deliberately chose to invest substantial monies in an enterprise with a friend instead of spending the same money on his legal and civic responsibilities to furnish tax returns, pay his tax and avoid bankruptcy. This is not only “very foolish” as the applicant admits, or commercially extremely “naïve” as his counsel submits, but raises issues as to the applicant’s overall awareness and regard for his responsibilities as a legal practitioner. At the same time I am mindful that this is not a matter in which I am required to consider whether his conduct in relation to that financial arrangement amounts to unprofessional conduct or unsatisfactory conduct, such consideration being the province of other bodies under the Act which would act on more detailed information than that which has been provided to me.
On balance and not without some hesitation, I consider that notwithstanding the circumstances of the applicant’s bankruptcy arising from the failure to pay tax for four years, compounded by the financial arrangement, I consider that the applicant’s application to practice should be granted. In so concluding I am relying heavily upon the applicant’s high professional reputation over many years of practice and that he is now 56 years of age; that most of his financial problems have arisen when he has been in practice on his own account; that his failure to lodge tax returns and pay tax was in comparison with the NSW cases of much lesser order; that his area of practice is in the family law jurisdiction and not for example in more commercial areas of practice; and most importantly having regard to the protections to the public contained in the undertakings given and the conditions for restricted practise.
I am satisfied that the interests of the public will be appropriately protected and that the future integrity of the applicant as a practitioner will be assured by the authorisation permitting him to practise on the following stringent conditions:
Orders
I grant the applicant authority to practise the profession of law pursuant to s 49 of the Legal Practitioner’s Act subject to the following conditions:
1. The practitioner’s right of practice be limited to that of an employed solicitor with no right of private practice in the employ of and under the supervision of David Monfries Davidson or such other legal practitioner of not less than ten years standing as may from time to time be approved by the Court;
2. The practitioner must forthwith advise the Law Society of SA should he cease to be so employed;
3. The practitioner must not receive or deal with money paid by his employer’s clients;
4. The practitioner must not render any bill for professional fees other than practice taxation invoices for the legal practice of David Monfries Davidson or such other practitioner as may from time to time be approved by the Court;
5. The practitioner must not establish nor maintain a solicitor’s trust account in his own name nor operate upon the trust account of David Monfries Davidson;
6. The practitioner must comply with the reasonable directions of his trustee in bankruptcy;
7. The practitioner must pay within the prescribed time periods any contributions to his bankrupt estate assessed against his income;
8. Any such contributions made to his bankrupt estate are to be made by his employer from his salary directly to the bankrupt estate;
9. The practitioner must lodge his future income tax returns within the prescribed time periods and pay any income tax assessed thereon as required by the Australian Taxation Office;
10. The practitioner must retain the services of Mr Andrew Paine, Chartered Accountant, to manage his financial affairs whilst he remains an undischarged bankrupt.
I will hear the parties as to any other order or condition which may be required