Wang v Council of the Law Society of New South Wales

[2009] NSWSC 67

Reported Decision: 73 NSWLR 226

New South Wales

Supreme Court

CITATION:	Wang v Council of the Law Society of New South Wales [2009] NSWSC 67
HEARING DATE(S):	2 February 2009, 3 February 2009
JUDGMENT DATE :	20 February 2009
JUDGMENT OF:	Schmidt AJ
DECISION:	1. The appeal be upheld. 2. The Law Society pay Mr Wang $130,000 plus interest from the Fidelity Fund. 3. The Law Society pay Mr Wang’s costs of the proceedings.
CATCHWORDS:	ADMINISTRATIVE LAW - appeal - claim against Fidelity Fund - the role of the Law Society in appeal proceedings - Hardiman principle - Law Society's proper role that of active contradictor - whether provisions of the Legal Profession Act 2004 applied to appeal - merits of appeal - criminal enterprises - money received in course of solicitor's practice - trust money - default by solicitor - whether plaintiff ought to have known of illegality - appeal upheld - costs
LEGISLATION CITED:	Administrative Decisions (Judicial Review) Act 1977 (Cth) Criminal Injuries Compensation Act 1972 (Vic) Legal Profession Act 1987 Legal Profession Act 2004 Migration Act 1958 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	R v The Australian Broadcasting Tribunal and Ors; ex parte Hardiman and Ors (1980) 144 CLR 13 Community Television Sydney Limited v Australian Broadcasting Authority and Anor (No 2) (2004) 136 FCR 338 Law Society of New South Wales v Glenorcy Pty Ltd and Ors (2006) 67 NSWLR 169 Laurent v the Law Society of New South Wales [2000] NSWSC 1103 Laurent v Law Society of New South Wales [2002] NSWSC 655 TXU Electricity Ltd v Office of the Regulator-General (2001) 3 VR 93 Swart v Carr [2006] NSWSC 1302
PARTIES:	Qiuxue Wang - Plaintiff Council of the Law Society of New South Wales - Defendant
FILE NUMBER(S):	SC 30008/08
COUNSEL:	Mr A Crossland - Plaintiff Mr S Free - Defendant
SOLICITORS:	Bruce Bian, City Law - Plaintiff Raymond Collins, Solicitor - Defendant

- 35 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
ADMINISTRATIVE LIST

SCHMIDT AJ

Friday, 20 February 2009

030008/08 QIUXUE WANG v COUNCIL OF THE LAW SOCIETY OF NEW SOUTH WALES

JUDGMENT

1 HER HONOUR: By a summons of 25 January 2008, Mr Wang seeks orders that a decision of the Law Society of New South Wales ('the Law Society'), refusing a claim brought under the Legal Profession Act 2004 ('the 2004 Act'), for payment of $130,000 from the Legal Practitioners Fidelity Fund, be set aside and that he be paid that sum from the Fidelity Fund, plus interest.

2 The claim arose out of events which occurred in 2004, when Mr Wang entrusted $130,000 to a solicitor, Mr Andrew Lui, later to be paid to a Mr Yi Li Li, for assisting Mr Wang to obtain a permanent resident visa. It was claimed that it was promised that the money would be repaid, if the visa was not obtained. A visa provided by Mr Li proved to be a forgery, but Mr Wang was not repaid. In 2007, a claim was made on the Fidelity Fund, but was refused by the Law Society.

3 As well as the merits of the appeal there were two other issues raised by the parties. The first, the proper role of the Law Society in these proceedings and the second, whether the provisions of the 2004 Act, applied to the proceedings.

The role of the Law Society

4 It was the case advanced for Mr Wang that the Law Society had no role to play as an active contradictor in the appeal brought under s 452 of the 2004 Act. (See R v The Australian Broadcasting Tribunal and Ors; ex parte Hardimanand Ors (1980) 144 CLR 13 and Community Television Sydney Limited v Australian Broadcasting Authority and Anor (No 2) (2004) 136 FCR 338.)

5 For its part, the Law Society argued that the Hardiman principle had no application, given the statutory scheme under which the appeal was brought. Such an approach would leave a de novo review of the merits of a claim brought against the Fidelity Fund, to be decided by this Court in proceedings involving no active contradictor, even though the legislation expressly contemplated that the Law Society would perform that role.

6 At the hearing I announced that I could not accept the approach urged for Mr Wang and that I would in due course give reasons for that conclusion.

7 In Law Society of New South Wales v Glenorcy Pty Ltd and Ors (2006) 67 NSWLR 169, the Court of Appeal concluded at [14] that s 90D of the predecessor legislation, the Legal Profession Act 1987 ('the 1987 Act'), required the appeal to be conducted as a de novo review of the merits of the claim. It was not in issue that appeals brought under the 2004 Act, must also be approached on that basis.

8 Section 83 of the 1987 Act required the Law Society to conduct an investigation of Mr Wang’s claim. In Laurent v the Law Society of New South Wales [2000] NSWSC 1103, Adams J discussed the nature of that obligation at [9]:

In conducting that investigation the Law Society is not a judicial tribunal. It in(sic) not conducting a criminal or, indeed, any trial. It is not bound by the laws of evidence. It is entitled to have regard to any material which fairly and rationally bears upon the relevant considerations entailed in investigating the claim. That evidence may be hearsay. It may be evidence of similar facts. It may include evidence about other dishonest or improper behaviour by the solicitor in question. These are all questions for the conscientious consideration of the Council. The members of the Committee must bring their own judgment, opinions and experience to bear on the issues. Of course a claimant must be given the opportunity to submit such material as he or she believes is relevant to the investigation but that in no sense delimits the scope of the Society's duty. Of course, it may be that, in a rare case, even following a full investigation a determination positively of honesty or dishonesty or any other necessary element of liability may not be able to be made. If that be the case then, of course, there is no finding as to that matter and it follows no claim on the Fund is established.

9 As was submitted for Mr Wang, it follows that in an appeal such as this, involving as it does a de novo hearing, the rights of a party to the proceedings are quite different to the obligations imposed on the Law Society by s 83 of the 1987 Act, to investigate a claim on the Fidelity Fund. Parties’ rights in appeal proceedings are both wider and narrower. While, on appeal, the parties are bound by the rules of evidence, witnesses must give their evidence on oath or affirmation and they may be cross examined, including as to credit. It is against that background that the argument as to the Hardiman principle must be considered.

10 The High Court’s decision in Hardiman concerned an application to the Australian Broadcasting Tribunal for approval of the acquisition of shares in a subsidiary of the holder of a commercial television license and the resulting public inquiry conducted by that Tribunal. In the proceedings before the High Court, the Tribunal did not adopt the usual approach of filing a submitting appearance, but instead appeared to present a substantive argument as to the nature and scope of an inquiry under the relevant statutory scheme, as well as to the way in which the particular inquiry had been conducted. At pp 35 - 36, it was observed:

There is one final matter. Mr Hughes was instructed by the Tribunal to take the unusual course of contesting the prosecutors' case for relief and this he did by presenting a substantive argument. In cases of this kind the usual course is for a tribunal to submit to such order as the court may make. The course which was adopted by the Tribunal in this Court is not one which we would wish to encourage. If a tribunal becomes a protagonist in this Court there is the risk that by so doing it endangers the impartiality which it is expected to maintain in subsequent proceedings which take place if and when relief is granted. The presentation of a case in this Court by a tribunal should be regarded as exceptional and, where it occurs should, in general, be limited to submissions going to the powers and procedures of the Tribunal.
In the result, we would make absolute the order nisi for mandamus.

11 This approach was followed by Sackville J in Community Television Sydney Limited, where the Australian Broadcasting Tribunal sought an order for costs, it having acted as a protagonist in judicial review proceedings brought under the Administrative Decisions (Judicial Review) Act 1977 (Cth), in relation to its decision to allocate a broadcasting license to one of the other respondents in the proceedings. His Honour concluded that the Hardiman principle applied, given that the proceedings had raised the prospect of remitter to the Tribunal; that the Tribunal would then have had to decide between the two applicants for the license, they both being parties to the proceedings; and that there was a contradictor present, prepared to advance arguments in opposition to the claim for relief sought against the Tribunal's decision. His Honour took the view that there was only one aspect of the matter in respect of which the Tribunal had properly appeared in the proceedings, consistent with the Hardiman principle and so awarded the Tribunal 25% of its costs of that appearance.

12 Sackville J referred to a judgment of Ashley J in TXU Electricity Ltd v Office of the Regulator-General (2001) 3 VR 93. There his Honour had to consider a ‘one party’ case, observing at [42] - [45]:

"[T]he context in which the Hardiman observations were made suggests that the High Court was there giving its imprimatur to the course previously adopted in industrial and court matters, and was probably indicating that in proceedings for judicial review the same course should at least be adopted by decision-makers before whom hearings which were in substance inter partes were conducted. In such cases there would be a natural contradictor. Moreover, there might reasonably be as much concern about partiality or the appearance of partiality if a matter was to be remitted to such a decision-maker as there might be in the case of a court or industrial tribunal to which there was to be remitter.

It cannot be said, in my opinion, that Hardiman plainly extended the then-existing regime to decision-makers in `one party' cases. But there was and is good reason for giving the principle operation in at least some cases of that kind. The cases in which the principle sensibly applies are those in which:

. the decision-maker is bound to apply the rules of procedural fairness; and
. the application for prerogative relief raises the prospect of remitter; and
. there is a public interest as would justify the intervention of the Attorney-General.


Even so, the dictum of Brennan J in Fagan [v Crimes Compensation Tribunal (1982) 150 CLR 666, at 681-682] makes it clear that the principle should not be applied if the Attorney-General does not intervene and no `law officer' or `public official' is heard by the court. In the absence of such intervention the decision-maker in such a case should characteristically assist the court, particularly upon the question of power, and in doing so adopt as little of the role of partisan as is possible.

I said a moment ago that there was and remains good reason for giving the Hardiman principle operation in certain `one party' cases. The reason is this: in such a case, where there is prospect of remitter, a concern as to the fact or appearance of partiality could arise. It would not be a concern that the decision-maker was or appeared to be favourably disposed to one of two parties; but rather that the decision-maker was or appeared to be unfavourably disposed to the prosecutor."

13 Ashley J, after an extensive review of the authorities, concluded that in a one party matter where the Attorney General had not intervened, the Court could not deny a decision maker the right to participate fully in the judicial review proceedings. His Honour noted that no case had been cited to him in which a court had precluded a party from participating fully in judicial review proceedings, in order to avoid a breach of the Hardiman principle. Nor was there any such authority referred to in these proceedings.

14 Ashley J also observed at [39], in relation to appeal proceedings:

Distinct from cases in which prerogative relief was sought, there are many reported cases in which decision-makers were parties to, and appeared substantively in appellate proceedings. The role of the decision-makers in such cases was dictated by statute. [See the very many proceedings to which the Commissioner of Taxation, his predecessors, his State counterparts and Collectors of Customs have been parties, and cases involving the Registrar of Trade Marks and the Commissioner of Patents; see also, for example, Repatriation Commission v Law [1981] HCA 57; (1981) 147 CLR 635, and Matthews v Chicory Marketing Board (Victoria) [1938] HCA 38; (1938) 60 CLR 263.] They do not cast light, in my opinion, upon the resolution of the present problem. If there was to be remission to the decision-maker in the event of successful appeal, and if that carried with it any concern about the fact or appearance of partiality, the short answer is that the pertinent statute nonetheless set up a regime in which the decision-maker was made a substantive litigant on the appeal.

15 In Fagan, the High Court was concerned with a decision made pursuant to the Criminal Injuries Compensation Act 1972 (Vic), where the Tribunal had refused a claim for compensation. The Tribunal appeared in the appeal proceedings in the Victorian Supreme Court and in the High Court. Its role was discussed by Brennan J, who observed at pp 681-2:

In this case the Tribunal appeared by counsel as respondent to contest the appellant's case. Where curial proceedings arise out of a matter which is contested between parties appearing before a tribunal, it is not ordinarily appropriate for the tribunal to appear to contest the curial proceedings brought by one of the parties before it ( Reg. v. Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 CLR 13, at pp 35-36 ). But where the proceedings before the tribunal are not inter partes, and where the Attorney-General cannot or does not intervene to represent the public interest (cf. Corporate Affairs Commission v. Bradley (1974) 1 NSWLR 391 ) and neither a law officer nor a public official is heard by the court (cf. Reg. v. Cook; Ex parte Twigg (1980) 147 CLR 15 ), it may be desirable that the tribunal should appear by counsel to make such submissions as it thinks calculated to assist the court and, in an appropriate case, to argue against the applicant's case. That is what was done in this case. Here, the Tribunal's function was to determine whether and to what extent a claimant was entitled under statute to a payment out of public moneys. Though the Tribunal was bound to act impartially, it was in a sense the guardian of the moneys appropriated by Parliament to answer the proper claims for compensation under the Act. In proceedings to review its decision, the Tribunal properly represents the public purse, and it was right that the Tribunal should appear by counsel as a party to respond substantially to the application. It follows that the Tribunal should then be treated as an ordinary party in the matter of costs. Therefore I would make an order awarding the applicant his costs against the Tribunal both here and in the Supreme Court.

16 In this case, the decision maker, the Law Society, was not an administrative tribunal. Mr Wang’s claim did not involve any inter parties contest. Rather, the Law Society had a statutory obligation to investigate his claim and to determine it in accordance with its responsibility to administer the Fidelity Fund and to make payments out of the Fidelity Fund, to claimants who established rights to such payments in accordance with the statutory scheme. Undoubtedly in carrying out those functions, the Law Society was obliged to act impartially. These proceedings then came to this Court as an appeal from the Law Society’s decision to refuse Mr Wang’s claim, not by way of judicial review.

17 It was put for the Law Society that its role in the appeal proceedings was to ‘test the evidence, make submissions about the effect of the evidence as against the provisions of the Act and as to whether this Court should find, on the merits, the plaintiff is entitled to payment from the Fund.’

18 The authorities suggest that in past proceedings such as these, whether brought under the 2004 Act or the 1987 Act, the Law Society has appeared as an active party. There has, to date, seemingly, been no suggestion that the Law Society did not properly have such a role to play. That is not by any means a decisive consideration, but explains why this point only now arises for determination. Even so, it was not suggested for Mr Wang that the Attorney General, or anyone else, could or should have appeared in these proceedings to perform the role which the Law Society seeks to perform. That was the order sought in TXU Electricity Ltd, which was refused by Ashley J. No such relief was sought here.

19 In my view it must be accepted that consistently with the approach taken in Fagan, the Law Society appearing as an ordinary party in the appeal to respond substantially to the relief sought, so as to properly represent the Fidelity Fund which it must administer, is its proper role.

20 That view is directly supported by the statutory scheme, particularly s 454 Court Proceedings, of the 2004 Act, which provides:

454 Court proceedings

In any proceedings brought in a court under section 448 (Subrogation) or section 452 (Appeal against decision on claim):

(a) evidence of any admission or confession by, or other evidence that would be admissible against, an Australian legal practitioner or other person with respect to an act or omission giving rise to a claim is admissible to prove the act or omission despite the fact that the practitioner or other person is not a defendant in, or a party to, the proceedings, and

(b) any defence that would have been available to the practitioner or other person is available to the Law Society Council.

21 Were the approach urged for Mr Wang correct, s 454(b) would have no work to do in appeal proceedings such as this. The section expressly contemplates that the Law Society will appear in such proceedings in order to run a defence. That, it seems to me, puts beyond doubt that the Law Society may properly play an active role as contradictor in these proceedings.

22 I am unable to accept the argument that the possibility that one of the orders which the Court could make in proceedings such as this, is that the matter would be remitted to the Law Society for reconsideration (s 452(5)(b)(iii)), must lead to the conclusion that like in Hardiman, the Law Society ought not to appear as an active contradictor in the proceedings.

23 While the legislation contemplates remitter, that is not the only remedy provided for and indeed, was not the remedy here urged. Both parties accepted that in this case, the Court would decide the plaintiff’s claim on the basis of the evidence led, although each accepting, in theory, that the Court could come to a different view and could order remitter. The 2004 Act expressly contemplates that the Law Society will appear as defendant in appeal proceedings and the possibility of remitter. As Ashley J observed in TXU Electricity Ltd, such a regime is one entirely open to the Parliament to adopt, if it wishes.

24 Were the Law Society not given such a role, on the approach urged for Mr Wang the result would be that a de novo hearing on appeal would proceed before this Court without any contradictor, leaving it entirely in the hands of the appellant as to what evidence to lead. Such evidence would then, seemingly, remain untested and the Court would be left in the position of being given no assistance, of the kind discussed by Brennan J in Fagan. That would be quite a curious appeal process, one which the legislation itself does not hint at. To the contrary, it contemplates, as I have said, that the Law Society will play an active role as a defendant.

25 It followed that the approach urged for Mr Wang had to be refused.

Which Act governs these proceedings?

26 Mr Wang’s claim was made in 2007, in relation to events which occurred in 2004, at a time when the 1987 Act was in force. It was considered by the Law Society as a claim required to be dealt with in accordance with the provisions of the 1987 Act, even though the 2004 Act was then in force.

27 The appeal was brought to this Court in 2008 pursuant to the 2004 Act. A question was raised by the Law Society as to which legislation the appeal had to be determined under, having in mind the transitional provisions which appear in Schedule 9 to the 2004 Act. There, clause 3 makes general saving and transitional provisions in relation to events which occurred before the 2004 Act came into operation (1 October 2005) and clause 22A deals with appeals brought after the 2004 Act came into operation in respect of matters arising under the 1987 Act. It provides:

22A New appeals or reviews about old matters

(1) A matter arising under the old Act may be the subject of an appeal or review made or applied for on or after 1 October 2005 if the appeal or review could have been made or applied for had this Act not been enacted.

(2) The appeal or review may be made or applied for under the provisions of either the old Act or this Act (even if the matter could not otherwise be the subject of appeal or review under this Act if the matter had arisen on or after 1 October 2005).

(3) The appeal or review may be dealt with under this Act (even if the matter could not otherwise be the subject of appeal or review under this Act if the matter had arisen after 1 October 2005), except in so far as a direction of the Supreme Court or the President of the Tribunal, as the case requires, under this clause otherwise provides.

(4) The Supreme Court or the President of the Tribunal, as the case requires, may direct that the appeal or review proceedings be dealt with in accordance with the provisions of:

(a) the old Act, or

(b) the old Act and this Act as regards different aspects of the proceedings, as indicated in the direction.

Those provisions apply accordingly, and so apply with any necessary adaptations.
(5) The President of the Tribunal may, for the purposes of this clause, direct that the Tribunal be constituted as determined by the President or the Divisional Head of the Legal Services Division, being a determination that is consistent with requirements for the constitution of the Division under the Administrative Decisions Tribunal Act 1997 at or at any time before the commencement of this clause.

(6) The President may give any such direction at any stage of the proceedings.

(7) The Supreme Court or the Tribunal, as the case requires, may make orders declaring how the decision on the appeal or review is to have effect in relation to the provisions of this Act.

(8) Any decisions of the Supreme Court or the Tribunal or directions of the Supreme Court or the President of the Tribunal that:

(a) were made or given before the commencement of this clause, and

(b) would have been valid had the Legal Profession Amendment Act 2006 (which inserted this clause) been in force at the relevant time,

are taken to have been validly made or given.

28 It was accepted that Mr Wang had a right to make a claim on the Fidelity Fund under the 1987 Act and also the option of bringing an appeal under either the 1987 or 2004 Acts, but still a question arose as to which statutory scheme had to be applied by the Court, in determining the appeal.

29 The question is not without complexity, but it was common ground that while there will be cases where this issue may have consequences, given the nature of the particular claim and what is raised on the appeal, given changes introduced by the 2004 Act, this case is not one of them. It was accepted that the relief sought on appeal in the circumstances of this case, is available under either statutory scheme.

30 In those circumstances, I do not propose to come to any conclusions as to the matters raised. They are academic, the parties accepting that the same orders are available to be made, no matter which Act governs the proceedings. The question to be determined is whether Mr Wang’s claim on the Fidelity Fund ought to have been granted.

The merits of the Appeal

The evidence

31 Mr Wang’s claim was made in 2007, after he had been deported. It was determined by the Law Society’s Fidelity Fund Management Committee. On 18 December 2007 the Law Society advised Mr Wang's solicitor, Mr Bian, that the claim had been disallowed, the Committee having come to the view that there had been no failure to account by Mr Lui, within the meaning of s 79A of the 1987 Act, because the sum of $130,000 received by Mr Lui had not been received in the course of his legal practice. Further, that even if there had been a failure to account, the Committee ‘was satisfied that the conduct of the transaction with Mr Lui was illegal and that Mr Wang knew or ought reasonably to have known of that illegality’. In coming to that conclusion, the Committee took into account:

. Mr Wang's past experience of the visa application process


. the fact that $130,000 was paid supposedly for a visa based on a fear of persecution

. the imposition of a two week time limit for the visa

. the fact that the agreement made provision for the eventuality that the visa was fraudulent

. its view that Mr Li was not an associate of Mr Lui within the meaning of the Legal Professsion(sic) Act 1987

32 There was no explanation given as to why the Committee had come to the view that Mr Lui had not received the money paid to him in the course of his legal practice. Nor was it entirely clear from the letter, what transaction the Law Society was referring to, when it concluded that the transaction in which Mr Lui had been involved was illegal.

33 After further representations were made by Mr Bian, the Law Society considered Mr Wang’s claim again. More information was sought from Mr Wang, but on 7 August the Law Society again advised Mr Bian that the claim had been refused. It advised that it had discovered that the visa which had been issued to Mr Wang was one of a number of blank visas which had been stolen from the Department of Immigration and Citizenship in Canberra. The Law Society took the view that while it was not suggested in any way that Mr Wang was a party to the theft of the visas, ‘the following matters suggest that Mr Wang may have known that he was not genuinely applying for a protection visa’:

. the fact that a payment of $130,000 was made for an application which attracts a $30 fee


. the fact that the payment was conditional on a visa, being a visa grounded on fear of persecution, being granted within two weeks

. the fact that the parties contemplated in a written agreement the possibility that the visa might be fraudulent.

34 Still, further comment was invited by the Law Society from Mr Wang, to which Mr Bian again responded, pointing, amongst other things, to Mr Wang’s reliance on Mr Lui as a lawyer, on whom he had relied not to be involved in any illegality and who he had trusted. Mr Wang denied that he knew or ought to have known of the illegality in question.

35 On appeal, the only evidence was that led in Mr Wang’s case. Mr Wang gave his evidence by telephone, from China, with the assistance of an interpreter. Mr Lu was called and also gave his evidence with the assistance of an interpreter. Mr Bian, who represented Mr Wang both in his dealings with the police and the Law Society gave affidavit evidence and was not required for cross examination. The evidence expanded upon the information which had been provided to the Law Society in the claim form and by the subsequent correspondence to which I have referred.

36 The Law Society led no evidence as to its investigation of the claim, or what it had revealed. It was common ground that both Mr Li and Mr Lui had disappeared and were not able to be found.

37 From the evidence, it became apparent why the Committee had reached the view that Mr Lui had been involved in an illegal transaction. He was a sole practitioner, who represented on his letterhead ‘Andrew Lui Lawyers’ that he was a solicitor, a public notary and a migration agent.

38 In his claim to the Law Society, Mr Wang claimed that Mr Lui had provided him with legal services in relation to an application for a permanent resident visa. It was not in contest that Mr Lui was introduced to Mr Wang by Mr Li, to whom Mr Wang had earlier been introduced by an acquaintance as being a migration agent, who could assist Mr Wang in obtaining a permanent resident visa.

39 Mr Wang, a Chinese national, had been in Australia since 1996. He had first travelled here under a one month business visa, which had been arranged for him by Mr Lu, with the assistance of a migration agent. Mr Lu, a friend of Mr Wang’s father, had himself first come to Australia from China as a student and had later obtained permanent residency granted to such students by the Australian Government, in the aftermath of the events in Tiananmen Square in the early 1990s.

40 Mr Wang had remained illegally in Australia after the expiry of his business visa and in 1998 had applied for a protection visa, with the assistance of a migration agent. That application was unsuccessful, but Mr Wang still continued to remain illegally in Australia.

41 In 2004, Mr Wang was introduced to Mr Li. Mr Li told him that he could get Mr Wang a permanent resident visa, which would cost $130,000, but that if he could not get the visa, he would refund all of the money to Mr Wang. In a later conversation Mr Li told Mr Wang that he would 'have to pay a deposit of $35,000'; that he had a ’working partner’ Mr Lui and that ‘even if you won’t trust me you have to trust Mr Lui. Mr Lui is a solicitor and we are good friends.’ Mr Wang later borrowed money from Mr Lu and on 13 February 2004, together they went to see Mr Li and Mr Lui at Mr Lui’s offices, which he and Mr Li appeared to share.

42 In the discussion Mr Li told Mr Wang that he could apply for a permanent visa. Mr Lui said ‘I can guarantee what Mr Li has said. He will guarantee you success with the application for Visa or have your money fully refunded’.

43 Mr Lu paid $35,000 cash to Mr Lui, who provided a typed ‘acknowledgement’ printed on his letterhead, which provided:

"We acknowledge receipt of $35,000.00 this date as trustee for (John) Yi Li Li from Wang Qiuxue for work to be done from Yi Li Li.

In the event that such work is not completed within 2 weeks Yi Li Li is to refund all monies to Wang Qiuxue."

44 Mr Wang, Mr Lu and Mr Li also signed a handwritten ‘agreement’, written in Chinese, which had already been prepared. It was not written on any letterhead. That agreement provided:

"This agreement is entered into between Yi Li LI and Wen Jun LU:

Yi Li LI will act for Qiu Xue WANG in the matter of immigration application. Wen Jun LU will pay $35,000 as a deposit. This immigration matter shall be finalized in two weeks. If the application fails to be finalized in two weeks, all the deposit shall be refunded to Wen Jun LU."

45 Mr Lui also signed this agreement, but as a witness.

46 On about 12 March, Mr Li told Mr Wang that his visa was ready and that he had to pay the balance of the money. Mr Wang and Mr Lu again went together to Mr Lui’s office and paid him $95,000 in cash. Mr Lui again provided a typed ‘acknowledgment' printed on his letterhead. It provided:

"We acknowledge receipt of $95,000 this date as trustee for (John) yi Lil(sic) Li from Wang Qiuxue for work to be done from Yi Lil(sic) Li.

In the event that such work is not completed by 12 May 2004 Yi Li Li is to refund all monies to Wang Qiuxue."

47 A second agreement, also handwritten in Chinese, was also then signed by Mr Wang, Mr Lu and Mr Li and witnessed by Mr Lui. It provided:

"This agreement is entered into between Yi Li LI and Wen Jun LU:

Yi Li LI will act for Qin(sic) Xue WANG in his application for permanent residency. The application for Medicare card and Tax File Number shall be finalized between 12 February and 13 May. In two years, Australian Citizenship shall be obtained in two years. If any problem arises during this process, for example, the permanent resident visa is fraudulent, all the fees of $130,000 shall be refunded."

48 Mr Wang soon discovered that the visa he was given by Mr Li was a forgery. A few days later, when handling the visa he found that the colour came off. Mr Wang telephoned Mr Li but could not contact him. He then went to the office where he told Mr Lui what had happened. Mr Lui told him that he could also not find Mr Li. Mr Wang asked Mr Lui to refund the money, but Mr Lui told him that he did not have it. Mr Wang threatened legal proceedings. Mr Lui offered to get him another visa, but Mr Wang demanded the money, saying ‘I won’t trust you both regarding further visas. I want my money back’.

49 Mr Wang spoke to Mr Lui on a number of later occasions, always to be told that he could not find Mr Li. In 2005, Mr Wang was deported and now remains in China.

50 Mr Lu’s evidence corroborated that of Mr Wang. Mr Wang had approached him for a loan of $130,000, in order that he could apply for permanent residence through Mr Li, who was working for a law firm. Mr Lu thought that this was a lot of money, but Mr Wang told him that:

"Wang: I am applying for permanent residency through Mr Yi Li Li, who is a friend of mine working with a law firm. But they want $130,000. I don't have this money would you be able to lend it to me?

Myself: $130,000 is a lot of money.

Wang: I know, but they said they would give the money back if the application was not successful. Mr Li said it would go into the account held by a lawyer whose surname is Lui. The lawyer has an office in China Town. The lawyer will hold the money, and give it back to me if my visa application fails. They said they would sign an agreement with me about his."

Myself: OK, but you will have to pay it back from your salary over time .

Wang: I will do that . Thank you"

Myself: I would like to have a word with them about the arrangements."

Wang: That would be good. They say they want $35,000 upfront"

51 Mr Lu himself had to borrow money in order to lend Mr Wang the sum he needed. He wanted to speak to Mr Li and Mr Lui about this arrangement and so attended the two meetings with Mr Wang. Mr Lu’s account of the conversation on 13 February, was:

"Mr Li: The agreement will be that you pay us $35,000 and $95,000 if we obtain the visa.

Myself: Do you promise that if you can't get a visa, we will get the money back?"

Mr Li: There won't be a problem.

Myself to Mr Lui: Can we rely on you?"

Mr Lui: Of course you can. We have been successful with many similar cases. We have been doing this work for many years. If you have any problems, come back and see me.

Myself: Is this kind of work legal?

Mr Lui: Of course legal. "

52 Neither Mr Wang nor Mr Lu were cross examined as to the veracity of their accounts as to their dealings with Mr Li and Mr Lui. They were, however, both cross examined as to their concerns that the transaction might not be a lawful one.

53 Mr Wang’s evidence was that he stayed in Australia, knowing he did not have a valid visa in 1996, after the expiry of his one month business visa and later after his 1998 application for a visa was not successful. He wanted to stay permanently in Australia and was concerned about being deported. He agreed that the arrangement which he made in 2004 was that Mr Li would do the work to get the visa and that Mr Lui would hold the money for safekeeping, while he waited for the visa. Mr Li told him the visa cost $130,000 because it was very difficult to get. Mr Li wanted him to pay cash and he borrowed the money from Mr Lu, who told him that if he could get a visa for $130,000, it was worth it, but Mr Lu was worried that he would get ripped off.

54 Mr Wang also agreed that when he paid the money, he made an agreement that if any problems arose, the money would be repaid. He said that he did not sign the second agreement, when the $95,000 was paid, although the translation of the document in evidence shows that he did sign it. He did then receive the document, which he read. It included a statement that the money would be repaid if the visa was fraudulent. Mr Wang explained that the document had been prepared by Mr Lui and Mr Li. It was they who had used that phrase, not him. The document was not discussed at the meeting, it had been discussed before. He never thought that the visa would be fake. The agreement was to give him peace of mind.

55 Mr Lu’s evidence was that he was a business man and company director. He had engaged an agent to help him get a business visa for Mr Wang in 1996. He had never hired an agent to help anyone else get a visa. He was aware that Mr Wang had stayed in Australia after his visa had expired and that he had been unsuccessful in obtaining another visa in 1998, but he did not know that Mr Wang did not have a visa in 2004, when he came to seek his help.

56 Mr Lu explained that he thought it was strange that such a visa would cost $130,000. Initially he did not agree to help Mr Wang to apply for a visa, but when Mr Wang told him that it was to be done by a solicitor, he agreed, because he trusted Australian lawyers. He still wanted to go with Mr Wang to his meeting. He found that the offices they attended were professionally presented, with certificates on the wall and Mr Li told him that he would guarantee that the matter would be successful, otherwise he would refund the money, so he agreed. He was worried that the work was illegal, but since his visit to the solicitor’s office, he did not worry anymore. He had no more worries because Mr Lui was a solicitor. Mr Wang’s father had asked him to check that there was a proper solicitor’s firm and if there was, he should borrow the money and they would try to repay him. After going to the solicitor’s firm, he had no more worries, thinking that for $130,000 a solicitor should not just run away.

The parties’ cases

57 It was Mr Wang’s case that the evidence showed that Mr Lui had been involved in a criminal enterprise with Mr Li and that he had taken steps to draft documents in such a way as to disguise his true involvement in the transaction, in which he had provided legal services. The evidence showed that in reality, Mr Li was Mr Lui's associate, as defined in the 1987 Act and that Mr Wang had a proper claim upon the Fidelity Fund, which had wrongly been refused.

58 It would be accepted that the money was trust money; Mr Lui had an unmet obligation to repay the money to Mr Wang and the failure to do so was as the result of Mr Lui’s dishonest omission, or that of Mr Li, as an associate of Mr Lui.

59 It was the Law Society's case that while there was evidence of a relationship between Mr Lui and Mr Li, the evidence did not admit of a conclusion that it was trust money; Mr Lui had not received the money in the course of his legal practice and that Mr Li was not an associate of Mr Lui’s legal practice.

60 It was argued that the evidence showed that the only involvement which Mr Lui had in the transaction was to hold money as trustee for Mr Li, with the related condition that in certain circumstances, Mr Li was to refund the money to Mr Wang. This did not constitute work done or business transacted in the ordinary course of legal practice. The act of holding money as a trustee was not within the realm of activities which may only be undertaken by legal practitioners; any person may hold money on trust. Here there was the bare holding of money, with no associated legal services being provided. Even if Mr Lui’s receipt of the money evidenced an intention to create a legal relationship of some kind, it was not intended to create a retainer to provide legal services. Nor was there evidence of consideration from Mr Li to Mr Lui, as would be expected if it was they who had had a solicitor/client relationship.

61 Even if it could be concluded that the money had been received as trust money in connection with the provision of legal services, the evidence disclosed no relevant default by Mr Lui to pay or deliver the money. It was not entrusted to him for payment or delivery to Mr Wang, but rather for payment to Mr Li.

62 Further written submissions were filed, which it is not necessary here to outline.

Consideration

63 In its case the Law Society relied on the approach of Hulme J in Laurent v Law Society of New South Wales [2002] NSWSC 655, as to what a claimant had to establish under the 1987 Act:

20 Putting aside factors not relevant in this case, it is clear from the terms of sections 80 and 79A that for a claim against the Fidelity Fund to succeed, there must be established:-

(i) pecuniary loss because of
(ii) a failure by a solicitor to account for, pay, or deliver
(iii) money or other valuable property
(iv) (which has been) received by, or entrusted to, the solicitor
(v) in the course of the solicitor’s practice
(vi) that the failure arose from an act or omission of the solicitor
(vii) being an act or omission which the Law Society Council finds to be dishonest

64 There was no real issue here between the parties as to what was referred to by his Honour in paragraphs (i), (iii) and (vii). For reasons which will become clear, I am satisfied that the other factors here in issue, were established on the evidence.

65 Mr Wang’s claim was dealt with by the Law Society under the 1987 Act, which provided in s 80, that:

(1) The Fidelity Fund is held, and is to be a, by the Law Society for the purpose of compensating persons who suffer pecuniary loss because of a failure to account or a dishonest default.

66 Relevant to this claim was the definition of ‘failure to account’ appearing in s 79A of the 1987 Act:

79A Meaning of “failure to account”

(1) In this Division, a reference to a failure to account is a reference to a failure by a solicitor to account for, pay or deliver money or other valuable property received by, or entrusted to, the solicitor or an associate in the course of the solicitor’s practice (in the case of an associate, being money or valuable property under the direct or indirect control of the solicitor).

(2) This section applies only to a failure to account that arises from an act or omission of the solicitor or associate:

(a) for which the solicitor or associate has been convicted of a crime or an offence involving dishonesty, or

(b) which the Law Society Council has found to be dishonest.

(3) A finding by the Law Society Council under subsection (2) (b) that an act or omission is, or is not, dishonest is final and conclusive.

(4) This section applies whether the money or other property was received by the solicitor or associate as trustee, agent, bailee or stakeholder or in any other capacity.

(5) This section applies whether the failure to account, or the act, omission, conviction or finding of dishonesty, took place before or after the commencement of this Act.

67 At the hearing, the parties also advanced submissions by reference to the provisions of the 2004 Act, given the time at which Mr Wang made his claim. Section 436 of the 2004 Act gives a right to make a claim on the Fidelity Fund in respect of a ‘default’. Section 434 provides that this part of the 2004 Act is concerned with ‘a default of a law practice arising from or constituted by an act or omission of one or more associates of the practice’. ‘Default’ is defined in s 419 as:

default, in relation to a law practice, means:

(a) a failure of the practice to pay or deliver trust money or trust property that was received by the practice in the course of legal practice by the practice, where the failure arises from or is constituted by an act or omission of an associate that involves dishonesty, or

(b) a fraudulent dealing with trust property that was received by the practice in the course of legal practice by the practice, where the fraudulent dealing arises from or is constituted by an act or omission of an associate that involves dishonesty.

68 In the 2004 Act 'legal services' is defined in s 4 as ‘legal services means work done, or business transacted, in the ordinary course of legal practice.’ While there was an issue as to whether or not Mr Li was an associate of Mr Lui’s law practice, (as defined in s 7 of the Act), there was no question that Mr Lui fell within the definition. ‘Trust money’ is defined in s 234 and there was a question as to whether or not the money entrusted to Mr Lui, fell within that definition.

69 It was, however, not in dispute that the evidence showed that Mr Lui and Mr Li were involved together in a scheme in which they convinced Mr Wang to pay over $130,000 to Mr Lui, which it was agreed that Mr Lui was to hold on trust. The scheme involved Mr Wang being provided with a false visa, which, on the Law Society's advice to Mr Wang, it learned had been forged on a blank visa form stolen from a Commonwealth Government Department. That explained why the Law Society came to the conclusion that the transaction in which Mr Lui was involved was an illegal one. That view, undoubtedly, had a proper basis, given the disappearance of both Mr Li and Mr Lui, once the forgery was uncovered and Mr Wang sought the return of the money.

70 There was no suggestion that Mr Wang had actual knowledge of any of these matters. Rather, the Law Society’s view was that given the obvious implausibility of a permanent resident visa being able to be obtained by a migration agent in two weeks, as was promised, in return for the payment of the sum of $130,000, Mr Wang ought to have known of the illegality in which Mr Lui was involved.

71 There can be no question that whatever Mr Wang ought to have realised, Mr Lui had actual knowledge of the illegality of the scheme in which he was so clearly involved. The Law Society’s view that Mr Lui was a knowing accomplice in the provision of a false visa is understandable. Mr Lui’s role in this criminal enterprise was the use which he and Mr Li made of Mr Lui’s position as a practising solicitor, to entice Mr Wang and Mr Lu to hand over a large sum of money, for a worthless document.

72 It does not necessarily follow, of course, from the overall illegality of Mr Li and Mr Lui’s scheme, that the transaction in which Mr Lui was involved with Mr Wang was an illegal one. Plainly a legal transaction can be used in order to further an illegal enterprise.

73 Indeed, it was accepted in the Law Society’s case that Mr Lui’s role as a stakeholder was a lawful one, but it argued that the evidence did not show that the money received by Mr Lui, was received in the course of his practice as a solicitor, as the definition in s 79A of the 1987 Act required (and the corresponding provisions of the 2004 Act.)

74 The evidence was that Mr Wang and Mr Lu met with Mr Lui and Mr Li at Mr Lui’s offices, which, it appeared to them, they shared, consistent with Mr Li’s advice that they worked together. In the discussion it was agreed that Mr Lui was to act as stakeholder of the money, holding it on trust, he having assured Mr Lu and Mr Wang that the services which Mr Li was offering to provide Mr Wang were legal. That advice was accepted and Mr Lui then received $130,000 cash, which he acknowledged by the documents he had prepared on his letterhead and which he signed. Thereby, it was acknowledged that Mr Lui’s role was to hold the money on trust, until certain work was performed by Mr Li and that it was to be returned, if the work was not undertaken.

75 That evidence demonstrated, as was accepted by the Law Society, that Mr Lui was to hold the money on trust as a stakeholder. There is nothing illegal about a solicitor acting in such a capacity. On the evidence, I am unable to accept the Law Society’s case that in agreeing to undertake that role, Mr Lui was not doing so in the course of his legal practice.

76 If a solicitor agrees to hold money on trust as a stakeholder, I can see no basis on which it may properly be concluded that the solicitor is doing so other than in the ordinary course of that solicitor’s practice, unless it be the case that the solicitor received the money in the course of some other business entirely. While services of a stakeholder need not be provided by a solicitor, such services are within the range of services which they customarily provide in the course of their practice.

77 That approach is directly supported by various of the provisions of the 1987 Act, which were concerned to regulate solicitors’ receipt of money. Section 61 obliged a solicitor ‘who, in the course of practising as a solicitor in this State, receives money on behalf of another person’ to deal with such money as trust money. In the definitions appearing in s 60, it was provided, as to such receipt:

(4) A reference in this Division to money received by a solicitor includes a reference to:

(a) money coming under the direct control of the solicitor, whether or not by the exercise of an express power or authority or by operation of law,

(b) money paid to an associate of the solicitor on the advice of the solicitor, but only if the money is under the direct or indirect control of the solicitor, and

(c) money in relation to which the solicitor (whether or not through an associate) has a power of disposal exercisable jointly and severally with the person on whose behalf it was received or a nominee of the person.

78 Those obligations were not qualified on the basis that they only arose, if the solicitor who received the money was to provide other legal services. Receiving the money as a stakeholder, was, of itself enough to trigger these statutory obligations. In this respect, what was provided in s 79A may not be overlooked. It specified the circumstances in which ‘a failure to account’ on the part of a solicitor arose, making it clear that:

(4) This section applies whether the money or other property was received by the solicitor or associate as trustee, agent, bailee or stakeholder or in any other capacity.
.

79 The 2004 Act, if then in force, would have required a similar approach, given the definition of trust money in s 234:

trust money means money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice, and includes:

(a) money received by the practice on account of legal costs in advance of providing the services, and

(b) controlled money received by the practice, and

(c) transit money received by the practice, and

(d) money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person.

80 The money Mr Lui received fell within paragraph (d) of the definition and perhaps even paragraph (c). Section 248 which deals with the question of when money is received by a legal practice, makes this conclusion even clearer. It provides:

248 When money is received

(1) For the purposes of this Act, a law practice receives money when:

(a) the practice obtains possession or control of it directly, or

(b) the practice obtains possession or control of it indirectly as a result of its delivery to an associate of the practice, or

(c) the practice, or an associate of the practice (otherwise than in a private and personal capacity), is given a power to deal with the money for or on behalf of another person.

81 I am unable to conclude that either Act contemplated that such an obligation to deal with the money which Mr Lui received as trust money would not arise, if Mr Lui received the money only as a stakeholder, providing no other legal services, as the Law Society argued. If that view were properly open it would seem to leave a large loophole in these legislative schemes. Solicitors whose only service in a particular transaction was that of stakeholder, would thereby be able to avoid entirely the obligations imposed by the Act as to how they are to deal with money which they receive, in the course of the practice. Thereby those with whom they deal would be deprived of the important protections established by this legislation.

82 Such an approach would appear inconsistent with what was contemplated by both Acts. In my view, the Court should be slow to come to such a construction of this important statutory scheme.

83 In any event, on the evidence in this case there can be no question that Mr Lui, a solicitor, came to have control of this money as the direct result of his position as a solicitor and his advice that the services Mr Li was to provide Mr Wang were legal. There was no evidence that Mr Lui was to hold the money as stakeholder, otherwise than in his capacity as a solicitor, to the contrary, that was why Mr Wang and Mr Lu were convinced to pay the money over. By the acknowledgment under which he received the money, Mr Lui was given power of control over it and its disposal. Mr Lui drafted the terms of the acknowledgement, which specified the basis on which the money was to be held. That also appears to have involved the provision of legal services, as did his advice that the work Mr Li was to undertake for Mr Wang, was legal. There can be no question that such services are services which a solicitor may provide in the course of legal practice. It follows that s 61 of the 1987 Act required Mr Lui to deal with that money as trust money.

84 There was some debate as to who Mr Lui’s services were provided to, it being accepted that the evidence was capable of showing that either Mr Li, or Mr Wang, or both of them, were clients of Mr Lui, although it was the case put for Mr Wang that Mr Li was, in reality, Mr Lui’s agent.

85 Mr Wang certainly claimed that he had received legal services from Mr Lui. That claim was supported by Mr Lu. Why they had such an understanding was apparent on the evidence. They were not prepared to entrust such a large sum of money to merely anyone, not even a migration agent, as Mr Li claimed to be. They understood that they were entrusting the money to Mr Lui, to be held in his capacity as a solicitor. That was the basis on which Mr Li and Mr Lui convinced them to pay the money, Mr Lui also having assured them as to the legality of the services which were being offered to Mr Wang.

86 In its case the Law Society relied upon Swart v Carr [2006] NSWSC 1302, where Palmer J had to consider the question of what evidenced whether a person is 'acting as a solicitor'. From his analysis of the authorities, his Honour concluded that:

85 From a consideration of these cases, I deduce the following propositions:


i) the capacity in which a solicitor has been acting is always a question of fact depending upon the particular circumstances of the case;

ii) one of the relevant circumstances is the antecedent relationship between the solicitor and the other party, if any, particularly if there is a history of an acknowledged solicitor/client relationship;

iii) a critical circumstance indicating that a solicitor has been acting in his or her capacity as a solicitor is that:

– the solicitor has been acting pursuant to a contract, express or implied, under which the solicitor is to provide services; and

– the services to be provided under the contract include at least some services which require legal knowledge to perform;

iv) a material circumstance reinforcing (iii) is that there is an acknowledgement, express or implied, between the parties that the contract of engagement has been entered into wholly or partly because the provider of the services is a solicitor;

v) if a contract which qualifies under (iii) also requires services to be performed by the solicitor for which legal knowledge is not necessary but which are customarily performed by solicitors, those services too will be performed in the capacity of solicitor.

vi) if a contract with a solicitor for services requires the performance of duties which:

– require no legal knowledge to perform; and

– are not within the range of services customarily provided by solicitors,

it would be unlikely that the solicitor has been engaged in his or capacity as a solicitor.

87 It was argued for Mr Wang that these tests were not relevant to determining the questions which arise under this statutory scheme. Nevertheless, even accepting the relevance of this approach, the evidence here was well capable of establishing that Mr Lui had agreed with both Mr Li and Mr Wang, to provide the services of stakeholder; that he drafted the terms on which he was so to act, plainly a service involving the exercise of some legal knowledge and that he also gave advice to Mr Wang, as to the legality of the service to be provided by Mr Li. That evidence is sufficient to meet his Honour’s tests. Even if Mr Lui’s agreement to act as a stakeholder had only been with Mr Li, that would have been sufficient.

88 The evidence established that it was only agreed that the service of stakeholder would be provided by Mr Lui, because he was a solicitor and was to hold the money on trust in that capacity. The acknowledgement, provided on Mr Lui’s letterhead and the circumstances in which that document came to be created, make these conclusions unavoidable. That evidence also brings the work within the definition of ‘legal services’ in s 4 of the 2004 Act, earlier quoted.

89 As the Law Society submitted, the terms of the acknowledgment drafted by Mr Lui undoubtedly favoured Mr Li’s position and sought to conceal Mr Lui’s involvement in the scheme. Instead of providing that Mr Lui, as stakeholder, would repay the money to Mr Wang, if the agreed work was not performed by Mr Li, the money was to be repaid by Mr Li. As was argued, of necessity, this meant that the money had to be released by Mr Lui to Mr Li, even if it had to be repaid because the agreed work had not been undertaken by Mr Li. There was, of course, never any intention for that work to be performed or the money to be returned, if the false visa was discovered. The release plainly assisted this criminal enterprise, rather than protecting Mr Wang’s position, by requiring Mr Lui to repay the money direct to Mr Wang, as one might ordinarily expect of a stakeholder. That thereby Mr Li and Mr Lui were assisted in duping Mr Wang, does not lead to the conclusion that Mr Lui was not acting in his capacity as a solicitor, in drafting the terms of the acknowledgement, agreeing to hold the money on trust as a stakeholder, or advising on the legality of the service which Mr Li was to provide.

90 As was argued for Mr Wang, given the underlying criminal enterprise in which Mr Li and Mr Lui were engaged, it is unlikely that Mr Lui drafted the terms of the acknowledgement to ensure that they faithfully reflected the true nature of the relationship between Mr Wang, Mr Li and Mr Lui. Rather, they were drafted to help conceal what Mr Li and Mr Lui intended.

91 The 1987 Act obliged Mr Lui to deposit the money into his trust account to hold until the agreed work was performed. That work was never intended to be done. What actually happened to the money is entirely unknown. No doubt that was investigated by the Law Society. It led no evidence, but the inference is that Mr Lui never dealt with it as trust money. The money was certainly not recovered or repaid.

92 Mr Lui claimed, shortly after Mr Wang discovered that the visa was a forgery, only a few days after it was supplied, that he no longer had the money. That situation can only have occurred because the money was not dealt with in accordance with Mr Lui’s written acknowledgements as to the basis upon which he was to hold it, he being involved in the scheme to provide Mr Wang with a forged visa. The second acknowledgement contemplated that Mr Lui would hold $95,000 until the ‘agreed work’ was done. The written agreement described that work as obtaining a visa, a Medicare and tax file number and permanent residency after two years. The money entrusted to Mr Lui was not dealt with in accordance with the agreed terms. Mr Li and Mr Lui set out to dupe Mr Wang. They succeeded.

Was there any relevant default by Mr Lui?

93 It was also argued by the Law Society that there was no relevant default in relation to the moneys held by Mr Lui.

94 Given Mr Lui’s obvious involvement in the scheme whereby a forged visa was supplied to Mr Wang, that he dealt dishonestly with the money entrusted to him in the course of his solicitor’s practice, as a stakeholder, on terms other than those agreed, is not arguable. The entire purpose of this scheme was to defraud Mr Wang of $130,000.

95 As I have earlier noted, Mr Lui acknowledged that he was to hold the money on trust until specified work was performed. That work, which included the provision of a valid visa, also contemplated other things being achieved, for example by May 2004, a Medicare card being obtained and a tax file number. Any fair reading of the agreement whereby this work was specified, can only mean that it was work to be performed by Mr Li.

96 The evidence can only leave open the conclusion that there was never any intention to perform the promised work and that Mr Lui dealt fraudulently with the money he received, in the course of his practice as a solicitor, as had been intended from the outset. That was the purpose of Mr Li and Mr Lui’s scheme.

97 On any view that conduct amounted to a default, in the statutory sense.

Should Mr Wang have known of the illegality?

98 That the overall purpose of Mr Li and Mr Lui’s scheme was illegal, does not mean that all of its elements were illegal, as I have explained. Mr Lui’s involvement was to provide an entirely legal service, that of stakeholder. He also advised Mr Wang as to the legality of what Mr Li promised he could do. On that basis, strictly, the question of illegality does not arise. I turn however, to consider the issue as argued by the Law Society, if I be wrong in that approach.

99 In terms of s 80(4)(d), should Mr Wang have known:

... that the conduct of the transaction with the solicitor was illegal, and the person who made the claim knew or ought reasonably to have known of that illegality?

100 The evidence revealed Mr Wang’s vulnerable position. He was in Australia illegally, having remained here without a valid visa since 1996. Clearly Mr Li’s offer of the opportunity of obtaining a permanent visa was made in circumstances where Mr Wang had suspicions. He had only paid $1,000 in 1998, when he had unsuccessfully made an earlier application for a visa, with the assistance of another migration agent. That process had taken about a year. Mr Lu, who had not had any experience of applying for a visa since he had assisted Mr Wang obtain a business visa in 1996, nevertheless rightly shared his concerns. He himself had to borrow money, in order to loan the $130,000 to Mr Wang.

101 Mr Li and Mr Lui’s scheme was designed to allay those concerns, by utilising Mr Lui’s position as a solicitor. Mr Wang was told they worked together. He and Mr Lu met with Mr Lui and Mr Li at Mr Lui's offices where they did appear to work together. Not only did Mr Lui’s letterhead indicate that he was a solicitor, but also that he was a migration agent. Had Mr Wang made enquiries, he would have learned that the Migration Act 1958 (Cth) contemplated that Mr Lui, a solicitor, could offer migration legal assistance (s 277). The provision of migration services could have been lawfully provided by Mr Li, if he was a registered migration agent (s 276). The evidence did not explore whether he had such registration, but Mr Li told Mr Wang that he worked together with Mr Lui and Mr Lui advised that the services Mr Li was to provide, were legal.

102 The question which thus arises for determination is whether Mr Wang ought reasonably to have known that Mr Lui, a practicing solicitor in this State, would be engaged in a criminal enterprise, in which he wrongly advised that the service which Mr Li was offering at a cost of $130,000 was legal and that the service he agreed to provide, that of stakeholder, itself an unarguably legal service for a solicitor to provide, was but part of a scheme to defraud him.

103 While $130,000 was no doubt a very large sum for Mr Wang to pay for a permanent resident visa, it is not a sum large enough, one would think, to tempt a solicitor practising in this State, to become involved in a scheme which would risk his reputation, his practising certificate, his livelihood and a criminal conviction. That was certainly Mr Lu’s reasoning. He was an experienced businessman, used to dealing with lawyers in Australia. Mr Wang was not, having worked as a gyprocker while living illegally in Australia. Ought he reasonably have come to some different conclusion?

104 I am satisfied that Mr Wang’s evidence, that he never expected to receive a false visa, must be accepted. It was Mr Lui’s involvement, his advice as to the legality of what was being offered and he agreeing, as a solicitor, to hold the money on trust until Mr Li had done the work necessary to obtain the promised visa, which reasonably provided Mr Wang with the necessary confidence that he was not being involved in an illegal exercise.

105 The evidence cannot properly lead to the conclusion that Mr Wang ought reasonably to have known of the illegality in which Mr Lui was involved.

Orders

106 For the reasons given, I order that:

1. The appeal be upheld.

2. The Law Society pay Mr Wang $130,000 plus interest from the Fidelity Fund.

3. The Law Society pay Mr Wang’s costs of the proceedings.

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