New South Wales Supreme Court CITATION : LAURENT v THE LAW SOCIETY OF NEW SOUTH WALES [2000] NSWSC 1103 revised - 1/12/2000 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 30058/98 HEARING DATE(S) : 29/11/00 and 30/11/00 JUDGMENT DATE : 30 November 2000 Daniel Antoine Laurent (First Plaintiff) Ormtrend Pty Limited ACN 003 424 545 (Second Plaintiff) PARTIES : Fabrama Pty Limited ACN 002 628 944 (Third Plaintiff) v The Law Society of New South Wales ACN 000 000 699 (Defendant) JUDGMENT OF : Adams J at 1 COUNSEL : Mr F S McAlary QC with Mr D A Smallbone (Plaintiff) Mr P R Callaghan SC with Mr N Manousaridis (Defendant) SOLICITORS : Maurice May & Co (Plaintiffs) Andrew Brown (Defendant) CATCHWORDS : Claim against Fidelity Fund - duty of Council to investigate whether any onus on claimant - necessity to make finding as to honesty or dishonesty - rights of appeal - whether court may make declarations - whether court can decide some elemments and remit question of honesty of the solicitor LEGISLATION CITED : Legal Profession Act 1987 CASES CITED : Vassiliadis v The Law Society of New South Wales (1997) 41 NSWLR 383 Whitfield and Another v The Law Society of New South Wales (unreported SCNSW 4/12/98) DECISION : See paragraphs 16 and 17. Revised THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADAMS J THURSDAY 30 NOVEMBER 2000 30058/98 DANIEL ANTOINE LAURENT AND OTHERS v LAW SOCIETY OF NEW SOUTH WALES JUDGMENT 1 HIS HONOUR: The plaintiff, and certain corporate entities associated with him, made claims on the Fidelity Fund Management Committee of the Law Society in respect of moneys allegedly entrusted to one M L Kandy, then a solicitor, who, it was said, failed to account for them. 2 On 27 July 1995 the Fidelity Fund resolved that the claim should be disallowed "as the claimant has produced no evidence of moneys entrusted to the solicitor". On 30 April 1998 the Committee resolved: "That these claims be disallowed on the basis of no entrustment to the solicitor in the course of his practice as a solicitor, no failure to account, and that insufficient evidence and documentation has been produced to enable the claimants to establish that the solicitor was dishonest". 3 These resolutions were for the purpose of disposing of claims made against the Fidelity Fund under Pt 7 of the Legal Profession Act 1987. I assume, it not having been otherwise submitted to me, that the resolution of the Committee is a determination of the Law Society Council. 4 When a claim is made against a solicitor for a failure to account for funds entrusted to him or her, the Law Society is bound to investigate it and determine the claim by wholly or partly allowing, compromising, settling or disallowing it: see s 83 of the Act. 5 Claims liable to be paid are defined by reference to ss 79 and 79A of the Act. There must be either a dishonest default or a failure to account, in respect of which latter requirement and, in the absence of conviction, dishonesty must be found by the Council before the claim can be allowed. 6 In relation to every material element, except that of dishonesty, an appeal can be had to this Court under s 90D of the Act, although strictly speaking the appeal must be against "a decision" or "a failure to determine a claim" within a prescribed period. 7 There is no doubt that the Law Society failed to make a finding as to dishonesty. If authority is needed for this determination, see Vassiliadis v The Law Society of New South Wales (1997) 41 NSWLR 383. For myself, I think the failure of the Committee to comply with the legislative requirements is self-evident. 8 Before I move on it is worth making the point, having regard to the language of the resolution, that there is no onus on a complainant to prove any element of a failure to act. There is no onus on anyone except the Society. There are no presumptions one way or another. The Act, without qualification, imposes a duty upon the Society to "investigate the claim". To my mind, that means to investigate every material consideration relating to the claim. Naturally those matters will vary from case to case but, at the least, they must include, in my view, an investigation of the elements to which ss 79 and 79A of the Act refer, in particular, the failure "to account for, pay or deliver money, or other valuable property" that is "received by or entrusted to the solicitor or an associate" which occurs "in the course of a solicitor's practice" and, where an associate is concerned, whether the "money or valuable property [is] under the direct or indirect control of the solicitor" as well as the element of honesty or dishonesty. 9 In conducting that investigation the Law Society is not a judicial tribunal. It in 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. 10 In this case, Mr McAlary QC has submitted that there was no valid determination because, amongst other things, there was no finding as to honesty or dishonesty. It is conceded, as I understand it, by Mr Callaghan SC for the Society that, indeed, the Society was bound to make a finding as to honesty or otherwise and, to that extent, the appeal is appropriately brought. Mr McAlary QC, however, wishes to agitate in this Court the other matters adverted to by the Committee's resolution, namely, the question of entrustment, whether it was in the course of Mr Kandy's practice as a solicitor and whether there was a failure to account, in the sense not involving the characterisation of any relevant act or omission as honest or dishonest. 11 The plaintiff therefore seeks affirmative findings in this Court as to these elements of a claim, conceding that, on failure in this regard, the matter is at an end (except of course for rights of appeal to the Court of Appeal) but, if successful on those matters he seeks remitter to the Law Society Council for the purpose of determination of the issue of dishonesty or of honesty. 12 Mr McAlary QC points to the unqualified character of the rights of appeal under s 99D of the Act. Having regard, however, to the privative provisions of s 79A(2) of the Act, I am of the view that the only decision which may be appealed to this Court by a claimant is one in respect of which there has been a finding of or conviction involving dishonesty. This is so even where errors may be demonstrated as to the findings about the other elements of liability. This demonstrates the necessity of the Council making a finding about honesty since, otherwise, the claimant's rights of appeal are rendered nugatory. This cannot have been the legislative intention. 13 An alternative mode of reaching the same conclusion is to consider the omission of the Council to make such a finding as a failure to determine the claim within s 90D(3)(c). For present purposes it is not necessary to decide one way or another in respect of these alternative routes. 14 Although I have expressed the reasons for my decision in terms somewhat differently to those expressed by his Honour, Greg James J in Whitfield and Another v The Law Society of New South Wales (unreported SC NSW 4/12/98) I should say respectfully that I agree with his Honour's reasoning which leads to the same conclusion as that to which I had arrived. 15 I should mention that the further amended summons filed by the plaintiffs seeks a number of declarations, for example, that Mr Kandy was a solicitor practising in New South Wales as such and that he received or was entrusted with the plaintiffs' money, that this was in the course of his practice and that he failed to account for it as he was obliged to do under the Act. The form of the summons highlights, to my mind, the problem facing the plaintiffs' claim in the light of the provisions of s 90D of the Act. Although it is true that a Court may make "such order as it thinks fit" (see subs (4)), I would not have thought that declarations would be orders within the meaning of that provision. 16 As I have said, in effect, the plaintiffs must succeed in setting aside the decision of the Council and the question now arises as to appropriate orders for disposition of the matter. 17 I make the orders specified in the short minutes of order signed by me, dated today and placed with the papers. ****************** Last Modified: 12/04/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.