Noble & Anor v Law Society of New South Wales [2000] NSWSC 487

New South Wales Supreme Court

CITATION : Noble & Anor v Law Society of New South Wales [2000] NSWSC 487 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 10114/99 HEARING DATE(S) : 29-30 May 2000 JUDGMENT DATE : 5 June 2000

PARTIES : Derek Hugh Noble & Farlmist Pty Limited v Law Society of New South Wales JUDGMENT OF : Michael Grove J at 1

COUNSEL : J. Simpkins (Plaintiff) J. Gleeson (Defendant) SOLICITORS : P.W. Turk & Associates (Plaintiff) A.S. Brown (Defendant) CATCHWORDS : Legal Practitioners - Solicitor - Failure to Account for Money - Claim on Fidelity Fund - Interest LEGISLATION CITED : Legal Profession Act 1987 DECISION : Orders to be made.

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

MICHAEL GROVE J

Monday 5 June 2000

10114/99 - DEREK HUGH NOBLE and FARLMIST PTY LIMITED v LAW SOCIETY OF NEW SOUTH WALES

JUDGMENT

1 HIS HONOUR : This is an appeal pursuant to s90D(3)(a) of the Legal Profession Act 1987 against a decision to partly disallow a claim upon the Fidelity Fund administered by the defendant (the Society). For the purposes of the issues litigated in the appeal, no distinction was drawn between the personal and corporate plaintiffs and I will likewise treat them as a unity in the person of Mr Noble. 2 By its relevant committee, on 26 November 1998 the Society resolved that the conduct of the plaintiff's former solicitor MacDonald in the application of the sum of $529,225.13 was dishonest and that a claim against the Fund by the plaintiff be allowed in the sum of $478,164.13 with 8 percent interest from 20 August 1996 to that date and that a claim by Susan Noble (the former wife of the plaintiff) be allowed in the sum of $53,755.93 with interest at 5 percent from 31 October 1996 to date. By resolution on 24 February 2000 the plaintiff's claim was further allowed in the sum of $3,500 and some interest enhancements to various parcels of money as specified. Payment from the Fund to the plaintiff was initially authorized at a rate of 50¢ in the dollar and later increased to 75¢ in the dollar. 3 The plaintiff's claim was lodged in two quantified sums, the first $719,458.24 and the second, $68,143.28. The second part is acknowledged by the plaintiff to relate to the same subject matter as the separate claim by Susan Noble and, given the resolution in respect of that claim, the second part of the plaintiff's claim is not sought to be sustained in the appeal. The essence of the plaintiff's claim is that pecuniary loss was suffered by reason of the failure to account for money by MacDonald. 4 The issues in the appeal have been narrowed as a result of the acceptance by the Society that it does not require the plaintiff to establish existence of an entitlement and it contests elements of the plaintiff's claim by reference to specific arguments relating to fact and applicable principles. 5 The amended summons filed on 12 May 1999 does not, of course, take into account the subsequent resolution on 24 February 2000. 6 The resolution in November 1998 followed a report dated 13 October 1998 by Miss Sue Gabor (whom I infer to be a solicitor in the employ of the Society), the content of which was substantially derived from the report of Miss Sayer, a chartered accountant who had been appointed receiver of MacDonald's practice. The plaintiff retained Mr Calabro a chartered accountant of Brisbane, Queensland and he has analysed Miss Sayer's report and, in the context of it, expressed views in a report of his own and during his attendance for cross examination at the hearing. The discrepancy between the plaintiff's claim and the Society's allowance emerges from the approaches and conclusions manifest in what I will refer to without courtesy titles and for convenience as the Gabor, Sayer and Calabro reports. 7 MacDonald commenced to act as a solicitor for the plaintiff in approximately 1983. He practised in various partnerships up until the appointment of the receiver, but it is unnecessary to chronicle these nor every transaction in respect of which the solicitor acted although reference to some of them will need to be made. In very broad overview, it is apparent that the plaintiff retained MacDonald's professional services for the buying and selling of his own residential property, the buying and selling of boarding houses, sites for demolition and/or development, both commercial and residential as well as for divorce and property settlement upon dissolution of his marriage to Susan Noble. The plaintiff was also both a borrower and a lender of mortgage funds. The entries in books of account of the dishonest solicitor are in the circumstances inevitably suspect and the colloquialism that on occasions Peter was being robbed to pay Paul was apt. The impression emerges that sometimes the plaintiff was Peter, sometimes Paul. 8 It is common ground that the nature of the appeal is governed, naturally first by the terms of the Legal Profession Act and then by s75A of the Supreme Court Act and Part 51A of the Rules of Court. No challenge was made to the Society's submission that the total of claim allowed to the present is $580,254.86 and that the onus is on the plaintiff to prove entitlement to anything above that sum. 9 The plaintiff's claim was postulated upon the receipt by MacDonald of the proceeds of the sale of a property at Mangrove Mountain in about 1991 which were to be invested at interest and the combined fund drawn upon as needed and particularly to develop a commercial property at Erina. Proceeds from the sale of the latter were received in December 1995 and, in a sense, the issues arise out of the failure to account for these but, of course, there was not a simple defalcation from these funds and it will be necessary to make some reference to what I might call past and intermediate transactions. That various transactions took place is common ground and, as I have said, nothing will be gained by attempting to construct a complete chronicle. 10 The contested claims were itemized by the plaintiff in ten separate amounts. Two of these have been conceded and others are dependent upon determination of the same matters of principle. I will deal with the matters as itemized. 11 Item 1 : Fees Variance on Erina sale. Calabro detected that although the plaintiff had been given an account for $2,506.63, Sayer had determined that $2,215.04 was drawn by MacDonald. The variance of $291.59 is conceded as an effective enhancement of the resultant Sayer accounting. 12 Items 2, 3, 4 and 10 : Interest Section 79C(1) of the Legal Profession Act defines the meaning of pecuniary loss to include: "(c) interest that, but for the failure to account, would have been received by a claimant, calculated to the date on which the claim succeeds, being interest at a rate that does not exceed the rate prescribed by the Supreme Court Rules in respect of unpaid judgments as at that date."