New South Wales Supreme Court CITATION : LAURENT v LAW SOCIETY OF NSW [2002] NSWSC 655 revised - 31/07/2002 FILE NUMBER(S) : SC 10513/01 HEARING DATE(S) : 23.8.01; 31.8.01; 3.9.01; 4.9.01 JUDGMENT DATE : 26 July 2002 PARTIES : Plaintiff: Daniel Laurent Defendant: The Law Society of NSW JUDGMENT OF : Hulme J at 1 COUNSEL : Plaintiff: M Slattery QC Defendant: S Epstein SC SOLICITORS : Plaintiff: Maurice May & Co Defendant: AS Brown DECISION : Principle issues resolved; Adjourned for further argument. - 60 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HULME J 26 July 2002 No: 10513/2001 DANIEL ANTOINE LAURENT & 3 ORS v THE LAW SOCIETY OF NEW SOUTH WALES JUDGMENT 1 HIS HONOUR: These Reasons are divided into the following sections. Paragraph Introduction 2 The Limits on the Appeal 19 Are Reasons Required 45 The Bondi Properties – Mr Laurent's claim 52 The Bondi Properties – The Receiver's Reports 74 Instructions as to Proceeds 80 Fabrama P/L, Ormtrend P/L and Affiliated Equities 94 Ormtrend's Claim for $774,219.8 99 Fabrama P/L's and Affiliated Equities' Claims 109 Mr Laurents Claim for $322,804.70 119 Mr Kandy's Dealings 124 Credits/Offsets 146 Absence of Records 154 Mr Laurent's Health 159 The Relationship between Mr Laurent and Mr Kandy 163 Sundry Matters 164 History of Claims 168 Denial of Natural Jusitce 194 The Plaintiff's Claims – Conclusions 208 Res Judicata 250 Introduction 2 In these proceedings the Plaintiff seeks the following orders:- 1. Declaration that the late Michael Lawrence Kandy: (a) was a solicitor practising as a solicitor in the State of New South Wales; (b) received or was entrusted with the money claimed by the plaintiffs; (c) received or was entrusted with the said money in the course of his practice; and (d) failed to account for, pay or deliver the said money in accordance with section 79A(1) of the Legal Profession Act, 1987. 2. An order that the decisions of the defendant's Fidelity Fund Management Committee purporting to disallow the first plaintiff's claim for $317,500.00, $308,966.63, and $322,804.70, and the second, third, and fourth plaintiffs' claims of $806,975.22, $774,219.88 and $308,966.00 be set aside. 3. In the alternative, an order that the decisions of the defendant's Fidelity Fund Management Committee of 25 January 2001, purporting to disallow the first plaintiff's claim for $317,500.00, $308,966.63 and $322,804.70, and the second, third and fourth plaintiffs' claims of $806,975.22, $774,219.88 and $308,966.00 be quashed. 4. An order in the nature of mandamus requiring the defendants to make determinations according to law, pursuant to section 79A(2)(b) of the Legal Profession Act 1987 whether the solicitor's failure to account in relation to each of the claims made by each of the plaintiffs was dishonest. 5. Further, orders that the plaintiffs' claims relating to the late Michael Lawrence Kandy, made upon the Solicitors' Fidelity Fund maintained pursuant to part 7 of the Legal Profession Act, 1987 be allowed in whole or in such part or parts as the Court thinks fit together with interest and costs pursuant to section 79C and 85 of the Legal Profession Act, 1987 subject to the defendant's determination according t olaw of the issue of dishonesty under section 79A(2)(b) of the Act. 6. Costs. 7. Such further or other orders as the Court thinks fit. 3 The Law Society filed a "Notice of Contention and Issues in Opposition". Its terms were:- 1. The Plaintiffs are not entitled to any of the declarations sought in paragraph 1 of the Amended Summons because the Legal Profession Act 1987 ("the Act") by providing the right of appeal under s90D of the Act, has impliedly excluded the power of the Court to grant declaratory relief. 2. In the alternative to 1, as a matter of discretion, the Court ought not grant the declarations sought because that would ignore the means by which the Act has provided that decisions of the Defendant made under Part 7, Division 3 of the Act should be challenged, that means being the means set out in s90D of the Act. 3. In the further alternative to paragraph 1, and additionally to paragraph 2, the Court ought not in its discretion make the declarations sought because to do so would be futile. 4. To the extent the Plaintiffs seek the orders claimed in paragraphs 2, 3 and 4 of the Amended Summons on the grounds set out in the grounds of appeal which form part of the Amended Summons ("the grounds of appeal"), the Defendant says that the Plaintiffs are not entitled to any of the orders sought because the Act, by providing the right of appeal under s90D of the Act, has excluded the power of the Court to entertain proceedings by way of judicial review in respect of determinations made by the Defendant pursuant to Pat 7 Division 3 of the Act relating to the Solicitors' Fidelity fund. 5. In the alternative to paragraph 4, if s90D of the Act does not exclude the power of the Court to entertain proceedings by way of judicial review in respect of determinations made by the Defendant pursuant to Part 7 Division 3 of the Act relating to the Solicitors' Fidelity Fund, the Defendant: (a) does not admit that in making the decisions referred to in paragraph 2 of the Amended Summons ("the decisions"), the Defendant denied the Plaintiffs natural justice or procedural fairness in the manner alleged in paragraph 1 of the grounds of appeal; (b) admits that it has not provided reasons for the decisions as alleged in paragraph 2 of the grounds of appeal, but says it was not obliged to do so; (c) does not admit that the decisions were so unreasonable that no reasonable decision maker could have made them as alleged in paragraph 3 of the grounds of appeal; (d) does not admit that the Defendant erred in the manner alleged in paragraph 4 of the grounds of appeal; (e) in relation to paragraph 5 of the grounds of appeal, does not admit that: (i) the facts referred to in paragraph 5 of the grounds of appeal were jurisdictional facts; (ii) the Defendant's finding of fact referred to in paragraph 5 of the grounds of appeal were erroneous; (iii) the Defendant's decisions were ultra vires; (f) does not admit that the Defendant failed to take into account the matters referred to in paragraph 6 of the grounds of appeal. (g) in relation to paragraph 7 of the grounds of appeal, does not admit that: (i) the Defendant was required to make determinations in relation to identified acts and omissions of the late Michael Lawrence Kandy ("Kandy") including the particular acts and omissions which the Plaintiffs alleged he had committed, or alternatively, that the Defendant was required to make a determination about the honesty or dishonesty of identified acts or omissions of Kandy upon the hypothesis that those acts or omissions occurred; (ii) The Defendant failed to make determinations in relation to identified acts and omissions of Kandy, including the particular acts and omissions which the Plaintiffs alleged he had committed, or alternatively, that the Defendant failed to make a determination about the honesty or dishonesty of identified acts or omissions of Kandy upon the hypothesis that those acts or omissions occurred. 6. The Court has no power to make the order claimed in paragraph 5 of the Amended Summons because the Defendant has decided that there was no act or omission of Kandy that was dishonest. 7. In the alternative to paragraph 6, the order claimed in paragraph 5 of the Amended Summons ought not to be made because, in view of the Defendant's having decided that there was no act or omission of Kandy that was dishonest, the making of the order would be futile. 4 The matter has a long history. It is sufficient at this stage to say that on 11 January 1993 Mr Kandy, a solicitor, committed suicide. It is common ground that prior to his death, and due to his dishonesty, many of his clients lost money they had entrusted to him. Some $17M has been paid to them by the Law Society out of the Fidelity Fund. Although I have not felt the need to rely on more than is referred to in copies of the reports of the receiver of Mr Kandy's practice which are in evidence before me, further details of Mr Kandy's defaults are to be found recorded in Macquarie Bank v National Mutual (1996) 40 NSWLR 543 at 563 et seq. 5 There is a deal of evidence that prior to Mr Kandy's death the Plaintiffs had placed with Mr Kandy substantial sums of money which have not been repaid and which have disappeared. 6 Commencing on 11 March 1993, the Plaintiffs made or foreshadowed claims on the Fidelity Fund. Further details of these appear below but on that date Mr Laurent made claims in principal sums of approximately $145,000 and $172,500, a total of $317,500. On 18 May 1993 further claims were made by:- Fabrama Pty Limited $806,946.69 Ormtrend Pty Limited $768,875.88 Affiliated Equities $308,966.63 7 On 20 May 1993 there was a another claim by Mr Laurent in a principal amount of $322,804.70. 8 For the next 2 years or so the matter proceeded in a somewhat desultory manner. It will be necessary below to provide some further details of this but on 27 July 1995, the Fidelity Fund Management Committee resolved that the claim for $322,804.70 be disallowed as Mr Laurent had "produced no evidence of monies entrusted to the solicitor". A letter of 1 August from Ms Siddons, the solicitor to the Fidelity Fund, asserted that Mr Laurent had failed to provide copies of the 9 cheques the subject of the claim. 9 On 30 April 1998, the Committee considered the claims by Mr Laurent for $317,500 or thereabouts and by Fabrama Pty Limited, Ormtrend Pty Limited and Affiliated Equities. 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." 10 The Plaintiffs appealed. The appeal came before Adams J who made the following orders:- 1. Order that the determinations of the defendant in respect of the plaintiffs' claims (determinations of 27 July 1995 in respect of claim 118/480 and of 30 April 1998 in respect of claims 67, 110, 111, and 112/408) upon the Fidelity Fund under the Legal Profession Act, be set aside. 2. Order that the plaintiffs' claims be remitted to the Defendant to be investigated and determined in accordance with the Legal Profession Act. 3. Direct that the defendant (by its Fidelity Fund Management Committee ("the Committee")) in its investigation and determination of the plaintiffs' claims is to have regard to evidentiary material filed in these proceedings in addition to such other material as it may have or may receive. 4. Direct that the defendant (by the Committee) conduct its investigation and make its determinations with expedition. 5. Note the defendant will place the claims before the Committee meeting on 14 December 2000. 6. Liberty to apply in respect of order 4. 7. The defendant pay the plaintiffs' costs. 11 The claims referred to in the first of these orders were:- 118/480 by Mr Laurent for $322,804.70 67/408 by Mr Laurent for $317,500 110/408 by Fabrama Pty Ltd for $806,946.69 111/408 by Ormtrend Pty Ltd fro $774,219.88 112/408 by Mr Laurent obo Affiliated Equities for $308,966.93 12 According to a letter on the Law Society's letterhead, and from Mr Andrew Brown, described as "In-House Counsel", the Plaintiffs' solicitors were advised that on 25 January 2001 the Fidelity Fund Management Committee resolved to disallow the Plaintiffs' claims. However the Law Society declined to formally notify the Plaintiff's solicitor of the decision because "the Committee's decisions are recorded in Minutes and those Minutes still have to be settled by the Chair of the Committee, who is currently (at 12 February 2001) on leave". 13 On 27 February 2001 the Law Society wrote providing this formal notification and on 8 March forwarded a copy of the relevant Minute. So far as presently material, it reads:- " M KANDY/DA Laurent (67 & 118/408) M KANDY/Fabrama Pty Limited (110/408) M KANDY/Ormtrend Pty Limited (111/408) M KANDY/DA Laurent obo Affiliated Equities (112/408) Ms Ayscough advised the Committee that the claimants' solicitor had requested that the claims be determined by the Committee in accordance with the orders of Adams J, notwithstanding that the claimants had lodged a holding appeal. The Committee considered the evidence regarding these claims, including: * claim forms; * further material provided by the claimants; * evidence filed in Proceeding No. SC 30058/98; * material from the Receiver; and * Ms Siddons' reports dated 11 December 2000, 13 December 2000 and 18 January 2001 Resolved that as required by Section 80 of the Legal Profession Act 1987 ("the Act"): (i) claims had been made against the Fidelity Fund by (a) DA Laurent (file nos. 67 & 118/408); (b) Fabrama Pty Limited (file no. 110/408); (c) Ormtrend Pty Limited (file no. 111/408); and (d) DA Laurent obo (sic) Affiliated Equities (file no. 112/408); (ii) the claims had been investigated ("the investigation"); (iii) the claims be disallowed on the grounds that as a result of the investigation:- (a) there had not been a failure to account as defined in Section 79A(1) of the Act; and (b) there was no act or omission of the solicitor that was dishonest (see Section 79A(2)(b) of the Act)." 14 The Law Society declined to give reasons for its decisions, asserting that it was not required to do so. 15 On 21 February 2001 the Plaintiffs commenced these proceedings. 16 On 28 June 2001, the solicitor for the Law Society wrote to the solicitor for the Plaintiffs advising that, in addition to the material referred to in the Minute, there was also before the Committee, the following:- * Report dated 23 March 1994 on a claim (no. 116/408) made on the Solicitors' Fidelity Fund by Burns Bay Investments Pty Limited in relation to the late Mr Kandy; * Letter dated 21 March 1994 from Messrs Patrick Hargraves and Co, solicitors of Maroubra Junction, regarding Saad & Ors lease to Desanges (premises: 512-514 Elizabeth street, Surry Hills); and * One page extract from a report on the late Mr Kandy's activities prepared by Insolvency and Trustee Service Australia. 17 In support of the relief claimed in the Amended Summons, there was placed before me a considerable quantity of documentation, most of which was before the Committee and Mr Laurent gave evidence. He was cross-examined. 18 Having regard to the extent of the time which has passed since Mr Kandy's death and the Plaintiffs first made their claims and that this is the second appeal to this Court, there is much to be said for the view that I should, so far as possible, decide all issues which exist between the parties. However, because the terms of the Legal Profession Act and the course followed by the Fidelity Fund Management Committee may impose some limits in this regard and make other decisions futile, it seems to me desirable to defer addressing the merits of the Plaintiffs' claims and deal with some of the legal issues first. The Limits of the Appeal 19 A convenient starting point lies in the terms of the Legal Profession Act, 1987. So far as presently relevant, the Act provides:- 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 any 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)(n) 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. 80 Claims against Fidelity Fund (1) The Fidelity Fund is held, and is to be applied, by the Law Society for the purpose of compensating persons who suffer pecuniary loss because of a failure to account or a dishonest default. (3) If a claim is made against the Fidelity Fund, the Law Society Council must: (a) investigate the claim, and (b) determine the claim by wholly or partly allowing, comprising, settling or disallowing it. 84 Claimant required to pursue claims etc (1) The Law Society Council may give a claimant not less than 21 days written notice requiring the claimant to do such of the following as are specified in the notice: (a) take specified steps for the purpose of pursuing the claim, (b) supply the Law Society Council with specified particulars in relation to the claim, (c) produce or deliver to the Law Society Council any securities or documents necessary or available to support the claim or to enable the Law Society Council to establish any rights of the Law Society against the solicitor or an associate of the solicitor, (d) do specified things in connection with the claim. (2) If the claimant fails to comply with the notice, the Law Society Council may: (a) wholly or partly disallow the claim, or (b) direct that the whole, or a specified part of, any interest otherwise payable under section 85 not be paid. 90D Proceedings against Law Society (1) An action does not lie against the Law Society in relation to this Fidelity Fund except: (a) with the leave of the Law Society Council, or (b) as provided by this section. (2) If the Law Society Council wholly or partly disallows a claim, it must (without delay) give written notice of the disallowance to the claimant. (3) A claimant may appeal to the Supreme Court against: (a) a decision by the Law Society Council to wholly or partly disallow a claim, or (b) a decision by the Law Society Council to reduce the amount allowed in respect of a claim, by virtue of section 80A, or (c) a failure by the Law Society Council to determine a claim within such period as is prescribed by the regulations. (4) On an appeal under this section, the Supreme Court may make such order as it thinks fit. 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 21 When a claim against the Fund is made, the Council is under a duty to investigate the claim and determine it – s80(3). In the previous appeal in this matter Adams J indicated that this included investigating each of the elements to which s79 and 79A referred. If the Council wholly or partly disallows a claim, it must give written notice of the disallowance to the claimant – s90D(2). Section 90D(3) gives a claimant a right of appeal to this Court against a decision of the Council to disallow a claim and section 90D(4) provides that the Court "may make such order as it thinks fit". 22 However, counsel for the Law Society submitted that the right of appeal was only available if the Law Society Council had made a finding of dishonesty. Unless constrained by authority, I would reject such a proposition. 23 In the first place, the Act does not say so. The right of appeal is conferred in quite general terms. Nowhere does the Act say that on receipt of a claim the Law Society Council must determine the issue of dishonesty and it is drawing a long bow to say that the reference in s 79A(2)(b) and (3) to the Law Society's finding of dishonesty being final and conclusive limit the right of appeal conferred in quite general terms to an extent greater than the terms of that reference necessarily require. 24 Secondly, the right of appeal is not only against the rejection in whole or in part of a claim but, under s90D(3)(c) against a failure by the Law Society Council to determine a claim within the appropriate time period. If the Council has been guilty of such failure it is in the highest degree unlikely that it will have made any decision on the question of honesty or dishonesty. It can hardly be suggested that there is no appeal in those circumstances, i.e. the event contemplated by s90D(3)(c) and there is no reason as a matter of statutory construction why the right of appeal in respect of an event contemplated by s90D(3)(a) or (b) should be any more limited. 25 Thirdly, the number of elements which must be established before a claim against the Fund can succeed means that the Council may reject a claim for a variety of reasons. I do not see in the provisions of the Act any requirement that even when the Council rejects a claim because of one or more of the matters I have numbered (i) to (vi) above, the Council is nevertheless obliged to go on and deal with the issue of dishonesty also. There is no express provision to that effect. It is not usual for courts or tribunals that can decide a matter on one (and sometimes a clear and easy) basis to be obliged to deal with other unnecessary matters that would call for a decision had the first matter been decided differently. And the proposition that, by implication, the Council must embark upon what may in some cases be a difficult question, just so that a right of appeal may be perfected or denied is not one which is attractive. 26 What of authority? In Van Houtoen v Law Society of New South Wales (unreported, Abadee J, 11 December 1991) and Harrison v Law Society of New South Wales (unreported, Smart J, 1993) decisions were made which involved explicit or implicit findings of dishonesty. However, given the particular circumstances of the cases, I do not regard them as authority persuasive of the issue facing me. 27 In Stego Pty Ltd v Law Society of New South Wales (1994) 35 NSWLR 466, the Plaintiff sought a declaration that a solicitor, in fact Mr Kandy, had failed to account for $50,000 and therefore that the plaintiff had suffered pecuniary loss, and alternatively a declaration that the Law Society erred in finding that there has not been a dishonest act or omission by the solicitor. The matter came before Windeyer J on a preliminary question whether the Plaintiff's claim was precluded by reason of Section 79(3) (now Section 79A(3)) of the Legal Profession Act, 1987. 28 Windeyer J said (at 468) that "the question then is whether or not the appeal is barred by Section 79(3) (now Section 79A(3)), or more precisely whether there is any right of appeal having regard to Section 79(3) (now Section 79A(3))". His Honour referred to the decisions of Smart J in Harrison v Law Society and of Young J in Vassiliadis v Law Soicety and said he found the reasoning of the latter more cogent and compelling and agreed with it. Later, Windeyer J said:- "It must be remembered that there are many occasions where there would be a proper appeal against a disallowance of a claim by the Law Society. Those occasions may be a finding that there was no pecuniary loss, or that there was no solicitor/client relationship, or that there was no entrustment of moneys or property to a solicitor. It my view, considering the history of this legislation, the words of Section 79(3) (now Section 79A(3)) should be given their ordinary meaning so that the determination of the Law Society is conclusive and therefore there is no appeal against that determination." 29 In Vassiliadis v Law Society of New South Wales (1997) 41 NSWLR 383, the Plaintiff had lodged claims on the fund, in consequence of what were said to be defaults by a solicitor Mr Fancipane. The claims were disallowed on the grounds that:- "Insufficient evidence and documentation had been produced so as to enable your client to establish that:- (a) Entrustment of moneys to the Solicitor in the course of his practice as a solicitor took place; (b) That the Solicitor failed to account; and (c) That the Solicitor was dishonest. 30 The Plaintiff appealed, initiating the process by Statement of Claim. In paragraph 9 of its Defence, the Law Society asserted that a claim only lay against the Fidelity Fund in respect of a "failure to account" as defined in the Act, that there was no failure to account for the purpose of such a claim unless the failure arose from an Act or omission of a solicitor or his associate (as defined in the Act) for which the solicitor or associate had been convicted of an offence involving dishonesty or which the Law Society Council had found to be dishonest, that neither Mr Francipane nor any associate of his had been convicted of an offence involving dishonesty in relation to any act or omission relevant to the Appellant's claim, and that the Law Society Council had not found to be dishonest any act or omission of Mr Francipane or any associate of his relevant to the Appellant's claim. 31 Young J determined a preliminary question expressed as whether the Appellant had "no claim against the Fidelity Fund by reason of the matters of fact alleged in paragraph 9 of the defence …". Young J read the question as meaning whether, in light of the matters alleged in paragraph 9, the Appellant had any claim on the Fidelity Fund, and answered it "no" and dismissed the proceedings. 32 The Court of Appeal dismissed the appeal. In doing so, Sheller JA recorded that counsel for the Appellant had "relied upon the unrestricted right of a claimant to appeal to the Supreme Court against the disallowance of or the failure to determine the claim" and went on:- "However, whatever may be the ambit of the appeal, the ultimate question remains the same, namely whether the claimant is entitled to compensation from the fund having suffered "pecuniary loss because of a failure to account". … In short, the Fidelity Fund could only be applied for the purpose of compensating persons who suffered pecuniary loss "because of a failure to account". Unless that definition was satisfied there was no basis upon which the court could intervene to uphold a claim. "Mr Barker submitted that so to read the Act was to limit the appeal and render it almost nugatory. I disagree with this. In Stego (at 469B), Windeyer J indicated some of the findings which could be challenged on appeal." 33 In Whitfield v The Law Society of New South Wales (unreported, 4 December 1998) Greg James J regarded the remarks of Sheller JA in Vassiliadis as precluding an appeal on the merits under s90D(3) and (4) unless there had been previously a finding of dishonesty by the Law Society Council (or I infer an appropriate conviction) and this even if the appeal were confined to matters except those made final and conclusive by s 79A(3) his Honour continued:- "I would find it inconceivable that the legislature would expect this court to embark on a lengthy factual determination which would only be of use if some other body were to reach an independent conclusion of a particular kind on a separate matter. In my view, s 79A requires as applicable here, not a two-stage approach but the determination by the Council as far as possible of the relevant facts and circumstances, to determine whether there has been a receipt or entrustment of money or valuable property by a solicitor or associate in the course of the solicitor's practice which the solicitor has failed to account for, pay or deliver in accordance with the terms of the receipt or entrustment which failure arises from dishonest act or omission. It would be artificial in the extreme, except perhaps in the clearest cases of dishonesty to attempt to answer the questions relevant to s 79A(1) and (2) discretely." 34 In the earlier appeal in this matter it was agreed that the appeal should be allowed because there had been no finding by the Law Society on the issue of honesty or dishonesty. Counsel for the Plaintiffs sought further to agitate the merits of the issues "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". Adams J refused this on the ground 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". His Honour continued:- "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. 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 Section 90D(3)(c). For present purposes it is not necessary to decide one way or another in respect of these alternative routes. 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 Anor v The Law Society of New South Wales … I should say respectfully that I agree with His Honour's reasoning which leads to the same conclusion as that to which I have arrived." 35 In Barber v Law Society of New South Wales [2000] NSWSC 1164 Bell J decided that the existence of a finding of no dishonesty did not preclude an appeal to this court by way of judicial review of a decision by the Society in relation to the Fund. However, in her Honour's Reasons she records some earlier history of the proceedings with which she was involved. Initially the Society had disallowed the Plaintiff's claim upon the basis that moneys had not been received by or entrusted to the Solicitor in the course of his practice. An appeal from that decision came before Levine J. What occurred and His Honour's remarks as quoted by Bell J were as follows:- "In the proceedings before Levine J it appears that the Society sought to contend that any appeal would be of limited utility if not futile. I understand that this contention was advanced by reference to the fact that a finding as to dishonesty (in the absence of evidence that the solicitor has been convicted of an offence of dishonesty) is an essential ingredient for a successful claim upon the Fund. Levine J dealt with the above submission at para 17-para 20 of his reasons:- "The fund made no finding as to Hill having been dishonest. No finding was made one way or the other. In the event that the fund has found the first leg, as I will describe it, namely in the course of the solicitor's practice, and found no dishonesty, the claim would fail. This is clearly so: Vassiliadis v Law Society of New South Wales (1997) NSWLR 303 at 387A-387C. In the instant case there has been no finding, as I have said, one way or the other. That point was not reached, nor indeed it seems to me was it adverted to either in annexure B or annexure N to Mr Barber's affidavit in which context I happen to note the observation of Young J at first instance in Vassiliadis (unreported, 10 August 1994) at p8 as to the question of whether there was a public duty to make any finding. Whilst it may be the law that the finding as to dishonesty, first, is a necessary element, secondly, can only be made by a Fund, the absence of any finding at all as to the latter cannot render futile or of little utility the proposed appeal on an issue which would be binding on the Fund if the appellant were to succeed on it. On the hearing of the substantive appeal whether a finding as to dishonesty could or should be made by the Judge will no doubt be the subject of debate. In Talarico Bruce J made a finding but remitted the matter, as I understand it, to the Fund. The Judge on the hearing of the substantive appeal may uphold the appeal as to the course of the solicitor's practice issue and remit the matter, without a finding of dishonesty, to the Fund." 36 It was later, and prior to the matter coming on for hearing before Bell J, that the Society made a finding of no dishonesty. 37 None of this authority persuades me, and I do not regard any of it as compelling me, to the view that, on the proper construction of provisions of the Legal Profession Act to which I have referred, the absence of a finding of dishonesty means that there is no appeal from a decision of the Law Society Council. In Stego v Law Society of New South Wales, Windeyer J's remarks were made in the context of a finding that there had been no dishonesty and I accept that the effect of s79A(3) means that there can be no (successful) appeal against that and perhaps against a decision which has such a finding as one of its foundations. But that is entirely different to a situation where there has been no finding on the issue of dishonesty. And when the words of Sheller JA in Vassiliadis v Law Society of New South Wales are considered, the difference between upholding a claim (which requires there to have been a finding of dishonesty) and upholding an appeal (which may relate to more limited issues) must be born in mind. One may accept that, as Young J held and the Court of Appeal affirmed, in the circumstances of that case Mr Vassiliadis had "no (valid) claim on the fund. It does not follow that absent prior resolution of the issues under s79A(2), he should have had no appeal to this court. 38 While there is force in Greg James J's remarks in Whitfield v Law Society of New South Wales concerning the Court embarking upon issues the resolution of which will or may not finally determine a claim, the situation His Honour envisaged is not radically different from that when a trial judge decides a preliminary question or only some of the issues raised in a case and a successful appeal leads to a matter being remitted. And I think there may well be equal disadvantages if the Council is always obliged to decide the issue of dishonesty whatever other reasons there may be for rejecting a claim. Certainly the Law Society seems from time to time to have found it convenient to decide matters on bases other than honesty or dishonesty. Evidence to this effect is to be found in Whitfield v Law Society at pages 7-8 and Barber v Law Society at [8-9]. In any event, the Court has sufficient powers, in relation to adjournment and costs, to deal adequately in most cases with premature or unnecessary appeals. Furthermore, on an appeal the court may "make such order as it thinks fit" – terms wide enough to permit the court to deal with issues other than dishonesty and, if the latter issue has not been determined, remit the matter to the committee of the Law Society. 39 I accept also that there are significant disadvantages in any attempt to answer discretely the questions posed by s 79A(1) and (2). Not uncommonly resolution of the issue of dishonesty will depend on what conclusions are reached on other issues such as the terms on which any money is entrusted to the solicitor. Less commonly it may depend on resolution of the issue whether any money was entrusted. However, once regard is had to the fact that the Law Society's determination of these sorts of issues is not made conclusive it seems to me to be an abrogation of the right of appeal on these issues for the Court to refuse to entertain them merely because no finding of honesty has been made. 40 I am comforted by the fact that, judging from his remarks quoted in Barber v Law Society of New South Wales, Levine J seems to share my views. 41 It was also argued that, in any event, here the Council had made a finding, adverse to the Plaintiffs, on the issue of dishonesty and that finding was final and conclusive. Again I disagree. Having regard to the significance which the Act gives to findings on the issue of dishonesty which fall within the terms of s79(3), it seems to me that attention needs to be given to the strict words of that sub-section. In saying that "A finding by the Law Society Council … an act or omission is, or is not, dishonest, is final and conclusive", the provision requires that the Council direct attention to one or more specific and identifiable acts or omissions and form a judgment whether it or they are, or are not, dishonest. 42 Of itself, that requirement may not mean that the Council must identify for the benefit of a person who makes a claim on the fund or others, the act or omission but to merely say, as the minute here records "there was no act or omission of the solicitor that was dishonest" is as consistent with a conclusion that there was no act or omission as it is with a conclusion that there was one or more acts or omissions, none of which was dishonest. And to those who would say that the Council obviously considered the Plaintiffs' claims and in the course of doing so must have considered various actions and omissions of Mr Kandy and therefore the expressed conclusion must mean none were found to be dishonest, the retort may be made that one just does not know in any comprehensive fashion what acts or omissions the Council directed attention to in making the decision called for by s79(A)(2). While a finding that an act or omission is not dishonest is final and conclusive, the same situation does not apply to the Council's views as to what were the relevant acts or omissions. 43 Given that an unsuccessful applicant for payment from the Fund is entitled to appeal, and the only aspect of the Council's decision which is made final is a finding that an act or omission is or is not dishonest, it seems to me to follow that there must be some specification of the acts or omissions in respect of which any such finding is made. No doubt the method and possibly the extent of that specification may vary from case to case but to wrap the matter up in the global way that has occurred in this case is wrong. The observation of Greg James J in Whitfield v The Law Society of New South Wales (unreported, 4 December 1998) that "the finding … that is contemplated by s79A(2) … must focus on identified acts or omissions …" argues towards the same conclusion. 44 I should add that counsel for the Plaintiffs conceded that, even if the Plaintiffs were otherwise successful in the Appeal, I would be forced to remit the matter to the Council so that the issue of dishonesty could be addressed. Are Reasons Required? 45 A further question is the extent to which the Council is obliged to give reasons for its decision. The only provision of the Act which may be said to be specifically directed to this topic is s90D providing that if the Council disallows a claim it must, without delay give written notice of the disallowance to the claimant. Under the principle of "expressio unius exclusio alterius", the specification of only "disallowance", suggests that no further notification is required. 46 However, whether or not all that I have said above as to the need for identification of the acts or omissions in respect of which a finding of honesty or dishonesty has been made is correct, clearly if effect is to be given in the course of an appeal to any finding under s79A (2)(b), there must be notification of it. And logic would demand that that notification should be prior to the time when any appeal is being considered – in effect, at the time notice is given of the disallowance of a claim. 47 The circumstances to which the sections of the Legal Profession Act with which I am concerned relate themselves argue for the giving of reasons. Sacrificing some accuracy for brevity, the purpose of the Fidelity Fund is to provide compensation to clients of solicitors who have suffered pecuniary loss due to dishonesty on the part of a solicitor. It is notorious that such losses have, from time to time, been great. While obviously there will be claims against the Fund which should fail and some which should never be brought, many of the applicants will be those who have been failed by a member of the profession. It is unappealing that, if their claims for compensation out of the Fund also fail, they should not be told why. 48 The existence of a right of appeal has been regarded as an indication that the body from whom that appeal may be brought should give reasons. The significance of this and prior authority on the topic was the subject of consideration by Sperling J in Kennedy Miller Television Pty Ltd v Lancken (unreported, Sperling J, 1 August 1997) where his Honour held that a person assessing costs of proceedings in this Court, and from whom an appeal lies to the Court, was required to give reasons for his or her decision. Sperling J's conclusion was upheld in Attorney General(NSW) v Kennedy Miller Television (1998) 43 NSWLR 729. Many of the considerations which applied in that case apply in the case of decisions on claims made against the Fidelity Fund, certainly in the case of claims which are disallowed, and in my view, in the case of those claims the same conclusion, viz. that reasons are required, should be reached. It is unnecessary for me to decide what should be the position in the case of successful claims. 49 That is not to say that the reasons need in the vast majority of cases to be elaborate. Both the elements required to be established if a claim is to succeed, listed above, and the issues surrounding them likely to arise, will in most cases be simple. And a statement of reasons may well have avoided the error in the Council's determination, or in the expression of it, to which I have just referred. 50 I should perhaps add that the right of appeal also argues against the validity of a resolution as elliptical as that in this case. It effectively means that the Court hearing an appeal will not know what issues have been decided in an Applicant's favour. 51 Two further legal submissions made on behalf of the Plaintiffs were that there had been a denial of natural justice, and that the Council's decision was unreasonable within the decision in Associated Provincial Picture Houses Ltd v Wednesbury Corporation (1948) 1 KB 223. However any consideration of these matters requires reference to the evidence and to this I now turn. The Bondi Properties – Mr Laurent's Claim 52 Mr Laurent who until 18 May 1982 used the name Daniel Roger Clark owned 3 properties at Bondi. These were acquired between about September 1980 and December 1983 and sold between about March 1985 and December 1986. Mr Laurent's personal claim for the sum of $317,500 relate to the proceeds of sale of these properties. Although there has been some modification of this subsequently, in his affidavit of 8 April 1999 Mr Laurent said that he had never received any of the proceeds of sale of any of the properties. 39/22 Penkivil St Bondi, CT 13310, Folio 115, Lot 39/SP 11889 53 Records show that this property was transferred to Mr Laurent by transfer dated 26 October 1981. It was the subject of a mortgage to Amigo Holdings Pty Limited dated 25 October 1981, the mortgage securing a principal sum of $60,000. The transfer and mortgage were registered on 25 November 1981. A Discharge of Mortgage dated 3 February 1983 shows that all monies owing had been received. Mr Laurent says that the moneys to discharge the mortgage were paid to Mr Kandy in cash. 54 Pursuant to a contract dated 27 February 1985 and a Transfer dated 3 April 1985, the property was transferred to a Mira Rosenblum for the sum of $89,000. 55 Mr Laurent annexed to his affidavit a copy of a note he identified as having come from Mr Kandy's files after his death and in Mr Kandy's handwriting which recorded the sums of $8,900, $78,595.73 and $57,249.02, the total of these amounts - $144,744.75 – and, as apparent dispositions of these funds an amount of $5,000 and further amounts described as:- Amev-UDC 1,754.52 ANZ 11,935.98 Bate 16,450.00 Hattersley Maxwell 17,188.66 Kandy 90,000.00 $137,329.16 56 Also in evidence were copies of "Request(s) for Issue of Bank Cheque" dated 29 March 1985 and in amounts and payees corresponding to the first, third and fourth lines in the above list. A similar "Request" referring to the ANZ Bank had been altered from $5769.31 to $11,935.98 or $3,900.81 and then re-altered to the other of these last 2 figures. A settlement statement relating to the property did refer to a disbursement to the ANZ Bank in the sum of $3,900.81. Mr Laurent said that he had no knowledge of why Mr Kandy paid money to Amev-UDC, "Babe" or Hattersley Maxwell and that he owed them nothing. He did not understand the reference to $11,395.98 (sic). 57 A copy of one of Mr Kandy's trust account ledger cards bearing the name of Clark and Rosenblum shows the receipt of $8,900 and payments out totalling that figure to D R Clark, J Bate and R B Kandy. The payment recorded as being made to D R Clark was $5,000. The other payments do not accord in amount with those appearing in any other document. 58 In his affidavit of 8 April 1999, Mr Laurent said that he did not know why the $5,000 appeared to be deducted and that he did not receive any of that money. He also said that he now remembered rounding up the figure of $144,744.75 to $160,000 by giving Mr Kandy the balance, including some adjustments, "in cash so that the final balance resulted in a rounded figure from which it was more practicable to calculate interest and was easier for me to remember." The affidavit proceeded:- "When my claim was submitted to the Law Society in March 1993 the condition of my health which had been dramatically affected by Michael Kandy's then recent suicide was such that I could not concentrate fully on the details of the claim. It is only with the passage of time and numerous attempts to recall the chain of events that I have now remembered these additional details." 59 In an affidavit of 11 July 2000 Mr Laurent said that he recalled requesting and receiving the $5,000. 60 When one has regard to the records in relation to the next transaction referred to below, it seems to me that it is a reasonable inference that the 3 amounts in the handwritten note to which reference has been made were intended to represent the deposit of $8,900, the balance of the sale price of the property at 39/22 Penkivil Street after taking account of adjustments and the net proceeds of the sale of the property at 31/355 Old South Head Rd. In saying that, I am not unconscious of the fact that there is not coincidence in some of the amounts. However, it is not clear whether the document came into existence when all of the final amounts were known. Furthermore, Mr Laurent made this suggestion in his affidavit and if it is incorrect one would have expected the Law Society, which has had reports from a receiver to Mr Kandy's practice, to have been able to disprove this suggestion if it was wrong. 31/355 Old South Head Rd, North Bondi, CT Vol 9349, Folio 8 & 21, Lot 31/SP 225 61 Records show that this property was transferred to Mr Laurent by transfer dated 30 September 1980. It was the subject of a mortgage to G and L Kulisich. The date of the mortgage seems to have been 30 September 1980 and the amount seems to have been $25,000. A Variation of Mortgage dated 15 October 1980 shows an increase in the principal sum secured to $35,000. On 14 July 1982, the mortgage to G an L Kulisich was discharged and another in favour of the ANZ Banking Group executed. 62 Mr Laurent transferred the property to D and G Lovrakovic on 29 March 1985 at which time the mortgage to the ANZ Bank was discharged. The sale price was $63,000 63 Also in evidence was a settlement sheet - a photocopy which may have omitted some cents - relating to this sale showing, inter alia, the receipt of $63,000 and adjustments, disbursements of $6,382 including $3,900.81 to the ANZ Banking Group, and intermediate and final lines respectively in terms:- "To our Professional Charges as agreed NO CHARGES Amount due to you herein $57,024" 64 The description of the transaction was in handwriting although most of the document was typed. There was also what seemed to be most of a handwritten draft of that settlement sheet and which also contained some of the items apparent on the face of the handwritten document mentioned when I was dealing with the Penkivil St property. 65 There was also what appeared to be a covering letter or a draft thereof, addressed to Mr A Laurent but with no address on it. The letter recorded that settlement occurred on 29 March 1985 and said there was enclosed a "Statement of our Costs and Fees together with Settlement Sheet". The document did not refer to the payment of any money to the client. A third document showed the receipt by Mr Kandy of the sum of $57,985 (or $57,988 or $57,989) by telegraphic transfer on 29 March. I infer that all of these documents also were obtained after Mr Kandy's death from Mr Baron, a former partner who took over Mr Kandy's practice. 66 Mr Laurent said that in fact he paid Mr Kandy the legal costs and disbursements relating to this transaction in cash. 22/14 Wilga St, Bondi, Ct Vol 11173 Folio 42 & 49, Lots 22 & 29/SP 4233 67 This property was the subject of a contract of sale to Mr Laurent in December 1983, the purchase price being $98,000. Mr Laurent deposes to having bought the property without borrowing. It was sold by Mr Laurent in December 1986 for the sum of $175,000. A letter of 10 March 1993 from the solicitors who acted for the purchaser said that they had handed over on settlement a bank cheque in the sum of $156,957.81. A trust account ledger sheet of Mr Kandy shows the receipt of this sum on 17 December 1986 and what appears to be an earlier deposit of $16,500. 68 That ledger sheet shows a credit to Mr Laurent's account by way of a journal transfer from some other accounts of sums totalling $26,414.13 and the disposition on 18 December 1986 of the funds by journal transfer in the following amounts to the following persons or accounts (leaving a nil balance):- G Amigo re mtge $100,000 G Blum re mtge $30,000 F Reiss re mtge $20,000 J Star re mtge $50,000 69 Mr Laurent also annexed to his affidavit what he described as "Mr Kandy's trust ledger … L108". A better copy is to be found at page 523 et seq. of Exhibit A. It is entitled "Laurent Re Mort". Included in the entries are a number in terms:- 27-8-85 Fr G Amigo fr B/A 45,000.00 28-8-85 Fr G Amigo fr B/A 60,000.00 24-1-86 To G Amigo fr B/A 5,000.00 7-3-86 Fr G Blum fr B/A 30,000.00 14-3-86 Fr Reiss fr B/A 20,000.00 1-5-86 Fr Star fr B/A 50,000.00 70 I have no idea what "B/A" may stand for but the ledger card also shows regular payments or credits, more or less monthly after the above entries, to the above persons. The amounts would suggest interest was being paid to them at the rate of 16% per annum. Mr Laurent said nothing in his affidavit directed specifically to the issues of whether he had borrowed any of the above-mentioned amounts, or from the persons mentioned at about the times indicated. The ledger card purports to record some payments into the account from Mr Laurent in cash amounts that could well be for interest. They are so described on the ledger card. On the other hand, the payments were not, for much of the time, regular. The card records:- 6/6/86 $2,666 6/8/86 $2,600 5/9/86 $1,800 20/11/86 $2,600 5/12/86 $2,600 71 It might be re-mentioned that prior to February 1983 the 39/22 Penkivil Street property had been mortgaged to Amigo Holdings Pty Limited. 72 Mr Laurent says that he received no moneys from the sale of the Wilga Street property. He says that he had an intention to round the total amount of the sale proceeds to $200,000 so handed Mr Kandy sufficient moneys in cash to cover agent's fees, adjustments and legal costs. 73 Relevant to all three Bondi properties might be a statement by Mr Laurent in his Affidavit of 8 April 1999 that in 1983 he was in possession of sufficient funds to repay mortgages prior to expiry of the mortgage terms although there is no evidence as to the source of such funds. The Bondi Properties – The Receiver's Reports 74 According to a report of 12 March 1997 by Ms Sayer, the receiver of Mr Kandy's practice, the net proceeds of sale of the Penkivil St property were $85,676.16 of which sum $5,000 was paid to Mr Laurent and the rest lent to Mr J Bate. As part of this operation, on settlement a cheque drawn payable to R B Kandy & Co was deposited to the Trust Account and credited directly to the trust account ledger of Mr Bate. 75 In that report Ms Sayer also asserts that the total net proceeds of sale of the property at 31/355 Old South Head Rd including an amount of interest, viz a sum of $58,733.43 were also advanced to Mr Bate. However, Ms Sayer goes on to say that she was unable to say whether or not the payments represented genuine advances. This sum included the proceeds of the payments to Amev-UDC, the ANZ Bank, Bate and Hattersley & Maxwell listed above. 76 There are some other matters referred to by Ms Sayer to which reference should be made. In her report of 4 May 1993 she said that Mr Bate had been a substantial borrower from trust clients of Mr Kandy's firm and he and Mr Kandy each held a one half share in a cement group of companies. In her report of 12 March 1997 she said:- (i) she could find no evidence of any interest paid to Mr Laurent on moneys credited to or paid to Mr Bate, (ii) there was no record in the trust account records of a loan representing moneys paid direct form the settlement moneys in respect of the sale by Laurent to Lovrakovic, i.e. the sale of 31/355 Old South Head Rd, but (iii) had been able to establish that no moneys remained due by Mr Bate or his company. 77 In a report of 24 March 1998,Ms Siddons, who describes herself therein as the manager of the Fidelity Fund asserts, on what evidence I do not know, that "Mr Laurent apparently 'represented' Kandy on a trip to Germany with Mr Bate in relation to Coastal Readymix Pty Limited, a company partly owned by Kandy". 78 So far as the property at Wilga Street is concerned, Ms Sayer records that the sale was settled on 18 December, the net proceeds of sale being $173,585.87. She says that an amount of $26,000 was received from Mr Laurent on 6 November 1986 and that these sums, together with a balance of $414.13 in an account styled "Laurent re. Mortgage" totalled $200,000. She asserts that "this sum was applied in the repayment of advances of $200,000 made to Mr Laurent by other trust clients between 27th August, 1985 and 1st May, 1986". The clients are Messrs Amigo, Blum, Reiss and Star listed above. 79 The topic of these 3 claims was adverted to again in later reports. On page 18 of the report of 17 March 1997 Ms Sayer said that it appeared to her that the amounts to be accounted for to Mr Laurent included a sum of $139,409.59. Ms Sayer also said that there were some payments subsequent to 30 June 1990 which should be brought to account. This topic can be left until later. Page 5 of Ms Sayer's report of 12 March 1997 shows the makeup of the sum of $139,409.59:- 29.3.85 Ex proceeds of sale to Lovrakovic – cheques purchased form ANZ Bank 47,329.16 3.4.85 Amount transferred to the trust ledger account of Bate from the proceeds of sale to Lovrakovic 11,404.27 3.4.85 Cheque received on settlement of the sale by Clark to Rosenblum credited to he trust ledger account of Bate 78,595.73 16.4.85 Cheque drawn on the Trust Account from the proceeds of sale to Rosenblum payable to J Bate 2,080.43 $139,409.59 Instructions as to Proceeds 80 It is convenient to record at this stage Mr Laurent's evidence concerning his instructions to Mr Kandy as to the use of the proceeds of sale or other moneys left with Mr Kandy, notwithstanding some of that evidence relates to moneys or claims arising later and unconnected with the Bondi properties. 81 There is no documentary record of Mr Laurent's instructions to Mr Kandy as to dealing with the proceeds of the above sales. In his affidavit of 8 April 1999, Mr Laurent's evidence was to the following effect. He said that at some time in 1985 whilst he was in Mr Kandy's office, conversation to the following effect occurred:- "Mr Kandy: The best thing to do would be to invest (the sale proceeds of the properties at Penkivil Street, Bondi and Old South Head Road, North Bondi) in an interest bearing form. That would be the most secure way. When do you want to retire? Mr Laurent: I want to retire at the age of 40. Mr Kandy: I will invest the money for you on long term deposits or bonds yielding 15% compound interest. I will also invest moneys with private borrowers. They will pay all tax on the interest. At the time of maturity you will have a tax free fund which is a big advantage. Mr Laurent: What a fantastic idea. 82 Mr Laurent said he was happy with the arrangement and did not worry about this money for quite a few years. In 1992 shortly after his fortieth birthday, which seems to have been on 28 January 1992, he said there was further conversation to the effect: Mr Laurent: How are my investments going? I'm 40 now what do I do next. Mr Kandy: Let it run for a while as you are making top interest. Mr Laurent: As long as it is not too long a while. Mr Kandy: You can get it back on 3 months' notice. 83 In his Affidavit of 11 July 2000, Mr Laurent re-visited the topic of instructions to Mr Kandy and conversations in that regard. After referring to his property dealing in 1988, i.e. that conducted by Ormtrend, Mr Laurent continued:- "12. Once the transaction profits began to mount, Mr Kandy said to me, words to the effect of:- 'I will enact term money investments for you, which will yield a high interest rate' This money was to provide a nest egg on my retirement, which I perceived to be at aged 40. 13. Except as set out below, the proceeds flowing from the sale of real property were never forwarded to me. My impressions were that Mr Kandy was investing the money on my behalf, as was agreed. 14 Michael Kandy had my direct authority to use the funds as was required for my legal affairs in the property sales and purchases. If I was purchasing a property he had my instructions to take the moneys in the above mentioned term investment funds and use them in the transaction. 18. The net sale proceeds of the conveyances were left with Michael Kandy to invest… I accepted Michael Kandy's assurances that, 'the moneys are invested for your benefit. You can access them at short notice'. 22 I never gave him instructions to dispose of funds from, or belonging to any of the plaintiffs, other than by enacting a purchase of particular real property, and any associated transactions or by term investment as referred to above. 32 …. I had told him about the proceeds of sale of properties that I or my companies bought and sold, 'These funds are to provide a nest egg for my retirement.' … 47 Michael Kandy assured me, 'The moneys are invested at call, and I am doing all that is necessary to have those profits brought to fruition at age 40. You need not be concerned with any legal aspect flowing from the investment as I will take care of any aspect which arises, including the preparation of income tax returns'. 50 I never received any statements regarding those moneys Michael Kandy had invested on behalf of the plaintiffs. I trusted Michael Kandy, and believed he was investing the moneys as he had told me. 84 In that affidavit Mr Laurent also gave a version of his instructions to Mr Kandy following the sale of the Penkivil St property in terms somewhat different from those recounted in his earlier affidavit. He said he advised Mr Kandy to "Please transact the funds into the term interest bearing accounts, for my benefit". Mr Laurent gave similar evidence in respect of the proceeds of sale of 31/355 Old South Head Road. So far as the net proceeds of the Wilga St property are concerned, Mr Laurent said that his instructions were that those moneys were to be added to the other funds for investment. 85 In that affidavit, commencing at paragraph 36, when referring to a number of sales of properties in 1988 in respect of which Mr Kandy had generally written advising that the net proceeds of sale had been previously paid to Ormtrend, Mr Laurent said that he had not received those monies and that he had given instructions that all profits on real estate transactions should be added to the other funds Mr Kandy had told him were placed in high interest yielding accounts. 86 Later, commencing at paragraph 43, when referring to a number of other sales which had occurred in 1988 and in respect of which Mr Kandy had written advising that the net proceeds were invested at call Mr Laurent said that his instructions were that surplus proceeds were to be invested at call. 87 There is no evidence of instructions specifically related to the moneys the subject of the Fabrama and Affiliated Equities Claims but given the transactions which are the foundation of these claims – details of which appear below - that is not surprising. 88 The only evidence specifically directed to the instructions concerning the moneys the subject of the claim for $322,804.7 seems to be that contained in the claim form in respect of that sum. In it Mr Laurent says that the instructions were "at the best short term rates available from time to time", 89 Mr Laurent also said that Mr Kandy had authority to use Mr Laurent's funds for other transactions of Mr Laurent. It may be inferred that this authority extended to any company's funds. 90 In the affidavit Mr Laurent also referred to remarks in a report of Ms Sayer to the effect that the proceeds of the sale of the property at Penkivil St had been paid to Mr J Bate and said that:- "I have never had any financial or legal dealing with J Bate. I never instructed Mr Kandy to perform this transaction with J Bate. … Thus I can offer no explanation for the funds being credited to J Bate as Mr Kandy was never instructed to do so." 91 Mr Laurent said also that Mr Kandy was never given instructions to credit Mr Bate with the proceeds of the Old South Head Road property and that he, Mr Laurent, never received any statements regarding the moneys Mr Kandy was supposed to have invested on behalf of the Plaintiffs. 92 Mr Laurent's oral evidence concerning his instructions to Mr Kandy was limited in its illumination. I set out a selection of extracts which is not, I think, unfair: Q. You do remember discussing with Mr Kandy entrusting money with him from the sale of the Bondi properties? A. Not exactly. – T123 Q. You had a conversation with Mr Kandy in which he said, "The best thing to do would be to invest them in an interest bearing form, that would be the most secure way." A. He said it would be franked dividends, they will pay the tax, 100 per cent legal, no scheme, no sham, legal, that's why we came to this country, to have it legal." - 125.2 Q I read out from your affidavit your evidence about the conversation with Mr Kandy in which he said amongst other things, "I will invest the money for you on long term deposits or bonds yielding 15 per cent compound interest. I will also invest monies with private borrowers. They will pay all the tax on the interest." Do you remember that evidence? A. He said he can get franked dividends." - 126.9 Q. He could get franked dividends? This was in 1985, was it? A. I don't remember when it was. - 127.1 Q. You spoke a moment ago about Mr Kandy using the expression "franked dividends"? A. Yes Q. On what occasion did he use that expression. A. Before he took the money. Q. Which money? A. For the apartments. Q. Which apartments? A. At Bondi. – 127.5 Q. Were the franked dividends mentioned at about the same time that Mr Kandy offered to invest this money for you at about 15 per cent compound interest? A. Yeah – 128.3 Q. Do you think Mr Kandy may have spoken about franked dividends before there were any such thing in existence in Australia? A. I don't know about it. All I know I want to 15 per cent net (sic) and not have problem with the taxation, that is all he promised, he was a lawyer. – 128.5 Q. Do you know what a dividend is, Mr Laurent? A. Yes. Q. What is it? A. Dividend is what you get on your investment – 128.7 Q. And you thought you were getting tax free profit on your investment? A. That's what he promised, that was the reason I entered in it with him. – 129.2 Q. What was it that convinced you? A. The evidence itself. I don't have to pay any more tax. I have a million, I get $150,000 a year and someone else pays tax. It is very good, clean, white, money, beautiful. Tax I can avoid. - 130.1 Q. And the accountant spoke in your presence once to Mr Kandy, did he? A. That's to my best recollection, with his partner, too. That was the day when they tried to minimise my tax somehow because I made quite a few millions in one year and Micheal Kandy said he will look after himself. So that was it. 131.10-132.1 Q. Were you told about the interest rate you were to receive? A. I was hoping for 15% Q. While you were hoping for 15%, were you told what interest rate you were to receive? A. I think so, franked dividends, 15%. Q. What were you told about what interest rate you were to receive? A. 15% Q. And did that rate ever change? A. I don't remember. – 132.4 Q. These 15% investments you had, you understood them to be with private borrowers, did you? A. I didn't worry about it. Please don't put words in my mouth. I don't understand these sort of things. Q. The words you have put in Mr Kandy's mouth was "I will also invest moneys with private borrowers"? A. That document is not mine. Probably someone else made it this. I can't be responsible for the way staff is writing files. I don't write English. My speech is quite inaccurate. I apologise for this. Q. Can you clarify-- A. Ask the question please. Q. Can you just clarify what inaccuracy there is in the portion of the conversation you attribute to Mr Kandy: "I will also invest moneys with private borrowers." A. He had a huge practice where he would lend money to mostly Jewish clients on the first mortgages, and he was, I would say, more liberal than banks, and to my understanding it would be money tied up in real estate mortgages against existing properties and first mortgage which give you additional security if someone made a mistake with it. Also it is hard to make a mistake with properties in Australia. That's what I mean, nothing else. Q. Is that what Michael Kandy told you? A. I don't know – what did he tell me? That's how the conversation went. That was the spirit of the conversation. That's what I thought when he said private. The private is his clients borrowing buying real estate and having mortgages. This way it is secure. – 133.6-134.1 Q. You thought your money was being lent out on first mortgage at 15% per annum? A. I didn't think so. It is a part of a situation. – 134.4 Q. And it was being lent on first mortgage at 15% per annum? A. That's what I have been told it would be. Q. And the borrowers were not just paying the 15% but they were paying your income tax as well? A. You are trying to confuse me. I am saying it again. I don't know, I am not responsible for someone writing something in the way it is opening opportunity for you to treat me the way you are treating me and to have this trial by ambush. I don't remember, I apologise. I am not responsibility (sic) for what is written there, only for facts, not wording of it, not technicalities, not spoke written, all the other devices. – 134.7 Q. You agreed with Mr Kandy that he could invest your money at a 15% per annum rate; it that right? A. That was in '85 Q. And that money was repayable on demand to you? A. No, not on demand. Whenever I reached 40 I needed it. I wanted to retire, buy a farm and live like a human being for a change. - 137.3 Q. The first thing you do in this affidavit, in this portion of the affidavit-- A. With all my due respects, try to remember I didn't write it, I dictated it, and how people took it and how they put it, it was in the terms it was all right, it was all right. – 137.6 Q. In paragraph 43 you speak of the sale of a property in Livingstone road, Marrickville, and then you attach Mr Kandy's statement of costs and fees, which indicate the surplus total of $133,565.15 was invested at call, "those were my instructions to Michael Kandy." Do you remember giving that evidence? A. I don't. Q. And were your instruction to Michael Kandy to invest the surplus proceeds of sale from properties at call? A. I don't remember. If you would be so kind to understand, to try to listen to me. I had 56 properties. I borrowed $11 million from Esanda myself. Part of the properties were settling, part of the properties were purchased, and it is all mixed, so we were working on the balance. That's how it was. It was crazy. – 137.7 Q. You thought the money was on first mortgages secured over properties, did you? A. I don't remember. I don't think I paid enough attention to it. To me most important thing I gave it to the person I could have trust, my lawyer. – 138.5 Q. "Mr Kandy said to me, 'You need not be concerned with any legal aspect flowing from the investment, as I will take care of any aspect which arises, including the preparation of income tax returns'." A. I don't speak that well in English as you can understand, and it is definitely not my wording. Definitely I didn't say anything like this, I simply couldn't. I don't have this vocabulary in me. Q. Your affidavit says that's what Mr Kandy said to you? A. I didn't write the affidavit. I just explained to you probably a clerk or someone wrote what happened, and if they misunderstand me, they misunderstand. Q Are you saying now that you don't know whether that statement is correct or not? A. I don't quite understand this statement, I'm sorry. I can't understand. – 138.10-139.3 Q. "You need not be concerned with any legal aspect flowing from the investment as I will take care of any aspect which arises, including the preparation of income tax returns." A. And what date it was said? Q. This is what Mr Kandy has said to you, and I am not sure when you think it was said, but it might be in 1988, perhaps? A. It's a very fancy way of describing what was happening. What was happening was he had franked dividends and that's what he said to me and I trusted him. If he didn't specify the amounts we didn't specify nothing. We didn't specify whether whole lot goes here or there. I trusted him. He was my solicitor. Q. And was something said about the preparation of income tax returns? A. When Q. At any time? A. Franked dividends, it is a tax return. Q. A franked dividend is a tax return? A. It is a tax return already because if you are talking franked it means taxation department knows someone else is paying tax, otherwise it doesn't pick up tax in this country. Q. Did Mr Kandy say words to you along these lines: "The moneys are invested at call." A. Sorry, I don't remember, I really don't remember. – 139.4 93 To enable some assessment of the 15% figure mentioned by Mr Laurent, there was in evidence also a publication of the Reserve Bank entitled "Interest Rates and Yields: Bill and Deposit Markets". The document showed:- Bank accepted bills 90 days Finance company debentures Year High Low Average June 1 year June 1984/85 17.05 10.18 13.19 15.90 13.75 1985/86 20.50 14.03 16.72 14.80 14.00 1986/87 18.85 13.30 15.88 13.45 13.75 1987/88 14.15 10.70 11.92 13.15 11.80 1988/89 18.65 12.98 15.52 18.30 16.50 Fabrama Pty Limited, Ormtrend Pty Limited and Affiliated Equities 94 Fabrama and Ormtrend were incorporated as "shelf" companies by Corporate Network Limited. It would appear from an annexure to the affidavit of Mr May of 11 July 2000 that they were "sold" to parties nominated by Mr Kandy. In the case of Fabrama Pty Ltd, this occurred on or about 12 July 1983 and in the case of Ormtrend, on or about 16 December 1987. According to Corporate Network Limited, at those times Mr Laurent was appointed a director and secretary and Sara Potza or Sarra Pozton) was also appointed a director. Both also became shareholders. Mrs Potza is Mr Laurent's mother. 95 Mr Laurent asserted in his affidavit of 11 July 2000 that at all material times he had controlled Ormtrend and Fabrama. 96 Mr Laurent also gave evidence that for a period commencing prior to the large scale property dealings which occurred in 1988, he and/or his mother were operating a jewellery business and that this was being done in the name of Fabrama Pty Limited. Documents produced by a firm of accountants and which became Exhibit E support this claim albeit they cover only a short period. The documents show that one or two jewellery businesses were sold prior to June 1985 having been owned for less than 12 months. The documents also indicate that the operations were on a very small scale and not productive of any substantial income. Whether they should be taken at face value was not explored. Given my general experience of operators of cash businesses over 45 years I would take some persuading that they should be. Even at face value the documents throw little or no light on what Mr Laurent's financial situation was prior to 1984 or after 30 June 1986. They do show that some attention was being given to the statutory obligations of Fabrama at least up until December 1986 and confirm that Mr Laurent and his mother were the directors. In evidence I am disposed to accept, Mr Laurent also said that Fabrama never had anything to do with any real estate transactions. I think the tenor of his evidence at T169 is that Affiliated Equity was in the same situation. The evidence does not reveal any reason for Affiliated Equities' existence. 97 The records of Corporate Network Limited also show that in February 1989 a third company Idoline Pty Limited was sold to parties nominated by Mr Kandy. Again according to those records Mr Laurent became a director and secretary and Mrs Pozton became a director, both acquired shares and the name of the company was changed to Consolidated Equity Pacific Pty Limited. A certificate from the National Companies and Securities Commission shows that Idoline changed its name on 14 May 1989 to Affiliated Equity Pacific Pty Limited. It might be noted that when Messrs Carroll and O'Dea, solicitors, wrote on 18 May 1993 making claims on behalf of Ormtrend, Fabrama and Affiliated Equities, they asserted that Affiliated Equities was a business name of Mr Laurent. There is no evidence that prior to the events with which I am concerned the change of directors of Ormtrend or the change of directors and name of Affiliated Equities was ever notified to the corporation regulatory authority. 98 All three companies were deregistered. On 18 February 2000 the Equity Division of this Court ordered that the three be reinstated to the Australian Companies register. Ormtrend's Claim for $774,219.88 99 Essentially Ormtrend's claim is for the proceeds of a number of cheques and one amount arising on the completion of a conveyancing transaction effected by Mr Kandy. Details of the cheques are as follows: Date Drawer Payee Amount 23.12.88 Ormtrend Pty Limited Lamtala Pty Limited 191,000.00 03.02.89 Ormtrend Pty Limited Ormtrend P/L 2,684.00 21.02.89 Ormtrend Pty Limited Lamtala P/L 2,660.00 03.03.89 Ormtrend Pty Limited Lamtala Pty Ltd 200,000.00 24.06.89 Ormtrend Pty Limited Lamtala P/L 180,000.00 $576,344.00 100 Mr Laurent does not dispute that he signed the cheques but he says that to the best of his recollection he did not insert the names of the payees. He says that it is likely that the cheques were given to Mr Kandy in blank and that the cheques were given by him to Mr Kandy for the purposes of investment by the latter on behalf of Ormtrend Pty Limited. Lamtala Pty Limited was the trustee of Mr Kandy's Family Trust. 101 Ormtrend was the payee originally named in the cheque for $2,660. This name was crossed out and Lamtala substituted. The change was initialled. The initials bear some similarity to the signature on the cheque but, particularly having regard to the poor quality of the photocopy attached to Mr Laurent's affidavit of 8 April 1999, I would not be prepared to conclude from their appearance that the initials and signature are that of the same person. The matter was not explored in oral evidence. 102 The amount arising on the completion of the conveyancing transaction was $197,875.88, which with the above figure, totals $774,219.88. The figure of $197,875.88 is the final amount in a financial summary dated 7 February 1989, addressed to "Ormtrend Pty Limited, 106/207 Old South Head Road, Bondi Junction" and relating to the sale of 3 shops at Belmore. The description of the amount is "Amount due to you herein and deposited to your account as requested." 103 In his affidavit of 8 April 1999 wherein the above details of Ormtrend's claim are given, Mr Laurent says that he is unable to recall any conversation with Mr Kandy in which he gave instructions in relation to the settlement of this sale. Although this transaction is referred to in the section of his affidavit dealing with Ormtrend's claim, Mr Laurent says nothing on the topic of whether he or Ormtrend received the $197,875.88. 104 However one of Ms Sayer's reports of 12 March and that of 17 March 1997 say that all of the above amounts were received by the Kandy Family Trust and these sums and others relating to Fabrama and Affiliated Equities, totalling in all about $2.7M were credited to the loan account of Ormtrend in the financial accounts of that Trust. 105 At least in large part, the source of Ormtrend's funds lay in profits it had made. In 1988, Ormtrend had begun to acquire a large number of properties in and around Sydney. Mr Laurent lists 56 in an schedule to his affidavit of 11 July 2000. A further schedule attached to the affidavit of Mr May of 11 July 2000 refers to something over 50. The first contract of purchase referred to by Mr May seems to have been on 29 March and the last on 16 August 1988. The first contract of sale seems to have been on 30 May 1988 and the last on 31 May 1989. According to the schedule the total of the purchase prices was about $4.5M and the total of the sale prices, about $6.8M. The gross profit was $2,124,118. It is clear that Mr Kandy acted as solicitor on most of these transactions and almost certainly on all. 106 The former partner of Mr Kandy produced 44 conveyancing files for the consideration of Mr May, the Plaintiff's' present solicitor, saying that there were others he was unable to locate. Mr May analysed those which were produced. That analysis shows that on the Statements of Fees and Costs attached to settlement letters addressed to Ormond Pty Limited contained in those files there are the following total amounts described as:- Amount due to us herein $34,796.82 Amount due to you herein $246,580.85 Amount due to you herein and previously paid $702,845.76 Amount due to you herein and invested at call as requested $486,488.08 107 From the evidence it seems clear also that not infrequently proceeds of one transaction were used to defray or provide for expenses associated with another transaction. The amounts the totals of which appear above would seem to have been reached after provision was made for payment to persons I infer to have been mortgagees, particularly Esanda Finance and the ANZ Bank. Mr Laurent gave evidence that he borrowed $11M from one or both of those organisations. That he had a significant facility derives support from Ms Sayer's report of 17 March 1997. 108 In light of Mr Kandy's treatment of the proceeds of these numerous sales which came into his possession, it should be noted that, following the completion of each sale, there seems to have been prepared in Mr Kandy's office a statement of costs and fees together with a settlement sheet. Each of these statements of costs and fees was addressed to Ormtrend Pty Limited at 106-207 Old South Head Rd, Bondi Junction. 107/207 Old South Head Rd seems to have been Mr Laurent's address at the time. Copies of numerous of these were in evidence, though it seems clear that the source of those copies were the files Mr Barron had made available. Fabrama's and Affiliated Equities' Claims 109 The claim by Fabrama is, as been said, in the sum of $806,946.69. This was the face value of a cheque dated 12 December 1988 drawn by Bill Acceptance Corporation Limited in favour of "R E (or B) Kandy and Co as Trustee for Fabrama Pty". "Ltd" or "Limited" may follow the "Pty" on the cheque but the photocopies in evidence are unclear. In any event nothing turns on this. 110 The claim of $308,966.63 by Affiliated Equity is the total of 2 payments, one in the sum of $305,854.90 being a cheque dated 12 December 1988 from Bill Acceptance Corporation in favour of Affiliated Equity and what would seem to have been a further payment of $3,111.73 from BAC (as I shall hereafter refer to Bill Acceptance Corporation). Both of these payments are recorded by BAC as on the account of "Affiliated". 111 That Mr Kandy appropriated these sums seems clear. The $806,946.69 was credited to a ledger account in the name of Fabrama and then the balance in the account reduced to nil by a debit in the sum of $806,975.22. The description of the debit seems to read – the photocopy is not clear – "T/F to Ormtrend fr BAC 0126". 112 The $305,854.90 was credited to a Trust Ledger Account number 151 in the name of Affiliated Equity. There was a debit in the same amount on the same day and it also seems to read "T/F to Ormtrend fr BAC 0126". 113 The Trust Ledger Account 0126 in the name of Ormtrend shows the crediting of the sums of $806,975.22 and $305,854.90 and the debiting of the total of these sums ($1,112,830.12) by an entry "Lamtala Pty Ltd". It may be mentioned that, apart from the name "Lamtala Pty Ltd", the last of these entries includes a deal of writing, indecipherable on the photocopy in evidence, and of crossing out. 114 The further payment of $3,111.73 from BAC was also credited to account A151 in the name of Affiliated Equity on 1 February 1989. A debit 2 days later purports to show its transfer to Ormtrend Pty Ltd although I have not seen an Ormtrend ledger card reflecting its receipt. However the receiver, on page 4 of her report of 17 March 1997 says that the sum of $3,111.79 (sic) was taken up as income of Lamtala Pty Ltd. 115 Before otherwise dealing with Lamtala's treatment of these funds, attention should be given to their source. It would seem that in large part it was Ormtrend Pty Ltd. In her report of 17 March 1997, Ms Sayer said that moneys from sales by Ormtrend Pty Limited were credited to Trust Ledger account F137 by way of transfer from the separate accounts relating to the various sales. The report also includes the following:- "A summary of this (Trust Ledger) Account No.F137 styled "Fabrama from BAC" … is given hereunder:- Moneys received from Fabrama Pty Limited For investment 40000.00 Proceeds of sales transacted through the Trust Account 756589.26 Proceeds of sales which were deposited Directly with BAC 133565.15 Total Principal 930154.41 Interest from BAC received and credited to this trust ledger account 27529.72 $957684.13 This sum was applied as follows:- 23.11.88 Cheque drawn payable to Fabrama Pty Limited re-deposited to the Trust Account on 23.11.88 and credited to Affiliated Equities Account No. A151 147,160.51 12.12.88 Transferred to the trust ledger account of Ormtrend from BAC Account No. 0106 on 12.12.88 806,975.22 03.02.89 Cheque payable to Lamtala Pty Limited 3,548.40 $957,684.43 The interest of $3,548.40 was taken up by Lamtala Pty Limited as income of that company." 116 The report says that the above summary of Account F137 was supported by a detailed summary and analysis attached as an annexure. The copy report in evidence did not contain this but there is nothing in evidence which casts doubt on the summary I have quoted. 117 Trust Ledger Account A151 records, prior to the crediting of the cheque for $305,854.90, an apparent source of those funds. It shows the receipt from, or on account of, Affiliated Equity of 3 sums, $147,160.51, $80,000 and $80,000 on respectively the 23rd November, 24th November and 9 December 1988 and payments to Bill Acceptance Corporation of the same sums on the same days. The passage quoted above from Ms Sayer's report would seem to explain the source of the $147,160.51. The immediate source of the sums of $80,000 is not apparent. However there were annexed to Mr Laurent's affidavit of 9 April 1999 photocopies of what appeared to be Trust Account receipts for the sums received on 23 and 24 November and photocopies of "Notice(s) to Client" under the Legal Profession (Trust Accounts and Controlled Money) Regulation 1988 referring to the payments on 24 November and 9 December, all 4 documents indicating that the moneys were received from or on account of Affiliated Equity (or, in one case, "Affiliated Equities"). The "Notices to Client" show that the last 2 sums were to be held by the R B Kandy and Co Trust Account and were to be invested with Bill Acceptance Corporation on 24 hour call. The matter was not adverted to during the hearing but it should be noted that what purports to be page 2 of the Notice to Client relating to the third of these transactions appears twice and in terms which are not identical. 118 For completeness it might be mentioned that Trust Ledger account A 151 also shows the receipt of interest from BAC in the sum of $1,844.72. Mr Laurent's Claim for $322,804.70 119 The claim which was lodged on 20 May 1993 is for the total of 9 third party cheques payable to Mr Laurent but given to Mr Kandy. Ms Sayer says the correct total is $322,824.95 and the cheques were dealt with as follows:- 1. 5.10.90 - $49,000.00 Deposited to the account of Esanda re Quizrock Pty Limited 2. 10.10.90 -$16,490.00 Deposited to the bank account of Lamtala Pty Limited and treated as Consultancy & Management fees in the financial accounts of the Kandy Family Trust for the year ended 30 June 1991. 3. 20.10.90 - $38,302.00 Deposited to the account of Esanda re Coastal Readymix Concrete. 4. 26.11.90 - $72,106.25 Deposited to the bank account of Lamtala Pty Limited and treated as Consultancy & Management fees in the Financial Accounts of the Kandy Family Trust. 5. 11.12.90 - $19,156.00 Deposited to the bank account of Lamtala Pty Limited and treated as Consultancy & Management fees in the Financial Accounts of the Kandy Family Trust. 6. 21.1.91 - $22,000.00 Deposited to the bank account of Lamtala Pty Limited and treated as Consultancy & Management fees in the Profit & Loss Account of the Kandy Family Trust. 7. 29.11.91 - $46,452.70 Deposited to the bank account of Resco Pty Limited. 8. 17.1.92 - $30,000.00 Deposited to the bank account of Lamtala Pty Limited. 9. 19.10.92 - $29,318.00 Deposited to the bank account of Lamtala Pty Limited Total amount $322,824.95 120 In the claim form, – a statutory declaration – Mr Laurent said that the moneys were due to be repaid at the end of 1992 and in answer to the question "What specific instructions did you give the solicitor regarding the money" he replied: "As to the various cheques totalling $322,804.7, at the best short term rates available from time to time." 121 There was a second part of the claim said to relate to " Further amount not yet quantified" which was said to "represent a running account, repayable at call". 122 This claim was not addressed in any affidavit filed by Mr Laurent or in evidence. It may be that this was in consequence of it being disallowed by the Law Society at an earlier time than the other claims on the basis that Mr Laurent had not provided copies of the cheques but whatever the reason there is little evidence about it. The only evidence as to the terms on which the cheques were delivered to Mr Kandy is in the claim form. 123 In that connection, Mr Laurent said in paragraph 10 of his affidavit of 11 July 2000: "Mr Kandy's conduct with the sale and purchase of real estate by the plaintiffs appeared to be very professional. He had no involvement in the transactions, but for professional duties which would include the preparation of contracts, attending on exchanges, advising the various authorities on the change of title ownership, and advising me on the amount of stamp duty to be paid. Mr Kandy played no part in negotiating the terms of sale or purchase of any property. Mr Kandy's Dealings 124 Ms Sayer in reports of 26 July 1995 and 17 March 1997 records that on 12 December 1988 the sum of $1,112,830.12 was paid to Lamtala Pty Limited and deposited to the company's bank account. It was also credited to one or more current accounts "kept for Mr Laurent's companies". I do not find Ms Sayer's report of 17 March 1997 clear as to how many such accounts there were but I doubt if it matters. At page 7 of that report she sets out "a summary of the amounts credited and debited to the Loan Account of Ormtrend in the Kandy Family Trust Accounts". That summary includes on the credit side the $1,112,830.12 and the amounts the subject of Ormtrend's own claim for $774,219.88 detailed above. On the debit side were figures described as "net profit Ormtrend Pty Limited" for the years ending 30 June 1988 and 1989. Although the allocation between years can, as Ms Sayer said, be criticised – because the profit, whoever made it, was made at least largely in the second year - in effect the net profit of Ormtrend Pty Limited was taken up in the Profit and Loss Account of the Kandy Family Trust as if Ormtrend was a trustee for Lamtala in its capacity as trustee of that trust. 125 The accounts of the R B Kandy Family Trust also contained entries for each of the years ending 30 June 1988 and 1989, described as "net profit Ormtrend Pty Limited" whereby amounts of $794,905 and $830,037.79 respectively were transferred to the Profit and Loss Account of the Trust. The current account of Ormtrend Pty Limited in the financial accounts of the Trust was debited with the calculation of the net profits. 126 Ms Sayer's reports show that upon the depositing of the $1,112,830.12, five cheques totalling $1,112,500 were drawn in favour of companies with which Mr Kandy was associated. One of the cheques was in the sum of $330,000 and in favour of Resco Pty Limited. 127 In his affidavit of 1 July 2000, Mr Laurent said that these transactions were done without his knowledge or consent. 128 Fairly and squarely raised by these transactions and others to which I shall refer is the question of whether there was any entrustment of moneys to Mr Kandy in the course of his solicitor's practice and whether use or appropriation of the moneys in the affairs of his family trust constituted a failure to account. If in fact, Ormtrend were but a trustee for Lamtala in respect of the moneys the subject of the claims Mr Laurent has propounded, then use by Lamtala was not obviously improper. 129 The evidence bearing on this topic is by no means comprehensive. Most of what there is is contained in Ms Sayer's reports, although in considering what she has said it is important to recognise that the reports also contain a significant amount of inference, commentary and surmise. 130 On the topic of Mr Kandy's conduct, Ms Sayer in a report of 4 May 1993 said, "… many of the transactions and dealings involved complicated fraud and concealment by forgery and other fictitious transactions"; trust moneys were not passed through the trust account, mortgage documents were forged; and moneys advanced to a borrower were transferred to the trust ledger account of another borrower. There were irregularities in dealing with trust funds dating back as far as late 1983 although the flagrant misappropriation of trust funds escalated from early 1990. From about early 1990, interest on moneys misappropriated was paid out of Lamtala Pty Limited and Resco Pty Limited. 131 In a report of 12 March 1997, Ms Sayer said that "due to the extensive fraudulent dealing in all of these accounts by Mr Kandy it would not be possible to accept the Books of Account of Lamtala Pty Limited and Resco Pty Limited as showing the true position concerning the moneys dealt with in those Accounts". 132 In the report of 17 March 1997 Ms Sayer also observes:- "As mentioned in my reports relating to other matters moneys that have been misappropriated by Kandy have been brought to account in the financial accounts of Lamtala Pty Limited as income. You will recall that amounts exceeding $M1 misappropriated from the funds of Belarus Tractor and Trading Co. Pty. Limited were treated as Management and Consultancy fees in the financial accounts of the Kandy Family Trust." 133 In a letter of 6 December 1995, Ms Sayer said that she had been advised by Mr Kandy's accountants that they held no documentary evidence of a trustee relationship between Lamtala and Ormtrend though Mr Kandy had verbally informed them to that effect. In her report of 12 March 1997 Ms Sayer records also that she was informed by the accountants that they relied on Mr Kandy for information as to the nature and details of moneys received and disbursed. Her report of 17 March, indicates that the accountants had no documents which supported these assertions. The accountants did however inform Ms Sayer that "it was only after Mr Kandy's death that Mr Daniel Laurent and Ms Anna Lamont represented themselves to us as the true proprietors of Ormtrend Pty Limited and sought assistance in tracing the whereabouts of their funds". Mr Laurent agreed that it was only after Mr Kandy's death he spoke to the accountants. 134 Ms Sayer's final report which is in evidence was that of 17 March, 1997 and it is convenient to refer to it at some length. In it Ms Sayer observed:- "If … moneys were properly those of Ormtrend Pty Limited and should not have been taken up in the Accounts of the Kandy Family Trust the amounts debited to the account and described as "Net Profit" which total $1,624,943.23 should be written back. If this is the case the total amount to be accounted for by the Kandy Family Trust to Ormstend would be $1,876,030.20 as follows:- Balance at 30.6.89 251,086.97 Add: Debit for Net profit 30.6.88 794,905.44 Debit for net profit 30.6.89 830,037.79 $1,876,030.20 "Between April and July, 1988 Ormtrend Pty Limited purchased a number of properties. I have identified almost seventy conveyances. While the deposit on the purchases and sometimes stamp duty was paid from the Trust Account I have established that most of the properties were funded by a loan made by the ANZ Bank to Ormtrend Pty Limited. The settlement moneys paid by the bank were debited direct to the company's bank account. Financial Accounts were prepared by Talbots for Ormtrend Pty Limited. Apart from the few entries covered by cheques drawn on the bank account of Ormtrend Pty Limited and those which were paid by Resco Pty Limited the entries relating to the purchase of the properties were by way of journal entry. The actual costs paid/or payable for the properties plus 10% were journalised by debiting the purchase account and crediting sundry creditors. The entries relating to the purchases paid by the bank make up the balance. …. The arrangement appears to be one with taxation implications in that the net profit has been brought to account in advance and before those profits were earned to perhaps split the income into the two years. Also by bringing the profits to account in the financial accounts of the Kandy Family Trust, the payment of income tax by Ormtrend Pty Limited was avoided. The Kandy Family Trust had losses which absorbed profits and consequently no income tax was paid on the transactions either by Ormtrend or by the Kandy Family Trust. .… It is difficult to accept that there was not some arrangement between Mr Laurent and Mr Kandy concerning the tax position regarding the transactions or perhaps there was a joint venture arrangement between the two. While there are tax implications perhaps the arrangement was for the washing of moneys by the concealment of these funds in the bank account of Lamtala Pty Limited. Between January and April 1988 Resco Pty Limited advanced moneys to Ormtrend Pty Limited for the purchases to that date totalling just over $100,000. Eventually a net debit balance in that account of $100,649.73 was transferred to the current account of M L Kandy. This might give some indication of a joint venture. As mentioned earlier Ormtrend Pty Limited had a bank account with the ANZ Bank. The company could have dealt with all of these moneys which passed through the bank accounts of Lamtala Pty Limited and Resco Pty Limited through the company's own bank account. …. It is hard to accept that if these moneys (the profit from trading) were held by Kandy in December 1988 that there would not have been any accounting to Mr Kandy for these moneys with no apparent formal arrangement for investment for some four years. No interest was ever paid to the companies by Kandy or his companies. The records available to me are one sided and misleading in that they show moneys going into the companies' bank accounts but it is not possible to trace moneys going out. The records do indicate that moneys were held by Lamtala Pty Limited for Mr Laurent and his companies. The main issue I believe is the question of a solicitor/client relationship as between Mr Laurent and his companies with Kandy in respect of these transactions. …. CLAIM Qualification must be held in relation to the numerous flaws in the accounting records available in relation to Mr Kandy's companies and the lack of records and other information available in relation to moneys disbursed form the companies' bank accounts. It appears to me that the amounts to be accounted for to Mr Laurent and his companies by Mr Kandy and his companies are the following:- Claim relating to the companies of Mr DA Laurent Current Accounts - Kandy Family trust – Loan/Current Account Ormtrend & Other Companies 1,876,030.20 Resco Pty Limited–Affiliated Equity 94,961.02 Resco Pty Limited-Ormtrend Pty Limited Advances (100,649.73) 1,870,341.49 Interest on BAC deposit-Ex FL137 3,548.40 (pages 3 & 4 herein)-EX A151 3,111.73 6,660.13 1,877,001.62 Claim of DA Laurent Claim re third party cheques 322,824.95 Claim re sales transacted in the Trust account-(separate report Dated 12.3.96) 139,409.59 462,234.54 2,339.236.16 Less: Payments made to or on Behalf of DA Laurent subsequent To 30.6.90 53,448.75 $2,285,787.41 135 In light of her earlier comments it cannot be suggested that Ms Sayer's statement under the heading "CLAIM" commencing "It appears to me" is any indication she regards Mr Laurent or his companies as entitled to succeed. Rather do I understand Ms Sayer to have been there addressing the issue of the amount of any entitlement there may be. 136 Although at the end of the passage I have quoted Ms Sayer makes a deduction on account of payments she asserts were made to Mr Laurent since 30 June 1990, she refers elsewhere to further possible deductions. Given that these do not affect the principal issues with which I am concerned they can be left for the present. 137 More detail of Resco's involvement is to be found in one of Ms Sayer's reports of 12 March 1997 which contains what is described as a reconstruction of the loan account of Ormtrend with Resco Pty Limited. Because the transactions recorded are early in the activities of Ormtrend, they may bear a weight which later events or records do not. Hence, it is appropriate to descend to a little detail. The reconstruction shows, inter alia:- In January 1988, 2 cheques, one in the sum of $8,200 and the other in the sum of $4,200 were drawn. The names of the persons to whom the advances were made are not obviously connected with anything or anyone although they could, for example, have been estate agents. The next transactions are 4 cheques dated 29 March apparently connected with the purchase of property at 6/67 Bayswater Road, Kings Cross. One cheque was in the sum of $70,782.10 apparently made payable to the Vendors. The other three advances totalled $1,103.09. On 31 March, there were 4 cheques apparently connected with the purchase of property at 2/65-71 Dudley Street, Randwick totalling $15,587.10. One in an amount of $10,664.20 was to the State Bank of New South Wales. The other three were to the Randwick Council, the M.W.S. & D Board and the Proprietors of a Strata Plan. The balance in the account at that time was almost $100,000 debit. On 6 April, there was a credit to the account in the sum of $14,245.47, the notation being "13/3 Hornsey Street, Rozelle". On 18 April there was a credit to the account in the sum of $16,524.18, the notation being "308 Enmore Road, Marrickville". On 6 May there was a credit to the account in amount of $38,210.93, the notation being "72/256-260 Alison Road, Randwick." On 12 May there were 3 cheques totalling $75,436.79 apparently connected with the purchase of 52/6-14 Darley Street, Darlinghurst. The largest of these was to MacFie Curlewis & Spiro in the sum of $66,500. A second was in the sum of $6,476.79 to a person with the same surname as the vendor and there was an amount of $2,500 to Citibank. Also on 12 May there were 5 cheques apparently connected with the purchase at 5/54 Hornsey Street, Rozelle. Payments to Leichhardt Council and the Proprietors of a Strata Plan totalled $501.35 and there were also payments to the NAB ($19,247.17), Grass Gemmell & McGill ($31,392.21) and Morris McMahon & Co ($113,500). On 16 May there were 2 credits, one in the sum of $50,400, the notation beside which is 5/54 Hornsey Street, Rozelle and $75,150.00 the notation of which is 52/6-14 Darley Street, Darlinghurst. On 18 May there was an advance of $4,881.62 apparently connected with 333 Forest Road, Bexley. The balance of the account was then approximately $162,000 (debit). On 2 June there was credited to the account, $16,143.15 apparently connected with 23/37 Francis Street, Darlinghurst. On 3 June there was credited to the account $20,654.15 apparently connected with 2/32 Hill Street, Marrickville. On 17 June there was credited to the account $15,492.41 apparently connected with 11/37 Francis Street, East Sydney. 138 Between April and December 1988 there were a number of other transactions including some payments to Mr Kandy's office account but the above summary includes nearly all of significance and provides a sufficient indication of the nature of the transactions. On 30 June 1989 there was a credit to the account in the sum of $8,000 which reduced its balance to $100,649.73 debit. On July 1, 1990 there was a journal transfer of this sum to Mr Kandy. 139 (It is not apparent why Ms Sayer made a "reconstruction of the account". Other statements by her indicate that Mr Kandy's company accounts were written up to 30 June 1990.) 140 There was not in evidence a comprehensive detailed account of the conveyancing transactions done by Ormtrend. A list attached to Mr Laurent's Affidavit of 11 July refers to 56 addresses. Annexure A to the Affidavit of Mr May of 11 July consists of a summary of 44 sales indicating the disposition of proceeds. Annexure B to Mr May's Affidavit consists of a schedule of 50 properties showing dates of the acquisition and conveyance on sale, the purchase and sale prices and generally the address of the properties. The difference between the numbers on this list and that annexed to Mr Laurent's Affidavit, indicates that Annexure B is incomplete. However, because of the information it contains, it is the document most useful for the purposes of comparison with Ms Sayer's reconstructed account to which I have just referred. The incompleteness may well arise because, according to the affidavit of Mr May, the information in the annexure was derived from searches at the Land Titles Office. Properties may have been sold before they were transferred into Ormtrend's name. Furthermore, the dates referred to in the annexure are presumably the dates of registration of dealings. 141 Annexure B shows:- As its first transaction, the purchase on 29 March 1988 of 6/67 Bayswater Road, Kings Cross for $79,000. As its second transaction the purchase on 31 March 1988 of 2/65-71 Dudley Street, Coogee for $17,500. As its sixth transaction a purchase on 6 April 1988 for the sum of $49,000. The address is not given. As its fifth transaction the purchase on 15 April 1988 of 308 Enmore Road, Marrickville for $88,000. The purchase on 6 May 1988 of 72/256-260 Alison Road, Randwick for $90,000. Between the purchase of 2/65-71 Dudley Street on 31 March and the purchase of 72/256-260 Alison Road on 6 May, there were a total of 12 purchases for a total price of $921,500. The purchase on 13 May 1988 of 51/6-14 Darley Street, Darlinghurst for the sum of $83,500. The sale date of this property was 4 August. The purchase on 18 May 1988 of 333 Forest Road for the sum of $97,500. The sale date of this property was 21 October. The purchase on 8 April 1988 of 23/37 Francis Street, Darlinghurst for the sum of $55,000. The sale date of this property was 30 May. The purchase on 16 May 1988 of 11/37 Francis Street, Darlinghurst for the sum of $63,500. The property appears to have been sold on 20 June for $78,000. 142 A comparison of the reconstruction and Mr May's annexure suggests that Resco, at least initially, paid all, or virtually all, of the purchase price of the properties at 6/67 Bayswater Road and 2/56-Dudley St. Why there should be a credit to the reconstructed account bearing the notation 308 Enmore Rd, at about the time that property was bought is not apparent. The same remark can be made concerning the properties at 72/256-260 Alison Rd and 33 Forest Rd, Bexley and possibly about the property at 13/3 Hornsey Rd (although one cannot be sure that that was the property purchased on 6 April). 143 It would seem clear however that for a time after 31 March Ormtrend was buying properties with money not supplied by Resco. However the comparison suggests that on or about 12 May almost all of the purchase price of 52/6-14 Darley St, Darlinghurst was supplied by Resco. 144 There is nothing in Mr Laurent's evidence to explain the matters apparent in the reconstructed account or to explain the apparent provision of funds by Resco. Of course during the period when those funds were provided, even if bank funds were not then available, if Mr Laurent's account is accepted, Mr Kandy had on deposit with him the proceeds of sale of the Bondi properties. However Mr Laurent never suggested that any reference was made to these in connection with the Ormtrend transactions. 145 According to Ms Sayer's report of 17 March, 1997 there was also a Loan Account in Resco Pty Limited for Affiliated Equity Pacific Pty Limited and "the entries in this account appear to indicate that the account was used as a means of exchanging cheques or using Resco Pty Limited as a bank account for Affiliated Equity". A reconstruction of that account annexed to that report shows that, starting in April 1989, largely round-figure sums were debited and credited to that account. Again Mr Laurent gave no explanation of this. However, by April 1989 all or virtually all of the Ormtrend properties had been sold and, so far as the evidence goes, Affiliated Equity Pacific Pty Limited never did anything beyond having its name on some transactions effected by Mr Kandy. Credits/offsets 146 Ms Sayer also observes that there are insurmountable difficulties in relation to establishing the position concerning moneys which found their way in to the bank accounts of Lamtala Pty Limited or Resco Pty Limited because, while it was possible generally to trace moneys going into those bank accounts, she could not identify moneys disbursed from them. This was due, inter alia to the absence of banking records prior to 1990, some payments in cash (described in the 17 March report as "substantial funds") and the fact that numerous amounts were disbursed by way of bank cheques. In consequence, according to Ms Sayer, there could well have been payment made to or on behalf of Mr Laurent or his companies by Lamtala Pty Limited or Resco Pty Limited, being payments it is not possible for her to trace. 147 On page 4 of a report of 12 March 1997, Ms Sayer does however identify some payments which total the amount of $53,448.75 referred to in paragraph 134 above and observes that "these amounts, I assume would be debited against the credit balances in the loan accounts". Resco Pty Limited 9.1.91 Chq. No. 422937 Westpac 6,118.75 18.1.91 Chq. No. 422944 D. Laurent 5,000.00 22.2.91 Chq. No. 141042 8,100.00 $19,218.75 Lamtala Pty Limited 7.4.92 Chq. No. 014476 12,500.00 15.4.92 Chq. No. 945836 6,850.00 21.4.92 Chq. No. 945876` 2,500.00 22.4.92 Chq. No. 945837 5,880.00 23.4.92 Chq. No. 014489 2,500.00 28.4.92 Chq. No. 941871 4,000.00 $34,230.00 148 Mr Laurent said in evidence that he could not remember receiving any payments from Resco and Lamtala. 149 In her report Ms Sayer also remarked: "In addition to the above cheques, quite recently I was able to establish that a cheque was drawn by Lamtala Pty Limited on 29th December, 1992 in the amount of $111,931.89 and transmitted to Hambros Bank London for transfer to the account in Warsaw of D Laurent. There has been no mention to date by Mr Laurent of a cheque drawn by him in the amount of $90,000 which was deposited to the account of Lamtala Pty Limited on 6th November, 1992. Maybe this amount is connected with the transfer to Warsaw." 150 Mr Laurent was questioned about the sum of $111,931.89. Asked if he received about 50,000 pounds sterling, Mr Laurent responded "75,000 US". He said that this money was part payment Mr Kandy owed him for diamonds. Mr Laurent said he had purchased the diamonds in Australia. Counsel for the Law Society was clearly interested in why Mr Laurent had an account in Warsaw but after receiving a few non-responsive answers did not pursue the matter. 151 Earlier, Mr Laurent acknowledged that of the money he said he had entrusted to Mr Kandy, 50,000 pounds sterling had been repaid. I understand this answer to refer not only to Mr Laurent's own funds but that of the companies, or at least Ormtrend, too. He said other small amounts, say of $100 could have been forgotten. When it was put to him that Ms Sayer had said that amounts of $20,000, $50,000 and $20,000 were repaid on March 1986, Mr Laurent said he did not remember. During this questioning, counsel referred to page 527 of Exhibit A, the photocopy of ledger card L108. That card shows as payments to Mr Laurent in March 1986, 2 amounts of $20,000 and one of $5,000, not $50,000. 152 On the assumption that the 50,000 pounds sterling referred to in the last 2 paragraphs is not the same money, Ms Sayer does not seem to refer to that referred to in the immediately preceding paragraph. Her silence suggests that the 2 amounts must be the same or there was no second sum in this figure. 153 In her report of 17 March Ms Sayer also said that "Payments have been made by the companies to Ms Anna Lamont, the defacto of Mr Laurent. I am unable to say with any certainty as to whether these payments were made in relation to transactions in which Mr Kandy acted on her behalf or on account of moneys due to Mr Laurent." The issue of whether Mr Laurent knew anything about these was embarked upon by counsel for the Law Society but not pursued to any useful conclusion. Absence of Records 154 Mr Laurent has produced no or virtually no documents from his own records or those of the claimant companies. His explanation(s) for this absence should be mentioned. In his affidavit of 8 April 1999 he said:- "Over a period of years I kept records of the moneys that had been invested by Michael Kandy and adjusted them as the years went by. I disposed of these records as and when the investments matured. I knew the amount of money I was to receive at the age of 40, namely: (a) $160,000.00 invested in April 1985 from proceeds of sale of 39/32 Penkivil Street, Bondi and 31/355 Old South Head Road, North Bondi with additional cash contribution I made to round the figure up to $160,000.00. In addition, I expected to receive interest at 15%; and (b) $200,000.00 invested in December 1986 from proceeds of sale of 22/14 Wilga Street, Bondi with additional cash contribution I made to round the figure up to $200,000.00. In addition I expected to receive interest at 15%. I did not receive any of these moneys during this period as they were for my retirement." 155 In oral evidence Mr Laurent said that when Ms Lamont moved out of premises he had apparently occupied with her at Bondi Junction, she removed everything. At T161-3 he gave the following evidence: Q. Was it true over a period of a number of years you kept records of the moneys invested by Michael Kandy and adjusted them as the years went past? A. I had some scribbles in Russian which only I supposed to understand, yes, I did. Q. Did those records record the mount of money which had been invested? A. I don't remember now. I have to see it. Q. Was there any record of the amount of money which was invested? A. I can't remember. I have to see it. Q. And did you say that: "I disposed of these records as and when the investments matured"? A. I don't remember saying it. Q. Did you dispose of records as and when the investments matured? A. "Dispose" sounds bad, the whole phrase sounds bad to me. I wouldn't talk like this. Would be "disposing" something you don't want to be found, isn't it? Q. You disposed of the Russian records from time to time, did you? A. Well, just change all to a new and throw away the old because I didn't need it any more, it was updated probably most likely. Q. Did you keep any track of the amount of money which you had invested with Michael Kandy? A. Of course I did. Q. How did you keep track of the amounts? A. Just keep writing things in Russian, in my own personal notebooks so no-one would put their noses. Q. What about the money invested by Ormtrend, how did you keep track of that money? A. I have record of the price how much I purchase, how much I sold and how much legals, the rest should be mine, but any rule of thumb or whatever, it's bad luck. Q. And did you get correspondence from RB Kandy & Co when properties were sold by Ormtrend Pty Limited? A. I got correspondence to all the properties but Anna Lamont remove the whole lot. Q. When did she do that? A. When she took possession of my property and gave all my clothes away. Q. In 1994? A. In 1994. Q. And you had these documents in 1993, when you claimed against the Law Society? A. Most likely I did, most likely I did. I not remember any more, but most likely I did. 156 In re-examination Mr Laurent said that it was in August/September 1994 that Ms Lamont had taken his documents. Subsequent attempts to contact her had been unsuccessful. She was involved with him in the early stages of the making and pursuit of his claims. 157 When asked in oral evidence whether Mr Kandy had said "you need not be concerned with any legal aspect of the investment", Mr Laurent replied "I don't remember this part at all." However two questions later there was the following exchange:- Q. Did he say anything to you to the effect that "I", that is, Mr Kandy "will take care of any aspect which arises, including the preparation of income tax returns". A. That's correct, that's correct. 158 Mr Laurent said he could not remember signing any tax returns on behalf of Ormtrend or Affiliated Equities. He said that Mr Kandy had said he was going to do it himself. Whether "it" refers to tax returns or CAC returns or both in that answer is not completely clear but in light of the totality of Mr Laurent's evidence, my impression is that he was referring to both. The terms of paragraph 47 of his affidavit of 11 July indicate that Mr Kandy agreed to look after at least the tax returns. Later, Mr Laurent said he could not remember whether Ormtrend had ever had any financial statement. Mr Laurent's Health 159 There can be no doubt that for much of the time since Mr Kandy's death and up to the time of trial Mr Laurent has been in ill health. This clearly is a factor which must be taken into account in assessing all he has said during this period. There is nothing to suggest that Mr Laurent suffered any ill health prior to Mr Kandy's death. 160 In his affidavit of 8 April 1999, Mr Laurent said:- "When my claim was submitted to the Law Society in March, 1993 the condition of my health which had been dramatically affected by Michael Kandy's then recent suicide was such that I could not concentrate fully on the details of the claim. It is only with the passage of time and numerous attempts to recall the chain of events that I have now remembered these additional details." 161 In oral evidence Mr Laurent said that he had been psychiatrically ill many times. At the time of trial he was taking Zoloft. In fairness in connection with the making of any judgment on his evidence, it should also be said that there was an element of the erratic or eccentric about him at that time. Three short passages of evidence may illustrate. (By way of partial explanation, his mother was in the back of the Court during all or most of his evidence.) The three passages are:- Q. Jean Sayer reports that Mr Kandy's trust account shows payments being made out to you in March 1986 of three amounts, the first of $20,000, the second of $50,000 and the third of $20,000? A. March of '86? Q. Yes? A. I don't remember. Mum's falling asleep. She fall down the last time, she broker her leg when she fall down from a chair. Don't fall. – T147 Q. And the first burglary was when she (Ms Lamont) moved out? A. She removed everything from the premises. When I got back the blackbird, which was protected species was killed, I did forensic on that, from a broken neck. I was away and was none of my stuff was anymore in my apartment and that was my home. – T148. Q. Did the company Ormtrend have any financial records? A. All records went and that time when apartment went and clothes went and furniture went and parrot got killed. Mama, don't sleep. – T167 162 Also in evidence was a letter dated 23 April 2001 from a consultant psychiatrist, Dr Dinnen to the effect that he had "seen Mr Laurent about sixty times since he first presented with an acute manic illness in December 1994. He has bipolar affective disorder, which appears to have been triggered as a form of traumatic reactive psychosis consequent to the matters before the court, following the suicide of his former solicitor." The Relationship between Mr Laurent and Mr Kandy 163 Mr Laurent is a Russian of Jewish descent. Mr Kandy was also of Jewish descent. According to Mr Laurent, nearly everyone he knew in the Russian Jewish community were clients of Mr Kandy and Mr Laurent had never heard any negative remarks concerning him. These matters caused Mr Laurent to see Mr Kandy as "the ultimate representation of honesty and security". In his affidavit of 11 July 2000 Mr Laurent said that there was never any reason to doubt anything Mr Kandy told him, or to suspect that there was anything wrong in anything Mr Kandy had done. The magnitude of Mr Kandy's depredations suggest that many other persons must have held the same view. Sundry Matters 164 I have referred to the circumstances in which Mr Laurent and his mother became directors of the companies involved and to the fact that very substantial financial accommodation was provided by one or both of the ANZ Bank and Esanda. There is no evidence from either of these organisations. Nor is there any suggestion that Mr Kandy was involved with this facility, say as a guarantor, and I would have expected Ms Sayer to have said so if it were the case. 165 Although clearly at some stage profits previously made were being used to fund later purchases, another area where the evidence is silent is whether Mr Laurent or Ormtrend (if it had any) put any of their own money into the purchase of the properties bought early in Ormtrend's operation. One may take judicial notice of the fact that banks rarely provide the whole purchase price without other security. 166 In her report of 17 November 1993, when dealing with a claim by Affiliated Equities – which I infer to relate to the cheque for $305,854.90 – Ms Sayer said:- "It would be premature for me to make any conclusions at this stage as to whether there was a loss sustained which could be related back to this particular cheque. Particularly, in view of the alleged money washing activities of Mr Laurent." 167 When Mr Laurent was asked questions on the topic of washing money for the Russian mob or mafia, he disclaimed any knowledge. Prior to that he had indulged in a number of evasive answers but it seems to me just as likely that these were the product of his mental state or antipathetic attitude and I do not regard it as possible to draw from that evasiveness any inferences on the present topic. In my view there was no evidence, or even a smell of evidence, before me of any such activities or involvement on the part of Mr Laurent. Ms Sayer's references to these matters I regard as speculation and of no weight. History of Claims 168 Because it may be thought to throw some light on the reliability or credibility of the claims advanced by Mr Laurent, it seems to me desirable to reflect also on the actions of Mr Laurent in and about the making of the claims. As has been said, Mr Kandy died on 11 January 1993. Mr Laurent was then overseas. On 11 March 1993, Messrs Carroll & O'Dea who then acted for Mr Laurent wrote advising the Law Society that they expected there would be a large number of claims both by him and in the name of companies "of which he or his family were the beneficial owners". The letter went on to say that Mr Laurent was "having extreme difficulty, in the absence of records, in quantifying his claims" but expected they would total in excess of $2,000,000. 169 Particulars were given, however, of claims in respect of the proceeds of sale of the three properties at Bondi. In respect of the first of these it was said that Mr Laurent claimed (subject to a qualification not presently relevant) some $87,495.73. In respect of the second, reference was made to a settlement sheet showing that $57,024.02 was due to Mr Laurent and that he "did not ever receive this money". In respect of that at Wilga St, the letter said that Mr Laurent had never received an accounting for the sale price of $175,000 and went on:- "At the time in 1985/86 Mr Kandy advised our client that he (Kandy) would invest the sale proceeds. Mr Kandy asked our client when he wanted to retire. Our client said that he wanted to retire at the age of about 40. Mr Kandy said that he would invest the money on long term bonds yielding 15% compound interest. Our client agreed. Since that time, that is 1985/86 our client took no further interest in the investment of these funds until last year. Our client turned 40 on 28 January 1992. He asked Kandy then about this investment. Kandy said "let it run for a little bit longer, you are making good interest". Our client agreed. … Our client's claim form is enclosed." 170 In the accompanying claim form Mr Laurent said that the moneys were due to be paid to him at the end of 1992. 171 After some correspondence to which it is unnecessary to refer, Messrs Carroll & O'Dea wrote again on 18 May 1993 making the claims of Fabrama Pty Limited in the principal sum of $806,946.69, of Ormtrend Pty Limited in the principal sum of $768,875.88 and of Affiliated Equities in the principal sum of $308,966.63. Affiliated Equities was said to be a business name of Mr Laurent. Carroll & O'Dea's letter included copies of a number of supporting documents including a statement from a director of Corporate Network Limited which indicated that he had been involved in the formation of Fabrama Pty Limited and Ormtrend Pty Limited, that he had received instructions in relation to them from Mr Kandy, and that the new shareholders and office bearers of the companies were to be Mr Laurent and his mother. 172 The letter went on to say that the capital sums being claimed arose from the sale of some 53 properties, mostly concluded in 1988, that Mr Kandy had handled many property transactions on Mr Laurent's behalf and that the latter had trusted Mr Kandy completely. The letter also said:- "Our client does not claim that in 1988/9 in respect of each particular sum of money stated in this letter, he gave specific instructions each time to Mr Kandy to invest. He confirmed his instructions given in 1985/86 when Mr Kandy promised to invest any money entrusted to him" and that Mr Laurent also confirmed the general nature of the investment instructions detailed in Carroll & O'Dea's letter of 11 March." 173 On 20 May 1993, Messrs Carroll & O'Dea wrote again enclosing a further claim form referable to two separate claims. One was in an amount of $322,804.70 "being a total of 9 cheques, handed by our client to Mr Kandy for the purposes of investment." The second part of the claim was said to relate to "an unquantified amount representing a running account, repayable at call" in respect of which further information would be forwarded. It was estimated that the claim would be in the vicinity of $300,000.00". The letter went on, "the evidence we would like our client to produce in support of his two claims herein is extensive. We are using our best endeavours to obtain it." In the claim form with the letter, it was said that the $322,804.70 was to be invested "at the best short term rates available from time to time" and to be repayable at the end of 1992. The unquantified amount was said to be repayable at call. In response to two questions in the claim form which sought information as to payments or repayments which might have been made the answer "to be advised" was provided. 174 There followed a deal of correspondence to much of which it is unnecessary to refer. However, it included the following. In a letter of 21 July 1993, Ms Siddons sought documentation and evidence in respect of the claims contained in the letter of 20 May. By letter dated 22 July 1993, Ms Siddons sought in connection with the claim in the name of Affiliated Equities for $308,966.63, inter alia, a statutory declaration by Mr Laurent addressing the following matters:- "1. Full details of … discussions with the late Mr Kandy regarding the placement of the funds with Bill Acceptance Corporation and their withdrawal therefrom. 2. As specific as possible information regarding (Mr Laurent's) instructions as to the investment of moneys in long term bonds. 3. When were the controlled money notices to client forms received by (Mr Laurent)." 175 By letter of 3 August 1993, Messrs Carroll & O'Dea adverted to the original claims in respect of the Bondi properties, said there was no further information that they could assist with but that if there were specific queries, that Ms Siddons or the receiver liked to raise, they would use their best endeavours to answer them. 176 In a letter of 11 August 1993, Ms Siddons sought more information in respect of the original three claims. In respect of the Penkivil Street, Bondi property, she sought "evidence that moneys were entrusted to the late Mr Kandy to discharge a mortgage over the property to Amigo Holdings Pty Limited. In respect of the property at 31/355 Old South Head Road, North Bondi, she sought evidence that moneys were entrusted to Mr Kandy to discharge a mortgage to Mr and Mrs Kulisich. In respect of the property at 22/14 Wilgar Street, Bondi, she sought information of "the entrustment of the moneys to the late Mr Kandy when Mr Laurent purchased this property." In this letter Ms Siddons went on to say that she did not believe it would be possible for the committee to look at those particular transactions in isolation but rather to conduct a full account of Mr Laurent's dealings with Mr Kandy. She sought information which she said she had been told by a Ms Lamont was available concerning the above matters. She also sought information as to the circumstances in which Mr Laurent had obtained a copy of Mr Kandy's handwritten notes concerning the first two of the properties mentioned. 177 On 23 November, 1993, Ms Siddons wrote asking when copies of both sides of the nine cheques, the subject of the claim for $322,804.70 could be provided. 178 The next correspondence seems to have been is a letter of 11 November 1994 in which Messrs Maurice May advised that they had been instructed in lieu of Messrs Carroll & O'Dea. Messrs Maurice May wrote again on 6 January 1995. The letter indicates that the documents they had received from Messrs Carroll & O'Dea were in something of a mess, that the person who had previously had the carriage of the matter had died and they sought help from the Law Society in determining whether some letters had been sent. Messrs Maurice May also said that they had some difficulty in obtaining precise details of the claim from their client. 179 On 1 August 1999, Ms Siddons wrote saying that the claim for $322,804.70 had been disallowed as Mr Laurent had failed to provide copies of the 9 cheques, the subject of the claim and had produced no evidence of moneys entrusted to Mr Kandy. 180 On 2 August 1995, Ms Siddons wrote enclosing a Notice under Section 84(1) of the Legal Profession Act in connection with the claim made in respect of the three Bondi properties. The letter intimated that the information requested was "required". What was sought included that requested in the letter of 11 August 1993 and, inter alia:- "All correspondence from RB Kandy & Co regarding (the properties) including statements regarding the sales of those properties and subsequent investment of the sale proceeds. Evidence of the payment of interest to you in relation to the investment of the proceeds of sale of the three properties… Your contemporaneous records in relation to the investment of the proceeds of sale of the three properties… such as cash books and ledgers. 181 By letter of 9 August 1995, Messrs Maurice May & Co made a number of proposals as to the method of dealing with the claims and sought an extension of time for compliance of the Section 84(1) Notice to 30 October 1995. By letter of 21 August 1995, these proposals were rejected. On 30 August 1995 Messrs Maurice May wrote advising that Mr Laurent suffered from a mental condition and was not in a position to turn his mind to the matters raised in the Law Society's letter of 2 August. It was said that "the problem appears to be that he simply cannot concentrate for sufficient time to recall accurately events that have occurred some years ago". There was enclosed a letter from a psychiatrist under whose care Mr Laurent had been since 1 December 1994 which said, inter alia, that Mr Laurent "suffers from manic depressive psychosis and his condition had caused severe incapacity at times during the period that I have been treating him." 182 That description of Mr Laurent's mental state was amplified in a further letter from the psychiatrist of 28 November 1995. It seems likely that that was passed on to the Law Society. 183 On 14 June 1996, Messrs Maurice May wrote to the Law Society enclosing a statutory declaration from Mr Laurent responding to the Section 84(1) Notice. The terms of this substantially accord with Mr Laurent's affidavit of 8 April 1999. 184 Some of the statements in that statutory declaration were the subject of particular note in a letter from Ms Siddons of 19 June 1996. Inter alia, that letter said:- "Additionally, I note that your client advises that over the years he kept records of moneys invested with Michael Kandy, disposing of those records as and when the investments matured. Your client has stated that the particular moneys claimed on the Fidelity Fund had not been repaid to him. In that case I would expect that he would still have records of the investment of those moneys with Mr Kandy. I also note that your client advises he knew the amount of money he was to receive at the age of 40. Please advise that sum." 185 This letter seems to have been replied to on 21 February 1997. To the parts I have quoted the reply was:- "In relation to his statement that he knew the amount of moneys he was to receive at the age of 40, we are instructed that this meant that he knew that he would have sufficient money to retire at the age of 40. We ask that you bear in mind that due to Mr (Laurent's) mental health problems, it is difficult to obtain clarification. 186 On 12 March 1997 the Law Society wrote observing that the reply of 21 February had not addressed the request for records of the moneys claimed on the Fidelity Fund and repeating the request. 187 Maurice May replied to this by letters of 4 and 30 April. The letter of 4 April said, inter alia:- "Upon taking further instructions from our client, he indicates that the figure he was to receive at the age of 40 was one which could be calculated but off-hand he cannot give us a specific figure. He does not have any further documentation to support same." 188 In a letter of 30 April Maurice May said again that to the best of Mr Laurent's knowledge, he had no more records or notes in relation to the transactions referred to in his statutory declaration and that "in relation to the amount of moneys that he knew he was to receive at the age of 40 that he instructed Kandy as set forth below: "1. Kandy was to invest $160,000 in April 1985 on behalf of our client. a. This sum was comprised of a rounding off of the proceeds of sale of both Old South Head Road property and the Penkevil street property. b. This sum was to attract interest at the rate of 15% per annum until 31 December 1991, the month prior to client's 40th birthday. 2. Kandy was to invest $200,000 in December 1986 on behalf of our client. a. This sum was comprised of a rounding off of the proceeds of sale of the property at Wilga street. b. This sum was to attract interest at a rate of 15% per annum until 31 December 1991." 189 On 2 July 1997 Ms Siddons wrote saying that she was reviewing all the information held by the Society in relation to Mr Laurent's claim and would contact his solicitors shortly. In the latter part of that year, there was desultory correspondence in the course of which Maurice May sought a reconsideration of the rejection of the claim for $322,804.70 and a face to face meeting all of which requests were rejected. On 15 October, Maurice May forwarded copies of a court order, ordering the re-instatement of Fabrama Pty Limited and Ormtrend Pty Limited and sought consideration of their claims. Ms Siddons indicated the latter would be considered but rejected the other requests. 190 On 24 February 1998 Messrs Maurice May wrote in respect of the claim connected with the three Bondi properties. After adverting to the delay which had occurred, the letter said that "our client requires that the Law Society make a determination pursuant to Section 79A(2)(b) of the Legal Profession Act, 1987 within 28 days. The letter enclosed a further statutory declaration in relation to those claims. This statutory declaration added nothing of significance. 191 On 25 March 1998 Ms Siddons responded, saying Mr Laurent's claims and those by or in the name of Fabrama Pty Limited, Ormtrend Pty Limited and Affiliated Equities have been placed on the Agenda for the next meeting of the Fidelity Fund Management Committee to be held on 26 March 1998. At that meeting a decision was deferred. 192 By letter of 13 May 1998, Ms Siddons wrote advising that apart from the claim for $322,804.70 which had been disallowed in July 1995, the claims of Mr Laurent, Fabrama Pty Limited, Ormtrend Pty Limited and Affiliated Equities had been "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. "I note that the claim by Mr Laurent which was considered by the Committee on 30 April 1998 was his claim for $317,500. As you are aware, Mr Laurent's other claim for $322,804.70 was disallowed by the Committee on 27 July 1995." 193 There followed the appeal dealt with by Adams J. Denial of Natural Justice 194 As has been indicated in the first section of these Reasons, there was placed before the Committee for its consideration in the course of making its decision the subject of the present appeal:- The reports of Ms Siddons of 11 and 13 December 2000 and of 18 January 2001. A report dated 23 March 1994 on a claim (no. 116/408) made on the Solicitor's Fidelity Fund by Burns Bay Investments Pty Limited in relation to the late Michael Kandy. Letter dated 21 March 1994 from Messrs Patrick Hargraves and Co., Solicitors of Maroubra Junction, regarding Saad and Ors. Lease to Desanges (premises:512-514 Elizabeth Street, Surrey Hills. One page extract from a report on the late Mr Kandy's activities prepared by Insolvency and Trustee Service Australia. 195 In the report of 11 December, Ms Siddons reminded the Committee of an earlier report 24 March 1998 she had provided. In her reports Ms Siddons is described as, variously the "Manager" or "Solicitor" of the Fidelity Fund. 196 The Plaintiffs claim that they were unaware, prior to the Committee's decision, of these documents. The Law Society does not dispute this and in any event I am satisfied that it is so. The plaintiff's claim that thereby they were denied natural justice. 197 Although my impression is that there is a deal of information in these documents (except that of 18 January) on which the Plaintiffs can found this complaint, it is only necessary to deal with the report of 13 December 2001. With that report Ms Siddons enclosed a copy of Mr Laurent's affidavit of 8 April 1999, albeit as she says "without annexures, which mostly duplicate material previously provided" and a letter from Ms Sayer also of 13 December 2000. In the body of the report, Ms Siddons refers to the cheque for $191,000 which forms part of the Ormtrend Claim, a statement by Mr Laurent to the effect that "It is most likely that the cheque I signed and gave to Mr Kandy was a blank cheque which Mr Kandy filled out himself", expresses her opinion that the reference to "blank cheque" presumably means blank as to amount as well and gives her opinion as to the handwriting on the cheque. She goes on:- "It seems unusual that a successful businessman such as Mr Laurent would sign blank cheques." 198 Ms Siddon's opinion "evidence" of what a "successful businessman" would do is clearly of a nature prejudicial to the Plaintiffs. However Ms Sayer's letter of 13 December 2000 is of more moment. It included the following:- "1. .… The method by which moneys were misappropriated by Kandy related to every claimant investigated by me with the exception of the claims of Laurent and his companies. I did not investigate the Laurent matter until 1997 and the circumstances in that matter are not like any other. 2. The position concerning the treatment by Kandy of the funds of Laurent and his companies was unique. Only in respect of Laurent and his companies were moneys received by Kandy treated as funds which formed part of the Kandy Family Trust. Only in the case of Laurent and his companies were current accounts opened in the ledgers of Lamtala and Resco. This did not occur in relation to any clients. 5. Moneys misappropriated by Kandy … also comprised some moneys which went into the bank accounts of Lamtala/Resco … which covered cheques drawn against those funds which also went to Macquarie Bank. In other words there was no pattern of the misappropriation of moneys of trust clients passing through the accounts of Resco/Lamtala. … 6. Laurent and his companies were buying and selling properties obviously as part of a profit making scheme or arrangement and any profits would be taxable. No taxes were ever paid on any profits because the profits became part of the Kandy Family Trust and were absorbed by losses in that entity – (Lamtala.) Laurent surely would be aware of the Income Tax implications in relation to these moneys and acquiesced in these moneys being offset in the accounts of Lamtala. 7. It is alleged by the claimant that the amount of $200,000 described as "mortgage advance" to Laurent should not be deducted as there is no mortgage. The trust account records show the disbursement of those moneys in relation to Laurent. I do not think the issue is whether or not there was a registered mortgage securing the moneys. Kandy's bookkeeper described any advance as a "mortgage loan". There does not appear to be any dispute by Laurent that the payments were made from the loan of $200,000 to or on his behalf. 10. … the claimant was aware that the cheques (the subject of the $774,219.88 Ormtrend claim) were drawn payable to Lamtala Pty Limited and were not payable to the Trust Account. He was obviously also aware that the moneys were not deposited to a Controlled Money Account. If the moneys were to be invested, I would expect that any businessman would ask for details of the security. 11. Reference is made to the entrustment of moneys by the claimants with Kandy. Moneys given by a solicitor are not an entrustment of trust moneys unless given to him in the course of his practice as a solicitor and if a solicitor/client relationship existed in respect of the transaction. 199 As I have pointed out previously, the statement in the second sentence of paragraph 2 is impossible to reconcile with the statement in Ms Sayer's report of 17 March that:- "As mentioned in my reports relating to other matters moneys that have been misappropriated by Kandy have been brought to account in the financial accounts of Lamtala Pty Limited as income. You will recall that amounts exceeding $M1 misappropriated from the funds of Belarus Tractor and Trading Co. Pty. Limited were treated as Management and Consultancy fees in the financial accounts of the Kandy Family Trust." 200 Clearly on the basis of this quoted statement, moneys received by Kandy from Belarus Tractor and Trading Co Pty Limited were treated as funds which formed part of the Kandy Family Trust. On a similar basis, the last sentence quoted in paragraph 5 would seem incorrect. 201 The first part of the last sentence in paragraph 6 is potentially a very damaging comment and while it may be thought to fairly arise, the legal profession has from time to time managed to avoid for its clients tax prima-facie payable. The second part of that sentence is even more prejudicial. It virtually concludes against the corporate Plaintiffs' any chance of success. It may be that is a conclusion at which any tribunal considering the matter may arrive but, at least on the material before me, it can only be done by way of inference after a review of a great deal of material. There is no direct evidence that Mr Laurent acquiesced in any offset, yet Ms Sayer states it as a matter of fact. 202 The statement in paragraph 7 that "Kandy's bookkeeper described any advance as a "mortgage loan", if true, certainly puts the records relating to the application of the $200,000 in a very different light from that which they would have if "mortgage loan" had its normal meaning. The last sentence in paragraph 7 again is one which may be justified as a conclusion to be inferred from other material but a claim for this money was made and, even before me, remains. The statement of fact in this last sentence, is prejudicial to one of Mr Laurent's claims and, in its bald form, arguably wrong. 203 I do not find it necessary to comment on the other paragraphs of Ms Sayer's letter although again, but without forming a final view, I incline to the view that they provide just ground for complaint. 204 When regard is had to the nature of the duties cast upon and powers given to, the Law Society Committee under the provisions of the Legal Profession Act to which I referred early in these reasons, there can be no doubt that there was an obligation to adhere to the rules of natural justice. In the context of this case I take the law to be as stated by McHugh J in Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 75 ALJR 889 at [140]- A basic principle of the common law rules of natural justice is that a person whose interests are likely to be affected by an exercise of power must be given an opportunity to deal with relevant matters adverse to his or her interests that the repository of the power proposes to take into account in deciding upon its exercise. Kioa v West (1985) 159 CLR 550 at 628 citing Kanda v Government of Malaya (1962) AC 322 at 337, Ridge v Baldwin (1964) AC 40 at 113-114; De Verteuil v Knaggs (1918) AC 557 at 560, 561. This does not mean that all material which comes before the decision maker must be disclosed but "in the ordinary case… an opportunity should be given to deal with adverse information that is credible, relevant and significant to the decision to be made". Kioa v West at 629. 205 The matters to which I have referred constituted adverse information. They were relevant and significant to the decision to be made. Particularly is this so when the statements to the effect that Mr Laurent and his companies had been treated, not only differently from the other clients who had been defrauded, but in a unique fashion are considered in light of Ms Sayer's earlier suggestion of a joint venture and acquiescence in the treatment of the moneys in Lamtala. Coming from Ms Sayer, the receiver of Mr Kandy's practice, and who has been for many years a person frequently appointed by the Law Society to such a role, the information was credible. The matters were also new. Accordingly the Plaintiffs, all of whose claims were liable to be affected, directly or indirectly, by the matters to which I have referred, should have been afforded an opportunity of dealing with them. Not having been afforded that opportunity, they were denied natural justice. 206 And there are 2 other matters that might be mentioned. While in the mass of material which was before the Committee there may be found at least arguable reasons for rejecting the Plaintiffs' claims, it is difficult to regard the letter of Ms Sayer of 13 June as other than a summary of reasons why rejection should occur. Even if nothing in the letter was new, in circumstances where one might conclude that the Committee would not or could not have appreciated much of the material – I doubt if they had a fraction of the time I have put into its consideration – there is something to be said for the view that the submission of Ms Sayer's letter was a breach of natural justice. However, it is unnecessary for me to reach a final conclusion on this. 207 Secondly, I do not regard the fact that in Ms Sayer's report of 17 March there can be found a statement inconsistent with the second sentence of paragraph 2 of her letter, establishes that what she said in that letter was not "new" or merely raised an issue for the Council to decide. On an issue of natural justice, one has to look at the practicalities. The Plaintiffs' Claims - Conclusions 208 In light of, inter alia, Mr Kandy's clear dishonesty in transactions affecting other clients, the doubts which the absence of records creates, the number of areas of poor recollection demonstrated by Mr Laurent and the odd nature of many of the transactions, it is obviously desirable, at least in the first instance, to consider the significance of such documents and events about which there is either no or relatively little doubt. 209 So far as the properties at 39/22 Penkivil Street, Bondi and 31/355 Old South Head Road, North Bondi are concerned, it is in my view clear that the net proceeds were left with Mr Kandy. Given the circumstances, there can be no doubt that those moneys were "received by or entrusted to the solicitor (Mr Kandy) in the course of his solicitor's practice". Given the time lapse, it is not possible to regard what happened in 1988 as throwing any doubt on that conclusion. 210 There are, of course, a number of possible explanations for the almost immediate payment of these amounts to, or for, Mr Bate. These include (i) the discharge of a debt owed by Mr Laurent to Mr Bate or the provision of funds by the former to the latter, for example for the purchase of something, (ii) a loan from Mr Laurent to Mr Bate with Mr Kandy acting on behalf of one or both in the implementation of the loan, or (iii) the appropriation of the moneys by Mr Kandy and the payment of them on his own behalf to Mr Bate. There may well be others. In light of Mr Laurent's evidence as to the mention in discussions with Mr Kandy of his funds being invested with private borrowers I would not be disposed to regard the second of these possibilities as unauthorised. However, it strikes me as inherently unlikely that Mr Laurent would have made any loan interest free and the absence of any documentation among Mr Kandy's records argues against both the second of the possibilities mentioned and, perhaps less strongly, against the first or some other legitimate transaction between Mr Laurent and Mr Kandy. It is probable I would have heard of such documentation if it existed. 211 In the normal situation one would, of course, expect proper documentation of the receipt and terms of receipt of moneys by a solicitor, as indeed occurred in relation to the 2 amounts of $80,000 referred to in or about paragraph 117 above. However, given Mr Kandy's clear tendency to appropriate to himself moneys of his clients, it would be surprising if he provided more documentation than was absolutely necessary. That tendency does not, of course, provide any explanation for why Mr Laurent may have not sought or insisted on documentation although the trust that Mr Laurent asserts he had in Mr Kandy does. 212 Thus I do find in such evidence as there is, some support for Mr Laurent's account that he left the proceeds of sale of the 39/22 Penkivil Street, Bondi and 31/355 Old South Head Road, North Bondi properties with Mr Kandy for the latter to look after or deal with on Mr Laurent's behalf. 213 A further factor to be borne in mind is that Mr Kandy clearly had, or perceived himself as having, a need for funds. That itself argues for the conclusion that, if the opportunity presented itself to acquire such funds without having to account for them until some time well down the track, Mr Kandy was likely to pursue it. I see in Mr Kandy's dishonesty generally, support for Mr Laurent's story that Mr Kandy promised him a good return if only Mr Laurent would leave the funds with him for years without interim payments meanwhile. That is not to adopt the terms Mr Laurent attributes to Mr Kandy. It is however the substance of what Mr Laurent attributes to Mr Kandy. 214 Of course one must recognise that in 1993, given the limited documentation there was, if Mr Laurent was to maintain a claim, he had to provide some explanation for not having received, or complained about the non-receipt of, interest or other return meanwhile. The possibility exists that this need was the inspiration for his evidence of the arrangement that Mr Kandy was to keep the money until Mr Laurent turned 60 and of the supplementary arrangement necessary to take account of the complication that the money was not then returned even though Mr Laurent turned 60 about a year before Mr Kandy died. 215 It strikes me that there is little scope for innocent error in the central theme of Mr Laurent's explanation of how Mr Kandy came to have the surplus proceeds of the first 2 Bondi properties sold. That central theme is either a concoction or true. Even putting aside any belief in Mr Laurent as a witness, it seems to me that the probabilities favour it being true. 216 With the exception of the last sentence of the immediately preceding paragraph, much of what I have just said applies to the surplus proceeds arising on the sale of the Wilga St property. However associated with that property is the complication of the evidence that the proceeds were used to discharge borrowings Mr Laurent had made and which, it may be inferred, he and Mr Kandy knew had been made. Thus as must have been known by Mr Laurent and Mr Kandy, there was no such surplus. If so, it is unlikely that, as Mr Laurent asserted, he told Mr Kandy that these moneys were to be added to the other (or earlier) funds for investment. 217 Of course the question arises whether the proceeds of the Wilga St property, brought up to $200,000, were used in paying off some indebtedness Mr Laurent's had to other of Mr Kandy's clients. Having regard to what Ms Sayer has said in her reports as to the extent and nature of Mr Kandy's fraud and fraudulent and fictitious record keeping, it does not seem to me that, without more, any weight whatsoever can be placed on the ledger card recording the disposition of the $200,000 to other clients. However, although the transactions so recorded were clearly raised as an answer to Mr Laurent's claim for the $200,000, Mr Laurent never sought to specifically address them or the apparent payments of interest recorded on the ledger card. Because of this, I believe I should accept that the transactions recorded on the ledger card occurred. Thus I do not accept that Mr Laurent suffered any loss arising from the entrustment of the proceeds of this property to Mr Kandy. It follows also that there was very probably no talk of investment of the proceeds of Wilga Street as Mr Laurent asserted. This conclusion must have an impact on Mr Laurent's credibility. 218 Other items which merit treatment at least partly discrete, are the 2 sums of $80,000 referred to in or about paragraph 117 above as having been paid into Mr Kandy's Trust Account in November December 1988 for investment on 24 hour call. There is the oddity to which I have referred of 2 different second pages in one of the documents but the matter not having been explored, I am not persuaded by this circumstance that the documents are of no weight. They provide clear support for the view that the $160,000 referred to in them was placed with Mr Kandy for investment with BAC. The records indicate that such investment occurred, at least until 12 December 1988, when BAC repaid the moneys as part of its cheque for $305,854.90. Thus, virtually independently of Mr Laurent, there is substantial evidence that this $160,000 was "received by, or entrusted to, the solicitor … in the course of the solicitor's practice". The same may be said in respect of the sum of $147, 160.51 dealt with at about the same time. 219 I turn to the moneys the subject of the claims of Ormtrend, Fabrama and Affiliated Equities. As between these companies the strong probability is that all of the moneys were Ormtrend's. It carried out the property dealing and the others seem to have done nothing productive of the moneys the subject of the claims. That is not to say that if the claims are otherwise to be allowed, they should not be allowed in the companies' names as made. It is not difficult to see evidence of ratification of any unauthorised acts of Mr Kandy or some other agent transferring money from Ormtrend to Fabrama and Affiliated Equities. No concerns about this aspect were raised during the hearing and no doubt if they exist they can be dealt with by appropriate documentation. 220 A question which is inspired by the fact of moneys originally earned by Ormtrend being in, or invested in, the names of Fabrama and Affiliated Equities is "why"? It is not, I think, a question possible to answer and in any event, it does not seem to me that it throws much if any light on the primary issue of whether the moneys wholly belonged to what I may call the Laurent group. The fact that Fabrama and Affiliated Equities were introduced suggest that Mr Laurent may have been involved with investment in their names but experience shows that some persons of Mr Kandy's bent, do frequently move monies around for no purpose that can be later determined by others. 221 The issue of whether the moneys wholly belonged to what I may call the Laurent group is of course the test to be found in s79A et seq. of the Legal Profession Act but in the circumstances of this case an answer to it will go a long way to answering the issues posed by the statutory provisions and which are seriously in contention. 222 Again it seems to me that analysis is assisted by oversimplifying the issues. One possibility is that the money was wholly owned by what I shall call the Laurent group. Another is that the money was wholly owned by the Kandy interests, in particular by Lamtala as trustee of the Kandy Family Trust. A third is that both groups had an interest in the money. The first of these is Mr Laurent's position and the foundation of the company claims. The second has the support of Mr Kandy's and Lamtala's records wherein Ormtrend was treated as a trustee for Lamtala and Ormtrend's income treated as income of the trust. 223 Again however, in light of what Ms Sayer has said in her reports as to the extent and nature of Mr Kandy's fraud and fraudulent and fictitious record keeping, it does not seem to me that any weight whatsoever can be placed on the records referred to in the immediately preceding paragraph. I wish there to be no misunderstanding about that. Mr Kandy has been shown to be so dishonest and his records so inaccurate that the issue of ownership should be approached as if the records of which he was the source, indicative of Lamtala being entitled to Ormtrend's profits did not exist. They are perfectly explicable on the basis of his misappropriation of those moneys. 224 I may add that, even if regard were had to those records, they provided no indication of any joint venture with Mr Laurent's interests. On its own, an assertion of absolute ownership provides no evidence of 50 % ownership. 225 I do not take the same view of Mr Kandy's records indicating the provision of funds by Resco at the time of Ormtrend's early purchases. The nature of the records and the transactions recorded are quite different from those the subject of the later records. Firstly they would seem to be contemporaneous and in significant detail conform with known events. Mr Laurent must have known that the funds were being provided and it is a reasonable inference that he would have had known their source (though he might well not have known it was Resco as distinct from Mr Kandy). Mr Laurent has provided no explanation of this aspect of the dealings and his failure to address the topic is, I think surprising. After all he, or his legal advisers, had access to Ms Sayer's report since the proceedings before Adams J. 226 To some extent the provision by Resco of funds argues in favour of the conclusion that it, or Mr Kandy, may have had some interest in what was occurring. So does the recording of the names of properties apparently associated with the transactions. In some circumstances a transfer of a debit balance as occurred to Mr Kandy would suggest that it was on his behalf or some entity he represented, rather than on Resco's own behalf that the funds were provided. Because of Mr Kandy's dishonesty, and he seemed to move funds without any obvious purpose I would hesitate to draw that inference here. However, there seems to be no other evidence which would suggest Resco itself had any interest in Ormtrend or the property-trading business. 227 If Mr Laurent was but an employee and Ormtrend wholly owned beneficially by Kandy interests, then one could understand those interests coming into possession of all of the proceeds. But the extent of Mr Laurent's involvement argues very strongly against that conclusion, even if one made the assumption – and that is all it could be – that for some reason Mr Kandy wished to carry out property dealing but not have his name connected with it. If that was his wish he certainly went to extraordinary lengths to conceal his involvement. I do not suggest one matter on its own would be conclusive but Mr Laurent and his mother were clearly intended to be the shareholders and directors of Ormtrend and Affiliated Equity and Fabrama. I am satisfied that they carried on the business of that latter company for years before 1988. There is not the slightest suggestion that Mr Laurent was not the person who did the physical work and made the decisions involved in the property dealings. He was not challenged on his suggestion that it was he or Ormtrend who had the accommodation with the ANZ Bank and Esanda and there was no evidence to the contrary. And although Ms Sayer said in her letter of 13 December 2000 that she did not investigate the Laurent matter until 1997, her reports of 17 November 1993, 26 July and 6 December 1995 show that she was looking at Mr Laurent's claims much earlier. One would have expected that if it was Mr Kandy who had, or had guaranteed, the accommodation with those organisations, that information was available in 1993. 228 Unless as I said, one made the assumption that Mr Kandy was doing the dealing on the quiet, it is difficult to think that all the settlement letters addressed to Ormtrend at Mr Laurent's address were nothing but a solemn farce. 229 On, the evidence I do not think that there can be any reasonable doubt that Mr Laurent or his companies had a substantial interest in the property dealings. If it is needed, this conclusion provides another reason for rejecting the treatment of the profits in the Lamtala/Kandy Family Trust accounts. 230 Whether there was some sort of joint venture is more doubtful. The apparent provision of some early funds by Resco, and their recording argues in favour of the conclusion that it, or Mr Kandy, may have had some interest in what was occurring. So does the fact that the funds would not seem to have been a normal loan. The absence of repayment may argue in the same direction but, given the conclusion at which I have arrived that the profits did not all belong the Kandy group, a fact Mr Kandy must have known, the question arises when he decided to misappropriate some or all of them. Both the actual and potential availability of those funds must have been very attractive to Mr Kandy. 231 The fact that Mr Kandy was left in control of the moneys argues also for him having some interest in them although once the conclusion be reached that Mr Laurent had a substantial interest in them, that fact becomes of much less weight. Clearly he must have had a great deal of trust in Mr Kandy. 232 I have so far sought to approach the matter without reliance on anything Mr Laurent has said which is not substantially corroborated. The reason lies in the fact that there remain a significant number of features of Mr Laurent's claim which are unusual and unexplained and he was a very unsatisfactory witness. Included in the matters unexplained are the apparent payments of interest to those who seem to have received the proceeds of the Wilga Street property, the apparent provision of funds by Resco, and the apparent absence of any other funds to pay for properties additional to those from the ANZ Bank and Esanda. As I have said, I do not believe that those institutions would have provided the whole purchase money at least in the case of the early properties. 233 It may be that there is some explanation. There must have been something to induce those institutions to advance millions of dollars. 234 At times Mr Laurent was evasive to an extent I do not feel able to attribute to his mental condition or what I think is understandable antipathy to the Law Society. An example is provided in my quotation from his evidence under the heading "Absence of Records". His absence of records is unusual and, even if it be correct that this arose because in some spiteful action Ms Lamont removed them all, the timing of that provides no explanation why they were not produced in 1993 when they were requested by the Law Society. His placing of money with Mr Kandy without obtaining proper receipts – and that is the clear inference which arises quite independently of Mr Laurent's own absence of records – is unusual and although it may be not uncommon among some members of the community, they can hardly complain when others are sceptical. Nor do I regard such actions as sufficiently explained by the trust Mr Laurent says he had. No matter how trusting one may be, the failure of the person trusted to accord with normal practice is calculated to raise at least some queries. 235 At the end of the day, the only evidence that Mr Kandy had any interest in the venture which I regard of substance is Resco's provision of funds and the extent to which Mr Laurent left them with Mr Kandy without any effective control, or it would seem record. On the other side is the fact that the property dealing was done by Laurent and Ormtrend, which he and his mother wholly owned. While his record keeping can certainly be much criticised, if one puts aside the late records I regard as of no weight, Mr Kandy's records of any interest in the venture are much less. Despite my grave reservations concerning Mr Laurent, the conclusion at which I arrive is that Mr Kandy had no interest in the property trading activities. 236 In that situation, once one has regard to the conveyancing transactions which led to the Ormtrend's profits and other funds coming into Mr Kandy's possession, and to his settlement letters, prima facie the funds "were received by or entrusted to the solicitor in the course of the solicitor's practice". And apart from matters with which I have dealt, and I do not regard them as sufficient, there is no persuasive evidence that the character of Mr Kandy's possession of the funds ever changed. 237 Thus in the case of the moneys the subject of the claims by Ormtrend, Fabrama and Affiliated Equities, and subject to one matter, I regard the ingredients of a successful claim against the fund, listed by me in paragraph 20 above, as made out. The reservation in the last sentence is that the issue of whether there was the relevant act or omission by Mr Kandy was dishonest is not for me. I accordingly make no finding about it. 238 Before I leave the topic of the company claims I should refer to a 25 page commentary on the Evidence made on behalf of the Law Society. In that document it was submitted (paragraph14) that schedule A to Mr May's affidavit casts doubt on Mr Laurent's portrayal of Ormtrend's activities. I do not accept this submission. It may be accepted that only in relation to a minority of sales were monies paid to the ANZ Bank or Esanda but without more evidence than is before me, I am not prepared to infer anything from that. For similar reasons, I do not see that the fact that all of the proceeds of some sales were paid to those organisations leads to any inference adverse to Mr Laurent. The proceeds of some of the sales seem, as Mr Laurent asserted, to have been used to fund other acquisitions and before the inferences suggested could be drawn, one would need to know more as to the arrangements with, and other security held at any particular time by, ANZ or Esanda. 239 Nor do I see in Ormtrend's failure to make claims for the moneys which in the schedule were recorded as paid or payable to Ormtrend that any inference to Mr Laurent should be drawn. On the basis of the claim as made, viz. that the moneys were in fact retained by Mr Kandy and supposed to be invested by him, such further claims would be duplications. It is also apparent that at the time the claims were first made there was significant disorganisation and some time pressures in Mr Laurent's camp. 240 I return to the claim for the proceeds of the first 2 Bondi properties. There is no persuasive evidence that after Mr Kandy's receipt of those moneys the character of his possession of them, or his authority to deal with them, changed. There is no evidence or indeed suggestion going beyond what might have occurred, that they were held other than on Mr Laurent's behalf. Again, despite my reservations concerning his credibility, I think the probabilities are that they were left with Mr Kandy for investment on mortgage or deposit. 241 Ms Sayer's stated that no moneys remain due by Mr Bate. It must follow from this that if the payments to Bate were by way of loan, they had been repaid to Mr Kandy. Had they remained in the trust account or lent to another borrower, no doubt Ms Sayer would have said so. Had they been relent as a normal transaction, there is no obvious reason why it would not have been documented. The same may be said of any repayment to Mr Laurent. Ms Sayer makes no such suggestion and in these circumstances I think the proper conclusion is that no repayment has occurred. Accordingly, subject to any later credits there may be, I regard Mr Laurent as having satisfied the requirements of ss79A and 80 (other than dishonesty, which I do not deal with) in respect of these moneys. 242 I am not satisfied that Mr Laurent is entitled to succeed in his claim for $322,824.95. There is little evidence as to the circumstances of the payments the subject of this claim. What is known suggests they were odd. Some of the amounts are also peculiar. 243 I turn to the topic of the terms on which the moneys were left with Mr Kandy. While market interest rates at the time were such as to think that 15% was then attainable – Mr Laurent seems to have paid more to the 4 lenders who were repaid with the $200,000 – I am not persuaded that Mr Kandy promised such a return, as it were, no matter what. Mr Laurent's references to "hope" argue in the same direction. I do not believe Mr Laurent who, I have no doubt, knew about the potential for rates to change, believed then that he was guaranteed 15%. In my view the terms on which the funds were left with Mr Kandy were that they were to be advanced on mortgage, or on fixed deposit at the best prevailing rates from time to time. One would clearly imply a qualification "so far as practicable" but otherwise, Mr Laurent was entitled to the best going rates. 244 Those findings involve the rejection of much of Mr Laurent's detailed evidence as to instructions although acceptance of the broad tenor that the funds were to be invested in particular ways. On this topic, it may well be that Mr Laurent, perhaps due to his illness has convinced himself. Be that as it may, I make it clear that this is some of the evidence that contributed to my reservations concerning Mr Laurent's credibility. 245 I am also disposed to accept that the initial arrangement was that the money would be invested until (subject to practicalities) Mr Laurent turned 40. The tenor of later conversations was that it would continue to be invested until demanded, implicitly on reasonable notice. 246 There is also Mr Laurent's evidence that Mr Kandy promised that the earnings would be tax free. I am inclined to accept this evidence. I appreciate this may seem odd in view of my rejection of a deal of what Mr Laurent has said but so firm was Mr Laurent on the topic and, so great must have been the temptation to Mr Kandy to have the funds that I am persuaded this was the original arrangement. I would not infer this applied to the company monies. 247 Consistently with what I said early in these Reasons the Law Society should have done, I should indicate at least some of the acts or omissions which led to the failure "to account, pay, or deliver" as required by the legislative provisions. In the case of the claim for the proceeds of the first 2 Bondi properties, it included the failure to invest the monies at interest with private borrowers or on deposit or to do the same when Mr Bate repaid it, as he must have done, actually or by some set off, to achieve an indebtedness to Mr Kandy of nil. One would infer that the acts or omissions included Mr Kandy appropriating the money to himself. The instructions I have found would not entitle Mr Kandy to borrow the money for himself or his companies – see Law Society of New South Wales v Harvey (1976) 2 NSWLR 154 248 In the case of the company moneys, the acts or omissions include the payment or other appropriation of the moneys to or for the benefit of Lamtala and failure to invest it, and to continue to invest it, in accordance with instructions. 249 I have referred in these Reasons to evidence largely from Ms Sayer to the effect that one or more of the Plaintiffs should give credit for payments received after the transactions which led to the claims occurred. I am not conscious of any dispute concerning those payments but because I do not intend to make final orders at the time of delivery of these Reasons, I shall postpone expressing any conclusion as to these amounts. Res Judicata 250 In an early part of these Reasons, circa [37] I expressed the view that the terms of the Legal Profession Act did not make a finding of dishonesty a prerequisite to an appeal to this Court. However there is a factor present in this case which may take it out of the normal rule. One of the bases upon which Adams J was asked to act was that there had been no prior finding or honesty or dishonesty. It was submitted that there was therefore no valid determination. Adams J records that counsel for the Law Society conceded that such a finding was required and "to that extent the appeal was appropriately brought". 251 Before Adams J, counsel for the Plaintiffs sought also to agitate the merits of the issues "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". Adams J refused this on the ground 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". 252 The question arises whether, because of either of these matters, the issue of the necessity of a finding of dishonesty is foreclosed between the Plaintiffs and the Law Society upon the ground of Res Judicata or issue estoppel. 253 The point was not argued and accordingly I do not believe I should decide it without giving the parties an opportunity of putting such submissions as they wish before me. In that regard the references in Spencer-Bower, Turner and Handley, Res Judicata, 3rd ed., para 182-4 may repay study. 254 That issue does not however necessarily prevent the making of any order. Adams J made one setting aside the earlier decisions and remitting the Plaintiffs' claims for determination in accordance with the Act. Bell J in Barber v Law Society of New South Wales (unreported, 12 December 2000) held that orders could be made pursuant to the Court's general power of judicial review. 255 I have held that the Law Society erred in failing to give reasons for its decision (and possibly in its determination or expression of it) and denied the Plaintiffs natural justice. Subject to anything that may be put to me in response to the invitation contained in the immediately preceding paragraph, it seems to me that the proper orders are: 1. Order that the determinations of the Defendant made on 25 January 2001 in respect of the Plaintiffs' claims118/480 and 67, 110,111, and 112/408 upon the Fidelity Fund under the Legal Profession Act, be set aside. 2. Order that the said claims be remitted to the Defendant to be investigated and determined in accordance with the Legal Profession Act and in accordance with these Reasons. 256 However, I will afford the parties an opportunity of making any further submissions as to the form or extent of relief when they have had an opportunity of considering what I have said. The matter should stand over for a period so this can occur. Last Modified: 08/16/2002 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.