Council of the Law Society of New South Wales v XX

Supreme Court of NSW|2019-06-14|Before: Lonergan J

Judgment

On Tuesday, 11 June 2019 as duty judge, I was referred an urgent application by the Law Society of New South Wales ("the Law Society") returnable immediately regarding a solicitor XX ("the solicitor"). I made various orders that day and on 14 June 2019. These are my reasons for making those orders.
The solicitor had been suspended in December 2018 however the Law Society had received recent information that the solicitor had been purporting to engage in practice as a solicitor and/or to hold himself out as a solicitor and had been receiving money which ought properly be classified as trust monies from purported clients.
Leave was sought to file in Court a summons commencing proceedings against the solicitor seeking final relief as well as a notice of motion seeking urgent orders restraining the solicitor from acting or receiving any money or from operating or opening a bank account or from representing or doing anything that states or implies that he is entitled to practice as a legal practitioner or to engage in legal practice. There were also some mechanical and supplementary orders included in the motion.
An additional issue regarding a notice to produce was also raised. The notice to produce sought any mobile telephone, tablet, computer, personal computer or other device capable of connecting to the Internet or www.which was used by the solicitor at any time during the period 6 June 2019 until the time the Notice is served. I was asked to make orders to facilitate production in response to the notice.

The evidence tendered

Tendered in support of the motion was an affidavit of Nadya Haddad, Acting Director, Professional Standards of the Law Society sworn 10 June 2019 and an affidavit of Ms Anusha Kailasanathan, a solicitor and investigator appointed pursuant to s 282 of the Legal Profession Uniform Law. Both affidavits had a substantial amount of material exhibited.
Ms Haddad's affidavit set out the solicitor's practice record, information about past contraventions of the Uniform law, the appointment of a receiver and the initial suspension. There was further information about more recent contraventions and contact made by the solicitor with former clients extending into April and May 2019.
The focus of Ms Kailasanathan's affidavit was the ongoing investigation into the solicitor's conduct and information provided by witnesses confirming that the solicitor was, despite his suspension, purporting to act as a solicitor from "XX"

Factual background

I was greatly assisted by a chronology and submissions from counsel for the Law Society. The submissions helpfully outlined the background and issues.
The solicitor was a principal of XX Pty Ltd, an incorporated law practice trading as XX. In December 2018 a trust investigation revealed evidence of the misappropriation of trust monies. The solicitor made admissions at least to the effect that the money was not in the relevant trust accounts.
An interim suspension order was made and a receiver appointed. Since then, investigations indicate that claims have be made in relation to missing money in an amount in excess of $3.5 million. There has been a police complaint and criminal charges and the solicitor is presently on bail, a condition of which is that he is prohibited from contacting certain former clients.
On 30 January 2019, the solicitor opened a personal bank account with Bendigo and Adelaide Bank and a second personal account with the same bank on 16 March 2019.
On 9 April 2019, the administrator gave material to the Law Society that suggested the solicitor was in contact with former clients of XX. Comment was sought from the solicitor, but on 23 April 2019, the solicitor's father advised the Law Society that the solicitor had been admitted to Gordon Private Hospital for treatment.
Material provided to the Law Society in mid-May 2019 suggested that the solicitor remained in contact with at least one former client of XX despite his hospitalisation. Material was provided that suggested that the solicitor had requested and received funds from purported clients after 20 January 2019 that had been deposited into the Bendigo and Adelaide bank accounts.
Without needing to at this interlocutory stage go into details, there is evidence that the solicitor has been overhead contacting clients saying that he is "going out on his own", not advising them of his suspension, requesting funds and banking them and not operating a trust account.
The Law Society submits that these concerns, coupled with the diagnosed mental illness and associated incapacity, requiring hospital inpatient treatment, comprises an obvious need for protective orders.

Relevant power and principles

The power to make the orders is provided in s 66(4) of the Supreme Court Act 1970 (NSW) in aid of the jurisdiction conferred by s 447 of the Uniform Law; Australian Securities and Investments Commission v Krecichwost [2007] NSWSC 948 per McDougall J; In the matter of Courtenay House Capital Trading Group Pty Limited (in liquidation) [2018] NSWSC 1918 at [11]-[12] per Black J.
Section 447 of the Uniform Law provides: "447 Injunctions to restrain contraventions of Law or Uniform Rules (1) This section applies if a person has contravened, is contravening, or is likely to contravene this Law or the Uniform Rules. (2) The designated local regulatory authority may apply to the Supreme Court for an injunction. (3) On application under subsection (2), the Supreme Court may grant an injunction restraining the person from contravening this Law or the Uniform Rules (including by requiring the person to do something). (4) The Supreme Court may grant the injunction - (a) whether or not it appears to the Court that the person intends to contravene this Law or the Uniform Rules, contravene this Law or the Uniform Rules again or continue to contravene this Law or the Uniform Rules; and (b) whether or not the person has previously contravened this Law or the Uniform Rules; and (c) whether or not there is a likelihood of substantial damage to anyone else if the person contravenes this Law or the Uniform Rules; and (d) whether or not proceedings for a contravention of this Law or the Uniform Rules have begun or are about to begin. (5) The Supreme Court may grant an interim injunction restraining the person from contravening this Law or the Uniform Rules (including requiring the person to do something) before deciding an application for an injunction under this section."
Section 66(4) provides: "66 Injunction … (4) The Court may, at any stage of proceedings, on terms, grant an interlocutory injunction in any case in which it appears to the Court to be just or convenient so to do."

Decision

I accept the submission that it is clear that the general prohibitions in the Uniform Law and the suspension orders made in December 2018 are not preventing the solicitor from engaging or purporting to engage in legal work.
I accept that his present conduct is putting members of the public at immediate risk and the standing and repute of the profession as a whole is put at risk if action cannot be taken to stop the solicitor's conduct.
In particular, on the issue of protection of the public, I take into account the Law Society's submission that because of the solicitor's suspension, any money taken by him in the form of trust money and or transit money is unlikely to be protected by the fidelity cover provided in Pt 4.5 of the Uniform Law and so if spent or disbursed, those people who provided the money will suffer loss.
These concerns clearly support the need for interim relief and the need for expedition. Substituted service is also required as I accept that attempts to serve process on the solicitor at Gordon Private Hospital were not able to be facilitated.
I am satisfied that the suite of orders proposed address these concerns and are directed towards protection of the public until the primary proceedings can be heard.

The notice to produce

A query was raised by the amicus as to whether the notice to produce (referred to in [4] of this judgment) needed urgent compliance. I accept the submissions of the Law Society that there is a real risk that the solicitor may delete communications with "clients" or delete material the Law Society should be able to access. I accept that even if deleted on the device, electronic material can be recovered, provided it is accessed in time. For those reasons, I agreed that there was an urgency, so I ordered that the notice to produce be returnable before me on Friday, 14 June 2019.
The orders made on 11 June 2019 are Annexure A to this judgment.

14 June 2019 - Developments and Further Orders

Mr Davidson of counsel appeared for the solicitor, instructed by HWL Ebsworth. An affidavit of Mr Heinrich solicitor was tendered enclosing a report of Dr Jebejian updating the solicitor's mental health positon. Dr Jebejian's report dated 13 June 2019 confirmed the diagnosis previously noted; stated that the solicitor was not ready for discharge and that his capacity to "give meaningful instructions" fluctuates.
Further facilitative orders were agreed between the parties and I made the orders set out in Annexure B to this judgment.
The primary proceedings on the summons are now listed for hearing on 20 August 2019.

Amendments 19 December 2019 - Amendments to the defendant's name to be referred to by the pseudonym. 28 January 2020 - 28 January 2020 - Amendments to the defendant's name to be referred to by the pseudonym. 25 March 2021 - Paragraph 6 - changes made to reflect orders made in 2021. Paragraph 27 - changes made to reflect orders made in 2021. 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. Decision last updated: 25 March 2021

At a glance

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