Davison v Council of the New South Wales Bar Association

Davison v Council of the New South Wales Bar Association - [2007] NSWCA 227 - NSWCA 2007 case summary — Zoe

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The removal of the appellant's name from the roll of legal practitioners and the grounds of appeal 3 By this appeal the appellant challenges an order made by the New South Wales Administrative Decisions Tribunal that his name be removed from the roll of legal practitioners: see Council of the New South Wales Bar Association v Davison [2005] NSWADT 252. 4 The appellant was born in 1943. In 1965 he was admitted to practise as a solicitor. In 1980 he was called to the Bar. In 1994 he was appointed Senior Counsel for the State of New South Wales. He specialised in local government law and there were affidavits in evidence from persons who testified to the high quality of his work. 5 As from the end of the 1990 financial year, the appellant experienced difficulties in paying the income tax owed by him. These difficulties continued and increased and were not resolved at the time of the hearing before the Tribunal (in 2005). During the period 1990 to 2005 the appellant made at least two financial investments that failed. He was declared bankrupt on three occasions. In addition, he experienced difficulties in his marriage and one of his children committed suicide. These matters caused him great distress. On 7 November 2001, his practising certificate was cancelled. He was substantially in arrears in regard to his income tax liabilities as well as the contributions he was required to pay to his trustees in bankruptcy. 6 The appellant's taxable income in the financial years from 1989 to 1999 was not less than $3,500,000. The appellant's income tax liability, disregarding penalties and interest (referred to as his "primary tax liability"), for the financial years from 1989 to 1999 was not less than $1,500,000. Of the sum of $1,500,000, the appellant did not pay more than $420,000. The Tribunal found that as at June 2004, the total amount of unpaid tax, including interest and penalties, was in the vicinity of $1,324,570. 7 The appellant contended that his failure to fulfil his tax liabilities was significantly attributable to his failed business investments and his domestic tribulations. The respondent, on the other hand, contended that during the period 1989 to 2005 (some 16 years) the appellant earned sufficient monies to pay his income tax in full and live a reasonably comfortable life; he chose, however, to spend his income on an extravagant lifestyle and to give monies to various family members. 8 The respondent took steps to have the appellant removed from the roll of legal practitioners. Before the Tribunal, the respondent relied on four grounds in contending that the appellant was guilty of professional misconduct and in seeking the relief in question. The grounds were supported by many particulars. Not all the particulars were established. The grounds were established to the extent set out below. 9 Ground 1 (which the Tribunal held was made out) was that: "The barrister has been guilty of long standing non-compliance with, and reckless disregard of, his legal and civic obligations to:- (a) pay tax by reference to his returns in a timely fashion; and (b) pay penalties and interest imposed as a result of late payment of tax." 10 Ground 2 was that: "The barrister has failed to comply with his legal and civic obligation to: (a) pay such of the amounts claimed by statements of claim filed on behalf of the Deputy Commissioner of Taxation as he did not reasonably dispute, prior to the entry of judgment; (b) comply with judgments of courts requiring payment to the Deputy Commissioner of Taxation; (c) comply with notices issued pursuant to section 264 of the Income Tax Assessment Act; (d) make timely contributions to his trustee in bankruptcy in accordance with section 139P of the Bankruptcy Act 1966." 11 The Tribunal held (at [34]) that ground 2(a) "so far as any legal obligation is concerned" was not made out. The Tribunal found that grounds 2(b), (c) and (d) were made out. 12 Ground 3 (which the Tribunal held was made out) was that: "The barrister arranged his affairs in such a manner that his income as a barrister, and assets purchased therefrom, were placed beyond the reach of the Deputy Commissioner of Taxation and his trustees in bankruptcy from time to time, and that the income and assets would therefore not be available to be used to discharge his legal obligation to pay income tax and pay penalties and interest imposed as a result of late payment of tax." 13 Ground 4 (which the Tribunal held was made out) was that: "Since a date not later than 1989 the barrister has used monies which would otherwise have been available to discharge his indebtedness to the Deputy Commissioner of Taxation to fund a lifestyle for himself and his family, in excess of that which he could have afforded, had he complied with his legal and civic obligation to pay tax." 14 The appellant conceded that he was guilty of professional misconduct. Thus, the fundamental issue before the Tribunal was whether he should be removed from the roll. 15 The Tribunal found that the appellant, during the period from 1989 to 2005, failed to pay his income tax liabilities despite the fact that his income was at a level at which he reasonably could have afforded to discharge those liabilities. Furthermore, the appellant failed over several years to make appropriate contributions to his trustees in bankruptcy. 16 The Tribunal held that the circumstances under which these failures occurred reflected adversely on the appellant's integrity and character. In addition, the Tribunal found that the appellant's sworn evidence before it "fell significantly short of consistent truthfulness" (at [150]). These matters, essentially, persuaded the Tribunal to order that the appellant's name be removed from the roll of practitioners. 17 Mr Clay, who, together with Ms Berglund, appeared for the appellant, submitted that the appeal was brought under s 171F of the Legal Profession Act 1987 (NSW) (the "1987 Act"). Ms Adamson SC, who, together with Ms Pritchard, appeared for the respondent, did not disagree. By s 171F of that Act, s 75A of the Supreme Court Act 1970 (NSW) applies to the appeal. It was common ground between the parties that, as the appeal is governed by s 75A of the Supreme Court Act, it is by way of rehearing and the appellant is not confined to questions of law. (As to the application of s 75A, see The Council of the New South Wales Bar Association v Sahade [2007] NSWCA 145). 18 The appellant relies on three grounds in appealing against the Tribunal's order, namely:

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1996 to 1999 31 According to the accountant's report, the appellant's taxable income for the financial year 1996 was $318,300. His tax liabilities for that year were assessed at $177,089 of which he paid only $36,866. His taxable income in the year ended 30 June 1997 was $476,193. He was assessed for tax in the amount of $214,412 but made no payment whatever. According to the accountant's report, the appellant's income for the financial year ended 30 June 1998 was $450,696. He was assessed for tax at $243,764 in respect of this year. He made no payments in respect of this liability. According to the accountant's report, in the financial year ended 30 June 1999 the appellant's taxable income was $499,709 of which he appears to have been assessed for tax at $115,899. He made no payments in respect of this liability. 32 From a date not later than April 1996, the appellant used a company called "Comserv (No 1482) Pty Limited" to operate as a service company for his practice. This company paid the appellant's expenses relating to his practice and charged the appellant for the services rendered by it. From the time that Comserv entered the picture, the appellant did not deposit the cheques he received from his practice into his personal bank account but banked those cheques into the Comserv bank account, his wife's bank account or his brother's bank account. The appellant was the only source of income for Comserv. He took these steps notwithstanding that he had insufficient cash or other assets to meet his tax obligations. 33 In April 1996, the Deputy Commissioner of Taxation commenced proceedings against the appellant to recover taxation due by him. On 21 March 1997, the appellant admitted in a verified defence filed in those proceedings that, at that date, he owed the Deputy Commissioner $427,367. 34 On 10 January 1997, the appellant's son committed suicide. 35 On 10 March 1999, judgment was entered against the appellant in favour of the Deputy Commissioner of Taxation in the amount of $517,770. On 12 March 1999, the Deputy Commissioner of Taxation called upon the appellant to attend a specified place on 9 April 1999 to produce specified material. The appellant did not comply with these notices. He did not furnish the information and he did not attend at the specified place as required. On 18 August 1999, the appellant acknowledged that he had, in consequence, committed offences under ss 8C(1)(a) and 8C(1)(f) of the Taxation Administration Act 1953 (Cth) and was convicted of offences under those sections. 36 On 7 April 1999, the appellant filed a petition for bankruptcy in the Federal Court. The appellant had paid no portion of his admitted (as at 21 March 1997) debt of $427,367 to the Commissioner of Taxation at the time he filed his bankruptcy petition. From the time of the filing of the petition until 9 June 1999, when the appellant was declared bankrupt for a second time, the appellant and Mrs Davison incurred debts of approximately $65,000 on their credit card. 37 The petition showed that he had only one unsecured creditor, namely, the Australian Taxation Office, in an amount of $1,525,221. His only assets were personal effects amounting to $5,000. According to the petition, his income over the last 12 months had been $637,566 and income expected in the next 12 months was $637,750. 38 Between the appellant's discharge from his first bankruptcy on 9 May 1995 and the filing of the debtor's petition leading to his second bankruptcy on 7 April 1999, his gross income was $2,240,200, his taxable income was $1,740,431, his primary tax liability was $796,847.71 and the total of his tax payments was $75,777.12. As the Tribunal pointed out, his tax payments amounted to less than 10% of his primary tax liability. 39 Between 1996 and April 1998, the appellant made payments to family members including weekly payments of $1,500 or $2,000 as living expenses to his brother. This enabled his brother to work on a joint venture in which the two of them held equal shares. This was a speculative enterprise that failed, causing the appellant to incur losses.

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SDS and the appellant's tax liabilities from 2002 43 In November 2001, the appellant's practising certificate was cancelled. 44 Shortly thereafter, in November or December 2001, the appellant caused a company known as Sydney Development Services Pty Ltd ("SDS") to be registered. SDS engaged the appellant as a consultant on matters of environmental law at an annual salary of $50,000. It did not, however, issue a group certificate to him with respect to his salary. SDS did not employ anyone else. The persons who engaged SDS were "in the main" clients who briefed the appellant when he had a practising certificate. 45 When asked in cross-examination whether he was aware that an annual income of $50,000 was insufficient to render him liable to make contributions to his bankruptcy, the appellant replied that he thought that the threshold was fixed at only $32,000. 46 This exchange referred to the fact that the level of the appellant's income from SDS was fixed at a figure the effect of which, by reason of the "base income threshold" provisions of the Bankruptcy Act 1966 (Cth) and the Bankruptcy Regulations 1996 (Cth), was that the appellant was not obliged to make contributions to his trustee in bankruptcy. As was pointed out by Ms Adamson, at all material times the appellant's gross income of $50,000 from SDS produced a net income that was less than the base income threshold amount that applied to him. 47 Mrs Davison was, from the outset, the sole director and shareholder of SDS. The Tribunal observed that in cross-examination the appellant had initially stated that he himself played no role in SDS's financial management or in the preparation of its tax returns. Nevertheless, the appellant testified that his wife had no knowledge of his financial affairs and did not pay much attention to how the family's finances were organised. The Tribunal found that the financial management of SDS was effectively in the appellant's hands and this finding was not challenged on appeal. 48 Although SDS paid the appellant $50,000 only, his total income for the year ended 30 June 2002 was $301,712. Of the latter sum, $251,712 was from work the appellant had performed prior to the cancellation of his certificate. This income straddled the financial years 2001 and 2002. Thereafter, the income the appellant declared to his trustee was the $50,000 he received from SDS. That did not take into account the fact that SDS was receiving a much larger income (earned entirely by the appellant). 49 The appellant did not file tax returns for the 2003 or 2004 financial years. 50 SDS's company tax return for 2002 recorded a total income of $63,275. This included a figure of $50,000 for total salary and wage expenses. Obviously, this was the payment of $50,000 made to the appellant. 51 After October 2002, a company called Walker Corporation paid SDS a monthly retainer of $10,000 in respect of services provided by the appellant. The appellant had also proposed to Walker Corporation that it pay a "success fee" to SDS if it succeeded in certain litigation in relation to which the appellant, on behalf of SDS, was providing consultancy services. 52 SDS's tax return for 2003 recorded a total income of $228,400 and total expenses of the same amount. It also contained figures of $50,000 for total salary and wage expenses and $211,051 for "payments to associated persons". Of the sum of $228,400 (earned by the appellant) the appellant received only $50,000. 53 When the trustee discovered the arrangement between SDS and the appellant, he caused notices to be issued to SDS under s 139ZL of the Bankruptcy Act requiring payments to be made by SDS as the appellant's employer, towards the appellant's bankruptcy. This prompted the making of contributions totalling $7,100. 54 The respondent contended that the appellant's conduct in not revealing to his trustee the extent of his financial arrangements with SDS and the income that SDS was receiving from services provided by the appellant was, at best, misleading. The respondent did not rely on this material to prove professional misconduct. The respondent drew attention to it merely as a reason why the "sincerity of his apology" should not be accepted and why the appellant's name should be removed from the roll. As Ms Adamson put the argument, the appellant's defence was essentially that he could not make substantial contributions because his income had been massively affected by the adverse publicity relating to his non-payment of tax. The facts, however, reveal that he was still able to earn a substantial income but he had deflected this income into the coffers of SDS, a fact that had not been revealed to his trustee. 55 Between June and November 2003 the trustee made several unsuccessful requests to the appellant (directly or through his accountant) for completion of an income questionnaire in order that the level of any further contributions might be assessed. The trustee gave the appellant ten days' notice of a date and time in November 2003 at which the appellant was to attend the trustee's office to discuss the administration of the bankruptcy. The appellant was then engaged in consultancy work for SDS. Nothing came of the trustee's requests. 56 On 20 February 2004, the Deputy Commissioner for Taxation commenced proceedings against the appellant in respect of tax liabilities outstanding for the period July 2000 to June 2003. On 6 August 2004, judgment was entered against the appellant in favour of the Deputy Commissioner of Taxation in an amount of some $612,000. This debt has not been satisfied. 57 On 23 March 2005, a third bankruptcy order was made against the appellant based on an act of bankruptcy occurring on 6 December 2004.

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Dealings with the appellant's trustee in bankruptcy 58 In January 2001, the appellant was in arrears with contributions to his trustee in respect of his second bankruptcy to the extent of approximately $36,000. He, nonetheless, caused approximately $11,000 to be paid to Comserv in order that it could pay the arrears of lease payments owing in respect of the Mercedes Benz driven by his wife. As at 30 August 2001, the appellant was up to date with his contributions in regard to his second bankruptcy. These contributions exceeded $350,000. 59 As at 19 August 2002, the amount the appellant owed to his trustee was $36,438. By 28 June 2005 that amount had been reduced to $19,835, the inference being that about $16,600 had been paid in the interim. 60 The appellant was not assessed for any further contributions after 16 June 2002, because his income fell below the "actual income threshold amount" applicable to him. This was due to the interposing of SDS. 61 By June 2005, payment of the balance of $19,835 owing to his trustee had been due for at least three years. The Tribunal pointed out (at [42]) that the evidence suggested that "his failure to reduce this balance cannot be attributed to any lack of capacity to pay". 62 Mrs Davison was paid $5,000 per month for typing services which occupied her from between one and five hours of her time each week. In 2001, the appellant's trustee in regard to the second bankruptcy commenced Federal Court proceedings claiming, amongst other things, that Mrs Davison had been paid more than the value of the commercial services that she had provided to Comserv. These were resolved by consent orders requiring, amongst other things, that she pay $150,000 to the trustee. 63 The appellant lived in a house with his wife that was registered in her name. He made substantial contributions towards its purchase. The trustee in regard to the second bankruptcy made a claim against Mrs Davison with respect to the appellant's share in the home and this was settled by her as part of the payment of $150,000 to which I have referred. 64 In considering the appellant's conduct towards his trustee in bankruptcy the Tribunal said (at [66] to [68]): "On 30 June 2000, Mr Ellison [the trustee] wrote to the Barrister expressing his concern at the Barrister's failure to comply with arrangements whereby he controlled the Barrister's income. He pointed out that between 28 October 1999 and 28 June 2000, the Barrister had paid cheques totalling $73,950 into Comserv's bank account and cheques totalling $32,500 into his personal account. Mr Ellison calculated that of the $73,950 paid to Comserv, $21,179.94 had been spent on that company's expenses and the balance ($52,770.06) on 'personal expenditure'. The outcome was that out of the total of $106,450 paid into these two accounts, $85,270.26 had been allocated towards personal expenditure. The Barrister, Mr Ellison wrote, had not disclosed any of these payments to him. At a later examination in his bankruptcy, held on 7 February 2001, the Barrister admitted that, although he had arranged with Mr Ellison that his deposits into his personal account for living expenses would not exceed $2,500 per month, he in fact deposited a total sum of $133,000 into this account during the period of eleven months between February and December 2000. This evidence clearly shows, contrary to the Barrister's assertion in his Amended Reply, that (a) at the time when he paid these funds into these accounts he appreciated that his personal expenses were excessive, and (b) through this conduct he 'thwarted attempts by his accountants to curb his expenditure'. Particular 4(b) is established in full."

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The findings of the Tribunal 70 The Tribunal found that the appellant's conduct preceding the second bankruptcy and during the early years of that bankruptcy "constituted a deliberate strategy for ensuring that [he] did not fulfil his civic obligations with regard to very substantial tax liabilities" (at [93]). 71 The Tribunal found that the conduct of the appellant since 2001, as disclosed at the hearing, "similarly amounts to a deliberate strategy precluding any discharge of his civic obligations (and possibly also his legal obligations) to make appropriate contributions to his second bankruptcy and thereby to reimburse the Commissioner of Taxation for some at least of the unpaid tax" (at [94]). 72 The Tribunal said (at [95]): "In the light of all this evidence, taken together with the statements acknowledging some element of wrongdoing by the Barrister and (on his behalf) by Mr Ellicott, we are comfortably satisfied that the allegations of breaches of civic obligations in the Information are fully made out." 73 In determining that the appellant should be removed from the roll of practitioners, the Tribunal said (at [103]): "In a nutshell, our principal reasons for so concluding are these. First, over a period of about 15 years the Barrister has intentionally or recklessly breached his civic responsibilities with regard to the payment of income tax, with the consequence that a very substantial sum of money has been lost to the Revenue. Secondly, his conduct in recent years provides good grounds for believing that the ethical shortcomings that underlie these breaches have not been remedied." 74 In concluding that there was no likelihood that the appellant would, in the future, comply with his legal and civic obligations relating to tax, the Tribunal said (at [137] to [138]): "In ways set out above, he has failed during the last five years to (a) adhere to the regime established by his accountant for controlling his personal expenditure; (b) provide for group tax to be deducted from the annual salary of $50,000 that was shown in tax returns of himself and of SDS to have been paid to him by SDS; (c) file two personal income tax returns within the period stipulated by law; (d) give priority to paying arrears of contributions to his second bankruptcy over paying an amount due on a lease of an expensive car for his wife; (e) pay an amount outstanding for more than three years by way of contribution to this bankruptcy; (e) [sic] assist his trustee in bankruptcy to determine his current income with a view to assessing future contributions; (f) give notice in due time to his trustee, or indeed to the Tribunal, of the commencement of his employment by Walker Corporation. This record of failures by the Barrister to make good his past tax defaults and to discharge properly his current tax obligations is counterbalanced only by the evidence of his contributions, totalling about $369,500, that he did make to his second bankruptcy … . Even taking these into account, however, we are comfortably satisfied that, as we indicated earlier, the ethical shortcomings that underlie the Barrister's past breaches of his legal and civic obligations with regard to taxation have not been remedied." 75 The Tribunal found that the appellant had not been a truthful and reliable witness. On a number of occasions he had been compelled during cross-examination to retract, wholly or substantially, statements made by him in an affidavit tendered in evidence or in his oral evidence. The Tribunal found that a number of claims made by the appellant in his affidavit concerning his explanations for failing to pay tax and his failure to disclose his engagement by Walker Corporation either to the Tribunal or to his trustee in bankruptcy "fell significantly short of consistent truthfulness and this is a matter which [the Tribunal] may and should take into account in determining what order should be made" (at [150]).

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General principles relating to the making of an order for removal from the roll 79 It is generally accepted that, upon an application for removal of the name of a legal practitioner from the roll, the question which has to be determined is whether the practitioner is a fit and proper person to remain a member of the profession: In re Davis (1947) 75 CLR 409 at 416 per Latham CJ. 80 The jurisdiction to remove a legal practitioner from the roll is protective, not punitive: Prothonotary of the Supreme Court of New South Wales v Costello [1984] 3 NSWLR 201 (at 204 per Glass and Samuels JJA). Disciplinary proceedings against a legal practitioner are concerned with the protection of the public: Wentworth v New South Wales Bar Association (1992) 176 CLR 239 (at 250 to 251 per Deane, Dawson, Toohey and Gaudron JJ). In New South Wales Bar Association v Hamman [1999] NSWCA 404, Mason P (at [21]) said: "Their object is not to punish the practitioner but to protect the public and to maintain proper standards in the legal profession." 81 As I have noted, by the 1987 Act an order for removal can be made if professional misconduct is established. In this case, professional misconduct was admitted. Professional misconduct on the part of a barrister consists of behaviour which would reasonably be regarded as disgraceful and dishonourable by his professional brethren of good repute and competency: Costello (at 203 per Glass and Samuels JJA). 82 Whether an order for removal should be made, once professional misconduct is established, depends on the nature and degree of the misconduct. Removal may be ordered if it is proved that a barrister is guilty of misconduct of such a character as to show that he or she is no longer fit to remain on it: Costello (at 205 per Priestley JA). The court is required to ask whether the practitioner whose character and conduct is under review can properly be held out as a fit and proper person to remain a practitioner of the Court: Incorporated Law Institute of New South Wales v Meagher (1909) 9 CLR 655 (at 681 per Isaacs J); Hamman (at [22] per Mason P).

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The first ground of appeal: the failed business ventures reasons and the appellant's first two bankruptcies 83 This ground concerns the Tribunal's finding that over a period of about 15 years the appellant intentionally or recklessly breached his civic responsibilities with regard to the payment of income tax. The appellant contended that in making this finding the Tribunal failed to take into account the consequences to the appellant of his failed business ventures with Geneva Finance and the joint venture with his brother. 84 I have set out in [24] the basic facts relating to the appellant's investment in 1990 in Geneva Finance. In summary, the appellant appears to have lost his investment of $100,000, he had 150 per cent taxation deduction for his investment disallowed, and was required to pay about $200,000 tax, including interest and penalties, as a consequence of the disallowance of the deduction. 85 Undoubtedly, the failure of the Geneva Finance investment had serious consequences for the appellant's tax position, at least for a couple of years after the investment failed. Nevertheless, this failure was by no means a complete explanation for the appellant's failure to pay his tax. 86 I have noted that for the period 1 July 1989 to 30 June 1992, the aggregate amount of the appellant's tax liability was $334,878, of which he paid only $71,224. $263,654 was not paid. On 13 March 1992, a judgment was entered in favour of the Deputy Commissioner of Taxation against the appellant in the amount of $556,957. I have observed that the increased amount of the appellant's tax indebtedness represented by this judgment may have been caused by the disallowance of tax deductions brought about by the failure of the Geneva Finance investment. Be that as it may, the appellant's aggregate taxable income over the period in question was about $750,000. This meant that the appellant was in a position to pay far more than the $71,224 that he in fact paid for the tax owing during this period. Thus, while the failure of the Geneva Finance investment may explain the very large amount the appellant came to owe for tax as at 30 June 1992, it does not explain his failure to make serious attempts to pay off the tax that he owed. 87 On the evidence, the appellant made no attempts to come to terms with his increased tax liability caused by the failure of his Geneva Finance investment and, indeed, made no attempt to pay the tax that he would have been obliged to pay in the ordinary course, had the Geneva Finance investment not failed. 88 In an affidavit filed by the appellant, he stated that in the period leading up to his first bankruptcy he did not make allowance for his tax liability. He explained this by reference to "the commitments to providing for a young and growing family". He acknowledged his "overspending". 89 As the facts set out above indicate, in the period after the failure of the Geneva Finance investment, and, in particular, after the appellant's bankruptcy on 9 April 1992, he made only desultory payments of tax (save for the financial year ending 30 June 1994), despite maintaining what appears to have been an affluent lifestyle with a high standard of living. By 30 June 1995, the appellant was again in arrears in respect of his tax in an amount of more than $290,000. He had not paid tax in 1993 and had paid little tax in 1995. The appellant's taxable income over this period appears to have been something in the vicinity of $900,000 of which he made contributions to his trustee in bankruptcy of approximately $163,000. The inference to be drawn from these facts is that the appellant should have been able to pay far more in respect of tax during this period than he did. 90 I have noted that between the appellant's discharge from his first bankruptcy on 9 May 1995 to his second bankruptcy on 7 April 1999, his taxable income was $1,740,431, his tax liability was $796,847.71 and the total of the payments he made in respect of tax was $75,777.12. This represented a gross underpayment of his tax liabilities. 91 For the three years from 1 July 1999 to 30 June 2002 the aggregate of the appellant's assessed tax liability was $639,476, of which sum he paid $124,421. Since 2002, the appellant's tax liabilities have been limited by the interposition of SDS. Notwithstanding this means of reducing the income tax payable by him, on 6 August 2004 judgment was entered against the appellant in favour of the Deputy Commissioner of Taxation in respect of his tax liabilities in an amount of about $612,000. 92 The appellant said in his affidavit: "Between 1996 and 1998 I did not make provision for payment of income tax as the amount due against me was always more than I could manage and the expense of investing in the computing projects by supporting my brother … together with my, by then well entrenched, pattern of spending meant that there was insufficient money available to pay tax."

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The second ground of appeal: the absence of dishonesty in the appellant's failure to meet his tax liabilities 96 Mr Clay submitted: "[T]he Tribunal wrongly concluded that absent an element of dishonesty or fraud, the [appellant's] breach of civic obligation [sic] [was] sufficient to require his name to be struck off the roll." 97 Before the Tribunal, senior counsel then appearing for the appellant submitted that an order for the removal from the roll should not be made on the ground of breaches of legal and civic obligations relating to payment of tax unless those breaches involved either the commission of criminal offences or dishonesty, in the sense of knowingly making false representations. 98 Except for failing to comply with notices under s 264 of the Income Tax Assessment Act 1936 (Cth) as alleged in ground 2(c), the appellant committed no criminal offences under the income tax legislation and was not guilty of dishonesty in the sense of knowingly making false representations in relation to his tax liabilities. The appellant had openly disclosed his full income in his tax returns, thereby exposing himself to liability to pay tax. On these grounds, senior counsel submitted that the appellant could not be compared with the barristers in New South Wales Bar Association v Cummins (2001) 52 NSWLR 279; New South Wales Bar Association v Somosi (2001) 48 ATR 562; [2001] NSWCA 285; New South Wales Bar Association v Young (2003) 54 ATR 22; [2003] NSWCA 228 and New South Wales Bar Association v Stevens (2003) 54 ATR 25; [2003] NSWCA 95 who had filed tax returns, and the barrister in Hamman who had deliberately understated his income in his tax returns. The barristers in those cases had all committed criminal offences and had deceived the tax authorities. The appellant's conduct was not of this kind. 99 The Tribunal, however, rejected these submissions. On appeal, Mr Clay reiterated them. 100 While dishonesty has often been a ground for removing legal practitioners from the roll, it is merely a means of determining whether a broader set of criteria has been met. These criteria are well established and well understood. I shall refer to some of the leading statements of principle in this regard. 101 In Incorporated Law Institute of New South Wales v Meagher (1909) 9 CLR 655, Isaacs J said (at 681): "There is therefore a serious responsibility on the Court - a duty to itself, to the rest of the profession, to its suitors, and to the whole of the community to be careful not to accredit any person as worthy of public confidence who cannot satisfactorily establish his right to that credential. It is not a question of what he has suffered in the past, it is a question of his worthiness and the reliability for the future." 102 In The Southern Law Society v Westbrook (1910) 10 CLR 609, O'Connor J said (at 619): "… [T]he Court in maintaining a solicitor on the roll is holding out to the public that he is a fit and proper person to be entrusted by the public with those difficult and delicate duties and that absolute confidence which the public must repose in persons who fulfil the duties of solicitors." 103 In Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279, Kitto J said (at 297 to 298): "The issue is whether the appellant is shown not to be a fit and proper person to be a member of the Bar of New South Wales. It is not capable of more precise statement. The answer must depend upon one's conception of the minimum standards demanded by a due recognition of the peculiar position and functions of a barrister in a system which treats the Bar as in fact, whether or not it is also in law, a separate and distinct branch of the legal profession. It has been said before, and in this case the Chief Justice of the Supreme Court has said again, that the Bar is no ordinary profession or occupation. These are not empty words, nor is it their purpose to express or encourage professional pretensions. They should be understood as a reminder that a barrister is more than his client's confidant, advisor and advocate, and must therefore possess more than honesty, learning and forensic ability. He is, by virtue of a long tradition, in a relationship of intimate collaboration with the judges, as well as with his fellow- members of the Bar, in the high task of endeavouring to make successful the service of the law to the community. That is a delicate relationship, and it carries exceptional privileges and exceptional obligations. If a barrister is found to be, for any reason, an unsuitable person to share in the enjoyment of those privileges and in the effective discharge of those responsibilities, he is not a fit and proper person to remain at the Bar. Yet it cannot be that every proof of which he may give of human frailty so disqualifies him. The ends which he has to serve are lofty indeed, but it is with men and not with paragons that he is required to pursue them. It is not difficult to see in some forms of conduct, or in convictions of some kinds of offences, instant demonstration of unfitness for the Bar. Conduct may show a defect of character incompatible with membership of a self- respecting profession; or, short of that, it may show unfitness to be joined with the Bench and the Bar in the daily co-operation which the satisfactory working of the courts demands. A conviction may of its own force carry such a stigma that judges and members of the profession may be expected to find it too much for their self respect to share with the person convicted the kind and degree of association which membership of the Bar entails. But it will be generally agreed that there are many kinds of conduct deserving of disapproval, and many kinds of convictions of breaches of the law, which do not spell unfitness for the Bar; and to draw the dividing line is by no means always an easy task." 104 The first part of the passage from the reasons of Kitto J in Ziems was adopted by the Full High Court in Clyne v The New South Wales Bar Association (1960) 104 CLR 186 (at 189) and the whole of it by this Court in Re Evatt; Ex parte New South Wales Bar Association (1967) 67 SR (NSW) 236 (at 240, 241 per Herron CJ, Sugerman and McLelland JJA). 105 These statements emphasise the following relevant factors: (a) A barrister holds a special position of trust in the system of administration of justice; the position carries exceptional privileges, obligations and responsibilities. (b) Whether a barrister is not a fit and proper person to be a member of the Bar of New South Wales depends on the minimum standards demanded by a due recognition of that special position. (c) Only persons worthy of public confidence as meeting those standards should remain on the roll. (d) Both conduct leading to convictions for criminal offences and other forms of conduct can lead to removal from the roll. (e) Conduct showing a defect of character incompatible with membership of the Bar is relevant; or short of that, conduct showing unfitness to co-operate with the profession and the judiciary in the working of the courts. 106 In those cases where a barrister has been convicted of a criminal offence, the court has been at pains to point out that it is not the fact of conviction that is of overriding importance; all the circumstances lying behind the conviction must be taken into account. The court is required to look behind the conviction at the conduct which gave rise to it, and the impact of such conduct upon the practitioner's fitness to remain a barrister: Hamman (at [72]); see also Somosi (at 576, [75] per Spigelman CJ). 107 Confining the issue at this stage only to the appellant's failure to pay his tax liabilities and contributions to his trustees in bankruptcy, focus must be directed to the Tribunal's unchallenged findings that the appellant deployed a deliberate strategy for avoiding his civic obligations. The strategy involved the means by which, over a period of many years, he earned large sums of money, paid very little tax, made few contributions to his trustees in bankruptcy, and used the money that should have gone towards his tax liabilities to fund his lifestyle and make donations to members of his family. 108 The profession's reputation was tarnished by the appellant's conduct. The consequences of this occurring through a deliberate failure to pay tax over a lengthy period were discussed In Hamman. Mason P said (at [87] to [89]): "This leads to the issue of the reputation of the legal profession. The barrister properly acknowledges that his actions have jeopardised the reputation and standing of the legal profession. These mean little in themselves, but they are an important element in the effectiveness of legal practitioners in their role as ministers of justice. Certain practices send out messages (intended and unintended) about what is acceptable to lawyers and acceptable generally. The response to proven violations also sends out messages. In their article Income Tax Offences by Lawyers: An Ethical Problem (1972) ABAJ 842 at 845, Sanford M Stoddard and Carl A Stutsman Jr conclude as follows: 'In its own interest, the organized Bar simply cannot permit the public to gain the impression that its members flout the revenue laws or that it condones or tolerates or belittles the seriousness of crimes against the revenue. 'Obedience to law exemplifies respect for law', states EC 1-5. 'To lawyers especially, respect for the law should be more than a platitude.' [EC 1-5 is a reference to part of the American Bar Association's Code of Professional Responsibility .]' I agree. A similar attitude should inform the Court's response to a proven infraction, not overlooking the need for due proportionality. To do less would be to abandon the underlying functions of the Court's disciplinary jurisdiction. The legal profession enjoys a monopoly of the right to practise on the theory that those possessed of the requisite learning, skill and character can be trusted to perform legal services involving high levels of trustworthiness. Removal from the rolls [sic] for unfitness is an extreme remedy, but it is necessary in order to maintain public respect for the legal process." 109 In Cummins, Spigelman CJ (with whom Mason P and Handley JA agreed) pointed out (at 283 [16]) that the barrister in that case was perfectly capable of conducting his personal and financial affairs save in one respect; he never performed his duties as a citizen and taxpayer. The Chief Justice said of this (at 283, [17]): "This Court made in clear in New South Wales Bar Association v Hamman that there is nothing acceptable, let alone smart or clever, about evading taxation." 110 It is true that the barrister in Cummins failed to lodge taxation returns for 38 years, and the appellant in this case did lodge his returns (at least until 30 June 2002). But the barrister's failure in Cummins to lodge his taxation returns and the appellant's deliberate strategy that he adopted in order to enjoy his entire taxable income for his own personal ends and those of his family were aimed at the identical purpose, namely, avoiding the lawful tax liabilities that were accruing each year. I accept that the failure to lodge taxation returns is more serious professional misconduct than that committed by the appellant. That is because the failure to lodge returns means that the barrister's existence and income is concealed from the tax authorities, while the appellant informed the authorities each year of his income (until 30 June 2002). But the appellant (like Mr Cummins and the other barristers in Somosi, Young and Stevens), by his conduct, increased the burden on taxpayers generally "because rates of tax inevitably reflect effective collection levels" (see Hamman at [85]). The ultimate evil in the two respective situations is the same. 111 In Cummins, Spigelman CJ (at 286, [30]) said: "The conduct of a barrister, particularly a barrister who has received the distinction of a commission as one of Her Majesty's Counsel, who has behaved in such complete disregard of his legal and civic obligations, was necessarily such as to bring the entire legal profession into disrepute."

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