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.