Murphy v The Bar Association of New South Wales

The amendments - Legal Profession Amendment (Disciplinary Provisions) Act 2001 9 The Act was amended in 2001 by the Legal Profession Amendment (Disciplinary Provisions) Act 2001 ("the Amending Act") following considerable publicity given to the taxation liabilities of barristers and related bankruptcies. The facts revealed in the matters since considered by the Court of Appeal suggest that the concerns which gave rise to legislative action were well founded. 10 The first response to the problem, which preceded statutory amendment, was to provide for a regime of notification pursuant to the Legal Profession Amendment (Notification) Regulation 2001. The plaintiff provided the notification and statement required of him pursuant to clause 69E of those Regulations. The Parliament enacted the Amending Act in July this year and the matter has accordingly been considered under that Act. 11 Both the regulations and the Amending Act: (s 38FB(3)), require a barrister who, since being admitted as a legal practitioner: "(a) has committed an act of bankruptcy, or (b) has been found guilty of an indictable offence or a tax offence, must provide a written statement, in accordance with the regulations, showing why, despite the act of bankruptcy or finding of guilt and any circumstances surrounding the act or finding, the barrister or solicitor considers that he or she is a fit and proper person to hold a practising certificate."

12 A similar provision applies when a legal practitioner seeks a practising certificate: s 38FB(1). 13 It was submitted by the Bar Association that section 38FB(1) and (3), together with s 38FC and s 38FE, which provide for the relevant decision, create a presumption that, without adequate explanation, an act of bankruptcy or a finding of guilt of an indictable or tax offence make a person not fit and proper to hold a practising certificate. It was suggested that the decision, pursuant to s 38FC, as to whether a person is "fit and proper" should be informed by this presumption. 14 I do not believe this submission should be accepted. In my opinion the provision should be understood so that the act of bankruptcy raises the occasion for consideration of the practitioner's fitness to practice but does not raise any adverse presumption or impose any onus on the barrister. I consider both s 38FC and s 38FE below. 15 The approach which I prefer is supported by consideration of the structure of Division 1AA, of Part 3 of the Act, which contains the amendments made in 2001. Section 38FA contains a definition of "relevant period". Commencing with the happening of a "relevant event", a three month period is provided in which a decision as to the "fitness" of a practitioner is to be made. In relation to a barrister, the decision is made by the Bar Council. 16 In the present case the relevant event occurred and the three month period commenced on the date on which the notification of the act of bankruptcy was given to the Bar Council. Within that three month period the matter was required to be determined under s 38FC failing which the practising certificate of the barrister would be automatically suspended: s 38FH(2). Although the Bar Association submitted otherwise, I am satisfied that notification pursuant to s 38FB creates an expectation that the Bar Council will make a decision under s 38FC. Apart from s 38FH, the language of s 38FG is directed towards a process where notification raises an obligation for determination of the matter under s 38FC. 17 Section 38FC provides as follows: (1) A Council must refuse to issue, or must cancel or suspend, a practising certificate if: (a) the Council is aware that the applicant for or holder of the practising certificate has, since being admitted as a legal practitioner, committed an act of bankruptcy or been found guilty of an indictable offence or a tax offence, and (b) the Council considers that the act of bankruptcy, indictable offence or tax offence was committed in circumstances that show that the applicant or holder is not a fit and proper person to hold a practising certificate. (2) A Council must, within 14 days after becoming aware that the applicant for or holder of a practising certificate has, since being admitted as a legal practitioner, committed an act of bankruptcy or been found guilty of an indictable offence or a tax offence, give notice in writing to the applicant or holder: (a) if the Council has not received a statement under section 38FB in relation to the act of bankruptcy or the finding of guilt concerned, requiring the applicant or holder to make a statement in accordance with that section, and (b) informing the applicant or holder that a determination in relation to the matter is required to be made under this section, and (c) informing the applicant or holder of the relevant period in relation to the determination of the matter and that the applicant or holder will be notified of any extension of the relevant period, and (d) informing the applicant or holder of the effect of the automatic suspension provisions in section 38FH in the event of the matter not being determined by the Council or the Commissioner within the relevant period. (3) Despite subsection (1), a Council may issue a practising certificate to an applicant referred to in that subsection who is a barrister or solicitor if the next relevant date (within the meaning of section 36) in relation to the barrister's or solicitor's current practising certificate is imminent and the Council has not made a determination under that section in relation to the applicant. (4) The issue of a practising certificate in the circumstances referred to in subsection (3) does not prevent a determination from subsequently being made under this Division to refuse to issue a practising certificate to the barrister or solicitor or to cancel or suspend the barrister's or solicitor's practising certificate. (5) Despite any other provision of this Act, a Council required to take action under subsection (1) in relation to a barrister or solicitor may, for the purpose of enabling the proper arrangement of the affairs of the barrister or solicitor. (a) issue a practising certificate to the barrister or solicitor that remains in force for such period, specified in the practising certificate, as the Council considers necessary to achieve that purpose, or (b) defer cancelling or suspending the practising certificate held by the barrister or solicitor for such period as the Council considers necessary to achieve that purpose. (6) If a Council acts under this section and, within 14 days after being notified of the action, the applicant or holder concerned requires the Council to state its reasons for the action, the Council must comply with the requirements without delay. (7) A Council is not required to take action under this section in relation to a person who has been bankrupt if the person was bankrupt because of an act of bankruptcy that has already been the subject of a determination under this section." 18 Section 38FC(1) raises no presumption but requires consideration of the circumstances of an act of bankruptcy and a determination as to whether the person is "not a fit and proper person to hold a practising certificate". 19 In the present case the decision made by the Bar Council was purportedly made under s 38FE rather than s 38FC. Accordingly, there being no decision under s 38FC within the relevant period, s 38FH(2) operated and the certificate is automatically suspended. The Supreme Court may remove the suspension: s 38FH(3). 20 As I have indicated, the decision required by s 38FC is whether the act of bankruptcy "was committed in circumstances that show that the applicant or holder is not a fit and proper person to hold a practising certificate." Because the Act requires a decision under the section to be made the Council must determine the matter. However, only if it is satisfied that the practitioner is not a fit and proper person can it resolve to cancel or suspend the practising certificate. If the Council is of that opinion it must determine to cancel or suspend the certificate. 21 Having regard to the potential damage to a person's reputation and the consequences for his or her livelihood from an adverse finding under s 38FC, the matter must be approached with caution. Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362; G v H (1994) 181 CLR 387 at 399. The relevant factors which might justify a finding that a person was not fit and proper must first be identified, and only when they have been considered, may an adverse finding be made. 22 Section 38FE provides a further power in a Council which assists in the administration of the reporting requirements forming part of the regulatory regime in the Amending Act. The section is in the following terms: "38FE (1) A Council may refuse to issue, or may cancel or suspend, a practising certificate if the applicant or holder: (a) is required by section 38FB to provide a written statement in relation to a matter and has failed to provide a written statement in accordance with that section, or (b) has provided a written statement in accordance with section 38FB but, in the opinion of the Council to which the statement was provided, has failed to show in that statement that he or she is a fit and proper person to hold a practising certificate, or (c) has failed to comply with a requirement under section 38FI or has wilfully contravened section 38FI(4). (2) If a Council acts under this section and, within 14 days after being notified of the action, the applicant or holder concerned requires the Council to state its reasons for the action, the Council must comply with the requirement without delay." 23 In effect the section provides for summary cancellation or suspension when there has been a failure to provide a written statement (s 38FE(1)(a)) or the statement, although provided, does not disclose that the person is fit and proper (s 38FE(1)(b)) or there has been some obstruction or failure to cooperate in the investigation (s 38FE(1)(c)). 24 It was submitted by the Bar Association, and it is inherent in its decision making processes, that s 38FE(1)(b) provides a discretion in the Bar Council to cancel a certificate, if the material provided in the statement fails to discharge the onus, which it submits falls upon the barrister to demonstrate that he or she is "fit and proper". A submission in these terms would, in my judgment, be correct. However, it was further submitted that the reference, in the sub-section to the statement, should be understood as a reference to the statement required by s 38FB and the other material collected by the Bar Council during the course of is investigation. 25 As I have indicated, this submission is at odds with the scheme of Division 1AA which requires a decision to be made under s 38FC. Such a decision would be irrelevant if the certificate has already been cancelled under s 38FE. Furthermore, it would be extraordinary if the Council was given the choice, having regard to the same factual material, to elect to cancel a certificate under s 38FC, which requires a positive finding by the Council that a person is not "fit and proper", or to invoke s 38FE(1)(b) which imposes an obligation on the barrister to show that he or she is "fit and proper", failing which, the Bar Council may cancel or suspend the practising certificate. 26 Counsel for the plaintiff submitted that s 38FE(1)(b) should be understood as part of the mechanism available to a council to ensure the effective investigation of a matter once notification has occurred. He submitted that the role of subsection (1)(b) should be confined to allowing a council to act, although a statement was provided, if that statement did not, on its face, provide a basis for determining that a person was "fit and proper". For this purpose, it was submitted the section limits the Council to an examination of the statement itself. Once the matter has moved beyond the provision of the statement and an investigation has taken place, or further submissions have been received, the discretion is no longer available. 27 There is considerable attraction to the submission. It is consistent with the language of the section and the obvious practical role which the section is intended to fulfil in ensuring that barristers cooperate with the need to report and provide details of their circumstances. However, I do not believe it necessary to determine the issue. Whatever be the correct construction, in my opinion, the discretion available under s 38FE(1)(b) should only be exercised where the circumstances surrounding the act of bankruptcy which are identified in the written statement exclude a finding that a person is "fit and proper", applying the appropriate test. The discretion should not be available once further investigation has taken place, or, as a fall back position, if the Council cannot make a decision that a person is not "fit and proper" pursuant to s 38FC. 28 I do not consider s 38FE of assistance in the present matter. The material sought from the plaintiff during the course of the Bar Council's investigation and the additional material the plaintiff provided significantly expanded the material in the statement. In my opinion the time for the consideration of any decision pursuant to s 34FE has gone and the matter must be considered under s 34FC. I should add that, given the obvious difficulties in reconciling s 34FC and s 34FE, consideration should be given to legislative change, so that the statutory basis for the cancellation or suspension of a practising certificate is plain and unambiguous. 29 In my opinion, the question which arises in an appeal to this Court pursuant to s 38B(1) of the Act, from a decision made by a Council under Division 1AA of Part 3 of the Act, is whether the circumstances surrounding a barrister's act of bankruptcy show that the barrister "is not a fit and proper person to hold a practising certificate". This is the question raised by s 34FC. 30 The decision requires careful identification of the relevant facts and consideration of them, having regard to the elements which may inform the decision as to whether a practitioner is "fit and proper".

"A fit and proper person" 31 The words "fit and proper person" have been utilised when determining the entitlement of a person to be included on the roll of barristers or solicitors - more recently, the roll of legal practitioners. As the High Court indicated in Clyne v New South Wales Bar Association (1960) 104 CLR 186 the words "fit and proper person" are used in the Charter of Justice of 1823. The Court said: "With regard to the jurisdiction of the Supreme Court, it is sufficient to refer to Ziems v The Prothonotary of the Supreme Court of NSW (1957) 97 CLR 279. The words 'fit and proper person' are the words used in the Charter of Justice of 1823, which issued under the authority of the Imperial statute 4 Geo IV, c 96, and by which the present Supreme Court of New South Wales was constituted. Clause 10 of the Charter provided for the admission of persons to practise in the Court. It empowered the Court to approve, admit and enrol persons who had been admitted at Westminster, Dublin or Edinburgh 'to act as well in the character of Barristers and Advocates as of Proctors, Attorneys and Solicitors in the said Court'. Persons so admitted were authorised 'to appear and plead and act for the suitors of the Court, subject always to be removed by the said Court from their Station therein, upon reasonable cause'. It was further provided that if there should not be a sufficient number of such persons in the Colony competent and willing to appear for the suitors of the Court, then the Court might admit other 'fit and proper persons' according to such general rules and qualifications as it might make. In Ziem's Case Kitto J said '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'." 32 Prior to the Amending Act, when there were allegations of misconduct with respect to a legal practitioner, which might result in a finding that a practitioner was not "fit and proper", the structure of the Act provided, in most cases, for a process of complaint to the Legal Services Commissioner, followed by investigation. In this case any decision to cancel a practising certificate, or remove a person from the roll, is made by the relevant division of the Administrative Decisions Tribunal. The Amending Act provided a power in the Bar Council to determine, in the context only of a reported act of bankruptcy, indictable offence or tax offence whether a person is "fit and proper" to hold a practising certificate. Although the Bar Council had power to investigate the conduct of barrister under s 37(1)(a) this was a new power given to the Council. It is a power which can be exercised without the procedural steps required to precede a decision of the Administrative Decisions Tribunal. 33 The matters relevant to a decision as to whether a barrister is "fit and proper" must be those which have guided the court when determining the same issue. 34 There are many decisions of intermediate appellate courts and the High Court dealing with the fitness of legal practitioners to practice. Because practitioners were, until recently, supervised by the Court, the decisions are in the context of a decision as to whether a person should remain on the roll. Those decisions have been recently reviewed in the context of taxation matters by the Court of Appeal - two matters being determined after the Amending Act. 35 The decision in NSW Bar Association v Hamman (1999) NSWCA 404 was made before the recent amendments. Nevertheless, it is a convenient starting point for consideration of the approach which the court should take to conduct relating to the taxation affairs of a practitioner. 36 Hamman was a successful and busy barrister. However, he both failed to bring to account fees which he had received in the taxation year of receipt and, also, failed to disclose significant amounts of income in his taxation returns. Mason P found that "viewed compendiously, the five charges covered income tax returns in 1990, 1991 and 1992 that, in total, understated income by $656,636." He pleaded guilty and was convicted of five charges under s 29B and s 29D of the Crimes Act 1914(Cth) and sentenced to fourteen months imprisonment to be served by way of periodic detention. 37 The issue before the Court of Appeal was whether the name of the barrister should be removed from the roll. The Bar Council had already cancelled his practising certificate, although the power which it had exercised is not identified. The circumstances were found to represent "a high level of dishonesty fundamentally motivated by greed". 38 Mason P analysed the principles previously identified in Ziems; Law Society of New South Wales v Bannister (1993) LPDR 24 and Law Society of New South Wales v Foreman (1994) 34 NSWLR 408. It is unnecessary for me to repeat the analysis. However, the principles which emerge are these:

(a) In relation to any question of fitness to practice the attitude of the relevant professional association is relevant but not determinative.

(b) Any conviction and sentence are relevant but not conclusive of the issue.

(c) The court must look at the conduct of the individual to determine that person's reputation and character.

(d) The jurisdiction of the court is not exercised in order to punish the practitioner but rather it is protective of the public and is also intended to maintain and encourage appropriate standards of professional behaviour.

(e) The court must ensure that its decision gives weight to widely and reasonably held public attitudes to practitioners in the context of the administration of justice.

(f) An offence of clear dishonesty demonstrates unfitness to practice.

(g) There is no relevant distinction between defrauding an individual and defrauding the revenue.

(h) The right to practice as a lawyer involves high levels of trustworthiness and removal from the roll for unfitness, although an extreme remedy, may be necessary in order to maintain respect for the legal process. 39 There are many cases which have involved dishonest conduct by legal practitioners: Law Society of New South Wales v Bannister 4 LPDR involved fraud on a client; Ex Parte Macaulay (1930) 30 SR(NSW) 19 involved theft; Law Society of NSW v Foreman (1994) 34 NSWLR 408 involved deception of other legal practitioners and the court; Re Milte & Ors, Legal Practitioners (1991) 22 ATR 740 involved deliberate tax fraud when income was understated; In the Matter of Mahoney (Supreme Court of South Australia, 11 December 1996, unreported) involved deliberate tax fraud in which the Full Court divided over whether the practitioner should be struck off. 40 It is apparent that in all of these cases the touchstone for the intervention of the court and the taking of disciplinary action has been a finding of dishonesty in the activities, private or professional, of the legal practitioners. However, the Bar Association submits that the decision in Chamberlain v The Law Society of the Australian Capital Territory (1992) 43 FCR 148 reflects an instance where conduct, not found to be dishonest, nevertheless resulted in a finding of professional misconduct. In that case, the conduct of the solicitor in fostering a mistake by the Taxation Commissioner was found to be improper. The finding of the Chief Justice of the Australian Capital Territory, not departed from by the majority on appeal, was that the conduct of the solicitor in "inducing" the Deputy Commissioner to sign terms of settlement amounted to "grave impropriety affecting his professional character". 41 In proceedings seeking to set aside the judgment, but not relied upon in the disciplinary proceedings, both the trial judge and the Full Court described the solicitor's conduct as a "shabby trick" and unconscionable. Although the solicitor was not subject to an express finding that he had acted dishonestly, there can be little doubt that in his dealings with the Deputy Commissioner of Taxation he was not frank and his actions were motivated by an intention to gain an advantage to which he knew he was not entitled. I would have little difficulty describing his actions as dishonest. 42 These issues have been authoritatively considered by the Court of Appeal in two cases determined since the Amending Act. In New South Wales Bar Association v Cummins [2001] NSWCA 284 the Court of Appeal considered the circumstances where the barrister had failed to lodge a taxation return for a period of thirty-eight years. Spigelman CJ considered the principles appropriate to the determination of the court's response: "Honesty and integrity are important in many spheres of conduct. However, in some spheres significant public interests are involved in the conduct of particular persons and the state regulates and restricts those who are entitled to engage in those activities and acquire the privileges associated with a particular status. The legal profession has long required the highest standards of integrity. There are four interrelated interests involved. Clients must feel secure in confiding their secrets and entrusting their most personal affairs to lawyers. Fellow practitioners must be able to depend implicitly on the word and the behaviour of their colleagues. The judiciary must have confidence in those who appear before the courts. The public must have confidence in the legal profession by reason of the central role the profession plays in the administration of justice. Many aspects of the administration of justice depend on the trust by the judiciary and/or the public in the performance of professional obligations by professional people." (at para 19-20) 43 In determining the quality of the particular conduct in that case, the Chief Justice said that the barrister's conduct "was an inexcusable pattern of illegal conduct in complete defiance of his civic responsibilities." For that reason his name was removed from the roll and a declaration was made that he was not a "fit and proper person to remain on the Roll of Legal Practitioners." 44 In New South Wales Bar Association v Somosi [2001] NSWCA 285 the barrister failed to file an income tax return in any of the seventeen years between 1978 and 1994. It was found that he paid no income tax for any of those years. This was deliberate conduct which had the effect of concealing his income and ensuring that he paid no tax. The court found that "the only inference is that he deliberately and intentionally evaded tax." (at para 63). The court confirmed its findings in Hamman "that a systematic course of tax evasion demonstrated unfitness for practice." 45 In my opinion, and guided by these decisions, the test which must be applied when determining fitness to practice, in the context of bankruptcy, is whether the indebtedness which led to the bankruptcy was brought about or associated with dishonest conduct by the barrister. It may be dishonesty associated with not paying tax or dishonesty associated with a failure to meet some other personal financial obligation. Conduct which reflects incompetent management of a person's affairs, without the intention to avoid lawful obligations, does not of itself justify a finding that a person is not "fit and proper". I do not believe the general public or other legal practitioners hold the view that a person should not be allowed to practice at the Bar merely because he or she has failed to pay all their debts. The decision must be otherwise if the practitioner has deliberately engaged in dishonest conduct with the intention of avoiding his or her lawful obligations. The dishonesty may be associated with commercial dealings, obligations to dependents or revenue obligations. It is the dishonesty, not the existence of a debt, or the fact of bankruptcy, which disentitles the person to hold a practising certificate. The quality of the conduct and whether it should be described as dishonest must be assessed, having regard to the level of probity appropriate for a barrister: see the discussion about the concept of honesty in Royal Brunei Airlines v Tan [1995] 2 AC 378 at 389.

Factual matters The plaintiff's professional history 46 The plaintiff commenced his legal career in the Office of the Clerk of the Peace, where he worked initially as a clerk and ultimately as a Clerk of Arraigns from 1965 until 1968. He was then employed by the Public Solicitor's office, initially as an articled clerk and later as a solicitor, from 1969 until 1976. He was admitted to practice as a solicitor of the Supreme Court on 14 June 1974. 47 In January 1976 he became a partner in the firm of H E Wanstall & Murphy at Kogarah. He remained in that partnership until December 1976, when he commenced sole practice under the name B J Murphy & Co at Kogarah. He continued in practice under that name until 1998. The plaintiff's practice as a solicitor included personal injury litigation, conveyancing and Local Court matters. The majority of his work was Court-based. 48 The plaintiff was admitted as a barrister in August 1998. Since his admission, he has practiced from Windeyer Chambers, paying a monthly licence fee. The plaintiff's practise as a barrister is comprised largely of criminal matters in the Local and District Courts, with some Family Court matters, and some civil matters. 49 The plaintiff has been the subject of four complaints to the Law Society in two of which there was an adverse finding. However none of these relate to matters of financial dealings nor do they involve any suggestion of dishonesty. 50 Since his admission as a barrister, the plaintiff has been the subject of one complaint which, relates to advice given by him about a wrongful dismissal claim. At this time this complaint has not yet been determined. None of these matters are of significance to the matter before the court.

The kindergarten business 51 In 1981 the plaintiff and his wife purchased a Salvation Army Hall in the Seven Hills area and established a kindergarten business, known as Kermi's Kindergarten. The plaintiff did not attend to the day-to-day management of the kindergarten. He said that for many years the kindergarten business "traded marginally." He retained it after he and his wife were divorced in the middle 1980s. Because of the divorce settlement it was encumbered with significant obligations to a bank. 52 In 1992 the plaintiff transferred the business, but not the land, to a company, Lemares Pty Limited. I accept that this was done when the business started to show a profit, and in order to ensure that all of the taxation liabilities of the kindergarten were paid. The plaintiff became an employee of the company and PAYE payments were made for him. All of the kindergarten's taxation liabilities have been paid. 53 The business does not seem to have been profitable until the introduction of Commonwealth government fee relief in 1992 -93, which continued with apparently less benefit to the plaintiff until about 1997. The plaintiff said that the business had a very large fee relief component and that the scheme meant that he received an advance of about $60,000 for the period from January to June 1992. Consequently, the plaintiff experienced a large temporary fluctuation in his income in 1992. This raised implications for payments of both tax and provisional tax which caused difficulties for the plaintiff. Those matters are discussed later in these reasons.

The plaintiff's financial and tax history 54 The plaintiff appears to have had no difficulty with his taxation affairs until the late 1980s. There was a dispute in relation to his 1989 returns arising from a failed investment. The dispute was resolved substantially in the plaintiff's favour. In relation to the year ended 30 June 1990, the plaintiff earned an income from his practice of $56,129. This was a significant increase on previous years as a result of an unusually large number of third party matters that were settled. This resulted in an income tax assessment, but more importantly a provisional tax assessment, which the plaintiff believed at the time would exceed his ability to pay from his anticipated more modest income in the following year. The plaintiff's belief was justified. 55 From about 1988, the plaintiff's accountant was Mr Alexander Hill. Mr Hill has been practising as an accountant since 1965. He became a chartered accountant in 1980. He currently operates a private practice from his home. He has known the plaintiff for a long time, having provided professional advice to the plaintiff's father, before taking on the plaintiff as a client in about 1988. 56 Mr Hill entered into a consultancy agreement with Partlett Chave and Rowland in 1989. He continued to do work for the plaintiff whilst with Partlett Chave and Rowland, and the plaintiff in effect became a client of that firm. 57 Considerable evidence was provided of the plaintiff's income taxation liabilities and payments. However, it was acknowledged by both the plaintiff and the Bar Association that it is impossible to reconcile the records and establish a completely accurate set of accounts. 58 For the purpose of this appeal this is not so important. The figures which are available demonstrate the position to a reasonable degree and are sufficient to determine the issues relevant to the plaintiff's professional standing. It would have been otherwise if I was required to precisely quantify the plaintiff's debts. 59 Both the income from the plaintiff's legal practice and kindergarten business must be considered. The plaintiff tendered a schedule of income and taxation liabilities which, with the reservation I have expressed, gives a reasonable picture of his situation. Relevant material from the schedule is as follows: (1) (2) (3) (4) (5) Financial Kinder-garten Practice Taxable Tax on (6) Year Income income Income Taxable Tax paid income 1989 8987 932 NIL 1990 56129 19098 NIL 1991 (1912) 15242 13330 1656 NIL 1992 76704 27864 NIL 1993 12441 20457 32898 7695 10000 3000 1994 28800 16743 45543 8826 *6657 9657 1995 30052 33438 60290 18938 *6786 1996 24909 13242 38151 9006 *5626 1997 42986 42986 11085 NIL 1998 54721 16320 NIL 1999 9436 807 NIL 2000 4827 NIL NIL *The figures marked with an asterisk indicate PAYE payments which may be understated.

60 The income in 1989 and 1991 may be readily contrasted with the income in 1990. It is plain that unless the provisional taxation obligations for 1990-1991 were addressed at an early stage, as the plaintiff had no other financial resources, he would quickly get into difficulties. 61 The effect of the Commonwealth government fee-relief for the kindergarten business on the plaintiff's taxable income for 1992 has already been identified. As the table demonstrates, the plaintiff's taxable income for 1992 was $76,704. This outcome also required early consideration of the likely income in the following year unless the provisional taxation was to become an impossible burden. The Notice of Assessment for the taxation years 1989 to 1991 did not issue until 18 January 1993. The reasons for this delay are considered below. Those assessments showed that as at January 1993 the plaintiff owed the Australian Taxation Office a total of $39,671, including penalties and fines. On 28 April 1993 the Australian Taxation Office issued a Statement of Liquidated Claim for a total of $44,862.14. Additional tax for late payment was also claimed at the rate of 16% per annum. 62 On 30 April 1993 the plaintiff made a payment of $8,000 to the Australian Taxation Office. In a "without prejudice" letter to the Australian Taxation Office dated 3 June 1993, the plaintiff noted that he had already paid an amount of $8,000, and made a further payment of $2,000, offering a proposal to make payments by instalment with the balance to be paid at $2,000 per month, with the effect that the total amount would have been paid within 18 months. 63 By letter dated 4 June 1993, the day following the plaintiff's letter, the Australian Taxation Office declined to accept the proposed instalment plan. Instead the office sought payment in full of the outstanding income tax, or a substantially increased offer for repayment. The letter advised the plaintiff that additional tax for late payment was accruing at 20% until 30 September 1992 and thereafter at 16% per annum. Also enclosed was a statement of account which showed a balance of $37,035 owing. 64 On 21 June 1993, the plaintiff increased his offer of payment to $2,400 per month. In this letter the plaintiff's financial position was outlined, disclosing total assets of $169,000 and total liabilities $109,000, the surplus being $60,000. The letter notes that the caravan which the plaintiff owned had been placed on the market for sale, with the intention that the proceeds from its sale would be used towards the reduction of outstanding tax debt. The letter also notes that tax returns were "currently being prepared." The value of the assets was undoubtedly optimistic. There is no reply to this letter in evidence. However, the offer was not accepted by the Australian Taxation Office. 65 In a further letter dated 23 June, the plaintiff stated that there had been an error in his 1989 return as it did not take into account losses in 1987 and 1988 and requested an amendment of his 1989 assessment and penalties. This claim was accepted and the plaintiff's liability for 1989 was reduced by $3,065. 66 The plaintiff's Notice of Assessment for the taxation year 1992 issued on 13 July 1993. By this stage the plaintiff's total liability including provisional tax, interest and penalties had risen to $94,774. Having regard to his income level, irrespective of any failure to make adequate provision for his taxation liability, with his incapacity to borrow, his situation was now hopeless. 67 Once the transfer of the kindergarten to the company had been made, the plaintiff received wages as an employee. Thereafter PAYE payments were made for himself and the other employees. No further provisional taxation obligations arose from that business. 68 On 9 August 1993, the plaintiff wrote to the Australian Taxation Office, advising of his intention to seek a variation of his provisional tax. In that letter he complained about delay in lodging returns by Mr Hill, and foreshadowed a further payment of $4,000. The letter notes that the plaintiff had been operating only one business (the legal practice) in the financial year 1992/1993 and believed that there should be a significant reduction granted in respect of provisional tax. The letter also states that the plaintiff intended to approach the Tax Agents Liaison Board relating to the late lodgement penalties incurred. The letter noted: "These penalties were incurred as Mr Murphy's Accountant lodged the returns considerably later than should have been lodged. The Accountant in fact had all the information to lodge the returns well within time. This was not done and all returns were late….We are also in the process of lodging an Appeal with the AAT with regard to the various penalties involved." 69 On 30 August 1993, the plaintiff paid a further $3,000, to the Australian Taxation Office. On 8 September 1993 the plaintiff's provisional tax obligation for the year was varied to $7,561. On 20 October 1993, the amendment of the plaintiff's 1989 Assessment was confirmed which reduced that Assessment by $3,065. However, at that date the plaintiff still owed some $94,897. He had no means of paying that sum. 70 The plaintiff's taxable income for the year ended 30 June 1994 was $45,543, of which $28,800 was referrable to his kindergarten salary and $16743 to his legal practice. For that year, $6,657 was paid in PAYE payments referable to his kindergarten salary. 71 On 15 March 1994, a Notice of Assessment issued for 1993, showing an amount payable of $76,890.33, including fines and penalties. 72 For the year ended 30 June 1995 the plaintiff's taxable income was $60,290, of which $30,052 related to his kindergarten salary and $33,438 related to his legal practice. PAYE payments of $6,786 were made in relation to his kindergarten income. 73 For the year ended 30 June 1996 the plaintiff's taxable income was $38,151 of which $24,909 was referrable to the kindergarten salary and $13,242 to the legal practice, with $5,626 being paid in PAYE deductions. 74 The plaintiff's Notice of Assessment for 1995 tax year showed $90,799.58 as being due. The Assessment for 1996 showed an amount of $95,124.36 as being due. 75 The plaintiff's Notice of Assessment for 1997, issued on 7 September 1998. It showed his taxable income as $42,986 and an amount of $166,142 as being due. 76 The plaintiff entered into a contract upon terms for the sale of his legal practice in July 1998. The contract price was $72,900, the purchaser being his employed solicitor, Mr Angelovski. 77 On 23 September 1998 a contract was entered into for the sale of the kindergarten business, including the real estate, for a total sum of $180,000. 78 The proceeds of the kindergarten, together with funds in the company's operating account were disbursed as follows:

Deposit used for commission and accountants fees $17 000.00 Mortgagee - National Australia Bank $98 127.25 Conveyancing adjustments $1065.45 Wages termination pay $6127.01 Superannuation $6272.54 ATO Group Tax $26 396.14 ASIC $200.00 Annual Return cost - accountants $250.00 Creative teaching aids $1055.60 Amazing fencing $760.00 Miljun products $509.26 Employers mutual $1262.32 Quell $124.00 Carol Franklin (repayment of loan) $25 000.00 TOTAL PAYMENTS $184 149.52

79 The debt owed to Carol Franklin included costs incurred by her for the payment of utilities and wages, food and incidentals for the kindergarten, a loan of $5,000 lent to the kindergarten, and equipment such as toys, refrigerator and carpet. 80 A Notice of Amended Assessment for taxation year 1998 issued on 24 November 1999 and showed an actual amount owing of $227,579.65. 81 A further Statement of Liquidated Claim was filed by the Australian Taxation Office against the plaintiff on 11 December 1998 for the sum of $195,518. The particulars of that claim included income tax, plus additional tax, for late payment and interest for the years 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and provisional tax for 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999 plus additional tax for late payment and interest. 82 Default judgment was entered in favour of the Australian Taxation Office against the plaintiff for $186,821 on 12 March 1999. 83 A Notice of Assessment, issued on 25 October for 2000, showed the plaintiff's taxable income as $9,436 and indicated $203,721 as being due.

How the plaintiff's problems arose 84 The plaintiff said he asked Mr Hill sometime in August 1990, the precise date was not identified, whether he should delay the lodgement of his tax return for 1990 to "even out the provisional tax burden." He gave evidence that Mr Hill advised that he should and, also, that it might be possible to have any penalties for late lodgment waived by the Australian Taxation Office. 85 In his letter to the Bar Association of 15 October 2001, the plaintiff said: "I asked him [Mr Hill] if I should delay lodgement of my tax return to even out the provisional tax burden. He suggested that I should and advised me that he believed that he could have any penalties waived. I was not aware that provisional tax could be varied and he did not advise me of that." 86 There are some troubling aspects to this advice. If, as was undoubtedly the case, the plaintiff's income was to drop significantly in the tax year 1990/1991, the proper course was to apply for a reduction in provisional tax rather than defer lodging a return. 87 At paragraph 14 of his Statutory Declaration of 7 November 2001, the plaintiff addresses this matter: "My accountant Alexander Hill…suggested that by deferring lodgment of the return until the following year's income was clear I would probably not have to pay as much provisional tax as otherwise. I was not aware, and he did not advise me, that I could apply for a variation of provisional tax." 88 I have had some reservations as to whether to accept this evidence for I would have expected an experienced solicitor to have been aware of the potential for a variation of provisional tax. However I have decided it should be accepted. Unless the evidence is true there is little explanation for the fact that the plaintiff's affairs were not dealt with by an application to vary. There was no reason to incur the risk of fines and penalties for late lodgment unless the plaintiff believed it was his only option. The position is confirmed by a letter which the plaintiff wrote to his new accountants in 1994. 89 Having lost confidence in Mr Hill, the plaintiff engaged Widdup Barilla as his accountants. On 11 November 1994, he wrote to them about his tax affairs. In that letter he said that all his papers, including manually written cash books for 1988/1989 years, for both the legal practice and the kindergarten business, were given to Mr Hill at Partlett, Chave and Rowland in late February/early March, 1990. He said in the letter that he specifically recalled the delivery of his papers to Mr Hill as: "I was aware that even with extensions a return had to be done by the end of April. There was not much money made that year, in fact the taxable income was assessed at $15,686.00 and tax payable $ 2,694.94." 90 The letter continued: At the time when I gave those documents to Alex Hill… I indicated to him that I thought the next financial year was going to involve me in a large commitment for taxation as I had settled about $80 000.00 worth of third party matters in late 1990 and would have to somehow try to balance the two. He said not to worry about this. That did in fact occur and in August, 1990 I gave him all documents relating to both the practice and the kindergarten for the tax year 1989/1990. A manual cash book was also done for 1989/1990 but from 1991 we put it on computer ourselves on 'Solution 6.' When I first spoke to Alex Hill in about August, 1990 in relation to my personal taxation for 1988/1989 and 1989/1990 he said that he would wait until the 1991 year was complete before lodging those tax years so as to relieve me from the provisional tax burden in view of the amount made during 1989/1990. He did not mention varying provisional tax at all and we continued on that basis Shortly after that I spoke to Marilyn Cottee from Partlett Chave and Rowland who came to the office and confirmed with her that that was going to be done so that it would even out the provisional tax burden for 1989/1990. I also recall Alex Hill saying to me when I asked him whether penalties were involved that there were but that he could get those waived so that would not be a problem. I have also a computer print-out which is enclosed herewith which shows the time costing entries from Partlett Chave and Rowland. The first date that I can see in that that they appear to have done any work was 24 July 1990 where it says Deanne Mortlock spent 2 units on the work and on 29 July 1990 Alex Hill spent 25 units on the work, this appears at the bottom of page 2. All I can think of was that that was for the 1988/1989 returns being done which had been handed to them as said in early 1990. I am enclosing copies of the taxation assessments and my correspondence with the taxation office. Please also note that included in that correspondence is a letter from the Tax Office in which they enclose a final notice. This was apparently sent to Dewsburys and they did not send it on to Partlett Chave and Rowland and they were not aware that that final notice had been done. I was told by Alex Hill that had if they known about that they would have lodged the returns earlier as that increased the interest."

91 Of course, this letter was written long before the plaintiff was declared bankrupt. Although no doubt the plaintiff may have been motivated to criticise Mr Hill at the time, he was not writing with any thought that there may be a later conflict of evidence between himself and Mr Hill in this Court. The letter is important when considering whether the plaintiff's evidence should be accepted where it conflicts with that given by Mr Hill. 92 In his letter to the Bar Association, dated 16 October 2001, the plaintiff said: "I believe that my problem started with the bad and unprofessional advice that I received from Alexander Hill. The ATO did not assist, as their attitude is intransient (sic) and unrealistic as to negotiations both for enforcement of penalties and instalments. " 93 The plaintiff was asked, in evidence, what he regarded to be the cause of his bankruptcy, he said: "Well it was certainly due to an inability to properly manage my own affairs. I have to acknowledge that. There were other factors, but I must take the primary responsibility. Q. What were the other factors? A. I still believe I received some poor advice; accountancy advice. I had absolutely no idea that I was going to get a grant from the Federal Government in 1992 that was going to give me a very inflated income for the 1992 tax year and then cause a huge bill that I received an assessment for that I received later in 1993. They were the other factors. Apart from that, I suppose it was my mismanagement. …the other thing was the fact that the scenario changed in the preschool thing from a business that looked like it might build into something that I could sell and pay it all out. It fell down again. That was government policy. It was a change in government in 1996 that caused it." 94 I accept the plaintiff's evidence. The advice he received was misguided and he was in error to accept it. That error was compounded by the fact that when confronted by the burdens of impossible obligations, he made wrong decisions. However, he acknowledges those errors and now demonstrates an insight into his problems which he did not have when they arose.

The evidence of Mr Hill 95 Mr Hill gave evidence by affidavit and was cross-examined. He denied that he advised the plaintiff to delay the lodgement of his 1990 tax return to "even out the provisional tax burden." He also denied that he advised the plaintiff that any penalties might be waived by the Australian Taxation Office. 96 In his affidavit Mr Hill said: "I cannot say whether I ever specifically advised Mr Murphy [the plaintiff] that provisional tax could be varied. The notice of assessment states clearly on it that you have a right to vary provisional tax and given Mr Murphy's experience and expertise in tax matters this is something I would have expected him to know." 97 Mr Hill denied that he was slow in completing the plaintiff's tax returns in 1990 - 1991. He said in his affidavit that the difficulty in competing the plaintiff's tax returns was "always getting information out of him rather than any delay on my part." 98 Mr Hill also denied negotiating on behalf of the plaintiff with the Australian Taxation Office for the waiver of penalties. He said, however, that he recalled attending the offices of the Australian Taxation Office with the plaintiff on one occasion with a view, solely, to seeking some arrangement in relation to the payment of the plaintiff's outstanding tax debt. He could not recall with any specificity the outcome of that meeting, but maintained that a waiver of penalties was not sought. 99 Mr Hill gave the following evidence: "Q. When Mr Murphy came to see you or when you went to see him and you discussed his results for the good year when he had all those settlements, acting prudently, you would have asked him, 'Well, how are you going this year' We are going to need to make a variation application for provisional tax.' Acting prudently you would have done that, wouldn't you? A. At the time he made the point to me that he had this high income - no, prudently that's not what I would have done. What I would have have been concerned about was Mr Murphy making readily available in a timely way his accounting records to enable, as far as was humanly possible; for his returns to be lodged on time." 100 I find this response surprising. I have no doubt that a competent adviser to the plaintiff would not only have sought to file the return on time but would also have given clear advice about the opportunity to vary provisional tax. The failure to give that advice is the source of many of the plaintiff's later problems. 101 He was asked specifically about the matter of deferring the 1990 return: "Q -- do you say there is no way that the question of deferring the 1990 tax return for a few months so that the results of 1991 would be known was discussed between you? A. I don't recollect. I do not recollect such a conversation. I can't imagine why. 102 He was also asked: "Q Do you then say that the only reason that the returns for the three years were not lodged until August 1992 was that Mr Murphy did not provide timely instructions? A. I wouldn't say that's 100 per cent, because there would be a large contributing factor. Q. What else contributed? A. Well, it could be time constraints within the office." 103 When Mr Hill left Partlett's in June 1993, he took the files relating to the plaintiff with him. He was asked whether he assisted the plaintiff in drafting correspondence to the Australian Taxation Office. He replied, "I don't recall having done so. It is possible. I don't recall it though." He was shown a letter dated 24 September 1993 addressed to the Commissioner. He did not deny being the draftsmen of the letter, but could not recall taking part in its composition. He was shown a further letter to the Australian Taxation Office dated 21 June 1993. Again, he did not recall preparing it but did not deny the suggestion. 104 Mr Hill was asked whether he attended the Australian Taxation Office with the plaintiff to endeavour to negotiate a variation in the fines and penalties and arrangements for repayment. He said he recalled attending on one occasion in the first few months of 1993: "I went there because Barry Murphy had arranged a meeting with a gentleman at the tax office. We had no pre-briefing as to why the meeting was to take place and at all times the conversation was controlled by Barry. Q. You knew the purpose of the meeting was to discuss his tax debt? A. That is right. Q. Now if you are going to the Commissioner to discuss an outstanding tax debt, one of the obvious things for discussion is whether any of the penalties might be waived or reduced, is it not? A. Yes and it obviously would have come up. Whether I specifically did it, or whether Barry did it, I don't know." 105 This evidence must be contrasted with the evidence given by Mr Hill in his affidavit which suggested that he would not have made any application to the Australian Taxation Office in relation to the waiver of penalties. He was questioned about these matters: Q. Paragraph 11, insofar as it suggests that you would not have raised that at the meeting with the ATO, is quite wrong, is it not? A. From what you just - in terms of that meeting, at that time, yes." 106 He was asked about the evidence in his affidavit where he denied advising the plaintiff that he could delay lodging his taxation return to alleviate his provisional taxation situation. "Q. When you say "It is not something you can do", do you mean it is something that it is not proper to do? A. Well, you wouldn't do it, because it's not necessary to do it. Q. That is not quite what you say in your affidavit. In your affidavit you say, "It is not something that you can do? A. That's fair enough, yes. I think that would be correct too. Q. Do you mean it is not something that you can properly do? A. Yeah. Q. Are you saying there that that is not advice that you would have given because you would never give advice to do something improper? Is that what you are saying? A. That's correct, yeah. Q. You would never give advice to do something improper? A. Well, I think that's a fair comment, yeah." 107 I do not accept Mr Hill's evidence where in conflict with the plaintiff's evidence. He was a most unconvincing witness and could no offer no explanation for the lengthy delay in lodging the plaintiff's tax returns except to say that the plaintiff was slow to provide the necessary details. Whether or not this is the case, the plaintiff was one of his clients and he was responsible to the Australian Taxation Office for the plaintiff's affairs. His failure to recollect critical matters must be contrasted with the plaintiff's evidence which is confirmed by his letter of 11 November 1994. The letter is significant and confirms that Mr Hill worked on the returns during 1990 and otherwise confirms the critical elements of the advice which the plaintiff claims Mr Hill gave. I am satisfied that the plaintiff was poorly advised. His problems are significantly related to that advice.

The disposal of the kindergarten business 108 The plaintiff first put the kindergarten business as a package, including the land and the business, on the market in early 1998. By this stage government fee subsidy arrangements had again changed and the business had declined from its value in 1993. 109 When asked why it took five years between the recognition of a tax problem and the listing of the business for sale, the plaintiff responded: "I spoke to a number of estate agents. I asked them, if they had anyone who might be interested, if they would let me know. Nobody wanted a formal listing. I was told by a number of those agents, and at least by my accountant, that until I had a profitability record, because it had lost money for years, until I could actually show a record of profit, it wasn't going to realise any real amount of money. If I could show three or four years of profitability, it would show a fairly good return on sale." 110 The plaintiff said in his letter of 15 October 2001 to the Bar Association: "I expected to obtain enough from the sale to clear all of the businesses debts and pay out the ATO. The property as purpose built as a kindergarten and hence could only be sold as an operating concern. I could not find an interested buyer. In 1998 my accountant introduced me to an agent who had recently started specializing in kindergartens and in mid 1998 she found a buyer but I had to reduce the price from what I had originally expected by around $100 000.00 and the sale settled in October 1998 for $180 000.00. Although this amount met all outstanding debts owing by the business it left no surplus. All taxation and employee entitlements were paid in full." 111 I accept this evidence.

Sale of the legal practice 112 In 1998, the plaintiff sold his legal practice to Lupocho Angelovski, who had previously been his employed solicitor. The purchase price of the practise was $72,900.00 and was to be paid by quarterly instalments from 31 October 1998 to 30 October 2001. A further agreement was entered into, whereby the remainder of the purchase money was to be provided by payment from time to time as and when fees were recovered. Only $23,300.00 was paid to the plaintiff by the purchaser before the plaintiff's bankruptcy in October 2000.

The plaintiff's bankruptcy 113 I have already indicated that in 1998 the Australian Taxation Office filed a Statement of Liquidated Claim to recover the debt from the plaintiff, and obtained a default judgment on 12 March 1999 for $186,821. The plaintiff's position by 2000 was that he faced a significant tax debt, with penalties and interest. He believed that the situation had become "completely unmanageable", there being no prospect that he could pay the debt owing. 114 A bankruptcy notice was issued by the Australian Taxation Office on 26 June 2000, being served on the plaintiff in about July 2000. It claimed the sum of $209,896. The Australian Taxation Office filed a creditor's petition on 5 September 2000. 115 On 11 September the plaintiff signed an authority under s 188 of the Bankruptcy Act 1966 (Cth) authorising accountants Hall Chadwick as Trustee, to seek an arrangement whereby a Deed of Assignment pursuant to Part X of the Act, would be executed. 116 According to the Statement of Affairs prepared by the plaintiff and received and lodged with the Insolvency and Trustee Service of Australia on 22 September 2000, the plaintiff's total assets amounted to $53,000 with an estimated realisable value of $49,600. The plaintiff's liabilities to unsecured creditors amounted to $325,000, the major creditor being the Australian Taxation Office for the sum of $315,000. 117 The essential effect of the Deed would be that the plaintiff would assign all his available property to the Trustee and the creditors would accept payment in full and final satisfaction of all debts owed to them. Under the Deed proposal, after the costs of administering the estate, there would be about $26,832 available for unsecured creditors and the estimated likely dividend to creditors would be about 8.256 cents in the dollar. By the Trustee's calculation, if the creditors wished to bankrupt the plaintiff, after the costs of administration of the estate, there would be $14,132 available for unsecured creditors and the estimated likely dividend to creditors would be about 4.348 cents in the dollar. 118 At that point in the opinion of the Trustee, if the plaintiff was to be declared bankrupt, there would be "little likelihood of a distribution to creditors." 119 The Part X arrangement was accepted by the Commonwealth Bank (to whom the plaintiff owed $10,000 by way of debt accumulated on a credit card), but not by the major creditor the Australian Taxation Office. 120 The plaintiff became bankrupt by his own petition on 16 October 2000.

The plaintiff's response to his difficulties 121 It was suggested to the plaintiff, in evidence, that by delaying the filing of his 1990 return he was acting contrary to the requirements of the taxation laws, because he thought that it may have had a financial benefit for him. He denied the suggestion and explained his motivation in these terms: "Because I thought it might keep me out of a potential problem. That was really why. It wasn't a positive benefit." 122 He was also questioned about the fact that the returns were not lodged until well after any concern in relation to provisional tax for the year 1991 had gone and challenged as to the steps he had taken to ensure Mr Hill effectively discharged the obligation to file the return. He said: "I would have rung him. I can't remember what I did in relation to it, but I would have spoken to him a number of times about it and said I had to get these returns in. The deliberate lateness I have deposed to should have been in the later half of 1991, I didn't accept they would go in 1992. It cost me a lot of money in penalties because they went in almost 12 months after they should have gone in on what my estimate was going to be." 123 In relation to the penalties, he said: "I asked if there where penalties. I was told that that should not be a problem. I didn't know that the three years returns were going to go in at once. I always thought that the 1989 return was ready to go, insofar as I was concerned, fairly early in 1990. It didn't go in until late 1992. It wasn't completed until then." 124 He was asked what steps he took, if any, other than making his instalment plan offer, to address his outstanding taxation obligation. He responded: "I believe that negotiations were being held on my behalf by my then accountant to reduce some of the penalties. I don't remember exactly when it was but I know I had gone to see a man at the tax office in Hunter or Street or Bridge Street who had indicated that if there was a problem, if the returns had been made late and if it wasn't my fault entirely they would look at that but otherwise it was just to try to pay off - yes, the only steps I took, yes." 125 The plaintiff's tax liability at 30 April 1993 was $37,864. After receiving a Notice of Assessment for 1992 in July 1993, including provisional tax his liability was $94,774. His position was obviously very difficult and probably hopeless. He was asked: "Q. Why didn't you, at that point of time sit down with your accountant and say how am I going to complete this obligation and get rid of the problem? A. He did - in fact, he drafted, I think, that letter that is in there to the tax department setting out my assets and liabilities, he drafted it. … Q. After the $37 000 plus the assessment where you were saying to yourself as to how were you going to meet your responsibilities? A. I was saying all I could do is hope that I - build, this kindergarten up to a point, now that we've got relief in which I can sell it and pay all of this out, that is my own talk to myself, that was the only thing I could possibly think of doing because I had no intention of doing anything else at that stage." 126 He was also asked what steps he had taken to pay the outstanding taxation debt at October 1993. He said that he had deliberately employed himself in the company, so that he could make regular instalment payments. He said: "I haven't paid any amounts towards the amount that was outstanding, that's correct. That's partially - in, retrospect, I wish I had. It's partially through bad management on my part. It's partially because the amount was overwhelming, and partially because I was hoping that I could sell the kindergarten and rescue myself from my situation." 127 He was asked about the steps he took in the course of the year ended 30 June 1995, to pay or to make provision for the payment of income tax. He said "I didn't." He expanded on this by saying: "A. I had reached the stage - it was and I should have, but I had reached the stage where the problem was so enormous that if I paid $10 000 it was going to go back to something owing in 1992, and part of the penalties, and that was the wrong attitude and wrong approach on my part, but that was happening in my head with the amount that this had all accumulated into. … Q. What did you think was going to happen? A. I was hoping I could sell the property and business for an amount that I might be able to pay the whole thing out." 128 The plaintiff said in response to a question as to whether he would have been able to pay off his taxation debt in June 1993: "In retrospect I wish I had put in a debtors' petition at that time. I don't believe that it would have paid out my debts." 129 He said: "I don't believe that those assets were readily realisable in that way, or anything like it. I wished to retain my legal practice. It was my only form of income. I believed, as I think…that the kindergarten would, in all possibility, increase in value because the fee relief scenario had come about. I had spoken, even at that stage, to a number of people involved in the industry. I believed, once I put up a profitability record, that it would increase dramatically in value. I believed, probably for a while it did, but then the fee relief was taken away, or diminished. Q. Rather than attempting to rectify the position in which you found yourself, where you were unable to meet your tax obligations, you chose to trade on in the hope that such trading would create an improvement in your asset position to enable you to meet your debts? A. Yes. ….. I tried to battle on to pay my debts as best I could. I didn't believe I was going to be able to give the Taxation Department more money by declaring myself bankrupt back in 1993 than if I tried to continue running the practice, earning an income myself, running the kindergarten and building it up." 130 It was put to him that in 1993 he had no hope of trading out of the deficit position he had found himself in. He responded: "A. In retrospect, yes, but I did believe I had a chance to do it then. I would have been foolish not to have tried and just gone bankrupt and have some relief from that. Q. The point I am putting is that you did not confront the issue in 1993 by, in fact, examining what your options were? A. It is a very difficult question when one says "confront". One is looking at perceptions. I believe I confronted it. I believe I chose the option of trying to trade my way out of it, rather than just going bankrupt." 131 The plaintiff agreed that from September 1993 up until the date of his bankruptcy in 2000 he made no tax payment, other than for PAYE tax. He accepted that during this period he had earned taxable income, in addition to his salary from the company. He said that during that time he had spent all the money that he had received. He was asked how he had spent the money: "Q. In a way that you chose? A. In accordance with normal living. Q. In a way that you chose? A. Yes." 132 He was asked: "Q. I suggest to you that there was no inadequate intention by you in your obligations to the Tax Office, but rather a deliberate decision by you that you not attend to discharging your liabilities to them? A. I didn't have the money to pay the bills, the penalties. Q. You had the money to pay other bills? A. Yes. Q. You had the money to spend on activities that you chose? A. Yes." 133 Those activities included, at least since his bankruptcy, expenditure of some monies gambling on poker machines. It is impossible to determine the amounts spent in this manner although in the overall scheme, they were not significant. 134 The plaintiff said that once he received the bill for $94,897 in 1993, his "hands went up in the air a bit", "because he didn't know how he was going to meet it". In re-examination he was asked what capacity he had between 1993 and 1999 to make a payment, he responded: "I had some capacity to make a payment. If I had managed my money better, I no doubt could have, in retrospect could have. I was not managing the money well. I had the wrong attitude to a degree because I was wanting to deal with the whole matter and get it out of the way. By throwing a few dollars at it, it was just a drop in the ocean. I acknowledge that attitude was wrong." 135 The plaintiff said that the reason for the transfer of the kindergarten business was so that he could stop getting provisional tax bills for the business and make PAYE payments, he said: "I didn't even look which was the more tax efficient way of doing it, whether the company paid dividends or paid wages. I wanted to make it. There was no liability coming from that source of taxation." 136 The plaintiff was asked whether by delaying his possible bankruptcy in 1993 until 2000 he had the intention to wipe out all of the tax liability that accrued in the interim. He said: "No, I had no intention of doing that. To me looking at becoming bankrupt back at that time wasn't going to benefit me or benefit the Taxation Commissioner. It wasn't going to benefit everyone more if I could get myself out of it. I didn't like living for a number of years with the Damocles' sword hanging over my head. It wasn't very pleasant. I had to get out of it."

The plaintiff's family and personal circumstances 137 The plaintiff separated from his wife in 1983. He commenced living with Carol Franklin in 1992. He continues to live with Ms Franklin. Their circumstances are modest. 138 The plaintiff has two children, a son and a daughter, from his first marriage. The children were still dependent in 1991. Between 1991 and 1994, the plaintiff paid fees of around $9,000 to $10,000 per annum to send his son to a private boarding school. In his evidence he explained that he accepted this obligation because of problems his son was having at home. He said in his evidence: "My wife had indicated some time earlier she couldn't handle him and when he went into high school, after speaking to Barbara Holborow, who is a Children's Court Magistrate, I came to the conclusion that I was willing to fund him in a boarding school to try to overcome the problem. That was well before I had the taxation problem." 139 Up until the end of 1996, the plaintiff made child maintenance payments of about $5000 annually for his daughter. 140 The plaintiff has not owned a house since 1990, the properties in which he had an interest being transferred to his wife as part of his divorce settlement. He has lived in rental accommodation since that time. Since before 1990, the plaintiff has driven the same 1988 model motor vehicle. 141 The plaintiff has not been prosecuted for any tax or related offence. The process of the Bar Council 142 The plaintiff first notified the Bar Association of the fact that he had been declared bankrupt by letter dated 3 April 2001. His letter incorporated the explanatory statement required by the Act. He stated: "On 16th October 2000 I filed a Debtor's Bankruptcy Petition at the Sydney Registry and was declared a bankrupt. Notwithstanding the above declaration I believe that I am a fit and proper person to hold a practicing certificate in light of the history leading to my bankruptcy. In the financial year ended June 1990 I make, what was for my then Solicitor's Practise, (sic) a particularly high profit, and was faced with a provisional tax bill that was beyond my capacity to pay at that time. My Accountant advised that I should try to delay payment until the following year, as this would even out the provisional tax payable. He further advised me that he believed the ATO would waive penalties. I thereafter made another large profit in 1993 and my Accountant and I approached the ATO about payment by instalments and waiver or reduction of penalties. The ATO refused to either, reduce or, waive any penalties and indicated that I must pay the tax owing within approximately 6 months. To meet this demand I would have had to pay approximately two years pre-tax income to the ATO in 6 months. The demand was impossible for me to meet. I did make several payments of about $2,500 per month but was not able to sustain the payments. The ATO's demand was about $10,000.00 per month. My then income was about $40,000.00 per year before tax. I do not have full (but some) records of this history largely because my Accountant carried out most negotiations verbally. The tax owing at this time was approximately $60,000.00. During the early 1980's I had a joint interest in 3 or 4 properties but in the mid 1980's I went through a divorce and property settlement and by 1990 my only assets were a Sole Practitioner Suburban Legal Practise (sic) and the freehold and business of a 24-place kindergarten at Seven Hills. The kindergarten had a negative net value and I was living from the income from the Practise. (sic) During the first half of the 1990's the Federal Government introduced fee relief for childcare. Over a period this increased the value of the kindergarten and I believed that I might be able to meet my tax commitment. I engaged another Accountant and he negotiated with the ATO to obtain some relief for me from the penalties to enable me to pay my tax. The ATO again refused any relief from penalties, which had increased my indebtedness to approximately $260,000.00, and I suffered the further setback in that the Federal Government abolished fee relief. I had placed the kindergarten on the market but had to accept a sale price of approximately one half of what I would have obtained 6 to 12 months earlier. In 1998 I sold both my Legal Practise and the kindergarten and was admitted to the Bar. From the proceeds of sale of the kindergarten I paid out its' debts. The Legal Practise was sold on terms, as this was the only way that I could obtain a buyer. My creditors are the Commonwealth Bank ($9,500.00) and the ATO (approximately $350,000.00). The debt to the ATO is only about $65,000.00 in tax and the balance is penalties, which run at 20% (which I believe is cumulative). In October 2000 I attempted to enter into a Part 10 arrangement giving to my creditors the amount of the proceeds of sale of the Practise. This offer was accepted by the Commonwealth Bank but not by the ATO. The ATO presented a debtors petition against me in October 2000 and I then declared myself bankrupt. My tax returns have been lodged reasonably in time over the years and are in order at present. The reasons for my bankruptcy are as set out above and do not had (sic) any flavour of avoiding taxation or creditors. For these reasons I do believe that I am a fit and proper person to retain a Practicing Certificate." 143 The letter was acknowledged by letter dated 5 April under the hand of J Macken, Deputy Professional Affairs Director. On 14 May 2001 the Bar Association wrote asking for further details of the plaintiff's taxation liabilities. The plaintiff responded and provided further details with his letter of 21 May 2001. The Bar Association again sought further information in its letter dated 6 June 2001. 144 By letter dated 15 June 2001 addressed to Mr Brendon A Murphy but forwarded to the plaintiff, Mr Seth, the Executive Director of the Bar wrote: "The details of the notifiable incident have been considered and you are advised that no further action is to be taken with respect to the matters disclosed in the notification." 145 Upon receiving this letter, the plaintiff telephoned Mr Macken and the following conversation occurred: "Plaintiff: Barry Murphy is my name, Mr Macken, I have received a letter from the Bar Association mailed to my address. I don't know if it is for me or misaddressed - it is to Brendan A Murphy. Macken: What does it say? Plaintiff: I then read out the text of the letter. I also received a letter of the 6th June asking me for information. One of the questions is about a failed business venture, which I don't understand. I did have a kindergarten - is that what is being referred to? Macken: Yes. I remember a kindergarten - there was only one person with a kindergarten, so it is definitely for you. What is the file reference? Plaintiff: I then read it to him. He said: Oh yes. I think that's right. There was a pause and he then said: The file is out. I said: What do I do about the 6 June letter? Macken: Ignore it, but guard the other one with your life." 146 It was later discovered that the letter of 15 June 2001 had been sent in error. The error was corrected by letter dated 28 August 2001 when a response to the letter of 6 June was requested. A more formal demand for information was made by letter dated 19 September 2001 which was followed by a further letter of 25 September 2001. 147 At about this time a report entitled "Interim Report to Bar Council - 11 October 2001" was prepared. The section headed "Discussion" was in the following terms: "On the information presently available, it appears that the barrister has failed to pay any taxation for an approximately seven year period from 1993 to 2000. During that period, whilst in respect of some years he was not required to pay any further primary tax, nevertheless from 1993 onwards his account was always in debit with the ATO. The barrister has not properly explained why he was unable to pay any tax for that seven year period. Clearly he was deriving some income in respect of some of those years because from the information that is available it is apparent that he incurred taxation liabilities in respect of some of those years. It is the Committee's view that the barrister has had sufficient opportunity to provide a proper explanation for his failure to pay any tax for the seven year period. On the information that is available, the Committee is of the view that it is appropriate to infer that the barrister deliberately chose not to meet his taxation obligations, but rather chose to spend his earnings on other expenditure, presumably of a private nature. In these circumstances the Committee recommends that Bar Council resolve that, after investigation, it considers that the bankruptcy arose in circumstances that shows that the barrister is not a fit and proper person to hold a practising certificate, and therefore that the barrister's current practising certificate be cancelled under section 38FE. This draft report will be sent to Mr Murphy for any comments." 148 It is not apparent whether the relevant committee of the Bar had in fact considered the draft report although I infer this had occurred. In any event, the draft report was forwarded to the plaintiff with an invitation for him to review it and: " … let me know if: 1. you consider it contains any errors of fact or emphasis; or 2. there are any other facts that are material to the subject matter of the interim draft report you would wish Bar Council to consider." 149 The letter then contains this statement: "As has been indicated my letters of 23 and 31 July, the obligation is upon you to satisfy the Bar Council that you are a fit and proper person to hold a practising certificate notwithstanding the notifiable event. You should carefully consider the amendments introduced into the Legal Profession Act 1987 by the Legal Profession Amendment (Disciplinary Provisions) Act 2001 before you respond to this letter." 150 Three matters should be noted about the draft report and the letter. Firstly, the draft report recommends that the Bar Council take a decision pursuant to s 38FE, although the requirements of the section are not discussed, and the context of the statement not considered. I have already indicated that, in my judgment, the discretion under s 38FE was no longer available. 151 Secondly, the letter suggests that the legislation imposes an onus on a barrister to satisfy the Bar Council that they are a "fit and proper person". The inference is that failure to satisfy the Bar Council will bring regulatory action. This view is no doubt a reflection of the Bar Council's understanding of s 38FE(3). For the reasons I have explained I do not believe it is correct. 152 Thirdly, the letters said to be dated 23 and 31 July were not in evidence. As they were not referred to earlier in the letter, when all previous correspondence was apparently identified, it may be that no such letters were sent. 153 The letter concluded with the following paragraph: "If the Bar Council concludes in terms of s 38FC(1) of the Legal Profession Act 1987 that the matters investigated were committed in circumstances that show that you are not a fit and proper person to hold a practising certificate or in terms of s 38FE(1)(b) that you have failed to show that you are a fit and proper person to hold a practising certificate, you will be invited separately to make submissions to Bar Council as to the course that it should take consequence upon its finding." 154 This is the first mention of s 38FC(1) of the Act. It was not referred to in the draft report. 155 The plaintiff responded with a detailed letter of 15 October 2001. He attached a detailed account of his affairs and various documents from the Australian Taxation Office. 156 At its meeting of 24 October 2001 the Bar Council considered a further report from the relevant committee. The section headed "Discussion" was as follows: "The barrister's main difficulty is that for an approximately ten year period, the barrister only paid $13,000 taxation, and those payments were made in the context of advice from the barrister's accountant that this would assist in negotiations at that time with the ATO. No further payments were made. The barrister's explanation is that in 1990 his practice income was high. He states it to be an income of $60,000-$65,000 in that year. The barrister says that his accountant at that time confirmed that the barrister could delay lodgment of his tax return to even out the provisional tax burden. The barrister states that he was not aware that provision tax could be varied. Returns for 1990 and 1991 were then lodged together or close to one another. That brought about an assessment notice in July 1993 requiring a payment of tax including provisional tax and penalties in the sum of $94,774. The barrister states that that was totally beyond his capacity to pay at that time. There was then an attempt to negotiate with the ATO. It was in that context that the three payments were made. The ATO did not agree to an instalment program, nor to the waiver of penalties. The barrister then states that from 1997 he attempted to settle the kindergarten business. He states that he expected to obtain enough from that sale to clear all of his kindergarten debts and pay out the ATO. In 1998 the kindergarten sold, but for a lower price than expected. The sale price was sufficient to meet all outstanding debts of the business but no more. In 1995 the ATO served a statement of claim upon the barrister. The amount claimed was $195,000 as at 9 December 1998. It is not clear why the barrister says that the ATO commenced proceedings in 1995. Judgment was obtained in March 1999 in the sum of $186,821. The barrister states that his problems started with the poor professional advice he received from his first accountant. Further, the barrister states that the ATO did not assist, as their attitude is intransigent and unrealistic. The barrister states that the penalties and interest imposed (he did not indicate what period of time) meant that once he had fallen behind he had very little chance of redeeming the situation. He states that he did not give up on it until 1998. The difficulty with the explanation is that whilst it is understandable that the barrister may have been unable to meet the outstanding balance due in 1993, given that - it is assumed - he had made little provision to meet the upcoming taxation bill, nevertheless this does not explain why no tax was paid thereafter. The barrister continued to derive a taxable income from his practice as a solicitor until 1998, and thereafter from his practice as a barrister (although the income from the practice as a barrister was very modest, after costs). Further, despite being confronted with a large tax bill in 1993, the barrister was only able to pay $13,000 in total. There is no explanation as to why he was unable to pay more than that at that time, or thereafter. On the other hand, it appears that the barrister is up to date with his BAS and IAS (although there has been inadequate independent verification of these matters). The main problem is that for a lengthy period of approximately ten years, it appears that the barrister chose not to pay his taxation debts, but rather, it can be inferred, chose to spend his money on other expenditure, presumably of a private nature. In these circumstances the Committee recommends that Bar Council resolve that, after investigation, it considers that the bankruptcy arose in circumstances that shows that the barrister is not a fit and proper person to hold a practising certificate, and therefore that the barrister's current practising certificate be cancelled under section 38FC." 157 It is notable that the report makes a recommendation that the Bar Council cancel the plaintiff's practising certificate under s 38FC. Sections 38FE is not mentioned. The report contains no discussion as to the elements which should inform a decision as to a person's fitness to practice. The reason for the recommendation appears to be the conclusion based upon the presumption referred to in the penultimate paragraph. 158 The Bar Council further considered the matter at its meeting of 24 October 2001. By its letter of 26 October 2001 the Bar Association says the Council resolved as follows: "For the reasons expressed in the report dated 18 October 2001 and having considered the letter from Barry James Murphy of 15 October 2001 and his statutory declaration sworn 16 October 2001 with annexure 'A', resolved: (i) the Bar Council considers that the bankruptcy arose in circumstances that show that Barry James Murphy is not a fit and proper person to hold a practising certificate; and (ii) the practising certificate of Barry James Murphy be cancelled under s 38FE. Further resolved to defer cancellation of the practising certificate of Barry James Murphy so that it takes effect from midnight on Friday 2 November 2001, for the purpose of enabling the proper arrangement of the affairs of the barrister." 159 By resolving to cancel the plaintiff's practising certificate under s 38FE the Bar Council had acted contrary to its earlier indication, that if it intended to make a resolution pursuant to s 38FE, it would allow the plaintiff to make further submissions. The plaintiff responded to the Bar Association's letter with a letter from his solicitor dated 1 November 2001. Reconsideration of the matter was sought. The Bar Association responded by letter dated 2 November 2001. Notwithstanding that the Bar Council had apparently resolved to cancel the plaintiff's practising certificate at its meeting of 24 October 2001, the Executive Director wrote in the following terms: "Having considered a letter dated 1 November 2001 from Stewart Cuddy & Mockler, on 1 November 2001 the Bar Council resolved to defer consideration of this matter to afford you the opportunity to make any further submissions you wish to make no later than 4 pm on Wednesday 7 November 2001 . The Council invites you to make submission on the basis that it may make a determination under s 38FC as well as, or alternatively, under s 38FE of the Legal Profession Act 1987. Accordingly, Bar Council resolved to defer cancellation of your practising certificate until it has had the opportunity, on 15 November 2001, to consider any further submissions you wish to make. The Legal Services Commissioner has advised that he has granted an extension of time (to 27 November 2001) to enable the Bar Council to make a determination in your matter." 160 The plaintiff's solicitors responded by letter dated 7 November 2001 which attached further detailed information and submissions. There was a further exchange of correspondence, followed by a further report to the Council dated 15 November 2001. This further report contains no reference to s 38FC but recommends "In terms of s 38FE(1), the Bar Council is not satisfied that Barry James Murphy has by his written statement shown that he is a fit and proper person to hold a practising certificate notwithstanding the notifiable event". The report recommended that the plaintiff's practising certificate be cancelled. 161 At its meeting of 15 November 2001 the Bar Council resolved: "For the reasons expressed in the report dated 18 October 2001 and the further report to Bar Council dated 15 November 2001 and having considered the Executive Director's letter to the barrister dated 26 October 2001, Stewart Cuddy & Mockler's letter to the Executive Director dated 1 November 2001, the Executive Director's letter to the barrister dated 2 November 2001, Stewart Cuddy & Mockler's letter to the Executive Director of 7 November 2001 and annexure, the Professional Affairs Director's letter to the barrister of 9 November 2001 and Stewart Cuddy & Mocker's reply to the Professional Affairs Director of 13 November 2001 Bar Council resolved that, for the purposes of s 38FE(1)(b) of the Legal Profession Act 1987 the Bar Council is not satisfied that Barry James Murphy has by his written statement shown that he is a fit and proper person to hold a practising certificate. Further resolved to cancel the practising certificate of Barry James Murphy, effective midnight Friday, 23 November 2001 to enable the proper arrangement of the barrister's affairs." 162 A request was made of the Bar Council to state the reasons for its action. The response from the Council's solicitors was that the reasons are expressed in the report dated 18 October 2001 and 15 November 2001. This response is difficult to understand for the report of 18 October related to a prospective decision pursuant to s 38FC and the later report to s 38FE. The most that could be gleaned from the reports as to why the Bar Council made its decision is that since 1990 the plaintiff, although he met some of his tax obligations, did not pay all his tax, it being inferred that he chose to spend his money on other expenditure "presumably of a private nature". 163 Without identifying the circumstances in which the plaintiff fell short of his obligations to pay his income tax liabilities and, without consideration of the elements which contribute to determining whether a person is "fit and proper", the decision of the Bar Council, although relevant, should be afforded little weight. Furthermore, as I have already indicated, I do not believe it was appropriate for the Bar Council to determine the matter under s 38FE in any event.

The evidence of other legal practitioners 164 Mr William Barry Beilby, a solicitor, gave evidence that he has known the plaintiff since they were at school together. From about 1980 and 1998, Mr Beilby acted as the plaintiff's city agent. In that role he carried out numerous legal functions for the plaintiff. He gave evidence that the plaintiff's work was competently completed. He said he found the plaintiff to be reliable, frank and trustworthy and a person who was regarded highly as a practitioner by other legal practitioners. He said he would have no hesitation dealing with the plaintiff, although he was aware of his financial circumstances and the fact that he had been declared bankrupt and would brief him as counsel in an appropriate matter. 165 Mr Geoffrey Johnston, a barrister, also gave evidence by affidavit. He has known the plaintiff for twenty years and before giving evidence had read the report about the plaintiff to the Bar Council. He said he had always found the plaintiff to be "a man of integrity and complete honesty" and that he "would feel no discomfort or difficulty were Mr Murphy to remain in practice as a barrister following his bankruptcy in sharing the Bar table or in conducting professional dealings on behalf of clients with him." 166 Mr Johnston was not cross examined. 167 Mr Garry Foster, a barrister, also gave evidence by affidavit. He has known the plaintiff personally for more than twenty years and has had many professional dealings with him. Mr Foster had been President of the St George Sutherland Regional Law Society, a Councillor of the Law Society and Chairman of the Law society Professional Conduct Committee. He has read the relevant report to the Bar council and says that he has "always found Mr Murphy to be a man of who in the day to day practice of law was reliable, frank and trustworthy and who conducted himself to the standards I would expect as a member of the legal profession." 168 He said further, "I would feel no discomfort or difficulty were Mr Murphy to remain in practice as a barrister following his bankruptcy in sharing the Bar table or in conducting professional dealings on behalf of clients with him." 169 Mr Foster was not cross examined. The Bar Association's Submissions 170 The Bar Association submitted that I should not accept the plaintiff's evidence that he acted to delay the filing of his income tax return for the financial year ending 30 June 1990 on the advice of Mr Hill. I have dealt with that matter finding that I prefer the plaintiff's evidence. 171 It was further submitted that the appropriate course for the plaintiff was to have determined to place himself into bankruptcy in 1993 rather than attempt to trade his way out of his problems. As the plaintiff himself acknowledges, with hindsight, this would undoubtedly have been a more prudent decision. However, I do not believe it to be dishonest or lacking in probity for that decision to have been made as he did. Perhaps his optimism was "blind" but his decision to "struggle on" was not made out of an endeavour to avoid his financial obligations. To the contrary, it acknowledged them. 172 The Bar Association's ultimate submission as to the appropriate finding is based on the proposition that from 1993 the plaintiff paid little tax and presumably spent his money on other matters. The submission was that a person is not "fit and proper" to hold a certificate if they receive income but, fail to pay the tax due on that income. Although, without question, a failure to pay tax raises serious issues, in my opinion, the circumstances of the failure must be carefully considered before a decision can be made that a person is not "fit and proper".

Conclusion 173 After 1993, the plaintiff did rearrange his affairs so that all of the taxation obligations with respect to the kindergarten, including the tax due on his own salary, were paid. He also paid a total sum of $13,000 toward the tax liability on his income as a solicitor. Ultimately, he did not pay even part of the tax due on that income but, by that stage, it was plain that his position was hopeless, unless the sale of his assets could retrieve the situation. He says, and I accept that his decision making processes were compromised by the difficulties in which he found himself. The only way he could meet his taxation obligations would be from the sale of his remaining assets, the kindergarten and his law practice. 174 It is correct, as the Bar submits, that the plaintiff could have paid more tax than he did and, indeed, should have paid more in the years after 1993. However, he would not have been able to pay the whole debt for, by that time, his indebtedness was accumulating at a greater rate than he could afford. He deserves to be severely criticised for the fact that he did not pay more. But, if I find, as I do, that he honestly intended to try to trade out of his difficulties and by the sale of his remaining assets, meet all his liabilities, his conduct could not be described as dishonest. 175 I do not believe the public expects barristers to be perfect. There is a need to ensure, when problems come to notice, that the objectives of professional discipline remain the motivation for any disciplinary action. I do not believe that a failure to meet personal financial or taxation obligations, without a dishonest intent, would alone justify a finding that a person is not "fit and proper". 176 Kitto J in Ziems v The Prothonotary of the Supreme Court of NSW [1957] 97 CLR 279 emphasised the fact that a barrister is "in a relationship of intimate collaboration with the judges, as well as with his fellow-members of the Bar." That relationship "carries exceptional privileges and exceptional obligations." However, he went on to say: "Yet it cannot be that every proof 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. … 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." 177 In the present case I am satisfied that the plaintiff did not act dishonestly, was not motivated by greed and genuinely, although mistakenly, hoped he could trade out of his difficulties. I do not find that his conduct, although deserving of criticism, even strong criticism, justifies a finding that he is not a "fit and proper person". He was wrong to take the advice to delay filing his tax returns and he should have addressed his situation earlier and filed for bankruptcy when his position was obviously hopeless. He should also have made more taxation payments, rather than merely hope that from the sale of his remaining assets he would be able to meet all his obligations. 178 Mason P emphasised in Hamman that revenue obligations were not to be looked upon differently to obligations arising from personal or commercial transactions. I respectfully agree. 179 However, in my view an inability to meet, for example, one's mortgage commitments or family maintenance obligations, through mismanagement, but without dishonest intent, would be unlikely to justify the ultimate disciplinary response. It would be otherwise if the failure was deliberate and intended to disadvantage the barrister's creditors and advantage the barrister. 180 In the present case it is significant that although the 1989, 1990 and 1991 taxation returns were late there was no attempt to conceal or understate the plaintiff's income or avoid his taxation obligations either in those returns or the later returns. 181 All subsequent returns have been lodged. Furthermore, all taxes due from the kindergarten have been paid as were some further modest contributions. These are not the actions of a person intent upon defrauding the revenue to his own advantage. 182 I do not accept that the plaintiff's failure to pay some of his tax, in circumstances where his ultimate object remained to pay out all his debts including his taxation liabilities, requires the conclusion that he is not a "fit and proper person". The plaintiff acknowledges that he was wrong to delay lodgment of his taxation returns and that he should have addressed his financial problems at an earlier time. I accept that acknowledgment as genuine. No doubt the decision of the Bar Council and the publicity given to these proceedings have been a significant reminder to the plaintiff and other barristers of the serious consequences which may follow a failure to meet financial obligations. One of the purposes of professional regulations, being to send a message to others, has accordingly been achieved. 183 Whatever the conduct of other barristers which led to the publicity and legislative change in 2001, of which I know nothing apart from Cummins and Somosi, the plaintiff's conduct does not disentitle him to continue to practice at the Bar. His circumstances are wholly different to those who have deliberately and dishonestly avoided their taxation obligations or resorted to bankruptcy in order to minimise their financial obligations to their personal benefit. 184 Accordingly, the plaintiff's appeal will be upheld and I ask the parties to bring in appropriate short minutes. I reserve the question of costs for further submission. **********

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