Plaintiffs v Defendant

SOLICITORS - Consideration of whether a solicitor may correct an entry or error in the solicitor's office accounts and the consequences on any alleged breach of trust occasioned by the entry.

SOLICITORS - Consideration of the distinction between a statutory deficiency under the Act and an accounting deficiency.

SOLICITORS - Consideration of whether costing on scale likely to produce a lesser sum than on time based costing.

RECEIVERS - Consideration of duty of receivers to inform the Court of all the relevant circumstances relating to the claims they made against the solicitor.

1 On 10 February 1964, the aircraft carrier HMAS Melbourne and the destroyer HMAS Voyager collided off Jervis Bay, New South Wales with the tragic loss of many lives on the Voyager. Between around 1994 and 2004, David Forster acted as a solicitor in claims for compensation against the Commonwealth of Australia on behalf of about 86 sailors who were aboard the HMAS Melbourne at the time of the Voyager collision, on a 'no win no fee' basis. Mr Forster was then conducting a legal practice under the name Hollows Lawyers at 395 Nepean Highway Frankston.

2 On 12 April 2010, Noel Batrouney and Andrew Lyle were appointed joint and several receivers of the law practice conducted by Mr Forster known as Hollows Lawyers by order of Emerton J of this Court. Emerton J found, inter alia, that deficiencies had been created in Mr Forster's trust account that had not been properly rectified.

3 The receivers bring the claim the subject of this proceeding against Mr Forster under s 5.5.14 of the Legal Profession Act 2004 (the Act). The receivers divide their claims against Mr Forster into three groups that they describe as:

4 The receivers' allegations concerning double payment of disbursements relate to 46 clients. Speaking generally, in each case, the receivers allege that Mr Forster was successful in recovering damages from the Commonwealth on behalf of his client. The receivers allege that in conducting the litigation against the Commonwealth on behalf of the client, Mr Forster incurred disbursements on behalf of the client for fees such as counsel's fees. The receivers allege that, after settling the proceeding with the Commonwealth on behalf of the client, Mr Forster withdrew moneys from the client's trust account to pay these disbursements directly. The receivers allege that these disbursements were also included in a bill of costs that had been, or was then, rendered to the client.

5 The receivers allege that moneys were paid from the trust account to Mr Forster's office account and applied by an accounting entry in the office account to satisfy the bill that included the disbursements already paid (and to satisfy in part other outstanding bills due from the client to Mr Forster).

6 The receivers allege that the allocation in the office account of the transfer from the trust account to the office account to satisfy the bill that included the disbursements already paid constituted a double payment of the disbursements that had already been paid.

7 The receivers allege that this enlivened an obligation on Mr Forster under the Act to pay the amount of the 'double disbursement' payment back into the client's trust account, which he failed to do. The receivers allege that this obligation arose even though the allocation in the office account of the trust moneys transferred to the bill that included the disbursements that had already been paid had not been communicated to the client and the client in any event, was otherwise indebted to Mr Forster for fees in excess of the double disbursement payment, at the time of the allocation.

8 The receivers allege that Mr Forster failed to pay the double disbursement payments back into the trust account and this gave them a right to recover from Mr Forster the double disbursements under s 5.5.14(1)(c) of the Act.

9 The receivers allege that the double disbursement payments amount to $1,507,750.45.

10 The second group of claims relate to 'no fee agreement clients', where it is alleged by the receivers that, contrary to Mr Forster's obligations under the Act, Mr Forster invoiced two clients for work to be done when he had no costs agreement with the client in accordance with s 3.4.26 of the Act or s 96 of the Legal Practice Act 1996. The two clients are Mr Dawson and Mr Martin.

11 The receivers claim they are entitled to recover all fees paid by Mr Dawson and Mr Martin to Mr Forster under ss 5.5.14(2)(a) and (2)(c) in the sum of $244,707.90.

12 In the case of scale fee agreements, the receivers allege that Mr Forster was bound to calculate the legal professional fees billed to the scale fee agreement clients on scale but failed to do so. In these cases, the receivers allege that Mr Forster used time costing information to calculate the fees.

13 The receivers allege that the payments of moneys from trust to office to meet the bills that were not calculated on a scale basis were unlawful or improper. The receivers allege that Mr Forster knew or believed the payments were unlawful and/or improper.

14 The receivers allege that, under s 5.5.14(2)(a) of the Act, the receivers are entitled to be paid by Mr Forster $5,392,849.77 being the total amount of legal professional fees paid by these clients.

15 The receivers alternatively claim that, if Mr Forster did not know or believe the payments were unlawful or improper, that they are entitled to recover the full amount of the fees paid, $5,392,849.77 in any event.

16 The receivers further alternatively claim that, if Mr Forster did not know or believe that the payments were unlawful or improper, they are entitled to a Court order permitting recovery from Mr Forster of 'another amount' namely, the difference between the payments and the legal costs calculated by reference to the Victorian scales or other relevant scales.

17 I propose to deal with each of these claims in turn.

18 For the following reasons, I dismiss the receivers' double disbursement payments claim.

19 In doing so, I propose to deal with Mr Barltrop only. His case raises all the relevant legal issues. His case also contains the feature that is common to all the double disbursement clients, that is that the client had outstanding fees at the time of the double disbursement payment that exceeded the amount of the double disbursement payment so that on an accounting basis, the client was still indebted to Mr Forster after allowing for the double disbursement payment.

20 I find that in the case of Mr Barltrop a trust account deficiency was created. I find that the payment giving rise to the deficiency was unlawful. I also find that, as recognised by Emerton J, a distinction exists between a deficiency under the statutory definition and a deficiency on an accounting basis. On an accounting basis, the relevant payments gave rise to no debt or other liability to the client concerned as the client already was indebted to Mr Forster for a greater amount.

21 The accountants appointed by the receivers came to this conclusion in their report to the receivers entitled the Deloitte report. This was also the evidence of two expert accountants called by Mr Forster: Mr Osborne and Mr Wilkinson. None of their accounting evidence was challenged by the receivers.

22 In the receivers' final submissions, the receivers, after referring to the evidence of Mr Osborne and Mr Wilkinson, the expert accountants called by Mr Forster, said that the receivers did not rely on any accounting evidence to support the allegation that a trust account deficiency arose by reason of the transactions. The receivers asked the Court to reject the opinions of Mr Osborne and Mr Wilkinson on the legal issue (that is the trust account deficiency) as each witness confirmed that their opinions were premised on an accounting perspective and not a legal opinion. The receivers did not ask the Court to reject their accounting evidence.

23 Mr Corbett QC, senior counsel for the receivers, agreed in an exchange with me that, from an accounting point of view, the disbursements were not paid twice, although Mr Corbett QC said that from a trust point of view the disbursements were paid twice. The receivers in their submissions say that there is no dispute that the adjustment notes were issued to 'rectify' from an accounting perspective the error that the receivers allege occurred.

24 I understood from these submissions and concessions that the receivers were conceding that the fees actually outstanding at the time of the disputed payments were greater than the disputed amounts transferred from the trust account to the office account.

25 The receivers' case turns on a construction of the Act, legal issues and entries made in the office accounts of Mr Forster. There is no dispute about the payments or the accounting entries that were made to record those payments.

26 I have satisfied myself by an inspection of the accounts that in each case the 'double disbursement payment' did not give rise to any debt or other liability to the client as the client was at the time of the double disbursement payment indebted to Mr Forster for a greater sum. Usually, I would set out the evidence. In view of the fact that the receivers did not challenge any of the evidence of the accountants or otherwise challenge this accounting conclusion I do not intend to undertake this unnecessary task. In my opinion, all the double disbursement issues between the parties can be resolved by dealing with the first client, Mr Barltrop.

27 The receivers allege that from 26 May 2000 until about 22 August 2008 the law practice acted for Mr Barltrop in relation to his claim arising from the Melbourne Voyager collision. Mr Forster denies the allegation and says that he continued to provide legal services to Mr Barltrop until 21 August 2008.

28 The receivers claim that various amounts were paid by Mr Barltrop to the law practice to be held on trust for him in anticipation of payment of third party disbursements incurred by the law practice in acting for him (the 'Barltrop trust money'). Mr Forster does not admit this allegation. He says that the sums paid were not paid solely for the purposes asserted by the receivers.

29 The receivers allege that the law practice deposited the Barltrop trust money in the trust account and recorded the receipt in the client trust ledger. Mr Forster admits that allegation.

30 The receivers allege that the Barltrop trust money was money that was regulated property within the meaning of s 5 of the Act and under the control of the law practice. Mr Forster admits that allegation.

31 The receivers allege that the law practice received from the Commonwealth certain settlement funds on behalf of Mr Barltrop as follows:

(b) $57,552.95 on 20 August 2008 (the 'Barltrop settlement funds').

33 The receivers allege that the law practice recorded the receipt of the Barltrop settlement funds in the client trust ledger kept for Mr Barltrop. Mr Forster admits that allegation.

34 The receivers allege that the Barltrop settlement funds was money that was regulated property within the meaning of s 5 of the Act and under the control of the law practice. Mr Forster admits that allegation.

35 Under the heading of 'payment and disbursements', the receivers allege that on 21 August 2008 the law practice paid to third parties four disbursements of counsel's fees on behalf of Mr Barltrop directly from the trust account as follows:

37 Under the heading of 'improper recovery of disbursements', the receivers allege that on 14 September 2007 the law practice issued invoice number 4012 ('invoice 4012') to Mr Barltrop in the amount of $160,712.15. Mr Forster admits that allegation.

38 The receivers allege that invoice 4012 contained the following disbursements incurred by the law practice and payable by Mr Barltrop:

Foley's List Pty Ltd (Seccull) - conf, F&B, answers

Foley's List Pty Ltd (McGregor) - draft FF&B partics and answers

Foley's List Pty Ltd (McGregor) - directions hearing

Foley's List Pty Ltd (McGregor) - advice on evidence

PJ Roberts Pty Ltd - advice choice of law and letter

40 The receivers allege that on 21 September 2007 the law practice transferred $137,313.40 from the trust account to the office account, of which $132,088.86 was in part payment of invoice 4012. Mr Forster does not admit that allegation.

41 The receivers allege that on 22 August 2008 the law practice transferred $36,942.40 from the trust account to the office account, of which $28,623.29 was in part payment of invoice 4012.

42 Mr Forster denies that allegation as by operation of law no part of the payment of $36,942.40 is to be taken to have been paid so as to give rise to a breach of trust as it is capable of being applied in a manner which does not give rise to a breach of trust.

43 The receivers allege that each transfer made by the law practice and described above on the following dates:

was a transfer of regulated property within the meaning of s 5 of the Act from the trust account to the office account. Mr Forster admits that allegation.

44 The receivers allege that the transfers referred to immediately above were improper or unlawful in that:

(a) the following disbursements, having been paid for once from the trust account directly to a third party payee, were transferred a second time from the trust account to the office account:

Foley's List Pty Ltd (Seccull) [conf, F&B answers]

Foley's List Pty Ltd (McGregor) [draft FF&B partics and answers{

Foley's List Pty Ltd (McGregor) [directions hearing]

Foley's List Pty Ltd (McGregor) [F&B answers etc]

Foley's List Pty Ltd (McGregor) [advice on evidence]

PJ Roberts Pty Ltd [advice on choice of law letter]

(b) the double paid disbursements paid from the trust account to the office account above were not owing to the law practice;

(c) contrary to and in breach of s 3.3.13 of the Act, the law practice did not deposit or repay the double paid disbursements received by it back to the trust account as soon as practicable after receiving them or at all;

(d) by making each of the double paid disbursements payments, Mr Forster breached the fiduciary duties owed[1] by:

(i) not acting in the best interests of Mr Barltrop;

(ii) failing to exercise his powers and to discharge his duties as a trustee in good faith and in the best interests of Mr Barltrop in respect of money held on trust for Mr Barltrop by the law practice;

(iii) failing to account properly and lawfully to Mr Barltrop in respect of money held on trust by the law practice for Mr Barltrop;

(iv) gaining a financial advantage for himself; and/or

(e) each double paid disbursement caused a deficiency in the trust account pursuant to s 3.3.21(3) of the Act, in that the law practice has transferred money from the trust account to the office account for disbursements that were not paid from the office account and which were separately paid from the trust account directly to the third payee.

45 Mr Forster delivered several defences including a defence to the second further amended statement of claim dated 7 November 2013, dated and filed on 27 November 2013. It contains the substance of the defences raised by Mr Forster as follows:

1. All moneys the subject of the receivers' claim were taken across from the trust account to the office account in reduction of fees at times when the respective clients owed Mr Forster more than was taken across and in circumstances where Mr Forster was entitled to exercise a 'fruits of judgment' lien over such moneys.
2. Mr Forster's right to exercise his 'fruits of judgment' lien accrued before the appointment of the receivers as receivers of the practice of Hollows Lawyers and Mr Forster is entitled to retain all moneys the subject of this proceeding pursuant to that lien.
3. As a matter of law the respective clients became indebted to Mr Forster for the work performed by him for them and the relationship of debtor and creditor arose between them when the contingency in the 'no win no fee' retainer was satisfied and not when bills were subsequently provided to them.
4. The double accounting errors were in the office account and not in the trust account.
5. There has been no double payment of disbursements as the bills which erroneously included counted disbursements were not paid in full and the amounts taken across from the trust account were less than the amounts actually owed by the respective clients at the time of each transfer.
6. The accounting errors occurred as a result of honest and inadvertent mistake.
7. The second further amended statement of claim is premised on a false assumption that the internal office accounting errors disadvantaged the clients when in fact clients were generally not billed for all the work done for them and the amounts paid by the clients never exceeded the amounts actually owed by them to Mr Forster.
8. Mr Forster complied with his obligations to take across fees pursuant to the Legal Practice Act 1996 and the Legal Profession Act 2004 and regulations. All clients received notices to dispute accompanying their bill and generally did not exercise their entitlements to object within time, except for example Thompson. Mr Forster complied with reg 3.3.34 of the Legal Profession Regulations 2005 in relation to the withdrawal of trust money for payment of legal costs.
9. No trust money or other regulated property was taken by, paid to or transferred to Mr Forster in breach of trust with the meaning of a s 5.5.14(1) of the Legal Profession Act 2004.
10. Further and in the alternative, if, contrary to Mr Forster's contention, any regulated property was taken by, paid to or transferred to Mr Forster in breach of trust, improperly or unlawfully, then:

(a) he did not know or believe at the time of the taking, payment or transfer it was done in breach of trust, improperly or unlawfully;

(b) he provided to each of the clients adequate consideration for the taking, payment or transfer; and

(c) he did not because of the taking, payment or transfer become indebted or otherwise liable to anyone in any amount.

1. None of the accounting errors gave rise to a deficiency in the law practice trust account within the meaning of s 3.3.21 of the Act.
2. None of the accounting errors gave rise to any financial disadvantage to any client.
3. ....
4. Each and every client provided an authority to transfer trust moneys in payment of Mr Forster's fees.

46 In June 2000, Mr Barltrop retained Mr Forster as his solicitor to make a claim against the Commonwealth for compensation for injury which he suffered as a result of the Melbourne Voyager collision.

47 Mr Barltrop entered into a fee agreement with Mr Forster as his solicitor dated 7 June 2000. The agreement provided for the fees and costs to be paid in the event of Mr Barltrop recovering money from his case against the Commonwealth. Clause 4 of the agreement provided:

You authorise us to immediately deduct any unpaid solicitor/client costs from any money recovered from your case.

The first plaintiff, Mr Batrouney conceded in cross-examination that the receivers had no issue about the lawfulness of the costs agreements that Mr Forster had with his clients.

48 Mr Forster gave uncontested evidence that the specific terms of the law practice's costs agreements with each of its clients authorised the transfer of client moneys under reg 3.3.34(3)(a)(i) of the Legal Profession Regulations 2005 (the Regulations).

49 On about 3 September 2007, shortly after mediation with the Commonwealth, Mr Barltrop accepted an offer under which the Commonwealth agreed to pay him $175,000 plus costs.

50 The receivers tendered a report from Mr Forster's trust ledger account of Mr Barltrop. The report recorded that on 11 September 2007, $173,028.40 was credited to the trust ledger account as received from the Australian Government Solicitor.

51 The report recorded that on 14 September 2007, $35,715.00 was debited to the trust ledger account of Mr Barltrop. The notation beside the entry states, 'cheque paid To: Mr J Barltrop part settlement moneys to client'. The balance of the trust ledger account after the deduction of this sum was recorded as $137,313.40.

52 The receivers tendered a tax invoice no 4012, dated 14 September 2007, issued by Mr Forster. Mr Forster described this as a lump sum bill. The amount invoiced was recorded as follows:

OUR FEE $ 137,981.25

office expenses $ 1,523.81

Disbursements $ 6,596.89

GST $ 14,610.20

Total $ 160,712.15

53 Attached to the invoice was a document described as 'invoice itemisation'. It included details of work done on particular days without any time calculations or amounts allocated to any item of work that gave 'OUR FEE' of $137,981.25. Added to this was office expenses of $1,523.81 and disbursements of $6,596.89. GST was added making a total of $160,712.15. This figure reconciled with the invoice total of $160,712.15.

54 The attached invoice itemised disbursements included the following:

A/D Foley (Seccull) Conf, F&B Answers $ 1,500.00 A

A/D Foley (McGregor) Draft FF&B Partics & Answers $ 1,454.54 B

A/D Foley (McGregor) - Directions Hearing $ 166.67 C

A/D Green (Kennan) - Directions Hearing $ 123.47 D

A/D Roberts (Thomson) Advice Choice law & Letter $ 20.41 C

A/D Foley (McGregor) F&B Answers etc $ 1,590.90 B

A/D Foley (McGregor) Advise on Evidence for Barltrop $ 272.72 B

Total $ 5,128.71

55 The invoice included GST. With GST these disbursements amounted to $5,641.61.[2]

56 On 21 September 2007, $137,313.40 was debited to Mr Barltrop's trust ledger account and transferred to the office account bringing the trust account of Mr Barltrop to a nil balance. It will be recalled that after the deduction of the cheque of $35,715 paid to Mr Barltrop, the balance of Mr Barltrop's trust ledger account was $137,313.40.

57 The sum withdrawn from the trust account and paid to the office account was less than the amount invoiced under invoice 4012. The amount invoiced under invoice 4012 was $160,712.15, whereas the sum transferred from the trust account to the office account was $137,313.40 - some $23,399.05 less than the invoiced amount.

58 The notation recorded in the report of the trust transactions in respect of the debit of $137,313.40 to Mr Barltrop's trust account stated as follows:

Transfer trust to office

Transfer for payt bill nos.

3390, 3583, 3716 and

p/payt bill nos.

3893, 4012.

59 The receivers tendered a report from the Infinity Law system used by Mr Forster of the detailed office accounts rendered to Mr Barltrop that included invoices 3390, 3583, 3716 and 3893.

60 The Infinity Law system was an accounting software package designed for use in a solicitor's practice. It was developed in New Zealand. In New Zealand solicitors did not have a separate trust account and a separate office account. The program was deficient in its use in Victoria as it did not make adjustments in the office accounts to reflect payments that had been made in the trust accounts for a particular client. Such an adjustment was not necessary in New Zealand. For example if a disbursement was paid from the trust account on behalf of a client, I understand that the Infinity Law program did not make an alteration of the client's ledger account in the office accounts to reflect that the client had met a liability otherwise owed to the practice. I say understand, as there was only limited evidence on this issue. This was the subject of much examination in the hearing before Emerton J for the appointment of receivers as Mr Forster had claimed that the double disbursement payments arose as a consequence of this defect in the Infinity Law accounting system. It was not an issue in the proceeding before me.

61 On 20 August 2008, (the following year), $57,552.95 was paid into Mr Barltrop's trust account from the Australian Government Solicitor recorded as 'Payment in orders of Master Wood on 4 August 2008'. This was the next entry in Mr Barltrop's trust account since the nil balance was recorded on 21 September 2007. This sum represented the costs the Commonwealth had agreed to pay Mr Barltrop on the settlement reached in 2007. It is apparent that the fixing of the amount went before Master Wood and that orders were made on 4 August 2008. Mr Forster gave evidence that he did substantial work after the settlement to recover these moneys.

62 By letter dated 21 August 2008, Mr Forster wrote to Mr Barltrop. The letter set out the moneys received and expended. The letter concluded by saying that Mr Barltrop's final account came to $18,894.40 and that Hollows Lawyers had discounted the account by $7,387.01 making the payable amount $11,507.39 on the basis the account was accepted by Mr Barltrop in full and final settlement. The letter said that this amount would be paid from the balance of moneys received from the Commonwealth. The letter says that it enclosed bill no 4142, the full bill history and a cheque for $15,000.

63 As indicated, the letter states that Mr Barltrop's final account came to $18,894.40 and that it had been discounted by $7,387.01 making the amount payable on invoice 4142 $11,507.39. No reference was made in the letter to previous invoices that had been raised, which invoices still had outstanding balances due to Mr Forster. In particular, according to the 'detail accounts rendered - Barltrop report', $5000 was outstanding on invoice 3893; and $28,623.29 was outstanding on invoice 4102.

64 The receivers tendered a report from the Infinity Law system kept by Mr Forster that detailed the various accounts rendered to Mr Barltrop. $11,507.39 was recorded as the opening balance on invoice 4142 on 21 August 2008, the date of the letter referred to above sent to Mr Barltrop.

65 Also on 21 August 2008, $5,610.55 was withdrawn from Mr Barltrop's trust account to pay disbursements as follows

66 Also on 21 August 2008, a further $15,000 was debited to the trust ledger account as being paid to Mr Barltrop for 'Payment for balance of settlement moneys in the matter of Barltrop'.

67 The report of the trust ledger account records that on 22 August 2008, $36,942.40 was transferred to the office account. The notation states:

Transfer trust to Office

Transfer to pay bill

no 3893, 4012, 4042

(Part) - Barltrop

68 The receivers tendered a report headed 'Detailed Accounts Rendered - Barltrop JL. Matter 1 - Melbourne Voyager - Personal 1'. The report is not of the trust accounts but of the office accounts. It does not disclose what was recorded in the trust accounts. The report includes details of invoices 3583, 3716, 3893, 4012 and 4142. As mentioned above, invoice 4012 was tendered in evidence. The others were not. The report does not refer to an invoice 4042, but does refer to an invoice 4142 dated 21 August 2008.

69 The report records the amounts credited in the office account to each invoice. Taking each invoice in turn the report records that from the $137,313.40 that was transferred from trust to office on 21 September 2007, the payment was appropriated to the invoices as follows:

Invoice 3583: $334.75 that met in full the invoice amount

Invoice 3716: $280.24 that met in full the invoice amount

Invoice 3893: $1,531.80 that left a balance due of $5,000 still to be paid

Invoice 4012: $132,088.86 that left a balance due of $28,623.29 as referred to above.

70 According to the report, invoice no 4142 was raised on 21 August 2008. The report states it was raised for disbursements of $11,507.39.

71 As mentioned above, on 22 August 2008, the report of the trust account records that $36,942.40 was transferred from trust to office. The note to the payment states that transfer is to pay bills no 3893, 4012 and 4042 (part), and (part) Mr Barltrop.

72 As mentioned above, $5000 was outstanding on invoice 3893 and of the $36,942.40 transferred to the office account, $5,000 was appropriated in the office accounts to satisfy invoice 3893 in full. $28,623,29 was appropriated to invoice 4012. As indicated, the invoice had not been credited with the disbursement payments made the previous day and the sum transferred matched the unadjusted invoice 4012 in full. $3,319.11 was appropriated to invoice 4042 (described as 4142 in the detail of accounts rendered),[3] leaving a balance due of $8,188.28. That was subsequently recorded as written off in the office accounts as per Mr Forster's instructions on 11 September 2008 but then written back in the office accounts when the double payments were discovered.

73 As at 22 August 2008, the office accounts of the practice ought to have recorded that the disputed disbursements had already been paid. The office accounts should have credited invoice 4012 with the payment of the disputed disbursements. According to the detailed accounts rendered report, that had not been done.

74 Nevertheless, as at 22 August 2008, if the office accounts had been correctly recorded then the ledger office account for Mr Barltrop (which was not tendered by the receivers) ought to have shown that Mr Barltrop was still indebted to the practice for invoices rendered. In other words, the transfer of the sum of $36,942 to the practice's office account did not satisfy or extinguish Mr Barltrop's indebtedness to the practice as at 22 August 2008.

75 Subsequently, the detailed accounts rendered report records that on 11 September 2008, $8,188.28 was written off invoice 4142, which according to the report left nothing outstanding on any of the invoices issued to Mr Barltrop by the practice. The recorded notation beside the 11 September 2008 transaction is 'W/off to close file as DF's instructions'.

76 Subsequently, Hollows Lawyers raised an invoice no 4445 dated 5 March 2009 addressed to Mr Barltrop. The invoice included a credit for GST of $512.87 and a debit for $6596.89 giving a balance of $6,084.02. In the 'full bill history' obtained from the Infinity Law system, the invoice is described as 'Adjustment note - Bill' in the sum of ($5,641.58).

77 On 16 June 2009, Hollows Lawyers sent to Mr Barltrop a letter that informed Mr Barltrop that his file was finished and there were currently no additional moneys owing. The letter said that during a recent inspection of Hollows Lawyers' trust records Hollows Lawyers 'discovered errors in some of the accounting procedures which have used on our files'. The letter said that -

[T]his meant in some cases that items billed to you and later paid from you trust account moneys remained on your billed account without it being reduced in the appropriate way. As these errors were found they have been corrected, using various methods such as; the writing back on of debtors, expenses and disbursements then issuing adjustment notes, credit and debit accounts where necessary.

78 The letter did not contain any reference to any sums or amounts. The letter referred to enclosures 'Adjustment Note, Invoice and trust Statement'. These attachments were not tendered. In particular, neither party appears to have tendered the 'adjustment note' as distinct from invoice 4445.

79 Mr Forster in his written submissions, says that he tendered a sample of 4 or 5 adjustment notes. A sample adjustment note for Mr D Ramsay dated 31 December 2008 gives a credit to the client for a certain sum. Mr Forster submits that it provides evidence that the debt owed by the client was reduced.

80 Mr Forster tendered a document described as a 'billing report'. It refers to sums written off on 24 March 2009 and June 2009.

81 The adjustment transactions carried out in 2009 were not fully explained in the evidence. The office ledger account for Mr Barltrop was not tendered in evidence. Presumably that ledger account would have shown the adjustments whereby the amount written off in Mr Barltrop's ledger account on 11 September 2009 ($8,188.28), was written back and the outstanding amount reduced by $5,610.55 being the amount of the disputed disbursements included in invoice 4012.

82 As discussed later, the dispute over the double disbursements involves a consideration of issues of an accounting deficiency as against a deficiency as defined in s 3.3.21 of the Act. Evidence was given on an accounting deficiency by several witnesses including the accountant retained by the receivers to advise them on whether moneys were due to clients from Mr Forster.

83 In Mr Batrouney's witness statement of 21 December 2012, Mr Batrouney referred to two reports of Deloitte Touche Tohmatsu (Deloitte) prepared for the receivers. Mr Batrouney said that on 12 June 2010 the receivers engaged Deloitte to provide an initial report setting out the result of a preliminary inspection of 10 Melbourne Voyager files, and in particular, the result of a trust account inspection relating to those 10 files.

84 Mr Batrouney said that on 28 October 2010, Deloitte provided him with its preliminary report, authored by Campbell Jackson, a partner in the forensic practice of Deloitte. Mr Batrouney exhibited the report of 28 October 2010 entitled 'Trust Account Inspection Status Report.'

85 Mr Batrouney said that on 3 February 2011, Deloitte delivered their final report authorised by Mr Campbell Jackson. He exhibited the report of 3 February 2011 entitled 'Trust Account Inspection Final Report.'

86 The reports were prepared for the proceedings before Emerton J relating to the appointment of the receivers. The first report of 28 October 2010 in substance dealt with the double disbursement issue.

87 In Mr Batrouney's witness statement of 21 December 2012, he exhibited five reports that he said were relevant to this proceeding. Mr Batrouney's affidavit of 14 June 2013 (sworn before the trial commenced on 17 June 2013) was admitted into evidence on 2 December 2013. In that affidavit, Mr Batrouney exhibited a copy of a report by the receivers to the Court of 4 February 2011 that was not included in the list of reports that he said were relevant to this proceeding in his statement of 21 December 2012.

88 The receivers' report of 4 February 2011 annexed a sensitivity analysis done by Mr Jackson as referred to below. Although annexed to the 4 February 2011 report, the sensitivity report was not annexed to the copy of the 4 February 2011 report tendered to the Court by the receivers for the purposes of this proceeding. Rather it was subsequently produced by Mr Forster separately on 18 June 2013. The source of the information the subject of Mr Jackson's sensitivity analysis was the Infinity Law system. The sensitivity report was attached to the report of Munday Wilkinson a witness for Mr Forster. Mr Forster also referred to the sensitivity report in his amended defence to the amended statement of claim dated 13 July 2012 where he alleged that Hollows Lawyers had not collected from Mr Barltrop $2,547 as referred to in the table annexed as attachment A.

89 During the receivers' opening of the case on 18 June 2013, counsel for the receivers was asked by Mr Forster to produce the receivers' report of 4 February 2011. Counsel for the receivers said the receivers' report of 4 February 2011 was not a relevant report for the purposes of their case (this is despite the sensitivity analysis conducted by Deloitte being pleaded in Mr Forster's defence). Nevertheless, the receivers' report of 4 February 2011 was tendered by the receivers on 2 December 2013.

90 The trust account inspection status report of 28 October 2010 by Deloitte was authored by Campbell Jackson. Mr Jackson said that he identified instances where disbursements on the clients' invoices appeared to have been paid twice, once via a transfer from the client's trust account to the Hollows Lawyers office account; and also via cheque payments from the client's trust account, direct to the third party that had provided the invoice.

There were a number of invoices raised by Hollows that included disbursements for third party services that were paid directly to third party suppliers via the trust account and subsequently billed as disbursements by Hollows to the client. However, these amounts appear to have been written off by Hollows (ie deducted from the client's invoice) prior to any settlement payments being made to the client. The effect of the write-off of the disbursements eliminated any double payment of third party costs incurred on behalf of the client.

92 In the receivers' report of 4 February 2011, the receivers stated:

1. On 3 February 2011, Deloitte provided the receivers with their final report on the remaining MV files [Melbourne Voyager files]. The Deloitte report is Annexure B to this report.
2. After reviewing all of the MV files, Deloitte has concluded that there are 86 MV clients. On 25 October 2010, Deloitte provided the results from its investigation into ten of the Melbourne Voyager files.
3. Of the remaining 76 files, Deloitte undertook a detailed examination of 57 files. Although all of the files were reviewed, 19 files were identified by Deloitte as not requiring a detailed examination for the reasons set out in Deloitte's report.
4. Deloitte also provided the receivers with a fee sensitivity analysis that summarises Hollows' account transactions for each MV file and provides a summary of any fees that may be recoverable from David Forster if the professional fees were reduced by certain percentages. The fee sensitivity analysis is Annexure C to this report.

93 As indicated above, annexure C, the fee sensitivity analysis, was not produced with the report when tendered to the Court by the receivers.

94 The receivers then summarised the receipts and payments relating to the Melbourne Voyager files (MV files) and also dealt with the adjustments made to the clients' accounts following the inspection by the Law Institute investigators.

95 The receivers noted that between December 2008 and March 2009, Hollows Lawyers effected various write-offs and write-ups by raising adjustment notes totalling $2,585,479. The receivers said that in relation to the 86 MV files, Hollows Lawyers raised adjustment notes totalling $2,730,475. The receivers then described the write-offs and write-ups as follows:

1. Prior to raising any adjustment notes, Hollows Lawyers caused a write-up of costs (professional fees and disbursements). In many cases this occurred by Hollows re-opening the file and reinstating old WIP and costs previously written off. Hollows would then raise the adjustment notes, offset the adjustment amount from the outstanding costs and WIP (previously written up) and write-off the remaining costs.
2. These transactions were accounting entries only and did not involve the transfer of any funds. This allowed Hollows to offset the adjustment amounts without transferring any funds into the trust account.
3. Deloitte states that the write-offs and write-ups do not differentiate between professional fees, office expenses or disbursements. Therefore, it is not possible for Deloitte to determine what the write-ups and write-offs related to.
4. On 3 February 2009, the investigators sent a letter to Hollows Lawyers requesting a written explanation and/or information from the law practice regarding potential breaches of the Act and Legal Profession regulation 2005. They discovered, in particular trust account deficiencies. Annexure D was a copy of the letter.
5. In February 2009, Hollows had a total of $1,848,755 in write-ups and $2,457,861 in write-offs. It appears this was in response to the letter from the investigators.

96 Under the heading of 'Funds to be Returned to MV Clients', the receivers said as follows:

1. Based on Deloitte's report, Hollows responded to the investigators' examination of Hollows' accounts, by undertaking write-ups, adjustment notes and write-offs. The receivers note that at paragraph seven of the investigators' letter, they state that deficiencies "should be immediately restored by depositing funds to the credit of the trust ledger account prior to the disbursement of the funds". Hollows' approach of write-ups, and adjustments and write-offs does not comply with the investigators' directions.
2. Despite the above, Hollows' approach sufficiently covers the types of trust account irregularities uncovered by the investigators. Based on the Deloitte report, there are no current trust transaction issues that resulted in funds being returned to the MV clients.

97 In the summary at the end of the report, the receivers said as follows:

1. Hollows conducted large adjustments in the form of write-ups, adjustment notes and write-offs.
2. It appears that a vast majority of the accounting adjustments were made in response to the LIV investigation.
3. Deloitte has finalised its examination of the MV files and has determined that Hollows created sufficient adjustment notes and write-offs to cover all trust account irregularities discovered by the LIV and Deloitte.

98 Mr Forster places considerable emphasis on the receivers' admission that the write-offs and adjustments were sufficient to cover all trust account irregularities discovered by the LIV and Deloitte.

99 Mr Jackson is a partner in the forensic practice of Deloitte, chartered accountants. Although Mr Jackson was the author of the two reports of 28 October 2010 and 3 February 2011 prepared by Deloitte that were put into evidence by the receivers, Mr Jackson was not called by the receivers to verify the reports.

100 Mr Forster issued a subpoena for Mr Jackson to attend for examination. Mr Jackson, through senior counsel, applied to have the subpoena set aside. Mr Forster submitted, inter alia, that he wished to lead from Mr Jackson evidence on the sensitivity report and on the Deloitte reports generally. The application of Mr Jackson to set aside the subpoena was refused.

101 Mr Forster called on the subpoena and Mr Jackson gave evidence for Mr Forster. Mr Jackson was asked about the fee sensitivity report. Mr Jackson said that after the Deloitte report of 3 February 2011, his firm had been requested by the receivers to provide information from the Infinity Law system used by Hollows Lawyers.

102 Mr Jackson agreed that he had prepared a fee sensitivity analysis of all the 86 clients who were the subject of his review. The sensitivity analysis calculates, after making corrections for double disbursements, the amount written off by Hollows Lawyers from the invoices raised by Hollows Lawyers for each of the 86 Melbourne Voyager clients. It then calculates the professional fees due to Hollows Lawyers from the clients if the professional fees due to Hollows Lawyers, as shown in the books of account of Hollows Lawyers, were reduced by 10 per cent, 20 per cent, 30 per cent and 40 per cent. The table then calculates for each of those percentage reductions whether moneys would still be due to Hollows Lawyers despite the reduction in the professional fees by that percentage or whether Hollows Lawyers would have received more than the fees as reduced by those percentages.

103 The sensitivity analysis is annexed to these reasons.

104 Mr Jackson was referred to the calculation made by Mr Wilkinson of Munday Wilkinson using the Deloitte sensitivity analysis that concludes that on average 31.6 per cent would need to be written off the professional fees charged by Hollows Lawyers to its clients before the professional fees charged would be equal to the fees received for professional fees. Mr Jackson agreed that from an accounting perspective there would need to be another 31.6 per cent on average reduction in professional fees before any money was payable to the clients by Hollows Lawyers.

105 Mr Jackson agreed that his sensitivity analysis did not take into account any unbilled fees or any unbilled disbursements that were duly owed by the client that had not found their way into the Infinity Law system. Mr Jackson agreed that the calculation was done on what was invoiced. He agreed that the calculation did not seek to identify other expenses included in the Infinity Law system that could have been invoiced to clients by Hollows Lawyers, but were not invoiced.

106 Mr Jackson was taken to the receivers' summary that found that nothing was owed by Hollows Lawyers to the Melbourne Voyager clients. Mr Jackson agreed that from an accounting perspective nothing was owed to the Melbourne Voyager clients by Mr Forster.

107 Mr Jackson was taken through the adjustment process undertaken by Mr Forster as a result of the Law Institute examination of his trust accounts. Mr Jackson was asked whether the adjustment process undertaken by Mr Forster in any way took the character of a fresh invoice to the client. Mr Jackson said it did not, as the client would not know what had been processed from an accounting perspective unless they had been furnished with a copy of the write-up and the adjustment note.

108 Mr Jackson said that from an accounting perspective, the client would not actually care, because they did not owe anything and all of a sudden there would be a series of adjustments in the office account and they still did not owe anything.

109 Mr Jackson agreed that the adjustment process did not involve any change or transactions on the trust account. Mr Jackson said that was a typical scenario, save for the three or four cases where moneys needed to be refunded to the client.

110 As to the fee sensitivity statements which Mr Jackson identified that he prepared, Mr Jackson was taken to the calculations made by Munday Wilkinson. Mr Jackson said that he checked the adjustments made by Mr Wilkinson and agreed that they were correct.

111 Mr Jackson agreed that there were some clients where a reduction of even 40 per cent on the invoices raised would still leave a balance owed in favour of Hollows Lawyers when compared to what was paid to Hollows Lawyers on their account. In other words, in effect some of the clients paid less than 60 per cent of the invoices raised against them.

112 Under cross-examination, Mr Jackson was taken to the detailed accounts rendered record for Mr Barltrop. Mr Jackson was asked to confirm that under the heading 'reference' was the invoice number. He was also asked what the 'review date' referred to. He said that he was not sure, but he suspected that it was the date that the file was probably last opened for review. He said that the 'transaction date' was the date that the individual transactions and adjustments to that invoice were made within the Infinity Law system.

113 Mr Jackson was asked about the entries under the heading 'Type Description' and said that those entries were the narrative for what was actually occurring with that individual invoice. He said 'BC' referred to bill of costs and 'FT' a funds transfer. He said 'WO' would be written off. He identified 'AN' as an adjustment note.

114 Mr Jackson was taken to the line funds transfer to office, transfer to pay bill number 3893, and a minus sum, and asked what that represented. Mr Jackson said that it was an allocation against that invoice that a sum of $3,319.11 had been allocated.

115 Mr Jackson explained that the negative sign on the second line for invoice 4012 would actually appear before the sum of $132,088.86. Mr Jackson identified the document at page 59 as an adjustment note that had been produced on the Infinity Law system.

116 Mr Osborne was called as a witness by Mr Forster. Mr Osborne was a director of the accounting practice of Shepard Webster & O'Neill Pty Ltd. Mr Osborne was a Fellow of the Institute of Chartered Accountants in Australia and held a Public Practice Certificate from CPA Australia. Mr Osborne was asked to "provide a report on whether, in his opinion as a trust account auditor, the rectification works conducted by Hollows Lawyers were undertaken in accordance with trust accounting requirements including the requirements of the Legal Practice Act 1996... and the Regulations". Accordingly, his report of 30 May 2011 dealt with the double disbursement issues and the adjustment notes that were raised by Hollows Lawyers.

117 Mr Osborne was of the opinion that from an accounting point of view, if there were deficiencies in the trust account they might have been corrected by adjustment notes.

118 Mr Osborne was requested to provide a supplementary expert witness report on trust accounting requirements, and in particular in relation to paragraphs 11 to 14 of the affidavit of Mr Batrouney of 21 June 2011. The affidavit of Mr Batrouney of 21 June 2011 was not tendered in evidence.

119 In substance, in his supplementary expert witness report dated 22 June 2011, Mr Osborne said that the Legal Profession Act 2004 and the Legal Profession Regulations 2005 governed the operation of a legal practitioner's trust account. He said that the Act and the Regulations stipulated that deficiencies must be rectified, but he did not in his opinion set out how such deficiencies were to be rectified. Mr Osborne said that in his view there was a variety of ways that a deficiency could occur with funds not being held on trust at a point in time. Mr Osborne said that the most usual way to rectify a deficiency was to reinstate cash funds to the trust account. In the case of Hollows Lawyers, Mr Osborne said that adjustment notes were processed for the overdrawn amounts to each client. He said that charges were raised to reverse previous written off professional fees, ultimately bringing the state of each client's account back to zero.

120 Mr Osborne disagreed with Mr Batrouney's assertion that the only way to rectify the deficiencies in Mr Forster's trust account was to return funds totalling $2,730,475 to the trust account.

121 Mr Osborne also commented on the Deloitte fee sensitivity analysis which showed total write offs of $6,019,652 and the conclusion of Deloitte that no moneys were owed to clients of Hollows Lawyers.

122 Mr Osborne concluded that the rectification works carried out by Mr Forster, as indicated by Deloitte, were conducted in accordance with the Act and Regulations and rectified the deficiencies that were present from the date of the second drawing of funds from each client account within the trust account.

123 Mr Osborne was requested to provide a second supplementary expert witness report on trust accounting requirements, and in particular the way the accounting system being used by Hollows Lawyers operated. His second supplementary report was dated 3 October 2013.

124 Mr Osborne said that in cases where money transferred from the trust account of a client to the office account did not exceed the amount owed to the practice by the client, then no trust deficiency arose and all steps required to correct the accounting errors were actions taken in the office account. Mr Osborne opined that apart from the very small number (he understood four) of clients where the double-counted disbursements exceeded write-offs, the accounting errors did not give rise to trust account deficiencies but rather office account errors which were entirely rectified by actions taken in the office account alone. These four matters had been rectified by Mr Forster and were not the subject of this proceeding.

125 Mr Wilkinson was called as a witness by Mr Forster. Since 1988, Mr Wilkinson has specialised in forensic accounting, undertaking investigations and the valuation of businesses for commercial, compensation, compulsory acquisition and matrimonial purposes. Mr Wilkinson has appeared as an expert witness in a variety of matters in the Supreme Court, Federal Court, Family Court, Federal Magistrates' Court, County Court, Magistrates' Court and various tribunals.

126 Mr Wilkinson was asked to review the Deloitte report of 28 October 2010 and the three arch folders attached to it. He was asked to express his opinion on whether the opinions expressed by Mr Jackson in the Deloitte report were valid, especially where he asserted that anomalies existed in the Hollows Lawyers' trust accounting records which he examined. Mr Wilkinson was asked what rectification measures (if any) were undertaken by the law practice and, in particular, whether all (if any) trust deficiencies have been properly restored.

127 Under the heading 'Opinion' in Mr Wilkinson's report of 8 February 2011, he stated as follows:

5.1 In the Deloitte report 10 sample clients' trust accounts were reviewed. As a result of Deloitte's detailed review they appear to conclude at paragraph 7.8 that:

"The effect of the writeoff of the disbursements eliminated any double payment of third party costs incurred on behalf of the client(s)."

5.2 Further, based upon our review and analysis of the detail extracted by Deloitte (but not concluded upon) no client reviewed was financially disadvantaged by the transaction.

5.3 All errors, in terms of inadvertent charging or GST, and professional [fees] prior to 1 July 2000, were more than compensated with the writeoffs (via the adjustment notes).

5.4 In our opinion the Deloitte report fails to provide any evidence of anomalies or unusual transactions that would infer deliberate malfeasance on behalf of Hollows.

128 The report of 10 February 2011 contained the review by Mr Wilkinson of Deloitte's final report dated 3 February 2011.

129 Under the heading, 'Opinion', Mr Wilkinson said as follows:

4.1 In the first Deloitte report 10 Melbourne Voyager client trust accounts were reviewed.

4.2 In the final report 57 Melbourne Voyager client trust accounts were reviewed.

4.3 In both reports Deloitte merely described the transactions observed by them and do not express an opinion or provide a conclusion. Deloittes state that it is their understanding that the [receivers] will use the contents of the report for inclusion in their report to the Supreme Court of Victoria.

4.4 The report of the receivers dated 4 February 2011 states at paragraph 59:

"Deloittes has finalised its examination of the MV files and has determined that Hollows created sufficient adjustment notes and writeoffs to cover all trust irregularities discovered by LIV and Deloittes."

4.5 Specifically in respect of the rectification measures undertaken by Hollows the receivers conclude at paragraph 28:

"... Hollows' approach sufficiently covers the type of trust account irregularities uncovered by the Investigators. Based on the Deloitte report, there are no current Trust Transaction Issues that result in funds being returned to the MV clients."

4.6 The unambiguous statements at paragraph 28 and 59 of the report of the receivers are consistent with our opinions expressed at section 5 of the previous report which I have quoted above.

4.7 In our opinion the conclusion reached by the receivers ought to have been evident to Deloitte at the time of the preparation of the first Deloitte report.

4.8 In our opinion many of the verification measures undertaken in the first Deloitte report were excessive as an inappropriate sampling methodology, with materiality limits would have significantly reduced the level of work undertaken.

4.9 In our opinion many of the matters raised by Deloitte in the first Deloitte report were misleading and implied clients were entitled to refunds for double billing and GST related matters when the net position of the client's account which was known to Deloitte did not support the contention.

130 Mr Wilkinson also referred to the sensitivity analysis prepared by Deloitte. Mr Wilkinson reviewed the Deloitte fee sensitivity analysis and identified arithmetic errors totalling $294,061. Mr Wilkinson said in his report that they had prepared a corrected version of the sensitivity analysis which they attached to their report.

131 Mr Wilkinson said that a net reduction in the professional fees charged by Hollows Lawyers of 31.6 per cent, on average, would be required before the professional fees (so reduced) would be equal to the fees paid by the Melbourne Voyager clients to Mr Forster.

132 Mr Wilkinson was also asked to comment on the second supplementary report of Mr David Osborne dated 3 October 2013, which he did in his report of 26 November 2013.

133 Under the heading 'Comments and Conclusions', Mr Wilkinson noted what was said in paragraph 7.8 of Deloitte's first report of 28 October 2010, which said as follows:

There were a number of invoices raised by Hollows that included disbursements for third party services that were paid directly to third party suppliers via the trust account and subsequently billed as disbursements by Hollows to the client. However, these amounts appear to have been written off by Hollows (ie deducted from the client's invoice) prior to any settlement payment being made to the client. The effect of the writeoff of the disbursements eliminated any double payment of third party costs incurred on behalf of the client.

134 Mr Wilkinson said that 'in his opinion, with the exception of a small number of matters, there were no double payments of disbursements made from the trust account as the accounting misstatement was in the office account.' He said that '[f]urther, the rectification work corrected any such mistake.'

135 Mr Wilkinson included a table in his report relating to Messrs Burke, Cavenett, Gretton, Lymbery, Norrish, Ramsay, Spaulding, Stafford, Stringer and Vincent, in respect of whom the receivers alleged there had been a double payment of disbursements. The table shows that even after adjustment for the alleged double payment, substantial amounts were still written off by Hollows Lawyers and, although invoiced to the client, not recovered.

136 Mr Wilkinson noted that in a number of cases the 25 per cent uplift was not applied, although Hollows Lawyers were, in accordance with the costs agreements, entitled to seek such an uplift.

137 Mr Wilkinson said that in addition to the level of writeoffs, it was understood that there was a substantial amount of unbilled work and disbursements. He said that as a result of the unbilled work, Deloitte's calculations of the net amount of fees and disbursements written off by Hollows Lawyers of $6,019,650 must be considered conservative. This was the Deloitte figure of fees written off adjusted for the errors identified by Mr Wilkinson in his report.

138 Mr Wilkinson opined that he concurred with Mr Osborne that from an accounting perspective, the approach adopted by Mr Forster to rectify the accounting errors was practical, appropriate and an efficient means of addressing the accounting errors.

139 Under crossexamination, Mr Wilkinson agreed that he had not undertaken a review of the files themselves and insofar as he expressed an opinion, he did so in reliance upon what Deloitte had done or what Mr Osborne had undertaken.

140 Mr Wilkinson confirmed in crossexamination that although he had not reviewed Hollows Lawyers' financial records, he had reviewed the summary of each account, and he had determined that because of the writeoffs that were involved and fees that were charged, there was no disadvantage to any of the clients. It was put to Mr Wilkinson that that conclusion was made solely on the basis of an accounting opinion expressed by Mr Wilkinson as an accountant and an auditor. Mr Wilkinson said it was expressed by him, but it was also supported by the overriding comments by Deloitte in its report.

141 Mr Corbett took Mr Wilkinson to his conclusion as to what inferences could be drawn from Deloitte's observations in its executive summary, which in conclusion was as follows:

1. The Infinity Law cashbooks are representative of the cash transactions that occurred;
2. On 28 and 29 June 2007 funds were transferred from clients' trust accounts into the David Forster Superannuation Account and then transferred back again approximately 14 months later;
3. There were instances where disbursements were paid twice by the clients;
4. There were instances where clients may have been overcharged GST; and
5. There were instances where clients have been charged GST on professional fees prior to the introduction of the GST.

142 Mr Wilkinson was taken to the decision of Emerton J on 31 March 2010 in Legal Services Board v Forster. It was put to Mr Wilkinson that her Honour had found trust account deficiencies. Mr Wilkinson acknowledged her Honour's opinion, but compared it to his as an auditor. Mr Wilkinson said:

I don't see any information I've reviewed that there is any deficiency in the trust account. There may have been errors, but not a deficiency.

143 Mr Wilkinson said that a deficiency is when something is missing in the trust account, or something has not been put into the trust account, or something has been taken out that should not have been taken out. He said that as he understood the matter, all the funds went into the trust account. He said there were certain payments and there were certain duplications of payments, but the fees charged were less than the payments from trust. Effectively, there was a writeoff on the fees that were charged, which more than covered any potential small GST variation or duplication of barristers' fees.

144 Mr Wilkinson conceded, however, that he was not giving evidence of the legal consequences but only the accounting consequences.

145 Mr Wilkinson explained that from an accounting point of view if a disbursement was paid directly from the trust account and a sum was taken out of the trust account to meet an account that also charged the disbursement, but less was taken out than was in fact owed to the solicitor, then there was no deficiency. Mr Wilkinson said that such a transaction did not give rise to any deficiency. He said that everything was banked that should have been banked into the trust account. He agreed there were some errors in the transactions, but those transactions, he said, did not cause any one of the clients that Deloitte reviewed any deficiency or loss. So if that is the case, he said, he thinks that there has been no deficiency.

146 The receivers rely on s 5.5.14(1)(c) in support of the double disbursement claims. It is convenient to set out other provisions of the Act as well.

147 Chapter 5 of the Act deals with 'external intervention'. Section 5.1.1 provides:

Purposes

The purposes of this Chapter are -

(a) to ensure that an appropriate range of options is available for intervention in the business and professional affairs of law practices and Australian-registered foreign lawyers for the purpose of protecting -

(i) the interests of the general public; and

(ii) the interests and the trust money and property of clients; and

(iii) the interests of lawyers, including the owners and employees of law practices, so far as their interests are not inconsistent with those of the general public and clients; and

(b) to ensure that there is an accountable and transparent process for the appointment of interveners and for the conduct of interventions.

148 Section 5.1.2 contains several definitions including that of 'regulated property' as follows:

regulated property, in relation to a law practice, means the following_ - _

(a) trust money or trust property received, receivable or held by the practice;

(b) interest, dividends or other income or anything else derived from or acquired with money or property referred to in paragraph (a);

(c) documents or records of any description relating to anything referred to in paragraph (a) or (b);

(d) any computer hardware or software, or other device, in the custody or control of the practice or an associate of the practice by which any records referred to in paragraph (c) may be produced or reproduced in visible form.

149 Part 5.5 deals with receivers. Section 5.5.4 defines the role of the receiver as follows:

(1) The role of a receiver for a law practice is -

(a) to be the receiver of regulated property of the practice; and

(b) to wind up and terminate the affairs of the practice.

(2) For the purpose of winding up the affairs of the law practice and in the interests of the practice's clients, the Supreme Court may, by order, authorise -

(a) the receiver to carry on the legal practice engaged in by the law practice, if the receiver is an Australian legal practitioner who holds a practising certificate as a principal authorising the receipt of trust money; or

(b) an Australian legal practitioner who holds a practising certificate as a principal authorising the receipt of trust money, or a law practice whose principals are or include one or more Australian legal practitioners who hold practising certificates authorising the receipt of trust money, specified in the order to carry on the legal practice on behalf of the receiver.

(3) Subject to any directions given by the Supreme Court, the person authorised to carry on the legal practice engaged in by a law practice has all the powers of a manager under this Part and is taken to have been appointed as manager for the law practice.

(4) The Supreme Court may, by order, terminate an authorisation to carry on a legal practice granted under this section.

150 Section 5.5.6 regulates the power of a receiver to take possession of regulated property. The section provides:

Power of receiver to take possession of regulated property

(1) A receiver for a law practice may take possession of regulated property of the practice.

(2) A person in possession or having control of regulated property of the law practice must permit the receiver to take possession of the regulated property if required by the receiver to do so.

(3) If a person contravenes subsection (2), the Supreme Court may, on application by the receiver, order the person to deliver the regulated property to the receiver.

(4) If, on application made by the receiver, the Supreme Court is satisfied that an order made under subsection (3) has not been complied with, the Court may order the seizure of any regulated property of the law practice that is located on the premises specified in the order and make any further orders it thinks fit.

(5) An order under subsection (4) operates to authorise -

(a) a member of the police force; or

(b) the receiver or a person authorised by the receiver, together with a member of the police force -

to enter the premises specified in the order and search for, seize and remove anything that appears to be regulated property of the law practice.

(6) The receiver must, as soon as possible, return anything seized under this section if it transpires that it is not regulated property of the law practice.

151 Section 5.5.8 prescribes the power of a receiver to deal with regulated property as follows:

Power of receiver to deal with regulated property

(1) This section applies if a receiver for a law practice acquires or takes possession of regulated property of the practice.

(2) The receiver may deal with the regulated property in any manner in which the law practice might lawfully have dealt with the property.

152 Section 5.5.14 gives power to the receiver to recover regulated property as follows:

Recovery of regulated property where there has been a breach of trust etc.

(1) This subsection applies if regulated property of or under the control of a law practice has, before or after the appointment of a receiver for the practice, been taken by, paid to or transferred to, a person (the transferee) in breach of trust, improperly or unlawfully and the transferee -

(a) knew or believed at the time of the taking, payment or transfer that it was done in breach of trust, improperly or unlawfully; or

(b) did not provide to the practice or any other person any or any adequate consideration for the taking, payment or transfer; or

(c) because of the taking, payment or transfer, became indebted or otherwise liable to the practice or to a client of the practice in the amount of the payment or in another amount.

(2) The receiver is entitled to recover from the transferee -

(a) if subsection (1)(a) applies - the amount of the payment or the value of the regulated property taken or transferred; or

(b) if subsection (1)(b) applies - the amount of the inadequacy of the consideration or, if there was no consideration, the amount of the payment or the value of the regulated property taken or transferred; or

(c) if subsection (1)(c) applies - the amount of the debt or liability -

and, on the recovery of that amount from the transferee, the transferee ceases to be liable for it to any other person.

153 Section 5.5.14 is divided into two parts. The first part in subsection (1) prescribes the circumstances where the powers of the receivers in subsection (2) are enlivened. Subsection (1) requires the satisfaction of two limbs before moving on to consider whether any of (1)(a), (b) or (c) are satisfied. The subsection provides that it applies if regulated property of or under the control of a law practice has, before or after the appointment of a receiver for the practice, been taken by, paid to or transferred to, a person ('the transferee') in breach of trust, improperly or unlawfully.

154 The subsection then proceeds to qualify the earlier elements by setting out four (exhaustive) disjunctive situations in which the subsections may be enlivened.

155 Paragraph (a) of subsection (1) applies to transactions where the transferee knows or believes at the time of the transaction that it was done in breach of trust, improperly or unlawfully. The receivers do not allege that in the case of the double disbursement clients that at the time of the payments, Mr Forster knew or believed that the payments were improper or unlawful.

156 The subsection requires that what is known or believed to be improper or unlawful is the payment or transfer of the regulated property.

157 Paragraph (b) deals with transactions where the transferee of the regulated property fails to provide:

158 Paragraph (c) deals with two types of transactions. The first is where, because of the taking, payment or transfer, the transferee became indebted or otherwise liable to the practice in the amount of the payment or in another amount. Mr Forster submits that the principal and owner of a practice that is not in receivership, cannot be liable to his own practice. The receivers rely on this provision in respect of the double disbursement clients. Mr Forster contends that where, as in his case, he was the transferee and the practice, that this part of paragraph is intended to apply to employees and agents of the practice or other third parties who are transferees, and not to him. I accept Mr Forster's contentions.

159 The second type of transaction that paragraph (c) applies to, is where, because of the taking, payment or transfer, the transferee became indebted or otherwise liable to a client of the practice in the amount of the payment or in another amount. The receivers rely on this provision in respect of the double disbursement clients.

160 In the case of the double disbursements claim, the receivers rely on subsection (1)(c). Under that subsection, where the regulated property has been taken by, paid to or transferred to a person in breach of trust, improperly or unlawfully, the receivers are not entitled to recover the amount of the payment or the value of the regulated property taken or transferred. Rather, where because of the taking, payment or transfer, the transferee has become liable to the practice or a client of the practice in the amount of the payment or in another amount, the receivers are entitled to recover from the transferee the amount of the debt or liability.

161 In short, the receivers must establish two matters. The receivers must establish (first) that trust funds have been taken by, paid to or transferred to, Mr Forster in breach of trust, improperly, or unlawfully and (secondly) that, because of the taking, payment or transfer, Mr Forster became indebted or otherwise liable to a client of the practice in the amount of the payment or in another amount.

162 Although the receivers provide several grounds why the alleged double paid disbursement in respect of Mr Barltrop was improper or unlawful, each ground ultimately turns on the allegation that $5,641.61 of the moneys transferred from the trust account to the office account were in part payment of invoice 4012.

Part 3 of the Legal Profession Act 2004

163 Part 3 of the Act deals with 'trust money and trust accounts'. The following definitions are relevant:

general trust account means an account maintained by a law practice or an approved clerk with an approved ADI for the holding of trust money received by the practice or clerk, other than controlled money or transit money;

trust money, in relation to a law practice, means money entrusted to the law practice in the course of or in connection with the provision of legal services by the practice, and includes -

(a) money received by the practice on account of legal costs in advance of providing the services; and

(b) controlled money received by the practice; and

(c) transit money received by the practice; and

(d) money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person;

trust money in relation to an approved clerk, means money received by an approved clerk on account of the legal costs of one or more barristers in advance of the provision of the legal services to which those costs relate;

164 Section 3.3.13 deals with moneys to be deposited in general trust account as follows:

Certain trust money to be deposited in general trust account

(1) Subject to section 3.3.17A, as soon as practicable after receiving trust money, a law practice or an approved clerk must deposit the money in a general trust account of the practice or clerk unless -

(a) the practice or clerk has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account; or

(b) the money is controlled money; or

(c) the money is transit money; or

(d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person.

Penalty: 120 penalty units.

(2) Subject to section 3.3.17A, a law practice that, or an approved clerk who, has received money that is the subject of a written direction mentioned in subsection (1)(a) must deal with the money in accordance with the direction -

(a) within the period (if any) specified in the direction; or

(b) subject to paragraph (a), as soon as practicable after it is received.

Penalty: 120 penalty units.

(3) A law practice or an approved clerk must keep a written direction mentioned in subsection (1)(a) for the period prescribed by the regulations.

Holding, disbursing and accounting for trust money

(1) A law practice or an approved clerk must -

(a) hold trust money deposited in a general trust account of the practice or clerk exclusively for the person on whose behalf it is received; and

(b) disburse the trust money only in accordance with a direction given by the person.

Penalty: 120 penalty units.

(2) Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law.

(3) A law practice or an approved clerk must account for the trust money as required by the regulations.

Dealing with trust money: legal costs and unclaimed money

(1) A law practice may do any of the following, in relation to trust money held in a general trust account or controlled money account for a person -

(a) exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the practice;

(b) withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by this Act and the regulations are complied with;

(c) after deducting any legal costs properly owing to the practice, deal with the balance as unclaimed money under the Unclaimed Moneys Act 1962.

...

167 The relevant procedures referred to in s 3.3.20(1)(b) are prescribed in reg 3.3.34 of the Legal Profession Regulations 2005:

Reg 3.3.34 Withdrawing trust money for legal costs - law practices

(1) This regulation prescribes, for the purposes of section 3.3.20(1)(b) of the Act, the procedure for the withdrawal of trust money held in a general trust account or controlled money account of a law practice for payment of legal costs owing to the practice by the person for whom the trust money was paid into the account.

(2) The trust money may be withdrawn in accordance with the procedure set out in either subregulation (3) or (4).

(3) The law practice may withdraw the trust money -

(i) the money is withdrawn in accordance with a costs agreement that complies with the legislation under which it is made and that authorises the withdrawal; or

(ii) the money is withdrawn in accordance with instructions that have been received by the practice and that authorise the withdrawal; or

(iii) the money is owed to the practice by way of reimbursement of money already paid by the practice on behalf of the person; and

(b) if, before effecting the withdrawal, the practice gives or sends to the person -

(i) a request for payment, referring to the proposed withdrawal; or

(ii) a written notice of withdrawal.

(4) The law practice may withdraw the trust money -

(a) if the practice has given the person a bill relating to the money; and

(b) if -

(i) the person has not objected to withdrawal of the money within 7 days after being given the bill; or

(ii) the person has objected within 7 days after being given the bill but has not applied for a review of the legal costs under the Act within 60 days after being given the bill; or

(iii) the money otherwise becomes legally payable.

(5) Instructions mentioned in subregulation (3)(a)(ii) -

(a) if given in writing, must be kept as a permanent record; or

(b) if not given in writing, must be confirmed in writing either before, or not later than 5 working days after, the law practice effects the withdrawal and a copy must be kept as a permanent record.

(6) For the purposes of subregulation (3)(a)(iii), money is taken to have been paid by the law practice on behalf of the person when the relevant account of the practice has been debited.

168 The receivers contend that s 3.3.20(1)(b) only authorises procedures 'for withdrawing moneys from trust for payment for legal costs owing to the practice.' The receivers rely on the words 'for legal costs owing to the practice' in respect of the double disbursement claim, the no fee agreement claims and the scale fee agreement claims.

A summary of the receivers' case on s 5.5.14(1)(c) and Mr Forster's response

169 The receivers contend that the appropriation of trust moneys in the office accounts to pay the invoice that included the disbursements that had already been paid constitutes regulated property being taken by, paid to or transferred to Mr Forster for the purposes of s 5.5.14(1)(c).

170 Mr Forster agrees that regulated property was taken by, paid to or transferred to him from the trust account, but he maintains that the payment was not the appropriation of $28,623.29 from the payment of $36,942.40 made in the office accounts to invoice 4012. Rather, it was the payment from the trust fund to the office account of $36,942.40.

171 Mr Forster further says that the sum of $28,623.29 transferred as part of $36,942.40 appropriated in the office books of account to invoice 4012 was not in payment of invoice 4012. Mr Forster relies on principles of law relating to the appropriation of payments by a creditor in the creditor's books of account. As elaborated on below, Mr Forster submits that where a debtor owes a creditor more than one debt, and moneys are paid by the debtor to the creditor in partial satisfaction of his debts to the creditor, the debtor is able to appropriate the payment to the satisfaction of various debts owed by the debtor as he chooses. Where the debtor fails to make such an appropriation, the creditor is free to appropriate the payment to such debts of the debtor as he chooses. In that case, where a creditor makes an entry in its office books of account allocating the payment to debts of the debtor of its choice, the allocation is not treated as being an appropriation of the payment until and unless the creditor communicates the appropriation to the debtor. In other words, in that situation, payment of a particular invoice is not treated as being made until the allocation made to that particular invoice is informed to the debtor.

172 In this case, Mr Forster says that Mr Barltrop did not direct Mr Forster that $28,623.29 of $36,942.40 be appropriated to invoice 4012. In those circumstances, Mr Forster submits that he was at liberty to allocate in his office books of account, and change his mind and reallocate if he wished, the amount transferred to such of the outstanding invoices as he chose until his choice was communicated to Mr Barltrop. Mr Forster says that as it was, the initial allocation in the office accounts (and not in the trust account) of $28,623.29 to invoice 4012 was not communicated to Mr Barltrop. The allocation was subsequently reduced in the office accounts to the correct amount owing on invoice 4012 and the balance of the payment appropriated to the amount outstanding on invoice 4042, before any allocation was communicated to Mr Barltrop, if notified at all.

173 Mr Forster says that any preliminary allocation by his office of a portion of the two sums transferred from the trust account to the office account, to the satisfaction of an invoice for disbursements, when the disbursements had otherwise been paid, was an error in the office accounts and the office accounts alone. There was no error made in the trust accounts. Mr Forster says that such error was able to be, and was, corrected by Mr Forster and that Mr Forster made such correction in the office accounts before any notice of the error was brought to the attention of Mr Barltrop.

174 Mr Forster submits that, in those circumstances, $28,623.29 was not taken by, paid to or transferred to Mr Forster in satisfaction of invoice 4012. Rather, until any appropriation by Mr Forster in the office books of account to any particular invoice outstanding between Mr Forster and Mr Barltrop was notified to Mr Barltrop, the payment from the trust account of $36,942.40 merely reduced the total amount outstanding by Mr Barltrop under the various unpaid invoices, which were in excess of the sum transferred after making any necessary adjustments to the invoices to account for the prior payment of the disbursements.

175 Returning to the receivers' contentions, the receivers contend that under s 3.3.20 of the Act Mr Forster was only entitled to transfer moneys from trust to office to pay invoices in accordance with his costs agreement, the Act and the Regulations in an amount that was 'owing' to the law practice.

176 The receivers contend that s 3.3.20 permits a law practice, in relation to trust money held in a general trust account for a person, to withdraw money for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by the Act and the Regulations are complied with.

177 On the assumption that there was a payment of $28,623.29 towards the moneys due under invoice 4012, the receivers contend that the payment of the amount in excess of the moneys actually due under invoice 4012 was not paid in accordance with Mr Forster's costs agreement, the Act and Regulations and was not 'owing' to the law practice, contrary to s 3.3.20 of the Act. Accordingly, the receivers contend that the excess sum taken, paid or transferred to Mr Forster was done so unlawfully and/or improperly.

178 The receivers further contend that the words 'liable to the practice or the client in the amount or another amount' in s 5.5.14(1)(c) picks up the statutory obligation on Mr Forster under s 3.3.13 to deposit trust money in a trust account.

179 The receivers contend that as an excess amount was taken by, paid to or transferred to Mr Forster, Mr Forster was in receipt of trust money and accordingly, under s 3.3.13 of the Act, Mr Forster was obliged, as soon as practicable, to deposit the money in a general trust account of the practice, which he failed to do.

180 The receivers submit that by reason of the deficiency and Mr Forster's failure to deposit the excess back into his trust account, Mr Forster was indebted to or otherwise liable to Mr Barltrop or the practice for the excess amount paid on invoice 4012, thus satisfying s 5.5.14(1)(c) of the Act.

181 Further, the receivers say that the statutory obligation to deposit the money in the trust account meant that Mr Forster was 'otherwise liable' to the practice or to Mr Barltrop in the amount of the payment or in another amount within the meaning of s 5.5.14(1)(c).

182 The receivers contend that the satisfaction of s 5.5.14(1)(c) of the Act enlivens the receivers' right to recover from Mr Forster the amount of the debt or liability under s 5.5.14(2)(c) of the Act.

183 The receivers make these contentions despite not taking any issue with Mr Forster that from an accounting point of view, Mr Forster did not owe any moneys to the double disbursement clients as a result of the payments made from trust to office.

184 Returning to the case of Mr Forster, consistently with his submission that the relevant sum taken, transferred or paid within the meaning of s 5.5.14 is the actual payment from the trust account to the office account of $36,942.40, Mr Forster contends that the amount of $36,942.40 transferred from the trust account to office was in fact owing to him (as it was less than the actual sum owing on Mr Barltrop's account for bills rendered) and accordingly was not taken, paid or transferred in breach of trust, improperly or unlawfully within the meaning of s 5.5.14.

185 The receivers contend that the state of the account between Mr Forster and Mr Barltrop, after adjusting for the prior payment of the disbursements, is irrelevant to their claim under s 5.5.14(1)(c). As indicated above, the receivers submit that the allocation of $28,623.29 to invoice 4012 in the office accounts, although not communicated to Mr Barltrop, constituted the relevant moneys taken by, paid to or transferred to Mr Forster for the purposes of s 5.5.14(1)(c) and not $36,942.40 as shown as paid from the trust account.

186 In support of that submission the receivers contend that, in Legal Services Board v Forster,[4] Emerton J found that the allocation in the office account in satisfaction of an invoice, that contained disbursements (when the disbursements had previously been paid) constituted an appropriation to pay the invoice as a whole. The receivers submit that the findings of Emerton J establish and support their submission that the allocation to the invoice of part of the amount transferred from the trust account to the office account constitutes an amount taken by, paid to or transferred to Mr Forster for the purposes of s 5.5.14(1)(c).

187 The receivers also rely on the findings of Emerton J that the appropriation to the invoice resulted in trust account deficiencies 'because moneys were appropriated from trust for the same purpose twice. The law practice had the benefit of the second payment.'[5]

188 In support of Mr Forster's contention that he did not take, pay or transfer trust moneys in excess of those due to him and in support of his contention that the amount taken, paid or transferred was not in excess of legal costs owing to the practice under s 3.3.20, Mr Forster contends that he had a 'particular lien' that entitled him to transfer moneys to the office account for fees due to him.

189 Mr Forster submits that the trust moneys transferred were moneys he recovered on behalf of Mr Barltrop and were the subject of a particular lien recognised by s 3.3.20(1)(a) of the Act. Mr Forster contends that the particular lien entitled him to transfer moneys from trust to office without having to comply with any of the procedures provided in s 3.3.20(1)(b). Even if Mr Forster was required to comply with one or other of the procedures provided in s 3.3.20(1)(b), then Mr Forster contends that the receivers have not established that he had not so complied with any of them and that he was not entitled to pay the sum of $36,942.40 from the trust account to his office account under his lien.

190 Mr Forster contends that the receivers have not disputed that fees in excess of $36,942.40 were due and owing by Mr Barltrop and that Mr Forster was entitled to transfer that sum to the office account.

191 The receivers do not dispute that Mr Forster had a particular lien over the fees for 'amounts of legal costs reasonably due and owing' by Mr Barltrop to the practice as provided in s 3.3.20(1)(a). The receivers do argue, however, that the lien did not entitle Mr Forster to pay moneys from the trust account to the office account unless Mr Forster obtained a court order or otherwise complied with one or other of the procedures prescribed in s 3.3.20(1)(b) of the Act.

192 In any event, the receivers contend that the lien may only be exercised for the 'amount of legal costs reasonably due and owing by the person to the practice'. Such a lien would not entitle Mr Forster to apply the moneys to the payment of the same purpose twice. Similarly, s 3.3.20(1)(b) only applies to 'legal costs owing to the practice'. The receivers submit that the payment to satisfy the overstated invoice 4012 was not a payment for legal costs owing. The receivers contend that the act of making the allocation in the books of the office accounts constituted the 'payment' for the purposes of s 5.5.14(1)(c).

193 For the reasons given below, I find that the receivers' claim in respect of Mr Barltrop should be rejected. In particular, I find that, assuming that the allocation of $28,623.29 from the sum transferred from the trust account to the office account of $36,942.40 constituted regulated property taken by, paid to or transferred to Mr Forster, then by reason of the findings of Emerton J the payment was unlawful. I am not satisfied, however, that it was done improperly or in breach of trust. I am not satisfied, however that, because of the taking, payment or transfer, Mr Forster became indebted or otherwise liable to the practice or to Mr Barltrop in the amount of the payment or in another amount.

194 In reaching that conclusion, for the reasons given below, I have taken into account the state of the account between Mr Barltrop and Mr Forster on 22 August 2008 and also Mr Forster's lien over the trust moneys for the amount of his outstanding fees.

195 I have, moreover, found that Mr Forster is estopped from arguing that the payment did not give rise to a deficiency in the trust account.

The disputed transactions relating to Mr Barltrop

196 The payment of the disputed disbursements directly to the barristers' clerks occurred after the first transfer and before the second transfer of funds from the trust account to the office account.

197 The 2007 transfer from the trust account to the office account was of $137,313.40. According to the office accounts it was allocated as to $132,088.86 in part satisfaction of invoice 4012. As mentioned above, invoice 4012 was for $160,712.15, which included $5,641.58 for disbursements to counsel as mentioned above. On the narration on the report as to trust ledger account entries tendered into evidence, there is no indication whether or not the disbursement component of invoice 4012 was paid and satisfied from the sum of $132,088.86 transferred from the trust account to the office account. The trust accounts entry for the transfer was not tendered.

198 The office account entry for invoice 4012 is as follows. The introduction of the entry was: Bill Date, 14/09/2007, reference 4012 review date 10/10/2007, and stage 1.

199 The entries made on 5 March 2009 and 24 March 2009 took place after the Legal Service Board investigators had informed Mr Forster that there was a problem with the trust account records.

200 In the office accounts, as indicated above, there is also no indication that the disbursement component was paid in full or in part.

201 The disbursements of $5,610.55 were paid directly from the trust account to the relevant clerk on 21 August 2008. The adjustment note was for $5,641.58. The discrepancy between $5,610.55 and $5,641.58 was not explained and in any event has no bearing on the issues in dispute.

202 As mentioned above, on 21 September 2007, according to the trust accounts $36,942.40 was withdrawn from the trust account to meet invoices 3893, 4012 and 4042.

203 As discussed above, the report of the office accounts recorded that the outstanding amount on invoice 3893 of $5000 was paid in full on 22 August 2008. The report of the office accounts recorded that the outstanding amount on invoice 4012 of $28,623.29 was paid in full on 22 August 2008. The report of office accounts recorded that $3,319.11 was allocated in part payment of invoice 4042, leaving a balance due of $8,188.28 on invoice 4042 that was subsequently written off in September 2008 but written back on 5 March 2009.

204 There are several well established principles relating to the allocation of payments to satisfy debts due between a debtor and creditor.[6] If a debtor owes several debts to a creditor, the debtor may inform the creditor to which debt a payment by the debtor should be applied. If a debtor fails to inform the creditor of an allocation, the creditor may make the allocation. If the allocation is made by the creditor in his or her books of account, the creditor may alter the allocation at any stage before the debtor is informed of an allocation.

205 These principles were explained in Simson v Ingham.[7] In that case a country bank established as a partnership had an agreement with a London bank, also established as a partnership. The London bank had agreed with the country bank to meet certain obligations for the country bank. One of the partners of the country bank died. The country bank continued to trade after the death of the former partner but as new firm. The London bank continued to receive payments from the country bank which it applied against the moneys owing by the old firm to the London bank. When the London bank subsequently became aware of the death of the partner the London bank opened a new account for the new firm.

206 The London bank then transferred in its internal books the payments previously received from the country bank after the partner died (but before the new account was opened) from the account for the old firm to the account for the new firm. The London bank took proceedings claiming moneys due from the deceased partner as a member of the old firm. The executors of the deceased partner claimed that the London bank was bound by their actions in initially crediting the account of the old firm with the payments received from the country bank which the London bank subsequently transferred in its books of account to the credit of the new firm, and thus, they claimed, the estate of the deceased partner was not liable to the claim of the London bank.

207 The matter went to arbitration and the London bank was successful. The arbitration award was appealed.

208 On the appeal, Bayley J held that the general rule is that a party who pays money has a right to apply that payment as he thinks fit. His Lordship said:

If there are several debts due from him, he has a right to say to which of those debts the payment shall be applied. If he does not make a specific application at the time of payment, then the right of application generally devolves on the party who receives the money.[8]

209 Bayley J said that there was a third rule that dealt with partnerships. He said:

But there is a third rule, viz, that where one of several partners dies, and the partnership is in debt, and the surviving partners continue their dealings with a particular creditor, and the latter joins the transactions of the old and the new firm in one entire account, then the payments made from time to time by the surviving partners must be applied to that old debt. In that case, it is to be presumed that all parties have consented that it should be considered as one entire account, and that the death of one of the partners has produced no alteration whatever.[9]

210 Bayley J held that the London bank did not so consent, but rather it subsequently sent in two separate accounts, one for the old firm and one for the new firm. He said by doing this it indicated it did not agree to making one entire account.

211 It was argued by the defendants at that time that the London bank had no right to open two separate accounts, as they were precluded by the entries that they had already made in their own books in the intermediate space of time that treated the account of the firm as ongoing despite the death of a partner. Bayley J rejected that argument saying:

If indeed a book had been kept for the common use of both parties as a pass-book, and that had been communicated to the opposite party, then the party making such entries would have been precluded from altering that account; but entries made by a man in books which he keeps for his own private purposes, are not conclusive on him until he has made a communication on the subject of those entries to the opposite party. Until that time he continues to have the option of applying the several payments as he thinks fit. [10]

212 Bailey J accordingly found that the London bank was not precluded from applying the payments to the new account as it had done in its office accounts.

213 Holroyd J was also of opinion that the award was right. His Lordship said:

The persons making the payment not having made any direct application of it, the right of making such application devolved on the receivers; and if they have done no act which can be considered as such an application, it is equally clear, that although they did not apply it at the moment of payment, they would have the right to make application at a subsequent period. The question therefore is, whether from the entry in the books there appears to have been a complete election by them to apply the payments in any other way that they are applied in the accounts which have been actually delivered. Now, those entries not having been communicated to the opposite party, it seems to me that the election was not complete. The effect of making the entries in their own private books, shews only that the idea of so applying the payments had passed in their minds. [11]

214 The Laws of Australia[12] summarises the position with respect to the appropriation of a payment to the discharge of a particular debt. At 7.5.300 the learned editors state:

In the absence of an express or inferred appropriation by a debtor, payment may be appropriated to the discharge of a debt of a creditor's choice. There is no obligation to exercise that right at the time when the payment is received, or within a reasonable time, or by the date of the issue of a writ against the debtor. The creditor can make an appropriation at any time 'up to the very last moment.', and in one case was permitted to do so while giving evidence in the witness box against a debtor with regard to the debts in question.[13]

215 Turning to the meaning of 'payment'. Payment is not a technical word.[14] When a particular debt is paid depends upon when a payment is appropriated to the satisfaction of that debt. Such an appropriation is not made until it has been communicated to the debtor. The receivers did not dispute these propositions. I accept Mr Forster's submissions on the ability of Mr Forster to correct errors in appropriations in his office account that arose in allocating part of the payment to invoice 4012.

Relevance of Hallett's case and Coburn v Colledge

216 It is also appropriate, at this stage, to refer to these authorities that Mr Forster relied on.

217 Mr Forster sought to rely on the principles established in Re Hallett's Estate.[15] Mr Forster submits that, where an invoice is inflated and includes an amount that ought not to have been included, then where moneys are appropriated from the trust account in part payment of that invoice, in accordance with Re Hallett's Estate it is presumed that the trust money is only applied in satisfaction of the debt that is owing.

218 Consistently with this principle, Mr Forster submits that the moneys transferred from trust to office should be treated as being allocated to the invoice that included the double disbursement only to the extent of the amount actually due on the invoice and the balance should be applied to other outstanding invoices owed by the client.

219 Mr Forster also submits that, when a practitioner performs work for a client at the client's request, the client becomes liable to the practitioner (and the cause of action accrues), even though the practitioner has not yet rendered a bill of costs. This is because the legislation requiring the rendering of a bill of costs merely precludes a practitioner from recovering those costs, or postpones enforcement, until a month after the bill of costs has been delivered or rendered. Mr Forster relies on the authority of Coburn v Colledge.[16]

220 In that case, a solicitor took action for his fees. The defendant set a defence that the action was statute barred by the Statute of Limitations. The parties agreed that, if the cause of action arose when the work was done, then the claim was statute barred; but if the cause of action arose when the bill of costs was delivered, then the cause of action was not statute barred. Lord Esher MR, with whom Lopes and Chitty LJJ agreed, held that the cause of action arose when the work was done. His Lordship said that the provisions of the Solicitors Act 1848 that set out a procedure that had to be followed to recover costs, did not affect the right to payment but only affected the procedure for enforcing it. His Lordship said:

If the solicitor has any other mode of enforcing his right than by action, the section [in the Solicitors Act 1848] does not interfere with it. For instance, if he has money of the client in his hands not entrusted to him for any specific purpose, there is nothing in the section to prevent his retaining the amount due to him out of that money. If that be the true construction of the section, it does not touch the cause of action, but only the remedy for enforcing it. [17]

221 The legislation in question was s 37 of the Solicitors Act 1843 (UK). The equivalent Australian provisions were in s 22 of the Costs Act 1867 (Qld); s 201 of the Legal Profession Act 1987 (NSW); s 5 of the Legal Practitioners Act 1995 (Qld); s 65 of the Legal Practitioners Act 1893 (WA) and s 61 (now repealed) of the Supreme Court Act 1986. Section 61 (now repealed) of the Supreme Court Act 1986 is a precursor to s 3.4.33 of the Legal Profession Act 2004. The defendant contends that this line of authority applies to s 3.4.33 of the Legal Profession Act 2004.

222 Mr Forster submits that this principle on when fees are owed is reinforced by the cases on liens. In Margiotta v Legal Services Commissioner,[18] a client made a complaint about his solicitor's conduct to the Legal Services Commissioner that was dismissed. The client required access to particular files of the solicitor, over which the solicitor claimed a solicitor's lien existed, in order to ascertain whether there was an action against the solicitor for negligence. The solicitor contended that the Commissioner's power to waive the lien under Legal Profession Act 1987 (NSW) s 152(2) could only be exercised as ancillary to an investigation under s 152(1). Dowd J said:

It is further submitted that the bill of costs has not been served. However, as decided in Re Jalmoon Pty Ltd (1986) 2 Qd R 264, this does not prevent the lien operating on work which generates costs that continue to accrue. [19]

223 In Re Jalmoon Pty Ltd,[20] Thomas J held that the practitioner's failure to render a bill of costs does not stand in the way of a lien.

224 This position is to be contrasted with the situation in relation to claims under the Fidelity Fund. In The Trustees of the Legal Contribution Trust v Bailey,[21] dealing with the Solicitor's Guarantee Fund (the Western Australia equivalent of the Fidelity Fund), Le Miere J held that the natural and ordinary grammatical meaning of s 20(3) of the Legal Contribution Trust Act 1967 (WA) was that the words 'the amount of any moneys or the value of any benefit received' were qualified by the words 'in reduction of the loss so suffered, from any source, other than from the practitioner in respect of whom the claim is made or from the Guarantee Fund'. Therefore, the value of work performed for a client by a defalcating solicitor was not to be taken into account in determining the 'actual pecuniary loss' suffered by the client. Mr Forster contends that section 5.5.14 of the Act is not so qualified.

225 Mr Forster submits that Coburn v Colledge was cited as correctly stating the law with respect to the accruing of a cause action in Harris v Gas and Fuel Corporation.[22]

226 In my view, Coburn v Colledge supports Mr Forster's contention that, in determining whether he owed any debt or other liability to Mr Barltrop because of his conduct in failing to deposit in the trust account $5,610.55, it is permissible to take into account fees owed to Mr Forster even if the procedure for the transfer of trust funds for their payment under s 3.3.20 had not been observed.

227 In The Trustees of the Legal Contribution Trust v Bailey,[23] Le Miere J held that the loss suffered as a result of the defalcation should take into account fees outstanding but not invoiced. Similarly, in this case in determining the debt or liability to Mr Barltrop Mr Forster submits that it is appropriate to take into account fees outstanding even if the receivers established that none of the permissible procedures for their payment or recovery from trust funds under s 3.3.20(1) had been followed.

228 The receivers did not make any submissions contesting Mr Forster's submissions on this issue. I accept the principles established in Coburn v Colledge. As it is, I have not needed to rely on them to reject the receiver's claim on double disbursements.

229 In support of the submission that the moneys transferred from Mr Barltrop's trust account were not transferred unlawfully, improperly or in breach of trust, Mr Forster contends that he was entitled to transfer and retain a sum less than he was owed under the particular lien that he held over the trust moneys.

230 As the receivers bore the onus of making out their case, Mr Forster submitted that the receivers had not established that he was not entitled to withdraw moneys from trust in satisfaction of his lien, and that if he was also obliged to comply with one or other of the procedures permitted under s 3.3.20(1)(b) in exercising his lien, that the receivers had not established that he had not satisfied or observed any of the various permitted procedures.

231 Mr Forster contends that the general principles relating to a solicitor's lien are accurately set out in the judgment of Hope JA of the New South Wales Court of Appeal in Johns v The Law Society of New South Wales,[24] where his Honour said:

A solicitor may receive money to be held for or on behalf of a client either from that client, or from a third person. When it is received from a third person, it may be money which the solicitor has recovered from his client, or it may be money otherwise paid to the solicitor for his client. Over all money which the solicitor holds for his client, as well as other property of his client which he holds, the solicitor has a general lien for costs. This lien, however, is a mere retaining lien, ie, it gives a right to withhold the property from the client until payment of costs; it does not give any right to payment out of money (or other property) which is the subject of the lien. In the case of money recovered by a solicitor for his client, the solicitor has a particular lien which he may enforce by application to the court. If the money is in his hands the solicitor may retain his costs out of the recovered money and pay the balance to his client. In respect of either class of money, the client may, quite apart from any lien, agree with his solicitor that he, the solicitor, may take his costs out of moneys held by him for the client, and such an agreement may be express or implied. [25]

232 In Stewart v Stephens,[26] Helsham J of the Supreme Court of New South Wales similarly recognised the rights of a solicitor to retain money in his possession to meet outstanding fees under a particular lien. His Honour said:

... The only other way in which a solicitor might obtain what could be called a just claim to moneys received for his client is in pursuance of the common law lien that goes with recovery by him for the client of a fund, or the proceeds of a judgment in the course of litigation or arbitration; in such a case there is a lien for his costs of recovery by the exertions authorized by his retainer. The lien is over the money, and it may be actively enforced by application to the Court. As it was put by the learned authors of Cordery on Solicitors , 6th ed., p. 433: 'This common law lien is in face not a mere lien but a claim to the equitable interference of the court to have the judgment held as a security for costs', and if the money in respect of which the lien is claimed is already in his hands the solicitor may retain thereout the amount of his costs, and pay over the balance to his client. This is, no doubt, because the lien is one that may be actively enforced, and is not a mere retaining lien, as is the case with the solicitor's general lien. [27]

233 As these authorities indicate, if the solicitor has a particular lien over a fund and that fund is in her or his possession, then the solicitor may retain his/her costs out of those funds without an order of the court. This equitable right is recognised and explained in the wellknown case of In re Universal Distributing Company Limited (in liquidation).[28] Dixon J said:

If a creditor whose debt is secured over the assets of the company come in and have his rights decided in the winding up, he is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realization of such assets (In re Marine Mansions Co). The security is paramount to the general costs and expenses of the liquidation, but the expenses attendant upon the realization of the fund affected by the security must be borne by it (In re Oriental Hotels Co; Perry v Oriental Hotels Co). The debenture-holders are creditors who have a specific right to the property for the purpose of paying their debts. But if it is realized in the winding up, a proceeding to which they are thus parties, the proceeds must bear the cost of the realization just as if they had begun a suit for its realization or had themselves realized it without suit (cf In re Regent's Canal Ironworks Co; Ex parte Grissell; and see Batten v Wedgwood Coal and Iron Co). [29]

234 Dixon J also held that remuneration of the liquidator in raising the fund should be charged upon it.[30] In my opinion, the similar equitable considerations that give rise to the equitable rights of a liquidator also apply to solicitors. As is the case with solicitors, the liquidators do not need to apply to court for relief to exercise the lien.

235 In Quinn v Lovell,[31] a solicitor who acted for a now deceased client sought to recover his costs. The deceased client had settled a proceeding against a neighbour. The settlement sum was paid to the solicitor for the deceased's estate. The solicitor, who had successfully enabled the deceased to reach the favourable settlement, sought an order that the settlement sum held by the solicitor for the deceased estate be paid to him in satisfaction of his costs.

236 Douglas J of the Supreme Court of Queensland ordered that the sum be paid to the applicant. Both the receivers and Mr Forster rely on this judgment and various passages of it. Accordingly, it is convenient to set out the passages relied on. Douglas J said:

[8] No doubt the money held by Johnsons is an asset of the estate but, in my opinion, it is subject to a solicitor's particular lien as part of the subject matter of the action against Ms Christian that can be said to have been recovered or preserved by the work done in the action by the applicant solicitor. That the property is not yet in the possession of the applicant does not prevent the lien from arising as this type of lien does not depend on any proprietary or possessory relationship of the solicitor to the property.

[9] The discussion by Hobhouse J in Halvanon Insurance Co Ltd v Central Reinsurance Corp is helpful:

'They assert what is called a solicitor's particular 'lien', but it is not in truth a lien properly so called at all. It is a right to ask the court to interfere equitably to protect the rights of the unpaid solicitor.

In Mercer v Graves, Cockburn CJ said:

'... there is no such thing as a lien except upon something of which you have possession ... although we talk of an attorney having a lien upon a judgment, it is in fact only a claim or right to ask for the intervention of the court for his protection, when, having obtained judgment for his client, he finds that there is a probability of the client depriving him of his costs.'

In Mason v Mason (Cottrell cited) Lord Hanworth MR said: 'It is merely a right to claim the equitable interference of the Court.'

It does not depend on any proprietory or possessory relationship of the solicitor to the property. It simply requires that the property must have been in some definable way part of the subject matter of the action (see Re Wadsworth, Rhodes v Sugden) which can be said to have been recovered or preserved by the work done in the action by the solicitor. Where the solicitor has acted for the plaintiff the question ultimately arises at the time of the enforcement or satisfaction of any judgment that the plaintiff has obtained or if the action is settled before judgment at that time. If a plaintiff by a compromise with a defendant seeks to achieve a situation whereby he, the plaintiff, will get the fruits of the action without having to pay the solicitor, the unpaid solicitor may intervene and apply to the court for an order that he nevertheless be paid (see Wimbourne v Fine) and where there has been collusion with the defendant, get an order against the collusive defendant as well.'

[10] Jordan CJ also discusses the point particularly clearly in this context in Ex parte Patience; Makinson v The Minister:

A solicitor has no lien for his costs over any property which has not come into his possession. If, however, as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client's right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor. That is to say, the solicitor has an equitable right to be paid his costs out of the money; and if he gives notice of his right to the person who is liable to pay it, only the solicitor and not the client can give a good discharge to that person for an amount of the money equivalent to the solicitor's costs ... If the person liable to pay refuses, after notice, to pay the costs of the solicitor, the solicitor may obtain a rule of Court directing that the amount of his costs be paid to him and not to the client; and payment by the judgment debtor to the client after notice of the solicitor's claim is no answer to an application for such a rule ... Further, if the client and a judgment debtor made a collusive arrangement for the purpose of defeating the solicitor's right, the Court will enforce that right against the judgment debtor notwithstanding the arrangement and notwithstanding that no notice of the solicitor's claim had been given to the judgment debtor prior to the arrangement.

....

[14] In the circumstances, it seems to me that the applicant is entitled to exercise the right to make a claim to payment to it of the fund held by Johnsons and that an appropriate way of enforcing the lien and the costs agreement is to make a direction of the type sought by the applicant. It will then be up to the respondent to exercise his rights to challenge the amount of the fees sought by the applicant by the normal procedures available for an assessment of the costs claimed. In that way the amount of any obligation of the applicant to account to the estate can be calculated. [32]

237 The receivers submit that Legal Services Board v Gillespie-Jones[33] provides authority for their contention that s 3.3.20(1)(a) does not provide authority by itself for the withdrawal of moneys from the trust account to pay outstanding legal fees. There the High Court (French CJ, Hayne, Crennan and Kiefel JJ) considered an appeal by the Legal Services Board from the Court of Appeal of Victoria. The issue was described by the plurality (French CJ, Hayne, Crennan and Kiefel JJ) as follows:

[1] In 2006, a person charged with criminal offences ('the client') retained Mr Michael Grey ('the solicitor'), who was the principal of the firm Poulton Elliott & Grey, to act for him in connection with forthcoming criminal proceedings. The respondent, Mr Gillespie-Jones ('the barrister'), was briefed by the solicitor to appear for the client in those proceedings. The client made a series of payments to the solicitor on account of his legal costs. Most of the moneys supplied were misappropriated by the solicitor. The amount remaining was insufficient to meet the barrister's unpaid fees. The barrister made a claim against the Legal Practitioners Fidelity Fund ('the Fund').

[2] The Fund is maintained by the Legal Services Board ('the Board') under the Legal Profession Act 2004 (Vic) ('the LPA'). Compensation is payable out of the Fund where a claim is allowed under Pt 3.6 of the LPA. A claim may be allowed under that Part where a person establishes that there has been a default which has caused that person pecuniary loss. One circumstance of default is when a law practice fails to pay or deliver trust money received by it, where the failure arises from an act of dishonesty.

[3] The barrister's claim was rejected by the Board. Her Honour Judge Kennedy of the County Court of Victoria allowed the barrister's appeal and his claim. The Court of Appeal of the Supreme Court of Victoria (Nettle, Redlich and Hansen JJA) dismissed an appeal from her Honour's decision.[34]

238 The plurality dealt with s 3.3.20(1)(a) dealing with a lien. They said:

Section 3.3.20(1)(a) provides for a law practice to exercise a lien for legal costs (a term, it will be recalled, which is defined to include disbursements). But a lien does not provide an authorisation to withdraw trust money. Section 3.3.20(1)(b) requires that trust money may only be withdrawn 'for payment to the practice's account for legal costs owing to the practice' if the procedures prescribed in the regulations are complied with. Regulation 3.3.34 prescribes such procedures. Unless there is a costs agreement (and, it will be recalled, there was no costs agreement in this case) or the money is owed to the practice by way of a reimbursement of money already paid on behalf of a person, an instruction is required from the client authorising the withdrawal. The regulations also require, for a withdrawal, that the law practice requests payment to be made and sends a bill to the client, and that the client does not make an objection to the bill within a specified period.[35]

239 The receivers rely on the statement by Hobhouse J in Halvanon Insurance Co Ltd v Central Reinsurance Corp (referred to above), where his Lordship said:

a solicitor's particular 'lien' ... it is not in truth a lien properly so called at all. It is a right to ask the court to interfere equitably to protect the rights of the unpaid solicitor.

The receivers say that this is entirely consistent with what the High Court said in Gillespie-Jones, Re A Solicitor; Stewart v Stevens and Johns v The law Society of New South Wales. They also rely on the statement by Cockburn CJ that, 'there is no such thing as a lien except upon something of which you have possession', and by Lord Hansworth, 'it is merely a right to claim the equitable interference of the Court.'

240 The receivers say that the relevant authorities are against Mr Forster's contention that s 3.3.20(1)(a) gives Mr Forster a right to take money from the trust account, other than in compliance with the Regulations.

241 On the other hand, Mr Forster refers to the same passages where Cockburn CJ and Jordan J (as cited in Quinn v Lovell) accept that a solicitor may have a lien over something of which he/she has possession. Mr Forster submits that Quinn v Lovell concerned circumstances where the solicitor did not have possession of the fruits of the litigation. That was why he sought the assistance of the Court.

242 Mr Forster submits that in Gillespie-Jones, the moneys in the trust account had not been recovered by the exertions of the solicitor. The moneys were paid to the solicitor by the client towards the solicitor's costs and disbursements. Mr Forster says that the High Court was not dealing with a solicitor's particular lien. On the other hand, the receivers submit that the High Court did not qualify its remarks to a general lien and that they expressly state that the lien does not provide an authorisation to withdraw trust money.

243 As I have said previously, the receivers say that exercising a solicitor's particular lien is limited to a solicitor retaining possession of moneys recovered by the solicitor for the client through the solicitor's efforts. The receivers say the particular lien does not entitle a solicitor to transfer such money from the trust account to the solicitor without a court order or by observing one or other of the procedures permitted in s 3.3.20(1)(b).

244 The receivers also rely on the judgment of Bell, Gageler and Keane JJ in Gillespie-Jones, where their Honours make the following observations about the scheme in the Act regulating the receipt of trust moneys and the payment of fees out of trust moneys:

[95] Within Pt 3.3:[36]

'trust money, in relation to a law practice, means money entrusted to the law practice in the course of or in connection with the provision of legal services by the practice, and includes-

(a) money received by the practice on account of legal costs in advance of providing the services; and

(b) controlled money received by the practice; and

(c) transit money received by the practice; and

(d) money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person'.

'Controlled money' means 'money received or held by a law practice in respect of which the practice has a written direction to deposit the money in an account (other than a general trust account) over which the practice has or will have exclusive control'[37]. 'Transit money' means 'money received by a law practice subject to instructions to pay or deliver it to a third party, other

.....

[97] The Part applies to a law practice having an office in Victoria, in respect of trust money received by the law practice in Victoria[38]. The law practice is obliged to maintain a general trust account with an approved authorised deposit-taking institution in Victoria[39]. As soon as practicable after receiving trust money, the law practice is obliged to deposit the money in that general trust account[40]. That obligation of the law practice to deposit trust money it receives in its general trust account applies except where the money is: the subject of a written direction to deal with the money otherwise than by depositing it in the account (in which case the law practice must deal with the money in accordance with the direction)[41]; controlled money (in which case the law practice must deposit the money in the account specified in the written direction relating to the money)[42]; transit money (in which case the law practice must pay or deliver the money as required by the instructions relating to the money)[43]; or money that is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person (in which case the law practice must ensure that the money is dealt with by the practice or associate only in accordance with the power relating to the money)[44]. Failure of the law practice to comply with the obligation applicable to the category of trust money received by the law practice is in each case a criminal offence.

[98] The distinct obligations of the law practice in respect of how the law practice must deal with money within each of the specified categories of trust money indicate that those categories are to be read as mutually exclusive. money received by the practice on account of legal costs in advance of providing the services, unless accompanied by an appropriate written direction, is not amongst those categories excluded from the general obligation to deposit trust money received in the general trust account of the practice. money of that kind must therefore always be deposited by the law practice in its general trust account.

[99] Two restrictions imposed by the Part on the holding of trust money deposited in a general trust account of a law practice are of particular importance.

[100] First, the law practice is obliged by s 3.3.14 to hold the trust money so deposited 'exclusively for the person on whose behalf it is received' and must 'disburse the trust money only in accordance with a direction given by the person'. Failure of the law practice to comply is, again, a criminal offence. While the word 'for', like the expression 'on behalf of', 'may be used in conjunction with a wide range of relationships', the word is undoubtedly used in that context to 'describe a relationship of trustee and cestui que trust'[45]. The statutory obligation of the law practice, in other words, is to hold trust money deposited in its general trust account exclusively for the benefit of the person (or persons) on whose behalf the money was received by the law practice and to disburse that money only at the direction of that person (or those persons).

[101] Secondly, by s 3.3.18 the money 'is not available for the payment of debts of the practice or any of its associates' save in respect of money to which the law practice or an associate of the law practice 'is entitled'.

[102] By s 3.3.20(1)(b), a law practice is empowered to withdraw money held in its general trust account 'for payment to the practice's account for legal costs owing to the practice if the relevant procedures or requirements prescribed by [the Act and the Regulations] are complied with'. It accords with ordinary principles of construction[46], and furthers the protective purpose of Pt 3.3, to read that specific power as limiting the general power of a law practice to disburse money from its general trust account in accordance with a direction given by the person on whose behalf the money was received by the law practice. Whether or not that person has directed that the money be withdrawn for payment of legal costs (including disbursements) owing to the practice, the effect of s 3.3.20(1)(b) is that the money cannot be withdrawn by the legal practice from its general trust account for that purpose save on two conditions. One is that the withdrawal is for payment to the practice's own account. The other is that the withdrawal is in compliance with the relevant requirements of the Act and the procedures prescribed by the Regulations.

[103] The relevant requirements of the Act are principally those that arise under Pt 3.4, the purposes of which include to regulate the billing of costs for legal services and to provide a mechanism for review of those costs[47]. The requirements of Pt 3.4 ordinarily have the effect that (if not the subject of disclosure made by the practice and a written agreement about the payment of costs entered into between the law practice and the client) legal costs owing to a law practice need not be paid by the client unless they are reviewed by a taxing master and are not recoverable by the law practice unless they accord with the fair and reasonable value of the services provided[48].

[104] The procedures prescribed by the Regulations allow a law practice to withdraw trust money for payment of legal costs owing to the practice by the person for whom the trust money was paid into the general trust account in two relevant circumstances. One is where the money is withdrawn in accordance with a costs agreement or instructions authorising the withdrawal, or is owed to the practice by way of reimbursement of money already paid by the practice on behalf of the person, provided that, before effecting the withdrawal, the practice gives or sends to the person a request for payment, referring to the withdrawal, or a written notice of withdrawal[49]. The other is where the law practice has given the person a bill relating to the money and the person has not within a specified time objected to the withdrawal of the money or the person has objected but has not within a further specified time applied for review of the legal costs or the money otherwise becomes legally payable[50].

[105] In relation to trust money held in its general trust account, a law practice is authorised by s 3.3.20(1)(a) of the Act to 'exercise a lien, including a general retaining lien, for the amount of legal costs reasonably due and owing by the person to the practice'. The incidents of a general retaining lien of a law practice over money held on trust for a client are well understood. The lien is a common law right, implied by law, to retain the money until the costs of the law practice are paid. It is wholly passive and possessory in nature[51]. It 'does not mean that the money is not beneficially the money of the client' and it does not mean that the law practice can pay any part of the money to itself[52].

245 Bell, Gageler and Keane JJ in [15] expressly deal with a general retaining lien. In my view, they do not address a particular lien.

246 The difficulty the receivers face with the Gillespie-Jones decision is that s 3.3.20(1)(a) authorises a law practice to 'exercise a lien, including a general retaining lien'. As discussed above, the cases acknowledge that the rights recognised at law in exercising a particular lien include the right to apply the money towards the costs incurred in recovering the moneys subject to the lien without application to the Court. The rights involved in exercising a general retaining lien extend only to retaining possession and then applying to the Court for the further exercise of the lien.

247 The reference in s 3.3.20(1)(a) to 'including a general retaining lien' accepts that such a lien is not the only lien dealt with by the provision. In my opinion, the provision extends to a particular lien. Further, the provision recognises the lien may be exercised and exercised for the amount of legal costs reasonably due and owing by the person to the practice. Mr Forster relies on Coburn v Colledge[53] (discussed above) to submit that legal costs are due and owing when the work is done whether a bill has been raised or not.

248 In the case of Mr Barltrop, the moneys transferred on 22 August 2008, were entirely moneys recovered by the efforts of Mr Forster in the proceedings against the Commonwealth by Mr Barltrop. Mr Forster had a particular lien that, according to the principles enunciated by Hope JA would have entitled Mr Forster to retain his costs from those moneys and pay the balance to Mr Barltrop.

249 Mr Forster contends that it would not have been improper for him to retain the moneys transferred on 22 August 2008 even if he had not previously issued invoices for sums in excess of that transferred. The lien applies where work is done as indicated in Universal Distributing. Also, the law acknowledges that the indebtedness for work done by solicitors arises when the work is done rather than when the invoice for the work is raised.

250 The receivers contend that the lien was lost because the invoices were paid or written off. As discussed previously, the issue is whether, as at 22 August 2008, the debt or liability arose as alleged under s 5.5.14. The fact that the balance was written off on 11 September 2008 does not appear to be relevant to what the events of 22 August 2008 gave rise to. The write-off is not raised in the statement of claim. The statement of claim does not contend that, if on 22 August 2008 Mr Forster was not indebted or otherwise liable to Mr Barltrop, he nevertheless became so liable on 11 September 2008 because of the write-off. Nor does it contain any variation of such a claim. The write-offs were not advised to the client. They were purely made within the office accounts and accordingly could be corrected and altered at the whim of the solicitor.

251 I reject this submission of the receivers that the lien was lost.

252 The receivers also allege that Mr Forster does not have standing to assert the lien as the lien no is under the control of the receivers. Mr Forster says the issue is whether on 22 August 2008 he had standing to assert the lien and at that date he did. I reject the submission of the receivers that Mr Forster does not have standing to assert the lien in answer to the receivers' claim.

253 As indicated above, the receivers accept that a solicitor may have a particular or general lien over trust funds. The receivers contend, however, that a lien, whether it be a particular or general lien, may not be exercised without first satisfying other steps, either by applying to the court to exercise the lien, or by complying with the Act and Regulations relating to the transfer of funds from the trust account to meet fees and disbursements owed to the solicitor. In particular, the receivers contend that to enforce a lien, there must be proper and clear authority and there must be a proper bill of costs.

254 The receivers contend that s 3.3.20(1)(b) only authorises a procedure 'for payment to the practice's account for legal costs owing to the practice'. The receivers rely on the words 'for legal costs owing to the practice' in respect of the double disbursement claim, the no fee agreement claims and the scale fee agreement claims.

255 The receivers contend that in the case of the double disbursements the amount was not owing to the practice and thus could not be withdrawn under s 3.3.20(1)(b) of the Act. Further, in relation to the double disbursements, Mr Forster did not comply with either of the procedures in subreg (3) or (4).

256 For these reasons, the receivers say that Mr Forster cannot take the double disbursement payment from trust and if he does he creates a trust deficiency.

257 The receivers referred to Re A Solicitor[54] and the finding of the Full Court that the existence of a lien in favour of a solicitor did not entitle her or him to transfer moneys from the client's trust account without the express authority of the client to do so. The Court said that no general authority exists simply as a result of a solicitorclient relationship and it is not to be inferred from the existence of a lien.[55]

258 The receivers contend that, assuming Mr Forster was entitled to a lien over trust moneys arising from a debt incurred by disbursements and interest or professional fees incurred but not yet billed, any such lien was not converted into a debt to Mr Forster (by for example writing up a bill for the liability) at the time the transfers were made.

259 Mr Forster contends that a lien is not converted into a debt as submitted by the receivers. Mr Forster submits that the lien is something which arises when the settlement funds are received as a result of the exertions of the solicitor to the extent of the entire liability under the solicitor's retainer.

260 Relevantly, to the claim against Mr Forster in relation to Mr Barltrop, Mr Forster submits that he had not exercised the lien to the full extent of the indebtedness of Mr Barltrop to him in recovering the moneys in the trust account. In those circumstances, where there has been an error made in the book entries in the office account, Mr Forster submits that no liability to repay the money could arise where Mr Forster was entitled to retain the money under his lien.

261 Further, the receivers contend that a debt does not arise unless and until an invoice is issued in accordance with the Act. Mr Forster says that this is wrong as a matter of law as discussed above.

262 The receivers submit that it is an offence under s 3.3.19 to mix trust money with other money. Mr Forster submits that the money was not mixed with his own money but was nevertheless subject to a particular lien for his costs and fees.

263 Before embarking on a discussion of the issue of whether or not the receivers have established their claim under s 5.5.14 of the Act, it is necessary to address the lien Mr Forster had for the fees due to him over the trust moneys he had recovered on behalf of Mr Barltrop from his exertions.

264 I find that Mr Forster had a lien over trust moneys standing to the credit of a client for the fees due to him for the work that he did on behalf of the client and for disbursements he incurred on the client's behalf. In the case of Mr Barltrop, I find that the moneys in the trust account had been recovered by the law practice from the Commonwealth due to the efforts of Mr Forster. In that event, I find that Mr Forster had a particular lien. Mr Forster claimed that the particular lien that he had entitled him to withdraw moneys from the trust account to meet the fees owed by Mr Barltrop irrespective of whether any of the procedures or requirements prescribed by the Act and the regulations referred to in s 3.3.20(1)(b) were complied with.

265 The receivers deny that the particular lien that Mr Forster had entitled Mr Forster to transfer money from the trust account to the office account to meet such a liability without a court order or following a procedure specified in s 3.3.20(1)(b).

266 I find that it is unnecessary for me to decide whether s 3.3.20(1)(b) must be satisfied for a solicitor to withdraw moneys from trust to satisfy his or her particular lien as I have otherwise decided that the 'payment' of the double disbursement by Mr Forster was unlawful (discussed below).

267 The existence of Mr Forster's particular lien is relevant, however, to whether because of the payment of the double disbursement Mr Forster became indebted or otherwise liable to the practice or the client in the amount of the payment or in another amount.

268 Invoices had been rendered to Mr Barltrop by the practice for sums that exceeded the sums paid from the trust account to the office account to satisfy those invoices. That is, although invoice 4012 was overstated by $5,641.61, as the disbursements it included had already been paid, the amount actually owing on invoice 4012 together with invoice 4142 and invoice 3893 was greater than the amount paid from the trust account to the office account. Mr Forster's lien was for a sum in excess of the amount transferred and applied to invoice 4012.

269 Mr Forster says, and I accept, that a debt or other liability to Mr Barltrop did not thereby arise under s 5.5.14(1)(c) of the Act. In particular, Mr Forster contends that he (the transferee) did not, because of the taking, payment or transfer of $36,942.40 (being regulated property) from the trust account to the office account on 22 August 2008, become indebted or otherwise liable to the practice or to Mr Barltrop (a client of the practice) in the amount of the payment or in another amount, being $5,641.61, within the meaning of s 5.5.14(1)(c) of the Act.

270 I find that Mr Forster retained his particular lien over the double disbursement moneys paid in respect of invoice 4012. I find that Mr Forster would not have lost his lien if he paid the double disbursement amount back into the trust account as the receivers claim that he should. The lien Mr Forster had over those moneys as recognised by s 3.3.20(1)(a) meant that the money was not owed to Mr Barltrop nor was it obliged to be paid to him.

271 As it is, I reject the receivers' claim on other grounds as referred to below.

272 The receivers submit that certain issues between them and Mr Forster are the subject of issue estoppel. Emerton J has made numerous findings of accounting errors made, or allowed to occur, by Mr Forster. By an oral application made on day four of the trial before me, the receivers sought orders that Mr Forster be estopped, by operation of the doctrine of issue estoppel, from denying findings made by Emerton J in that judgment and other findings made in related proceedings.[56]

273 In particular, the receivers submit that Mr Forster was estopped from asserting the following defences:

(a) that the Infinity Law system was the cause of the trust account deficiencies;

(b) that the double payment of disbursements did not cause a trust account deficiency within the meaning of s 3.3.21 of the Act; and

(c) that the double payment of disbursements from the trust account caused no problem with the trust account but was an error in the office account.

274 Mr Forster's defence of 27 November 2013 to the second further amended statement of claim (referred to as the long defence) pleads, inter alia:

1. All moneys the subject of the plaintiffs' claim herein were taken across from the trust account to the office account in reduction of fees at times when the respective clients owed the defendant more than was taken across and in circumstances where the defendant was entitled to exercise a 'fruits of judgment' lien over such moneys.
2. The defendant's right to exercise his 'fruits of judgment' lien accrued before the appointment of the receivers as receivers of the practice of Hollows Lawyers and he is entitled to retain all moneys the subject of this proceeding pursuant to that lien.
3. As a matter of law the respective clients became indebted to the defendant for the work performed by him and the relationship of debtor and creditor arose between them when the contingency in the 'no win no fee' retainer was satisfied and not when bills were subsequently provided to them.
4. The double counting was error in the office account and not the trust account.
5. There had been no double payment of disbursements as the bills which erroneously included double counted disbursements were not paid in fill and the amounts taken across from the trust account were less than the amounts actually owed by the respective clients at the time or each transfer.
6. The accounting errors occurred as a result of honest and inadvertent mistake.
7. The second further amended statement of claim is premised on a false assumption that the internal office accounting errors disadvantage the clients when in fact clients were generally not billed for all the work done for them and the amounts paid by the clients never exceeded the amounts actually owed by them to the defendant.
8. The defendant complied with his obligations to take across the fees pursuant to the Legal Practice Act 1996, the Legal Profession Act 2004 and regulations. All clients received notices to dispute accompanying their bill and generally did not exercise their entitlement to object within time, except for example Thompson. The defendant complied with regulation 3.3.34 of the Legal Professions Regulations 2004 in relation to the withdrawal of trust money for payment of legal costs.

1. None of the accounting errors gave rise to any financial disadvantage to any client.

1. There was no trust deficiencies by rather accounting errors in the office account. The clients Vesty, RA Smith and Trudgett received extra payments and the remainder of the clients were not affected by the internal double counting errors as verified by Deloitte's report summarized by the receivers.

1. The accounting errors were a bona fide mistake and were not improper or unlawful.

275 The receivers by their reply of 29 November 2013 plead that Mr Forster is estopped by issue estoppel from asserting as defences the allegations contained in paragraphs [5], [6], [7] [9], [12], [24] and [38] of the defence by reason of the findings of fact and law made in the following proceedings:

(a) Legal Services Board v Forster[57] (Emerton J);

(b) Forster v Legal Services Board[58] (Ross J);

(c) Forster v Legal Services Board[59] (Court of Appeal); and

(d) Forster v Legal Services Board and Batrouney and Lyle (in their capacity as receivers of the law practice known as Hollows Lawyers)[60] (Court of Appeal).

276 Issue estoppel is not raised in relation to the defence in [2]: 'All moneys the subject of the plaintiffs' claim herein were taken across from the trust account to the office account in reduction of fees at times when the respective clients owed the defendant more than was taken across and in circumstances where the defendant was entitled to exercise a "fruits of judgment" lien over such moneys'.

277 The receivers rely on several findings of Emerton J in Legal Services Board v Forster, where Emerton J appointed receivers to Mr Forster's practice for a limited purpose. Her Honour said:

[6] For the reasons that follow, I have decided that a receiver should be appointed to the law practice for a limited purpose. Having considered evidence from the Board and the defendant about the accounting practices of the law practice and the rectification of the errors that were identified, I have concluded that while the errors identified by the trust account inspectors were for the most part inadvertent accounting errors that were not deliberate or dishonest, their existence has exposed a lack of understanding of the trust accounting requirements of the Act and the Regulations, and a somewhat cavalier attitude towards the management of trust funds. The defendant ought not to have allowed the errors to occur. In particular, I have found that:

(a) Although the defendant blamed the errors on the accounting software used by the law practice, the errors were not principally attributable to a design flaw in the software system;

(b) Rather, the accounting errors were caused by a lack of understanding of how the accounting software worked and a lack of attention to the requirements of Part 3.3 of the Act and Part 3.3 of the Regulations;

(c) The accounting errors should have been readily apparent and might have been avoided had the law practice prepared final trust account statements as required by the Regulations;

(d) Further, the manner in which the trust account irregularities were remedied by the law practice gives rise to concern because -

(i) trust moneys that were appropriated in breach of the Act and Regulations were actually restored to the trust account in only a very small number of cases;

(ii) in the majority of cases, to deal with the deficiencies identified, amounts 'written off' were 'written back in' or new invoices were raised, even though many of the matters had been finalised some time earlier;

(iii) in the matter of Rann, the new invoice that was raised to partially offset the deficiencies identified included fees for professional services that the defendant was not able to properly explain;

(iv) the review conducted by the law practice to identify deficiencies in its Melbourne Voyager files looked only for deficiencies created by one means (the double payment of disbursements) and did not look for errors of other kinds, such as those identified by the inspectors in the files that were reviewed by them.

[7] Accordingly, I cannot be confident that trust account deficiencies have been properly identified and restored or that the errors that gave rise to them have been rectified. It is necessary for the protection of clients and former clients of the law practice that a suitably qualified person to be appointed to examine the Melbourne Voyager files held by the law practice to ensure that all irregularities in relation to trust money, trust property or the affairs of the practice have been fully identified and rectified and, in particular, that all trust deficiencies have been properly restored.[61]

278 Emerton J relied on a report of Mr Chun, an accounts inspector employed by the law Institute of Victoria. Her Honour said:

[54] The Chun Report identified irregularities in the law practice's trust account and records, which constituted breaches of the Act and Regulations by the law practice. These included failure to deposit trust money into the general trust account kept by the law practice (s 3.3.13 of the Act), failure to disburse trust money in accordance with the directions given by the client (s 3.3.14(1)(1b)), failure to account for trust money as required by the Regulations (s 3.3.14(3)), deficiencies in the law practice's trust account, principally arising from the law practice appropriating trust moneys for the payment for invoices that included disbursements that had already been paid from the trust account (s 3.3.21) and failure to notify irregularities in trust accounts (s 3.3.22).

[55] The Chun Report identified two main types of breaches of the trust account provisions:

(a) In three files, the same item of disbursement had been billed twice to the client and paid twice ('the double billing of disbursements');

(b) In nine of the files examined, there had been a double payment of disbursements by the client on a slightly different, but more troubling basis. Disbursements were billed once, and paid once from funds held in trust for the client, but then subsequently appropriated or deducted from settlement moneys received on behalf of the client ('the double payment of disbursements').

[56] The double payment of disbursements was the issue that occupied most of the Court's time. The sums of money involved were significant and the law practice benefited financially from the errors. In each case, the double payment of disbursements gave rise to a trust account deficiency, and a breach of the Act and the Regulations.[62]

[81] In essence, it was the defendant's case that the Infinity law software required a three stage process to be followed by the law practice to avoid the double payment of disbursements. The law practice had known about and carried out the first two stages, including the entry of credit notes in the office accounts to reflect payments made from the trust account for disbursements. The third stage, involving the creation of a hitherto unknown document called an 'adjustment note', had not been carried out by the law practice because it was not aware of the need to do so.

[82] The double payment of disbursements occurred when the law practice appropriated settlement moneys from trust to pay third party disbursements and then appropriated further moneys from trust to pay its own invoices. The defendant was repeatedly asked in cross-examination to describe the steps he took to appropriate money from trust to pay third party disbursements. His attempts to answer to this question resulted in a number of lengthy diversions which are not relevant for present purposes. He said that where there was money in trust, disbursements would be paid from the trust account. If the invoice for the disbursement had already been entered into the debtors ledger, the balance of the office account had to be reduced. He then said:

And that step - and that step of reducing off and taking it down is not done by a credit note, it has to have - it's a three - it's an extra step in the process and you have to do the adjustment note. I think I can't really explain myself any more clearly than that.

280 Emerton J set out Mr Forster's answer to the alleged double payment deficiencies as follows:

[112] Not surprisingly, the defendant was requested to explain more clearly how the double payment of disbursements occurred. During final submissions, the defendant handed up a further outline providing the following explanation:

1. The office account is all the firm's accounts other than the trust accounts. These are kept in a ledger called the debtors ledger which is linked to other ledgers including the creditors' ledger.
2. At the time the client's bill is made or created, it draws items from the debtor's ledger (such as office payments for disbursements, disbursement expenses), from the WIP, and from trust.
3. When a trust cheque is drawn to pay creditors that were previously billed to the client, there was no link to the other accounts.
4. Hollows created a credit note in order to reduce the amount paid by that trust cheque. The credit note was produced in the accounts payable and we believed it was reducing the creditor's invoices and the linked debtor's ledger to the linked client's bill. In fact it only reduced the creditor's and debtor's ledgers and failed to reduce the client bills.
5. Later the firm ascertained that not only did it have to do a credit note but that it should also do an adjustment note containing the same information. [Court Book reference is provided.]
6. The new software package correctly links the trust cheque with the creditor's ledger reducing it and then reducing the debtor's ledger and reducing the client's bills at the same time. What it does now is what the Practice thought it always did.

[113] The explanation that was given by the defendant in final submissions by counsel seemed to attribute the double payment of disbursements to the fact that the drawing of trust cheques to pay creditors would not be reflected in a bill that had already been prepared. Counsel for the defendant, when again pressed to explain what had gone awry, said:

[114] The specific situation that we have got here arises when in fact the client's bill has already been prepared, and the credit note reduces - the credit note which was produced at the time the trust cheque was drawn would have the effect of automatically - would have the effect of reducing the debtors' ledger but not the client's bill. ... The problem, as I understand it, arises when the client was - the bill was prepared previously, for example for the mediation, and a cheque was paid from trust, the credit note was created, that reduced the debtors' ledger but it didn't reduce the client's bill which was sitting there.

[115] In effect, it appears that the double payment of disbursements occurred because the client invoice was prepared before settlement funds were received and third party disbursements were paid. The invoice included amounts for disbursements. It was a static document. settlement moneys were then received, paid into the trust account and third party disbursements were paid from those trust moneys. There was then a further appropriation from the trust account to pay the invoice as a whole (including the disbursements that had since been paid). This resulted in trust account deficiencies, because moneys were appropriated from trust for the same purpose twice. The law practice had the benefit of the second payment.

[116] In these circumstances, it seems to me to miss the point to attribute the trust account deficiencies that were created by the duplicated appropriations from trust to defects in the Infinity law accounting package and the failure to produce adjustment notes. If funds are appropriated from trust to pay costs and disbursements on the strength of an invoice that has already been prepared (and given to the client), but disbursements are also separately paid from trust without reference to the invoice, then surely that is a problem with the way that the accounting system is being used rather than a problem with the accounting system per se. Invoices were prepared before disbursements were paid and a credit note entered in the debtors ledger to reduce the balance owing by the client. This is a process issue, not a problem with the software. The manual entry of a credit note would have ensured that the running balance of the debtors ledger reflected payment of disbursements.[63]

281 Relevantly for Mr Forster's defence based on the payments not giving rise to any debt or other liability to the clients, Emerton J said:

[189] It may well be that, from an accounting point of view, there were or are no deficiencies in the practice's accounts where amounts paid by the law practice to itself in error can be offset by moneys owing to the law practice by the client for unbilled work or work that has been written off. As a matter of simple mathematics, so much is clear. That does not, however, address the problem that has been identified relating to the creation of deficiencies in the first place, nor does it mean that the deficiencies have been restored in compliance with trust accounting requirements. Although I found Mr Lombardo to be an honest and thoughtful witness who did his best to assist the Court in difficult circumstances, his evidence was of limited assistance, as he was only generally familiar with the special accounting requirements in the Act and the Regulations, and had a limited understanding of the way in which the law practice managed its files. Had the evidence that was ruled inadmissible been admitted into evidence, it would have made no difference to the conclusions that I have reached.

[295] Having carefully considered the Chun Report and heard extensive evidence in relation to the 12 files that were examined by the inspectors, I am satisfied that the law practice has -

(a) committed serious irregularities in relation to trust money. The double payment of disbursements in particular created deficiencies in the firm's trust account of significant proportions;

(b) failed properly to account in a timely manner to clients for trust money received by the practice on their behalf ; and

(c) contravened the Act and Regulations, in particular, s 3.3.31 of the Act.

[296] I am also satisfied that in the matter of Ramsay, the law practice failed to make a payment of trust money as directed in contravention of s 3.3.14(1)(b) of the Act.

[297] Moreover, there is cause for concern arising from the manner in which trust account deficiencies have been identified and restored by the law practice.

[298] Although the major problems identified in the Chun Report - the double payment and double billing of disbursements - were most likely inadvertent, they occurred because the law practice did not pay sufficiently close attention to its trust accounting obligations when settlement moneys started to flow in from the Commonwealth. I do not accept that these problems were caused by a defect in the accounting software used by the law practice, as submitted by the defendant.

[299] There was evidence before the court that prior to settlement, clients were given detailed estimates of costs and disbursements up to the proposed date of settlement, which enabled them to understand what proportion of the settlement funds they would receive after costs and disbursements had been deducted. There was also evidence that an invoice of costs and disbursements to that date was given to clients. This was usually the major invoice for the matter and, in most cases, it contained an account of professional fees over a number of years. The sums involved were significant, so alerting the client to the fact that he would lose a large proportion of the settlement sum in solicitor/client costs was a prudent, albeit unexceptional, measure.

[300] It appears, however, that once settlement took place and settlement moneys were paid by the Commonwealth, the defendant may have been unduly hasty in taking his professional fees. I have come to the conclusion that the defendant was careless in dealing with settlement moneys, and that many of the problems that arose could and should have been avoided by careful trust account management as required by the Act and Regulations. The problems experienced were inextricably bound up with the failure by the law practice to prepare and furnish final trust statements as required.

[301] I accept that the Melbourne Voyager litigation was long and difficult. The defendant undertook the 'long haul' on behalf of his clients and in so doing, took a significant financial risk himself. The defendant said that he received little or no income during the period of the Melbourne Voyager cases and that he had to mortgage his house to keep the practice afloat. Plainly, neither the defendant nor his clients anticipated that it would take so long to bring most of the matters to a conclusion. Furthermore, it seems that in many if not most matters, the settlements were smaller than the defendant had hoped, and he foresaw that such settlement moneys as were forthcoming could be eaten up in costs. In these circumstances, I accept that in dealing with the settlement moneys, the defendant was juggling competing demands and found himself in a difficult position, where his own interests conflicted to some extent with those of his clients.

[302] However, in the course of the hearing, the defendant displayed a strong sense of entitlement to the fees and other moneys that he had taken, notwithstanding the admitted errors, all of which benefited the law practice. He referred repeatedly to the large amounts of fees that had been written off; the clear implication was that it was of little consequence that he had taken moneys to which he was not entitled - much, much more was owed to him in any event.

[303] This attitude explains the manner in which the defendant responded to the findings of the inspectors, and to remedying the irregularities that were identified. While the defendant was anxious to sort out the problems as quickly as possible, in so doing he cast around for someone else to blame for what he ultimately regarded as a technical default. In my view, he failed to concern himself sufficiently with how the problems had arisen and how they needed to be remedied in compliance with trust accounting requirements.

[304] I find that the defendant has not given a satisfactory explanation of how the double payment of disbursements occurred. Moreover, the defendant did not properly turn his mind to the requirement to send out final trust account statements, which reflects a poor appreciation of his obligations and the importance of that requirement. His explanations for not passing on the benefit of creditor discounts, for the double billing of disbursements and for failing to pay trust moneys as directed were unsatisfactory. Furthermore, his treatment of Mr Rann displayed disregard for his obligation to give a proper accounting and, more generally, to the interests of Mr Rann as his client. This gives cause for concern about the rectification measures undertaken by the law practice, which principally involved raising new invoices and reversing previous write-offs to offset amounts that the law practice had appropriated in error.

[305] The review of client files carried out by Mr Scott was helpful, but insufficient to satisfy me that all irregularities in the Melbourne Voyager files have been identified and properly rectified. The fact that the accounting software used by the law practice has been updated and that new management practices have been introduced does not alleviate concerns arising from past practices.

[306] In these circumstances, it is necessary for the records of the law practice relating to its Melbourne Voyager files to be independently examined. If further irregularities are identified and/or further rectification is required, this must be undertaken as quickly, efficiently and transparently as possible. It must also be done in a way that engenders confidence in both clients (and former clients) and the public that the requirements of the Act and the Regulations have been met.

[307] The appointment of a receiver to a law practice is a drastic measure. Although the appointment of a receiver need not be for the purpose of winding up the practice, winding up is contemplated in the description of the role and the powers of a receiver in Part 5.5 of the Act. Once notice of the appointment has been served on the practice, it is an offence under s 5.5.3(1) for a partner to participate in the affairs of the practice. The receiver or another nominated legal practitioner may carry on the legal practice by order of the Court, but only '[f]or the purpose of winding up the affairs of the law practice and in the interests of the practice's clients'.[64] The person authorised to carry on the practice has all the powers of, and is taken to have been appointed as, a manager. This means that the defendant will be unable to carry out his practice during the term of the receivership.

[305] After careful consideration, however, I have formed the view that a receiver is best equipped to carry out the task that I have described. In reluctantly reaching this conclusion, I have considered the other options available, including the appointment of a manager to the practice or leaving it to the LIV inspectors to complete the job that they began in late 2008. Neither of these options fits the bill. The inspectors have limited powers and are concerned with monitoring compliance with Part 3.3 of the Act and Regulations only. A manager has the principal task of carrying the practice forward. He or she does not have the powers of a receiver to 'look back', unravel arrangements and repay moneys that have been taken in breach of trust, improperly or unlawfully.

....

[310] In my view, it is necessary for the person responsible for carrying out the examination and rectification task that I have described to have the powers of a receiver. The task of the receiver will be to examine the Melbourne Voyager files held by the law practice to ensure that all irregularities in relation to trust money, trust property or the affairs of the practice have been fully identified and rectified and, in particular, that all trust deficiencies have been properly restored. Depending on what is found, the task may involve recovering moneys or property taken in breach of trust, improperly or unlawfully. Ultimately, it may be necessary to wind up the law practice, but this is a matter for further investigation.

[311] Accordingly, a receiver will be appointed on condition that he or she does not, without further order from the Court, move to wind up the practice. I am also minded to limit the term of the appointment, because the law practice would be financially ruined by a lengthy receivership, which would amount to a de facto winding up.[65]

283 The receivers rely on paragraphs [295], [298], [300] and [304] of that decision.

Forster v Legal Services Board (No 1)[66]

284 The receivers also rely on Forster v Legal Services Board (No 1), where the Court of Appeal (Weinberg and Harper JJA and Kyrou AJA) heard an appeal from the decision of Ross J sitting in the VCAT, where Ross J made decisions concerning Mr Forster's fitness to practise. Ross J had held that Mr Forster was not entitled to raise the same matters that had been raised by him before Emerton J about whether or not there were trust account deficiencies and whether or not they had been rectified.

285 Weinberg and Harper JJA agreed with the judgment Kyrou AJA. Weinberg JA added a few words of his own that I quote below.

286 At the VCAT hearing, Ross J made a ruling that issue estoppel applied to the findings made by Emerton J that necessarily established the legal foundation or justification for her Honour's decision in the receivership proceeding.

287 On appeal, Mr Forster, amongst other grounds, argued that the ruling made by Ross J that Mr Forster was estopped from contesting matters found by Emerton J in the receivership proceeding, was wrong.

288 Kyrou AJA found that Emerton J had made the findings set out in paragraphs [295], [289], [300], [304] and [310] as quoted above. Kyrou AJA also referred to [6], [7] and [189] quoted above. Paragraph [189] is relied on in Mr Forster's defence as mentioned above.

289 Kyrou AJA cited with approval Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2),[67] where Lord Guest stated that issue estoppel does not arise in respect of a judicial decision unless the following three components are satisfied:

(1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.[68]

290 Kyrou AJA noted that the above passage was quoted with approval by the High Court in Kuligowski v Metrobus.[69] His Honour addressed the 'same question' issue as follows:

[102] Authorities such as Blair v Curran[70] and Ramsay v Pigram[71] make it clear that the expression 'same question' in the first component of the doctrine of issue estoppel does not refer to the ultimate question, as identity in the ultimate question would give rise to a res judicata. Rather, the first component refers to an issue which established the legal foundation or justification for the judicial decision. Accordingly, the doctrine of issue estoppel can apply notwithstanding that the ultimate question for decision in a subsequent proceeding is different.

[103] In Ramsay, Barwick CJ stated:

Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case.[72]

[104] The difference between res judicata and issue estoppel was explained by Dixon J in Blair as follows:

The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.[73]

[105] With respect to the nature of issue estoppel, his Honour held that:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared.[74]

[106] Dixon J also emphasised that nothing but what is legally indispensable to the conclusion is finally 'closed or precluded'. In matters of fact, issue estoppel is confined to the ultimate facts which form the ingredients in the cause of action. It includes any matter which it was necessary to decide, and which was actually decided, as the groundwork of the decision, though not then directly the point at issue.[75] The corollary of this is that:

... matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion.[76]

[107] Although the appellant's written submission states, rather ambiguously, that '[t]he appointment of the Receiver is a different capacity to the fitness to [practise]', he did not elaborate on why the first component of the doctrine of estoppel has not been satisfied.

[108] It may be accepted that the cause of action in the Receivership proceeding concerned whether the requirements in s 5.5.1 of the Act for the appointment of a receiver to the Practice were satisfied, and that this differed from the cause of action in the VCAT proceeding which concerned whether the appellant was a fit and proper person to hold a practising certificate under s 2.4.7(2)(b) of the Act. The existence of this difference, however, does not determine whether issue estoppel arises.

[109] Ross J was correct to conclude that, while the ultimate issue or cause of action in the Receivership proceeding was not the same as the ultimate issue or cause of action in the VCAT proceeding, the factual question relating to the existence of trust account deficiencies and resultant breaches of the Act and the Regulations - which the appellant sought to agitate in the VCAT proceeding - had been determined in the Receivership proceeding. His Honour also correctly concluded that Emerton J's factual findings on this question necessarily established the legal foundation or justification for her Honour's decision to make the Receivership order. Had Ross J permitted the appellant to re-litigate this question, the result may have been two inconsistent decisions (one judicial and the other administrative) on the same factual matter. This is precisely the type of result that the doctrine of issue estoppel seeks to avoid.

[110] It follows that the first limb of the appellant's contention that the Estoppel Ruling was wrong must be rejected.[77]

291 Kyrou AJA then dealt with whether the decision of Emerton J in the receivership proceeding was final. Kyrou AJA held that it was. As to whether a decision is final, his Honour referred to Kuligowski where the High Court held 'that a 'final' decision is one which is not of an 'interlocutory character', but is completely effective unless and until rescinded, altered or amended.'[78]

292 After considering the necessary elements as to whether a receiver should be appointed under the Act, his Honour said:

[117] In the Receivership proceeding, Emerton J decided to appoint the receivers on the basis of the factual findings regarding trust account deficiencies and breaches of the Act and Regulations, set out ... above. Those findings were final, and were made after her Honour had heard extensive evidence and submissions in the course of a lengthy trial, and after taking time to consider her decision.

....

....

[125] Emerton J's decision made final findings on the issues which necessarily established the legal foundation or justification for her decision to appoint the Receivers. Her Honour's findings were not tentative or provisional in any sense. They were unlike the findings that suffice for an interim order, such as an interlocutory injunction, namely, that there is a serious question to be tried and that the balance of convenience favours the making of an order. Nor were her Honour's findings made to the standard of a prima facie case or whether the matters were arguable. Her Honour made factual findings on the balance of probabilities, which warranted the making of an order under s 5.5.1 of the Act to appoint receivers to the Practice. The findings were not ones that required revisiting by her Honour in the light of further evidence and submissions at a subsequent trial.

[126] The fact that an appeal against the decision to appoint a receiver to a legal practice may be made to the Court of Appeal under s 5.6.4 of the Act, does not assist in determining whether the orders made by Emerton J were 'final' for the purposes of issue estoppel. Had the appellant appealed against the Receivership order and the Court of Appeal had set aside the order, self-evidently the order would have ceased to be final. In the present case, however, the appellant abandoned his appeal to the Court of Appeal and the Receivership order continued to be final.[79] Following several extensions and the removal of the condition precluding a winding up of the Practice, the Receivership order continues to be fully efficacious according to its terms.

[127] The appellant submitted that Emerton J's decision was 'interlocutory and was affected by the subsequent reports of Munday Wilkinson, David Osborne and Deloitte'. For the reasons I have already discussed, Emerton J's decision was not interlocutory. Even if it is established that the reports upon which the appellant relied demonstrate that her Honour made erroneous factual findings, that would not affect the correctness of the Estoppel Ruling. The whole purpose of the doctrine of issue estoppel is to prevent re-litigation of factual issues with a view to persuading a court in a subsequent proceeding between the same parties to make different factual findings. In any event, as discussed ...., insofar as the reports in question support the proposition that the trust account irregularities had not resulted in a breach of trust or in any Melbourne Voyager client suffering a loss, they do not demonstrate error in Emerton J's findings regarding deficiencies in the Practice's trust account.

[128] Accordingly, the second limb of the appellant's challenge to the correctness of the Estoppel Ruling is not made out.[80]

293 Kyrou made further observations about the existence of the deficiency in the trust account of Mr Forster. He said:

[141] The correctness of the Estoppel Ruling means that Ross J did not err in precluding the appellant from re-agitating the question of whether there were deficiencies in the Practice's trust account. In any event, for the reasons discussed at [137] to [1143] above, even if the Estoppel Ruling were incorrect, Ross J decided that the appellant was not a fit and proper person to hold a practising certificate independently of the trust account deficiencies.

....

[152] The existence of a trust account deficiency does not depend on whether a practitioner has committed a breach of trust or on whether a client has suffered a loss. This is because s 3.3.21(3) defines 'deficiency ' in a trust account as including 'the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account.' Accordingly, evidence and submissions on these issues were not relevant to the VCAT proceeding.[81]

294 Weinberg JA agreed with the decision of Kyrou AJA that the appeal should be dismissed and said:

[2] I wish to add only this. The appellant conducted this appeal with an apparent fixation upon findings that Emerton J had earlier made, in other proceedings,[82] regarding the appointment of receivers to his legal practice, 'Hollows Lawyers'. He persisted throughout in seeking to challenge her Honour's conclusion that the practice committed 'serious irregularities in relation to trust money' and that 'double payment of disbursements ... created deficiencies in the firm's trust account of significant proportions'.[83] Indeed, a major part of his argument before this Court involved an attempt to relitigate that very conclusion.

[3] One difficulty with that approach, as Kyrou AJA makes clear, is that the decision by Ross J - sitting in his former capacity as President of the Victorian Civil and Administrative Tribunal - to refuse to renew the appellant's practising certificate was not itself based upon any finding relating to any such trust account deficiency. As Ross J's reasons make abundantly plain, the appellant was found to be unfit to hold a practising certificate largely because of the manner in which he was found to have conducted himself in relation to the receivership proceeding. Ross J's decision had nothing whatever to do with Emerton J's finding that there had been a deficiency in the firm's trust account. That meant that much of the appellant's argument before this Court was completely irrelevant.[84]

295 Kyrou AJA also held that the decision of Ross J that Mr Forster was not a fit and proper person to hold a practising certificate was not based on any findings by Emerton J in relation to trust account deficiencies. Rather, it was based on candour and other issues. In particular, Kyrou AJA found as follows:

[33] Ross J referred at length to Emerton J's findings about the Practice's trust account deficiencies and the associated breaches of the Act and the Regulations. However, his Honour did not make any finding that those deficiencies and breaches rendered the appellant unfit to hold a practising certificate. Further, based on a concession by the Board, Ross J stated that he was prepared to assume, in the appellant's favour, that the rectification measures taken by the Practice complied with the relevant legislative provisions. His Honour also assumed that the rectification measures had rectified the deficiencies identified in the Chun report. Accordingly, his Honour determined that it was unnecessary for him to pursue 'that issue' further.[85]

Forster v Legal Services Board (No 2) [86]

296 The receivers also rely on Forster v Legal Services Board (No 2). The appeal concerned an order made by Emerton J extending the receivership for the purposes of bringing this proceeding. Mr Batrouney and Mr Lyle were parties to this appeal. Harper JA (with whom Weinberg JA and Kyrou AJA agreed) said:

[15] The Board's application for the appointment of receivers to the firm followed the law Institute of Victoria's appointment, on 28 October 2008, of two inspectors to examine the firm's trust account. In the opinion of the inspectors, 12 of the 82 Melbourne/Voyager files disclosed a number of trust account deficiencies and breaches of the Act and the Legal Profession Regulations 2005 ('the regulations').

[16] The alleged breaches and deficiencies, assuming their proper identification by the Institute's two inspectors, were serious. For example, two instances were identified in which, although counsel briefed by the firm had agreed upon a discount, the firm had nevertheless billed the relevant clients for, and subsequently received and retained, the full amount of counsel's fees. In one such case, according to the inspectors' report, the discount was $26,775.00; in the other, $3,525.00.[87] The client paid the practice the undiscounted fee, while the practice paid counsel the discounted amount and pocketed the difference.

[17] Another - it seems more commonly recurrent - breach was the duplicated payment of disbursements from the trust account. One payment went to the person or entity entitled to it, whereupon the client's interest in the funds held in trust was diminished accordingly. Then, when the firm recouped to itself the amount shown as outstanding in its own bill of costs - something which it did by again drawing on the funds in the trust account - the disbursement was paid out again. The original payment not having been properly accounted for in the firm's accounting process, the bill upon which the firm based the amount it deducted from the trust account and paid to itself included the disbursement which, in effect and reality, the client had already paid. So the client paid twice, and Hollows Lawyers was the beneficiary. In one case alone, the sum involved was $53,375.70. But that was only one instance of many.

[18] The Board's application for the appointment of receivers, which was based upon the findings of the inspectors, was heard by Emerton J in a trial which occupied 16 days. The Board was successful. Her Honour, in the judgment delivered on 31 March 2010 (the initial judgment), said this about the allegation of trust account deficiencies. (His Honour then quoted [295], [296], [300], [304], and [310] which are set out above)

....

[19] Her Honour also found that the appellant employed unorthodox measures by which to rectify the problems once they had been made known to him. (His Honour the quoted [6], [7] and [189] which are set out above.

...

[20] In short, her Honour found that there were deficiencies in the trust account of the practice which were sufficiently serious to warrant the appointment of a receiver or receivers who would 'ensure that all irregularities in relation to trust money, trust property or the affairs of the practice have been fully identified and rectified and, in particular, that all trust deficiencies have been properly restored.'[88] Her Honour continued:

[311] Accordingly, a receiver will be appointed on condition that he or she does not, without further order from the Court, move to wind up the practice. I am also minded to limit the term of appointment, because the law practice would be financially ruined by a lengthy receivership, which would amount to a de facto winding up.[89]

297 Harper JA then set out what her Honour directed be done by the receivers. Subsequently orders were made for the winding up of the practice. Harper JA also found there was a second significant consideration in the decision to further extend the receivership as follows:

[34] A second significant consideration in the decision to further extend the receivership was the appellant's entirely inappropriate attempts to remedy the trust accounting breaches. As Emerton J found in her judgment of 31 March 2010, in the majority of cases in which deficiencies had been identified, amounts which had previously been written off by the practice were simply written back in, or new invoices were raised, with the result that, by a series of book entries, the deficiencies were made to disappear without the clients having first been given an opportunity to make an informed choice about whether or not they approved of their affairs being dealt with in this way.

[35] The receivers have taken the view that a quite different approach should be adopted in rectifying the firm's accounting irregularities. They have now instituted in this court a proceeding ('the recovery proceeding' - proceeding S CI 2012 0732) to recover from the practice the deficiencies which they have identified in the trust account. With this in mind, they applied by summons dated 27 January 2012 for an order that the receivership be extended until the determination of the recovery proceeding. Emerton J granted the application on 1 March 2012.

[36] The recovery proceeding was foreshadowed by the receivers in the 'plan' to which her Honour referred in her ruling of 23 June 2011. It had been spelt out in a document dated 21 June 2011 and headed 'Recommendations'. This document was exhibited as exhibit 'NJB1' to an affidavit sworn by one of the receivers, Noel James Batrouney, on the same day (21 June). In paragraph [27] of the exhibit, under the heading 'Further Steps', the receivers proposed that the recovery proceeding (to which, in exhibit NJB1, they referred as an 'application') be instituted. The action they recommended was described as follows:

(a) The receivers bring an application seeking orders that:

(i) Mr Forster pay the adjusted amount of $2,730,475 to the receivers, to be held in the trust account; and

(ii) Mr Forster provide the receivers with all requested documents and information regarding his financial affairs ...

(b) If the Court makes an order in favour of the receivers' application, the receivers will seek to immediately enforce the order against Mr Forster.

(c) Once the adjusted amount is returned to the trust account, the receivers are then to issue the following invoices:

(i) lump sum invoices based on scale for files where there is a costs agreement that stipulates costs are recoverable on a scale basis; and

(ii) lump sum costed invoices for files where there is a costs agreement that stipulates costs are to be recoverable on a time-costed basis.

(d) If any clients object to the invoices, then they are able to exercise their rights available under the Act.

(e) If any client does not object to the invoices, then after seven days (or such longer period as may be appropriate) of issuing the invoice, the receivers are able to transfer the money from the trust account to Hollows' office account.

[37] When arguing for the extension sought by their summons of 27 January 2012, the receivers (as was to be expected, given that their application was for an extension of the receivership until the determination of the recovery proceeding) gave as their principal reason for that extension the fact that, were it not granted, the recovery proceeding could not be continued. The appellant's response was to contend that, the onus being on the receivers, they had not shown that its prospects of success were sufficient to justify the time and expense involved. Indeed, as her Honour understood the appellant's argument, 'even if the recovery proceeding results in the payment or repayment of moneys into the trust account, those moneys (and possibly much more) will have to be paid back out to the law practice for legal fees in any event.'

[38] Although Emerton J accepted that the Court should be satisfied that the recovery proceeding had utility, she rejected the proposition that the receivers bore any onus of proof.

[39] Her Honour was satisfied of the utility of the recovery proceeding. She recorded what she referred to as the 'beginnings of a complex and apparently novel - at least in this proceeding - argument that the double payment of disbursements did not involve the payment of trust moneys in breach of trust account requirements' and noted that '[s]uch an argument might, if successful, constitute a defence to part of the recovery proceeding.' Her Honour continued:

It is not for the Court on this application to adjudicate on the merits of the recovery proceeding. That will be a matter for the judge hearing the recovery proceeding or any preliminary application to strike out the statement of claim in whole or in part that may be made.

[40] Emerton J was satisfied not only that the recovery proceeding had utility, but also that (i) while it was not for her on the hearing of the receivers' application for an extension of the receivership to adjudicate on the merits of the recovery proceeding, nevertheless that proceeding 'advances the purpose for which the receivers were appointed' and (ii) 'there is a sound basis for the recovery proceeding to be pursued, and that the receivership should be extended to enable that to occur.'[90]

298 Harper JA held that Mr Forster's application for leave to appeal against the extension of the appointment of the receivers should be refused. His Honour relevantly said:

[65] The investigations of the inspectors engaged by the law Institute, and those of the receivers, all point to there being irregularities in the trust account of Hollows Lawyers. Indeed, in his written outline of submissions dated 9 October 2012, the appellant states (at page 6) that 'her Honour erred in ignoring that Hollows created sufficient adjustment notes and write-offs to cover all trust account irregularities discovered by [the law Institute]'. The proposition that the receivers' investigations should continue until their proper completion, which point has not yet been reached, is - on the evidence available to this Court - unanswerable.

[66] It is, I think, relevant to note at this point a proposition upon which the appellant placed considerable reliance. It is that there cannot be a deficiency in the trust account of a law practice unless a breach of trust, causing loss to a client, has been committed.

[67] This proposition is fallacious. Section 3.3.21(3) of the Act defines a deficiency in a trust account as including 'the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account.' The evidence before her Honour pointed strongly to deficiencies of this kind in the trust account of Hollows Lawyers. It is the existence of these very deficiencies which the receivers are required to confirm or refute and, if confirmed, to identify with precision.

[68] The evidence that the appellant adopted inappropriate measures to rectify the already identified irregularities is likewise such as to compel the conclusion that the effect of those measures on the trust account should be thoroughly investigated. Emerton J was fully entitled to conclude that that investigation is also incomplete.

[69] Any issues surrounding the conduct, efficacy and management of the recovery proceedings are for the judge or judges who manage any relevant interlocutory proceedings, and for the trial judge, to determine. They are not to be determined by this Court, and were not to be determined by Emerton J in any of the proceedings before her Honour.

[70] Emerton J was well acquainted with the costs of the receivership and with its conduct generally. Nothing put before this Court suggests that the conclusions to which her Honour has come concerning its efficacy are wrong.

[71] I add a further reason why leave to appeal should be refused. In essence, all that has been put by the appellant in support of his case on this appeal was either put to her Honour in the hearing which culminated in her judgment of 31 March 2010, and rejected by her, or amounts to an attack on the findings of fact which her Honour then made. Not only were those findings open to her Honour, but the appellant abandoned the appeal which he once had on foot against that judgment. By the appellant's proposed appeals presently before us, the appellant seeks impermissibly to re-agitate the issues which (subject to the now abandoned appeal) were settled by her Honour.

[72] An example is readily to hand. In the judgment of 31 March 2010, Emerton J held (as recorded in the passages set out at [18] above) that the appellant's explanation for the double billing of disbursements was unsatisfactory. The explanation was based upon the proposition that, were it not for an inadequate software package, for which the appellant was not responsible, the errors would never have occurred. Her Honour found, correctly, that responsibility could not be shifted as the appellant submitted it could. She also found, equally correctly, that had the appellant met his obligation to furnish his clients with a final trust account statement in accordance with regulation 3.3.28, the mistakes would have been discovered as those statements were being prepared.

[73] Despite these findings, the appellant persisted in the present proceedings with the arguments which had rightly failed before her Honour in March 2010.

[74] In my opinion, for the reasons given above, the appeal against the refusal of Emerton J to lift the freezing order should be dismissed; and the applications for leave to appeal against the orders made by her Honour on, respectively, 23 June 2011 and 1 March 2012, should be refused. [91]

299 The receivers rely on Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2),[92] which was approved by the High Court in Kuligowski v Metrobus[93] and followed by the Victorian Court of Appeal in Forster v Legal Services Board.[94]

300 In Carl Zeiss Stiftung, it was said that issue estoppel will arise where the following components are satisfied:

(1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.[95]

301 In Blair v Curran, Dixon J distinguished those issues of fact and law to which issue estoppel attaches from those to which it does not:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion ...[96]

302 Issue estoppel arises where 'a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order'.[97] The estoppel extends to any:

...matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself .... Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.[98]

303 On the other hand, '[f]indings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion'.[99] It is therefore necessary to distinguish matters necessarily involved in the prior decision as its legal justification from matters that, although actually decided in the prior decision, 'are not in point of law the essential foundation or groundwork of the judgment, decree or order.'[100]

304 Both the receivers and Mr Forster rely on Ramsay v Pigram.[101] In Ramsay v Pigram, Pigram brought an action for negligence against the government of New South Wales, which was represented by Ramsay as nominal defendant. Pigram sought to recover damages for personal injuries caused by a collision between his vehicle and a vehicle owned by the government and driven by a policeman in the course of his duty. The policeman had earlier obtained a successful verdict against Pigram in an action for negligence. Ramsay, on behalf of the government, pleaded that Pigram was now estopped from asserting that the policeman had negligently caused the collision. Pigram demurred on the basis that there was a lack of privity between the government of New South Wales and the policeman. The Court of Appeal Division of the Supreme Court of New South Wales upheld the demurrer. The High Court dismissed the appeal.

305 Barwick CJ found that the government was not a privy of the policeman. The Chief Justice said:

Here it is quite clear that the Government had no interest in the action between the respondent and the police officer: nor can it be said that the action brought by the police officer was brought by him in any sense on behalf of the Government or that in relation to the defence of contributory negligence the respondent could have been treating the Government as the real 'defendant' to that claim. In every respect the action between the respondent and the police officer was personal to each of them, neither being in any sense in relation to the action or any of the issues involved in it, representative of another. Nor can it be said that the Government in any sense claims under or in virtue of the police officer or of any right of his, or that it derives any relevant interest through him. [102]

306 The receivers rely on the following passage from Ramsay v Pigram, where Barwick CJ said:

as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case. Of its nature such an estoppel must be available to and operative in respect of each party; or, as it is said, estoppels must be mutual.[103]

307 The requirement of mutuality means that both the party against whom an estoppel is sought and the party seeking to enforce the estoppel must have been a party to the prior proceeding or have relevant privity with that party. As McTiernan J said in Ramsay v Pigram, 'no one can take advantage of a judgment unless he would also have been concluded by the judgment had it gone against him'.[104]

308 The receivers also referred the Court to the discussion of privies in the decision of Garde J in Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd.[105]

309 In that case, Portbury Development Co Pty Ltd, as vendor, entered into a contract of sale of land with Ottedin Investments Pty Ltd, the purchaser. Ottedin subsequently nominated Goldcare Developments Pty Ltd as nominee of the sale. Portbury submitted that the doctrine of issue estoppel estopped Goldcare, as nominee purchaser in place of Ottedin, from contesting issues decided in an earlier decision of Dixon J[106] between Portbury and Ottedin. The question turned on whether there was privity between Goldcare and Ottedin. His Honour concluded that there was.

310 Garde J referred to the three classes of privies:[107] of blood, including ancestors and heirs; privies in law, such as testators and executors, intestates and administrators; and privies in estate or interest, such as vendors and purchasers, landlords and tenants. In a privy of interest, the privy must derive its title from the party of whom it is said to be a privy.[108] His Honour identified as the relevant test the statement of Barwick CJ that '[t]he basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy.'[109]

311 His Honour observed that, under the nomination form and under general condition 18 of the contract of sale, Ottedin and Goldcare were jointly and severally liable for performance of Ottedin's obligations under the contract. Although Goldcare was not a party to the proceedings before Dixon J, it did not seem to matter to the substantive issues to be determined whether Ottedin or Goldcare was the plaintiff; the same solicitors acted for both.

312 His Honour considered that, although a nomination does not ordinarily bring about the substitution of the nominee for the purchaser under a contract or alter the parties' respective obligations, a nominee derives his or her interest in land the subject of a contract of sale from the purchaser.[110] Since Goldcare claimed 'under or through' Ottedin, in that it would derive any interest it might acquire in the land through Ottedin, the test laid down in Ramsay v Pigram was satisfied, so that Goldcare was a privy of Ottedin and therefore bound by the decision of Dixon J.

313 The receivers submitted that Emerton J found that the payment of the double disbursements gave rise to a deficiency in the trust account within the meaning of s 3.3.21(1) and that Mr Forster was obliged under the Act to rectify the deficiency by paying into trust the trust moneys that constituted the double disbursement payments. The receivers submitted that this decision was upheld by the Court of Appeal in Forster v Legal Services Board.

314 The receivers submitted that this issue is the very same issue that Mr Forster seeks to dispute in this proceeding.

315 The receivers submitted that the decision was final. The Court of Appeal in Forster v Legal Services Board [No 2] decided that the findings of Emerton J on this issue were final for the purpose of issue estoppel.

316 The receivers contended that the finding of Kyrou AJA (with which Weinberg and Harper JJA) agreed was inconsistent with Mr Forster's contention that s 3.3.21(1) only applies to moneys received by the solicitor at first instance and did not deal with moneys dealt with by the solicitor subsequently.

317 The receivers contended that they are the privy of the Legal Services Board. The receivers submitted they only get their title and rights, in respect of this proceeding, as a result of the Board applying to have them appointed. The receivers said that they derived their title and interest and their rights to bring this proceeding from the Board and the decision of Emerton J to appoint them, on the basis that there were trust account deficiencies that had not been rectified.

318 Mr Forster submitted that the issues before Emerton J were different from those now before the Court. Mr Forster submitted that, for an issue estoppel to arise, the issues sought to be raised in the present proceedings must not only have been necessarily decided in the prior proceedings, they must also be identical to those issues.

319 Accordingly, Mr Forster submitted that the issues in question must be identified with 'absolute precision'. Mr Forster submitted that in Ramsay v Pigram, the High Court concluded that the issue differed in each proceeding. In the prior proceeding, the issue was whether the policeman was guilty of contributory negligence; in the present, it was whether that policeman had driven negligently.

320 Mr Forster referred to the finding of Emerton J that '[i]t may well be that, from an accounting point of view, there were or are no deficiencies in the practice's accounts where amounts paid by the law practice to itself in error can be offset by moneys owing to the law practice by the client for unbilled work or work that has been written off. As a matter of simple mathematics, so much is clear. That does not, however, address the problem that has been identified relating to the creation of deficiencies in the first place, nor does it mean that the deficiencies have been restored in compliance with trust accounting requirements.'

321 Mr Forster submitted that these observations establish that her Honour did not address the situation that is now relied on in Mr Forster's defence. That is, that the amount owed by Mr Barltrop to Mr Forster under bills already issued exceeded the amount transferred in satisfaction of that debt. Mr Forster submitted that Emerton J addressed 'moneys owing to the law practice by the client for unbilled work or work that has been written off'.[111] Mr Forster said that Emerton J did not address whether there was a deficiency under s 3.3.21 where billed work that had not been written off meant that less was transferred from the trust account to office than was owed.

322 Mr Forster said that his defence raised in relation to Mr Barltrop (and other double disbursement clients) primarily relies on billed work (not 'unbilled work'). Mr Forster submitted that meant that there was in fact no deficiency in the first place. Mr Forster said that his defence does not rely on 'work that has been written off' at the time the alleged deficiency arose.

323 Mr Forster submitted that her Honour did not address the defence now raised by Mr Forster in relation to Mr Barltrop (and the other double disbursement clients) that no debt or deficiency arose when money was transferred from trust to the office account.

324 Mr Forster said that his defence is that no deficiency was created by the transfer on 22 August 2008 in the first place. The defence is not that any deficiency was rectified by writing off the deficiency against fees that had previously been written off or against unbilled work, which was the issue addressed by Emerton J.

325 Mr Forster said that his defence is also that the error made in the office account of Mr Forster did not result in a deficiency as the money transferred was not appropriated to satisfying the invoice in which the disbursements were included until and unless the appropriation was communicated to Mr Barltrop. In fact the appropriation was not communicated before the error was corrected. Mr Forster said that the receivers' case is that the error occurred in the office account by allocating the transferred funds against the overstated invoice. Mr Forster said that there is a complete answer to that case, in that the office accounts could be corrected at any time before the allocation was notified to the client. The error could be corrected as the amounts owed by the client exceeded the amount transferred. Mr Forster said that Emerton J did not address this issue at all.

326 Mr Forster further said that Emerton J did not address his current defence that the amount transferred from the trust account was less than the amount due by Mr Barltrop (and the other double disbursement clients) and no deficiency was thereby created. In other words, these defences take issue with the plea that a deficiency was created on 22 August 2008 which is the extent of the claim. The defence is not one that admits the deficiency then claims it has been rectified, which was the issue addressed by Emerton J and rejected. The defence is that there was no deficiency to begin with.

327 Mr Forster submitted that the decision of Emerton J was not final. Mr Forster said that the decision of Emerton J was interlocutory and not final.

328 Mr Forster submitted that there is no privity between the receivers and the Legal Services Board. Mr Forster said that the capacity and interest of the Legal Services Board as a party to the receivership proceeding differed from its capacity and interest as a party to the VCAT proceeding.

329 Mr Forster submitted that the receivers have not satisfied the test for privity laid down by Barwick CJ in Ramsay v Pigram. Mr Forster submitted that the receivers do not bring this proceeding 'under or in virtue of' the Legal Services Board; nor do they derive any relevant interest through it. He submitted that an action under s 5.5.14 of the Act may only be brought by a receiver. Mr Forster further submitted that the event that brought about the appointment of the receivers was the decision of the Court, not the application of the Legal Services Board.

330 In my opinion, there can be no doubt that Emerton J made findings on certain issues that are identical to issues in these proceedings.

331 Her Honour made a finding that the double disbursement payments made by Mr Forster caused a deficiency within the meaning of s 3.3.21 of the Act and that Mr Forster was obliged to rectify the deficiency. The fact that Emerton J may not have considered all the arguments that Mr Forster now wishes to run is beside the point. The foundation of her Honour's decision to appoint the receivers was her finding that the payment of the double disbursements created a deficiency within the meaning of s 3.3.21. Her Honour expressly left open the issue of whether the payment of the double disbursements may have created an accounting deficiency.

332 Those findings had to be made and were in fact made as a necessary step in concluding that a receiver ought to be appointed under s 5.5.1 of the Act. In my opinion, it is plain that the finding of Emerton J that the double disbursement payments created a deficiency in Mr Forster's trust account underpinned her conclusion that a receiver ought to be appointed. Such a conclusion could hardly have been justified had her Honour found that there were no trust accounting errors. To raise those matters in this proceeding would be necessarily to assert that the decision of Emerton J was erroneous. It would be, moreover, a violation of the very principles on which issue estoppel is founded:[112] the desire that there be an end to litigation;[113] that no one ought to be twice troubled by the same claim;[114] and that a matter once decided is to be taken for the truth.[115]

333 The decision must be final. It was so found by the Court of Appeal in Forster v Legal Services Board as discussed above.

334 Given that the parties in this case are not the same as the parties before Emerton J, was there is privity between the Legal Services Board and the receivers?

335 The receivers submitted that, since their power is derived from their appointment as receivers pursuant to the application of the Legal Services Board, the receivers are therefore privies of the Legal Services Board. Their power is governed by s 5.5.4 of the Act. That section provides:

5.5.4 Role of receiver

(1) The role of a receiver for a law practice is -

(a) to be the receiver of regulated property of the practice; and

(b) to wind up and terminate the affairs of the practice.

(2) For the purpose of winding up the affairs of the law practice and in the interests of the practice's clients, the Supreme Court may, by order, authorise -

(a) the receiver to carry on the legal practice engaged in by the law practice, if the receiver is an Australian legal practitioner who holds a practising certificate as a principal authorising the receipt of trust money; or

(b) an Australian legal practitioner who holds a practising certificate as a principal authorising the receipt of trust money, or a law practice whose principals are or include one or more Australian legal practitioners who hold practising certificates authorising the receipt of trust money, specified in the order to carry on the legal practice on behalf of the receiver.

(3) Subject to any directions given by the Supreme Court, the person authorised to carry on the legal practice engaged in by a law practice has all the powers of a manager under this Part and is taken to have been appointed as manager for the law practice.

(4) The Supreme Court may, by order, terminate an authorisation to carry on a legal practice granted under this section.

336 In my opinion, for the following reasons, the receivers do bring their claim 'under or through' the Board, with the result that they are a privy in interest of the Board.

337 Unlike the government in Ramsay v Pigram, the receivers have a clear interest in the action between the Board and Mr Forster. The receivers' very appointment as receivers depended on the outcome of the prior proceedings. The findings of the Court in those proceedings formed the very basis for their appointment and enabled the initiation of these proceedings.

338 It can also be said that the receivers derive their interest in the proceedings through the Legal Services Board. They are successors of the Board in that sense and stand in a relevantly analogous relation to Mr Forster, even though the powers of the receivers are not identical to those of the Legal Services Board. It does not matter that the cause of action in this case differs from that in the prior proceeding, since issue estoppel is concerned with issues of fact and law, whereas res judicata is concerned with causes of action.[116]

339 There is a real sense in which it can be said that in these proceedings the receivers bring their claim 'on behalf of' the Legal Services Board. The task that the receivers were appointed to do carries on and extends the task initiated in the first place by the Legal Services Board. The receivers inherit certain powers from the Board and obtain whatever other powers they have under Chapter 5 of the Act as a direct result of the appointment made upon the application of the Board.

340 The purposes of Chapter 5 of the Act - which governs the circumstances in which the external intervention of a supervisor, manager or receiver may take place - are outlined in s 5.1.1 of the Act:

The purposes of this Chapter are -

(a) to ensure that an appropriate range of options is available for intervention in the business and professional affairs of law practices and Australian-registered foreign lawyers for the purpose of protecting -

(i) the interests of the general public; and

(ii) the interests and the trust money and property of clients; and

(iii) the interests of lawyers, including the owners and employees of law practices, so far as their interests are not inconsistent with those of the general public and clients; and

(b) to ensure that there is an accountable and transparent process for the appointment of interveners and for the conduct of interventions.

341 In my opinion, upon their appointment under s 5.5.1 of the Act, the receivers in substance succeed to the position of the Board and become invested with the powers granted under Part 5.5. The purposes outlined in s 5.5.1 inform the powers of the receivers.

342 Mr Forster's submission that it was the order of the Court, not the application of the Board, that brought about the appointment of the receivers should be rejected. Whether there is privity in interest depends on the relationship between the parties to the respective proceedings. Accordingly, I find that Mr Forster is estopped from denying that the payment of the double disbursements created a deficiency within the meaning of s 3.3.21 of the Act. On the other hand, Mr Forster is not estopped from asserting that the payment of the double disbursements did not cause an 'accounting deficiency', a distinction to which I now turn.

The distinction between a s 3.3.21 deficiency and an accounting deficiency

343 The question whether there has been a trust account deficiency pursuant to s 3.3.21 is distinct from the question whether a person has become 'indebted or otherwise liable' pursuant to s 5.5.14(1)(c).

344 There was some discrepancy in the way in which the word 'deficiency' was used throughout the trial. The definition of 'deficiency' under the Act differs from the sense in which deficiency may be understood in an accounting context. That distinction is critical to the question whether a person has become indebted or otherwise liable for the purposes of s 5.5.14.

(1) An Australian legal practitioner or an approved clerk is guilty of an offence if he or she, without reasonable excuse, causes-

(a) a deficiency in any trust account or trust ledger account; or

(b) a failure to pay or deliver any trust money.

Penalty: Level 4 imprisonment (15 years maximum).

deficiency in a trust account or trust ledger account includes the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account.

347 For the purposes of s 3.3.21 of the Act, 'deficiency' has a strict definition. If a practitioner fails, without a reasonable excuse, to include any amount required to be included in a trust account, he/she falls foul of s 3.3.21. That is so even if, in the broader scheme of things, the amount that the practitioner failed to include in the trust account was otherwise not due to the beneficial owner of the trust account. For example a deficiency in its ordinary meaning might be remedied by an agreement between the solicitor holding the trust account and the client. It will therefore be convenient to refer to a deficiency for the purposes of s 3.3.21 as a 's 3.3.21 deficiency' and a deficiency in the non-legal sense as an 'accounting deficiency'.

348 In her judgment, Emerton J acknowledged the distinction between a s 3.3.21 deficiency and an accounting deficiency. Her Honour made it clear that the test for whether a practitioner had breached s 3.3.21 did not turn on the net position of the books of the law practice. Her Honour said:

[187] Mr Lombardo expressed the opinion that where clients' files had 'write-offs' well in excess of any alleged deficiency, then no deficiency should be recorded 'from an accounting perspective'. To similar effect, Mr Lombardo said:

From an accounting procedure perspective, the write back of outstanding amounts when errors were identified after amounts were written off when payment was not expected is perfectly OK.

[188] Likewise, in his affidavit sworn on 17 August 2009, Mr Lombardo dealt with the files considered by the LIV inspectors. He concluded that there was no deficiency, or no 'net deficiency', 'current deficiency' or 'current net deficiency' in the matters of Rann, Craggs, Vesty, Lewis, Smith, Pride, Fogarty, Simmonds and Stafford. He said that he was satisfied that appropriate accounting corrections had been made by the law practice to meet the accounting errors.

[189] It may well be that, from an accounting point of view, there were or are no deficiencies in the practice's accounts where amounts paid by the law practice to itself in error can be offset by moneys owing to the law practice by the client for unbilled work or work that has been written off. As a matter of simple mathematics, so much is clear. That does not, however, address the problem that has been identified relating to the creation of deficiencies in the first place, nor does it mean that the deficiencies have been restored in compliance with trust accounting requirements. Although I found Mr Lombardo to be an honest and thoughtful witness who did his best to assist the Court in difficult circumstances, his evidence was of limited assistance, as he was only generally familiar with the special accounting requirements in the Act and the Regulations, and had a limited understanding of the way in which the law practice managed its files. Had the evidence that was ruled inadmissible been admitted into evidence, it would have made no difference to the conclusions that I have reached.[117]

349 In effect, Emerton J found that Mr Lombardo's evidence had no bearing on the question whether there had been a breach of s 3.3.21. Her Honour quite clearly contemplated that a s 3.3.21 deficiency would not necessarily bring about an accounting deficiency. That is, it might not give rise to any indebtedness from an accounting perspective on the part of the person who caused the deficiency. The Court of Appeal in Forster v Legal Services Board cited with approval Her Honour's findings in [189] where her honour expressly recognised the distinction between a statutory deficiency and an accounting deficiency.

350 The distinction between a s 3.3.21 deficiency and an accounting indebtedness is evident in the structure of s 5.5.14(1)(c) itself. The section applies only if a person has 'in breach of trust, improperly or unlawfully' taken, paid or transferred money. That threshold requirement will be satisfied if the allegations of Mr Forster's breaches of Part 3.3 of the Act are proved.

351 The obligation to repay money, on the other hand, depends on whether the taking, payment or transfer was made (1) knowingly; (2) without providing adequate consideration; or (3) with the result that that person has thereby become indebted or otherwise liable. Where, as here, knowledge of any impropriety is not pleaded, an obligation to repay only arises in circumstances where the person has failed to provide adequate consideration or has become indebted or otherwise liable.

Consideration of the Mr Barltrop claim - the office accounts

352 As a preliminary matter, it is necessary to consider the evidence relating to the office accounts of Mr Forster and the inferences that I have been required to draw.

353 The office accounts of the practice were not tendered into evidence. In particular, the office ledger account relating to Mr Barltrop was not tendered, nor were there tendered any journal entries relating to Mr Barltrop's account. Further, the receivers did not lead evidence from an accountant to explain standard accounting practice or how solicitors' accounts are kept. In particular, no evidence was led on accounting practice that explained how transactions affecting both the trust accounts and the office accounts in a solicitor's practice or Hollows Lawyers were or should be recorded.

354 For example, no evidence was led as to how work in progress was recorded and whether or not that work was debited to the client's accounts and if so when and how. Further, no evidence was led as to the relationship between the trust account and the office account. For example, when moneys were received from the Commonwealth for Mr Barltrop, there was no evidence of whether or not there were accounting entries made in the office accounts and, if so, what entries.

355 Another example of where the office accounts may have been of assistance is in understanding how the disbursements were dealt with. For example, when a barrister rendered an account for a service for Mr Barltrop, was it recorded in the office accounts and, if so, was there any record in Mr Barltrop's office ledger account? When a barrister's fees were paid direct from the trust bank account and recorded in the trust accounts, was there any corresponding entry in the office accounts?

356 If the books of account of the office had been tendered, the Court could have seen the complete accounting transactions. I can safely infer, however, that the books of account were kept according to the double entry system of bookkeeping. This system is the cornerstone of accounting and has been so for hundreds of years. The double entry system is the foundation for accounts to be able to show a true and fair view of the financial position of any business or similar concern.

357 On the other hand, the receivers did tender a report from the trust accounts for Mr Barltrop that showed the debits and credits made to his trust ledger account and showed a balance outstanding after each transaction. A similar report for Mr Barltrop's office ledger account was not tendered by the receivers. Such a report would have assisted in assessing Mr Forster's defence. In the conclusion to this judgment I will have something more to say about the receivers' failure to tender evidence in their possession.

358 When I queried counsel for the receivers on the receivers' failure to call an expert accountant as part of their case, I was told, 'Well, it's maths.' In a ruling, I said that I would have been assisted by the evidence of an expert accountant on the keeping of trust and office accounts and the interrelationship between them.

359 I am able to infer that the office ledger account for Mr Barltrop would have shown at any time the balance of the amount standing to the credit or debit of Mr Barltrop, just as the trust ledger account did. In the absence of any contrary evidence, I can infer that the office ledger account relating to Mr Barltrop would have recorded the invoices issued to Mr Barltrop and the payments made by or on behalf of Mr Barltrop in satisfaction of those invoices. I can infer that the office ledger account of Mr Barltrop would have shown a balance, as the trust ledger account for Mr Barltrop did. That balance would have been a balance of the amount owing to Mr Barltrop by the firm, or the balance of the amount owing by Mr Barltrop to the firm or a nil balance.

360 I raise these matters, as they are relevant to the way the two relevant transfers of $137,313.40 on 21 September 2007 and $36,942.40 on 22 August 2008 from the trust account to the office account were treated. The receivers have tendered a report taken from the office accounts giving information on the invoices rendered. As indicated, the receivers have not tendered accounting records showing how the invoices were treated in the office books of account of the practice.

361 Assuming, however, that the invoices were all entered into the office ledger account of Mr Barltrop, the office ledger account would have shown that at the end of August 2008 after the accounting transactions recorded on the invoices had been posted to the office ledger account of Mr Barltrop, Mr Barltrop owed the practice $8,188.28. That is the effect of the transactions that were recorded on 22 August 2008 (as recorded on the invoices, and at which stage all moneys in the trust bank account had been distributed). It would have shown that Mr Barltrop was indebted to the practice on invoices rendered for $8,188.28.

362 As can be seen from the invoices, on 11 September 2008, the practice closed Mr Barltrop's file and decided to write off the balance owing by Mr Barltrop. When the Legal Services Board pointed out to Mr Forster that invoice 4012 included a charge for disbursements that were earlier paid direct from the trust bank account to the barristers' clerks, Mr Forster made corrections to his office accounts but made no changes to the trust accounts.

363 The entries to the office account were to write back the sum of $8,188.28 that had been written off on 11 September 2008 and to reduce the amount owing by Mr Barltrop by the amount of the disbursements wrongly included in invoice 4012. The office account entries for these transactions were not tendered. I can only infer that the balance written off the office account was reduced from $8,188.28 to $2,577.73, that is, $8,188.28 minus $5,610.55.

364 I have mentioned these matters as they highlight the critical feature of the receivers' case, which is that, according to the record of the office invoices, after the payment of the disbursements, invoice 4012 was overstated by $5,641.66 and moneys paid from the trust account to the office account were allocated by the law practice in the office books of account of the practice to the payment in full of that invoice, without making an allowance for the prior payment of the disbursements that were included in invoice 4012.

365 One can see that the receivers' case turns on an accounting entry, the allocation in the office accounts of the $36,942.40 transferred from the trust account on 22 August 2008 to payment of $28,623.29 on invoice 4012 in full, whereas assuming the office accounts had been properly kept invoice 4012 should have been reduced by $5,641.61 to $22,981.68.

366 Thus, the allocation made by an entry in in the office accounts of the practice resulted in an overpayment of $5,610.55 on invoice 4012.

367 Importantly, this analysis shows how, on the receivers' case, it is irrelevant to consider the balance owing by Mr Barltrop to the practice as shown in his office ledger account. On the receivers' case it is irrelevant that, as a result of the transfer of moneys from the trust account to the office account in satisfaction of debts owed by Mr Barltrop to the practice, the office ledger account for Mr Barltrop showed that money was still owing to Mr Forster even after deducting the sum of $5,610.55 that was wrongly treated as still being owed for counsel's fees in invoice 4012.

368 It is also irrelevant, on the receivers' case, that the error in the office account could have been corrected after the allocation of moneys transferred from the trust account to the office account (and debited to Mr Barltrop in his trust ledger).

369 For example, assume on 23 August 2008 (that is, the day after the initial entries were made) the errors in the office accounts were identified and were immediately sought to be corrected by, for example, amending invoice 4012 to be reduced by $5,641.61 and allocating that sum - formerly allocated in the office accounts to satisfy invoice 4012 - to the office accounts to satisfy in part invoice 4142.

370 According to the receivers' case, those corrections in the office account would not avoid the consequence of moneys being transferred to the office account that were not owing to the law practice. This, according to the receivers, would be the position if nobody but the internal staff of the practice were aware of the error, and would still be the case if the error was made, for example, against the express instructions of the solicitor.

371 According to the receivers, the only way the error in the office account could be corrected was to make a deposit into the trust account of the amount wrongly allocated to the overstated invoice. The receivers claim that the error made in the office account could not be corrected in the office account alone.

Were moneys paid on invoice 4012 that were not owing to the practice?

372 As discussed above, the allegation of the receivers is that on 22 August 2008 payment was made from the trust account to the office account of $5,641.61 in excess of the sum due on invoice 4012.

373 There is no evidence that Mr Barltrop gave any direction as to how the payments made from the trust account were to be allocated as between the three separate invoices that had been rendered by the practice to him and were recorded in the office books of account. Mr Forster contends that the allocation by the practice to one or other of the invoices was not an election binding upon the practice until that allocation had been communicated to Mr Barltrop. The receivers did not contend that the allocation of $28,623.29 of the $36,942.40 to invoice 4012 had been communicated to Mr Barltrop, or that for any other reason the preliminary allocation could not otherwise be corrected before the allocation was communicated to Mr Barltrop. The receivers did not refer to any authority that threw any doubt upon the principles referred to in Simson v Ingham.

374 The receivers did not seek to argue that any event that occurred after 22 August 2008 was relevant to their case that payment to the credit of invoice 4012 was made on 22 August 2008 and that they were entitled under s 5.5.14(1)(c) to recover the overpayment of $5,641.61 from Mr Forster.

375 As discussed above, Emerton J held that an allocation that was made to an invoice that contained a charge for disbursements already met from the trust account created a deficiency in Mr Forster's trust account. That finding was upheld by the Court of Appeal. As discussed previously, I accept that Mr Forster is estopped from denying that the payment of the disbursement that had already been paid, by reason of the entry made in the office accounts, created a deficiency in Mr Forster's trust account.

376 I find that the payment of $5,641.61 in excess of the sum due under invoice 4012 was unlawful. I find that Mr Forster is estopped from disputing that, as Emerton J found, that the allocation in the office accounts of the payment of $28,623.29 to invoice 4012 constituted a payment of a legal fee that was not due to Mr Forster as it had already been paid. I find that the payment created a deficiency within the definition in the Act (as Emerton J held).

The alleged breach of s 3.3.13(1) - receipt of trust moneys

377 Section 3.3.13(1) provides that (subject to a provision that, for present purposes, can be ignored), as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account, save for certain irrelevant exceptions.

378 Any breach of this provision relates to the failure to deposit moneys in a trust account. The provision does not characterise a payment from a trust account to the office account as being unlawful or improper.

379 The receivers submit that the payment of $5,641.61 to invoice 4012 was unlawful, as the payment from the trust account to the office account was to meet a fee or disbursement but it was not 'for legal costs owing to the practice,' as provided in s 3.3.20(1)(b) of the Act.

380 In this context, Mr Forster relied on the particular lien that he had over the moneys in trust. Under s 3.3.20(1)(a) of the Act, a law practice may exercise a lien in relation to trust money held in a general trust account for 'the amount of legal costs reasonably due and owing by the person to the practice'. Thus the rights under a lien are limited to the legal costs reasonably due which would not include the excess amount paid on invoice 4012.

381 Emerton J found that the allocation of trust moneys to an invoice that wrongly included disbursements that had already been paid created a deficiency in Mr Forster's trust account irrespective of the overall state of the client's account. The unlawful action was the appropriation of $5,641.61 to invoice 4012 that was in excess of the amount due on the invoice. If that sum had not been appropriated to other outstanding invoices, the appropriation would not have been unlawful.

382 Mr Forster submits that the payment $36,942.40 from the trust account to the office account was for 'legal costs owing to the practice.' In fact, the payment to the office bank account was for less than the legal fees owing by Mr Barltrop. The allocation in the office books of an excessive sum to invoice 4012 was found to constitute an excess payment of what was owed on invoice 4012 giving rise to a trust account deficiency according to the Act. However, as mentioned, if the sum had been allocated to other outstanding invoices there would have been no unlawful conduct.

383 Accordingly, the payment of $36,942.40 to the office account was not the unlawful action. It was for more than was owed by Mr Barltrop. There was no breach of s 3.3.20(1) by reason of the payment of $36,942.40. In my view, the relevant question under s 3.3.20(1) is was the sum transferred from the trust account of $36,942.40 for 'legal costs owing to the practice.' In my view the answer to that question is 'yes.'

384 The fact that in the allocation of part of that sum to invoice 4012 constituted a payment of a sum that was not due does not mean the payment of the $36,942.40 was for a an amount in excess of the legal costs owing to the practice. That question does not deal with the allocation between invoices. It is directed at the global figure.

385 If I am wrong, and the allocation of part of the payment of $36,942.40 to invoice 4012 breached s 3.3.20(1), then that would not alter my decision, as I have accepted that the allocation of part of the sum transferred to the payment of invoice 4012 created a deficiency and was unlawful.

The alleged breach of s 3.3.21(3) - deficiency

386 The receivers allege that the payment of $5,641.61 towards the satisfaction of invoice 4012 gave rise to a deficiency in the trust account and that, by doing so, Mr Forster unlawfully breached s 3.3.21. Section 3.3.21(1) provides that an Australian legal practitioner is guilty of an offence if he or she, without reasonable excuse, causes a deficiency in any trust account. Under s 3.3.21(3), a deficiency in a trust account includes the noninclusion or exclusion of the whole or any part of an amount that is required to be included in the account.

387 As discussed above, consistently with the decision of Emerton J, the payment of invoice 4012 did create a trust accounting deficiency. Whether Mr Forster breached s 3.3.21 is a different issue. The section creates a serious criminal offence. The offence requires that a deficiency be created without a reasonable excuse. The receivers do not allege that Mr Forster made the double payment of disbursements in invoice 4012 without a reasonable excuse and thereby became criminally liable. I am not satisfied that Mr Forster breached s 3.3.21.

388 As I have decided that the double payment of the disbursements in invoice 4012 was unlawful, it is unnecessary to consider whether it was improper.

389 The receivers also contend that Mr Forster acted unlawfully or improperly by breaching his fiduciary duties in making the payment of $5,641.61 to invoice 4012. As I have decided Mr Forster acted unlawfully, it is strictly unnecessary to decide this issue. It is a serious allegation to make against a solicitor. Therefore I shall address the issue. I find that Mr Forster did not breach his fiduciary duties as alleged.

390 In their submissions, the receivers allege that Mr Forster breached his fiduciary duties to Mr Barltrop by failing to account properly and lawfully to Mr Barltrop in respect of money held on trust by the law practice for Mr Barltrop.

391 In their pleadings, the receivers allege that Mr Forster breached his fiduciary duties by:

(i) not acting in the best interests of Mr Barltrop;

(ii) failing to exercise his duties as a trustee in good faith and in the best interests of Mr Barltrop in respect of money held on trust for Mr Barltrop by the law practice;

(iii) failing to account properly and lawfully to Mr Barltrop in respect of money held on trust by the law practice for Mr Barltrop;

(iv) gaining a financial advantage for himself;

(v) causing a financial detriment to Mr Barltrop.

392 Mr Forster says that, as he transferred less than the balance of moneys owing by Mr Barltrop and, by doing so, extinguished a portion of the debt owed by Mr Barltrop to Mr Forster, it was in Mr Barltrop's best interests. Mr Forster says that the five ways by which he allegedly breached his fiduciary duties are all premised on the false basis that a sum was paid in excess of what was owed by Mr Barltrop.

393 Mr Forster rejects the receivers' contentions that, by taking less than was due to him and less than actually secured by his lien, he was not acting in good faith, he was not accounting properly in respect of money held on trust, he was gaining a financial advantage for himself, and he was causing financial detriment to Mr Barltrop.

394 Mr Forster contends that if money is taken out of trust for the purpose of paying or reducing a liability that the client has to the solicitor, and that money is no more than is due and payable, that conduct does not constitute a breach of fiduciary duties as pleaded. Mr Forster submits that that is no more and no less than taking the parties to the position that as a matter of law they should be in - that is, that the debt is paid or reduced.

395 The receivers, on the other hand, contend that the state of the accounts between Mr Barltrop and Mr Forster are irrelevant to their claims. They say that the ledger office account of Mr Barltrop is irrelevant and that the only relevant matters are that $5,641.61 was allocated to invoice 4012 that was not due on invoice 4012.

396 I find that Mr Forster did not breach his fiduciary duties on the bases particularised in the receivers' statement of claim. There is no evidence that Mr Forster gained a financial advantage for himself or that he caused financial detriment to Mr Barltrop. Nor am I satisfied that Mr Forster did not act in good faith in the best interests of Mr Barltrop.

Did Mr Forster become indebted to or otherwise liable to the practice?

397 The receivers allege that Mr Forster became liable to the practice as, under s 3.3.13 of the Act, Mr Forster was obliged as soon as practicable after receiving the trust money to "deposit the money in a general trust account of the practice". The receivers argue that by reason of the impugned payment made to satisfy invoice 4012, Mr Forster became indebted or otherwise liable to the practice.

398 Mr Forster was a sole practitioner as defined in s 1.2.1 of the Act. Further, under s 1.2.1, 'law practice' means:

(a) an Australian legal practitioner who is a sole practitioner; or

399 Thus, Mr Forster was defined in the Act to be the law practice. The receivers were unable to explain how Mr Forster was able to become indebted or otherwise liable to himself.

400 The argument that the receivers are now the practice was not pleaded. The pleading alleged that the relevant liability in respect of Mr Barltrop arose immediately upon the transfer from the trust account to the office account being allocated to invoice 4012. There is no suggestion that the liability did not arise until after the receivers were appointed.

Did Mr Forster become indebted to or otherwise liable to his client?

401 As I have found that the payment was unlawful, it is now necessary to consider whether, because of the payment of $5,641.61 to satisfy invoice 4012, Mr Forster became indebted or otherwise liable to the practice or to Mr Barltrop in the amount of the payment or in another amount.

402 The answer to that question hinges on whether there was an accounting deficiency. Even if the breaches of Part 3.3 are accepted, the question of liability on the part of Mr Forster is still a live issue.

403 Crucially, Emerton J did not make any findings on Mr Forster's indebtedness. Nor was she required to do so, for it was sufficient to conclude that it was necessary to appoint a receiver on the strength of her findings of trust accounting errors; it was for the receivers to determine whether there was any subsequent liability.

404 Under s 5.5.14(2)(a), if the transferee knew or believed at the time of the taking, payment or transfer that it was done in breach of trust, improperly or unlawfully then the receiver is entitled to recover the amount of the payment or the value of the regulated property taken or transferred. That is so, irrespective of whether the transferee did not provide to the practice or any other person any adequate consideration for the taking, payment or transfer, and irrespective of whether the transferee became indebted or otherwise liable to the practice or to a client in the amount of the payment or any other amount.

405 Similarly, under subs (2)(b), if the transferee did not provide to the practice or any other person any or any adequate consideration for the taking, payment or transfer, then the receiver is entitled to recover the amount of the inadequacy of the consideration or, if there was no consideration, the amount of the payment or the value of the regulated property taken or transferred. That is so, irrespective of whether the transferee became indebted or otherwise liable to the practice or to a client in the amount of the payment or any other amount.

406 It can be seen, therefore, that a transfer of regulated property unlawfully, improperly or in breach of trust is not sufficient by itself to entitle the receiver to recover the transferred property.

407 Mr Forster submits that, where the transfer in question is a transfer by the holder of a trust account to himself, it is not apposite to consider whether a debt or other liability to 'the practice' arises, as referred to in s 5.5.14(1)(c). Mr Forster submits that a person other than the holder of the trust account may become liable under s 5.5.14: for example, a bank officer or some other person who is not the trustee who improperly takes money from the trust account. In those circumstances, such a person may become liable to 'the practice' as s 5.5.14(1)(c) envisages.

408 As mentioned above, it is not possible for Mr Forster to have become liable to the practice that he conducted, as he was the legal entity constituting the practice. Accordingly, in circumstances where Mr Forster was conducting his practice as a sole practitioner, the relevant question would be, did Mr Forster become liable to Mr Forster as an Australian legal practitioner? Clearly, it is not possible for Mr Forster to be liable to Mr Forster.

409 The receivers contend that, because of the improper or unlawful transfer of trust funds on account of disbursements that were not in fact paid by the law practice, the recipient of those funds (Mr Forster) is indebted to the practice or the client or is otherwise liable to account for those amounts. Hence the receivers are entitled to recover the amounts now claimed from Mr Forster as transferee.

410 The receivers contend that the obligation to put money back into the trust account under s 3.3.21 gives rise to a debt or liability within the meaning of s 5.5.14(1)(c). The receivers contend that the words 'indebted or otherwise liable' go beyond the state of account as between the client and the solicitor. They say 'other liability' includes the liability to rectify the trust account deficiency arising from the obligation to put back into trust moneys that the solicitor was not entitled to take out.

411 Mr Forster says that the obligation referred to in s 5.5.14(1)(c) must be one that entitles Mr Barltrop to have a payment of a particular sum of money to him. In answer to a claim by Mr Barltrop that Mr Forster was indebted or liable to him, Mr Forster would be able to plead that, due to the balance of Mr Barltrop's account, Mr Forster is not indebted or liable to Mr Barltrop.[118]

412 The receivers' case is that the state of the office account is not a relevant consideration in determining whether or not the transfers were improper, unlawful or in breach of trust. The receivers say that it is irrelevant whether or not there was any indebtedness or liabilities owing by Mr Barltrop to Mr Forster.

413 This may explain the failure of the receivers to tender the relevant office ledger accounts, which would have recorded the relevant transactions between Mr Barltrop and Mr Forster and the balance of the account at any particular time. That is, whether there were moneys owing to Mr Forster or to Mr Barltrop in the office account. In my opinion, it does not excuse the receivers from doing so. I will elaborate on this issue at the conclusion of the judgment. It is just one example where the receivers failed to provide information within their possession that was relevant to the issues before the Court.

414 The receivers say that the appropriation of $5,641.61 from the transfer of $36,942.40 from the trust account to the office account was unlawful and that it is irrelevant that the amount of $36,942.40 was less than the amount owing by Mr Barltrop to Mr Forster on 22 August 2008.

415 Further, the receivers say that it is irrelevant that Mr Forster was entitled under his fee agreement with Mr Barltrop to transfer $36,942.40 from the trust account to the office account towards the fees and costs outstanding by Mr Barltrop to Mr Forster. Further, the receivers say that Mr Forster was not entitled under his particular lien to transfer that amount from the trust account to the office account, but even if he were, it would be irrelevant to whether the amount appropriated in the office account to invoice 4012 was $5,641.61 in excess of the amount actually due under invoice 4012.

416 I do not agree. First, the error in appropriation was an error in the office books of account that could be corrected at any time prior to the appropriations being communicated to Mr Barltrop by Mr Forster. Secondly, for reasons discussed above, Mr Forster was entitled to transfer the sum of $36,942.40 from the trust account to the office account. The transfer was lawful and proper. It was the subsequent mistaken book entry in the office account that created the deficiency under the Act and the obligation under s 3.3.21 to transfer the double disbursement sum back into trust. The transfer did not create any accounting deficiency.

417 If the money had been transferred back from the office account to trust, no debt or entitlement would have been created in favour of Mr Barltrop. Mr Forster had outstanding invoices for a sum in excess of the amount that would be transferred. Mr Forster would have a lien over the moneys transferred to the trust account. As a result of the transfer, no moneys would be owed to Mr Barltrop. Mr Forster would be beneficially entitled to the sum transferred back to the trust account.

418 Accordingly, the double payment of the disbursement, did not give rise to any entitlement of the receivers under s 5.5.14(2)(c) to recover the sum claimed.

419 There are some other issues raised by the parties that it is appropriate to deal with before concluding my decision on the claim in respect of Mr Barltrop.

420 The receivers contend that Mr Forster wrongly seeks to set off an independent claim against a debt due. The receivers submit that set off of this nature is not available, as the obligation is one requiring moneys to be put back into trust under the Act and Regulations.

421 Mr Forster submits that he does not seek to set off any sum. He says that the issue is one of the extent of the client's liability. In the case of Mr Barltrop, less was transferred than was owed. The issue of set off does not arise. The issue is that the payment transferred did not satisfy the liability owed to Mr Forster. I accept Mr Forster's submissions.

The relevance of the 11 September 2008 writing off

422 The claim of the receivers makes no reference to the record in the Detailed Accounts Rendered - Barltrop JL, that on 11 September 2008 $8,188.28 was written off invoice 4142. The receivers' claim alleges that the obligation to repay moneys to the trust account arose on 22 August 2008 and does not rely on any subsequent event to make out the claim.

423 Nevertheless, in the submissions of the receivers they contend that the writing off of Mr Forster's fees and the closing of the files is an acknowledgment to the clients by Mr Forster that he does not thereafter claim to be a creditor for any sums, including written off fees, disbursements or interest. The receivers submit that Mr Forster cannot as a fiduciary unilaterally write up an old bill and use client money to pay himself without accounting by way of an invoice and in accordance with the Act.

424 There are several observations that may be made about this submission. As mentioned above, this is not part of the pleaded case against Mr Forster and was raised for the first time in closing submissions. The receivers' case relies upon the deficiency arising when the payment from the trust account was allocated in the office account to invoice 4012 on 22 August 2008.

425 Secondly, there is no evidence that Mr Forster communicated to the client the write-off in September 2008.

426 Further, the client had been informed of the write-off of his account by $7,387.01. As indicated, Mr Forster's letter to Mr Barltrop of 22 August 2008 states that Mr Barltrop's final account came to $18,894.40 and that it had been discounted by $7,387.01, making the amount payable $11,507.39. Mr Barltrop was not informed of any other internal book entries in the office account.

427 As indicated earlier, there is no reason why Mr Forster was not entitled to adjust the write-off (which had not been communicated to Mr Barltrop) when Mr Forster discovered the error in the office account (that is, he had written off too much from the amount owed) that had itself not been communicated to Mr Barltrop. Mr Barltrop was informed of the fee that he owed, was informed of the discount he was to receive, and received the benefit of that discount.

428 The receivers also submit that the adjustment notes or further invoices, constitute an admission that a debt or liability did arise and Mr Forster sought by the adjustment note to subsequently extinguish the debt of liability.

429 The adjustment notes do not and cannot alter the true state of accounts between Mr Forster and Mr Barltrop when the alleged deficiency arose.

430 There are issues raised by the parties that are not necessary to decide in view of my decision that the receivers have failed on their claim under s 5.5.14(1)(c).

431 The parties disputed the entitlement of Mr Forster to charge interest on fees outstanding. As it is, the resolution of the claim relating to Mr Barltrop does not require interest to be taken into account. In view of the arguments put on this issue, it is appropriate that I say something about it.

432 The receivers contend that there was no provision in the costs agreement between Mr Barltrop and Mr Forster that entitled Mr Forster to charge interest. The receivers refer to the costs agreement made in December 2005. The agreement provided that interest was payable on 'legal costs payable' 30 days after payment 'is demanded'.

433 Mr Forster contends that submission overlooks his statutory right, at the time, to charge interest. Section 3.4.21 of the Act provides:

(1) A law practice may charge interest on unpaid legal costs if the costs are unpaid 30 days or more after the practice has given a bill for the costs in accordance with this Part.

434 Similarly in the Legal Practice Act 1996, s 95 provided:

A legal practitioner or firm may charge interest on legal costs, at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the period beginning 30 days after payment is demanded until the legal costs are paid.

435 Mr Forster submits that this entitlement is relevant to the fiduciary obligation that the receivers are advancing, as interest would need to be taken into account in ascertaining whether any moneys were due to Mr Forster. As it is, Mr Forster says that irrespective of this right there was a balance owing by Mr Barltrop to Mr Forster. Further, , although interest was not included in the bills rendered by Mr Forster, in any issue as to whether moneys were owed to Mr Forster, I find that he would be entitled to take into account any entitlement he had to interest.

436 The receivers submit that Mr Forster had no intention to write up fees in respect of the closed files.

437 Mr Forster submits that his intention is irrelevant as to whether the transfer on 22 August 2008 gave rise to a debt or other liability owed by Mr Forster to Mr Barltrop because of the payment constituted by the allocation of $5,641.61. The fact that Mr Forster may have mistakenly believed that he had written off the correct amount is irrelevant to whether or not the transfer created an obligation in Mr Forster to repay moneys to trust when on the true account Mr Barltrop still was indebted to Mr Forster on the invoices outstanding. As it is, the write-off did not take place until some weeks later in September, an event irrelevant to the claims made by the receivers. I accept Mr Forster's submissions.

438 The receivers contend that Mr Barltrop did not consent to the adjustments of his office account. Mr Forster says that there is no need for his consent to an adjustment in his favour. Secondly, Mr Forster says that the lack of consent forms no part of the allegations in the statement of claim. I accept this submission.

439 The receivers contend that Mr Barltrop did not consent to the disbursements that were paid on 21 August 2008. This again overlooks the fact that Mr Barltrop had consented to the transfer and payment of the costs that he owed. The amount transferred was less than he owed.

440 Mr Forster contends that a debt arose in his favour for the work that he did. That is a debt referable to the retainer between the client and the solicitor. Mr Forster says that the debt due to the him is not what was billed from time to time but what he was entitled to in accordance with his retainer. The billing is merely a mechanism which the Act and the Regulations require him to undertake.

441 In those circumstances, the transfers from the trust account to office were in part satisfaction of what was owed under the retainer. In this case the debt was misdescribed in respect of $5,610.55. That does not mean that the transfer was any less a partial satisfaction of the debt actually due.

442 Further, Mr Forster contends that, even if there was a breach of the Act and Regulations, the receivers' claim still must establish that a debt or liability arose and such a debt or liability would not arise if less was transferred from trust than was owed. Mr Forster may be subject to all sorts of penalties but s 5.5.14(1)(c) would not be enlivened. Further Mr Forster says that, if he took less than was owed, there would be no breach of Mr Forster's fiduciary duty to the client. I have accepted that submission.

443 The receivers did not produce the office accounts. Presumably, there would have been a ledger account for Mr Barltrop showing a balance owing to the practice. There would not have been a separate ledger for each invoice. Rather each invoice and each payment to the office for or on behalf of Mr Barltrop would be entered in the ledger account and a balance would be showing.

444 The ledger account would show a single amount as owing to the practice, or if too much was paid, owing by the practice to the client. That is under normal accounting practice, in which amounts are debited and credited to the account, and a balance would be showing or able to be calculated.

445 In the case of Mr Barltrop, on 22 August 2008, the ledger account should have shown that after the payment of the moneys from trust a sum was still owed to the practice. This is the case, even if the account was credited with the payments made on 21 August 2008 to the barristers' clerks.

446 In summary, Emerton J found that the double payment of the disbursements gave rise to a deficiency in Mr Forster's trust account for the amount of the disbursements. The receivers contended that this gave rise to an obligation on Mr Forster as soon as practicable to deposit the double disbursement amount back into trust (s.3.3.13). Mr Forster did not do that.

447 The receivers contended that as Mr Forster did not deposit the double disbursement amount back into trust, to the credit of Mr Barltrop, Mr Forster became indebted or otherwise liable to Mr Barltrop or the practice for the amount of the double disbursement payment within the meaning of s 5.5.14(1)(c).

448 I have found Mr Forster's failure did not cause him to become so indebted or otherwise liable to Mr Barltrop. Even if the moneys were paid back into the trust account, Mr Barltrop would have been indebted to Mr Forster on the outstanding invoices for a sum in excess of the money in trust. Mr Forster would have held a lien over the amount in trust for his fees which exceeded that amount. The moneys deposited back into trust could not have been paid to Mr Barltrop, nor were they owed to Mr Barltrop.

449 The obligation to pay the double disbursement back into trust, would not have resulted in any indebtedness in Mr Forster to Mr Barltrop. Rather, at all relevant times the state of account between Mr Forster and Mr Barltrop would be that Mr Barltrop was indebted to Mr Forster.

450 If Mr Forster had paid the money back into trust under s 3.3.21 he would have been entitled to use those moneys to satisfy the sums owed by Mr Barltrop on the other outstanding invoices.

451 In other words, payment of moneys back into the trust account would not have created any indebtedness or other liability to Mr Barltrop by Mr Forster.

452 Mr Forster's failure to deposit the double disbursement back into trust, may constitute a breach of the Act and have other consequences for him. Mr Forster may have been required to go through certain procedures to transfer the moneys back from trust to office as set out in s 3.3.20. Those procedures regulate the transfer of moneys from trust to office. The procedures do not determine the amount owing by Mr Barltrop to Mr Forster. Those procedures do not determine any debt or other liability as between the solicitor and client.

453 The failure to follow those procedures or otherwise comply with the Act, if there were any, did not give rise to any debt or liability in the amount of the double disbursement payment or in another amount to Mr Barltrop and to entitle the receivers to recover the double disbursement under s 5.5.14(2)(c).

454 The obligation to pay the double disbursement back into trust did not alter the state of accounts as between Mr Forster and Mr Barltrop. At all times Mr Barltrop owed more than was transferred from his trust funds to Mr Forster.

455 The receivers have failed to recognise the difference between determining the amount owing to Mr Forster and the procedures that had to be followed for him to recover the fees he was owed.

456 For the above reasons, I find that the receivers have not made out their double disbursement claim in respect of Mr Barltrop. For the same reasons, I also find that the receivers have not made out their claim on any of the double disbursement claims. In all cases, the amount of the double disbursement was less than the amount outstanding on other invoices that had been rendered to the client. None of this evidence was challenged by the receivers. Their issue was not with accounting principles but with the construction of the Act.

457 The receivers' decision to sue Mr Forster for the double disbursements when no moneys were owing by Mr Forster to those clients (as the receivers had been informed by their expert accountant) was misconceived. Mr Forster may be forgiven for believing it was also unfair.

458 The receivers allege that Mr Forster acted on behalf of two clients, Mr Dawson and Mr Martin, without entering into a costs agreement in accordance with s 3.4.26 of the Legal Profession Act 2004 (Vic) (the Act) or s 96 of the Legal Practice Act 1996 (Vic). Mr Dawson and Mr Martin are described as No Fee Agreement Clients.

459 The receivers allege that pursuant to s 3.4.19 of the Act and s 93 of the Legal Practice Act legal costs were only recoverable from each of the No Fee Agreement Clients:

(a) under a costs agreement made in accordance with Division 5 of the Act, or Division 3 of the Legal Practice Act, or the corresponding provisions of a corresponding law; or

(b) if paragraph (a) did not apply, in accordance with an applicable practitioner remuneration order or scale of costs; or

(c) if neither paragraph (a) nor (b) applied, according to the fair and reasonable value of the legal services provided.

460 The receivers allege that in the premises, the Law Practice was only entitled to recover legal costs from the No Fee Agreement Clients calculated in accordance with the applicable scale of costs provided in Appendix A of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) and Appendix A of the Supreme Court (General Civil Procedure) Rules 1996 (Vic), collectively 'the Victorian Scales'.

461 The receivers make an alternate plea relying on equivalent provisions of the New South Wales and Queensland laws in case those laws govern the situation alleged.

462 The receivers allege that for each of the No Fee Agreement Clients, the Law Practice:

(a) did not calculate or determine legal costs in accordance with

(ii) alternatively, the applicable scale of costs relevant to the New South Wales or Queensland provisions, whichever be the case;

(iii) alternatively, the fair and reasonable value of the legal services provided;

(i) multiplying the amount of time taken in providing legal services by an hourly rate; and

(ii) adjusting the hourly rate by multiplying it and uplifting it by 25 per cent (the Time Costing Basis); and

(c) rendered invoices which included charges for legal costs calculated on the Time Costing Basis (the Legal Costs).

463 The receivers allege that between about 17 March 1999 to 11 September 2008, in respect of the No Fee Agreement Clients, the Law Practice paid money from the Trust Account to the Office Account to pay each of the invoices identified in a schedule to the plea including the Legal Costs (the Payments).

464 The receivers allege that each of the Payments was 'regulated property' within the meaning of s 5.1.2 of the Act.

465 The receivers allege that each of the Payments was improper. The particulars provided allege that:

(a) The Law Practice made the Payments without written instructions from the No Fee Agreement Clients authorising the withdrawal;

(b) Alternatively, the Law Practice made the payments in the absence of confirmation in writing from the No Fee Agreement Clients within five working days;

(c) The Law Practice calculated legal costs on the Time Costing Basis without providing disclosure in accordance with s 3.4.9 of the Act;

(d) The Law Practice made the Payments contrary to the procedure prescribed by the Legal Profession Regulations 2005 (Regulations), specifically reg 3.3.34(3)(a)(ii);

(e) The Law Practice made the Payments contrary to the procedure prescribed by reg 3.3.34(4)(b), in that the Law Practice made the Payments described in Schedule 1 prior to the expiration of seven days after issuing the respective invoices;

(f) The Law Practice made the Payments in breach of s 3.3.20(1)(b) of the Act by reason of the matters particularised in paragraphs (b) through (e) above; and/or

(g) The Payments made by the Law Practice caused a trust account deficiency in breach of s 3.3.21 of the Act.

466 The receivers allege further and alternatively, that each of the Payments was unlawful. The receivers rely upon the particulars provided as to why the Payments were improper.

467 The receivers allege further and alternatively, that the Payments were improper or unlawful in that by making any one or more of the Payments Mr Forster breached his Fiduciary Duties (as previously defined) to the No Fee Agreement Clients by:

(a) not acting in the best interests of the No Fee Agreement Clients;

(b) failing to exercise his powers and to discharge his duties as a trustee in good faith and in the best interests of the No Fee Agreement Clients in respect of money held on trust for them by the Law Practice;

(c) failing to account candidly, properly and lawfully to the No Fee Agreement Clients in respect of money held in trust by the Law Practice for them;

(e) causing a financial detriment to the No Fee Agreement Clients.

468 The particulars allege that Mr Forster gained an advantage for himself as a result of the Payments by reason of him having made the Payments from the Trust Account to the Office Account and failed to return the Payments to the Trust Account, retaining the benefit of those Payments in circumstances where he was not contractually entitled to make or retain those Payments either in full or in part.

469 The particulars further allege that the No Fee Agreement Clients suffered a financial detriment as a result of the Payments by reason of Mr Forster retaining, and the No Fee Agreement Clients being denied, the benefit of those Payments in circumstances where the No Fee Agreement Clients were entitled to have those Payments paid to them in full or in part.

470 The receivers allege that at the time of any one or more of the Payments, Mr Forster:

(a) knew or believed that the Payments were made improperly, or, alternatively, unlawfully; the particulars refer to and repeat those referred to in the preceding two paragraphs and allege further that by:

(ii) acting for the No Fee Agreement Clients; and

Mr Forster knew that the Payments were improper or unlawful;

(b) was the transferee of regulated property of the Law Practice; and

(c) because of the Payments, alternatively the Breach of Fiduciary Duties, became indebted or otherwise liable to the respective No Fee Agreement Clients in the amount of each of the Payments.

471 The receivers allege that alternatively, at the time of any one or more of the Payments, Mr Forster:

(a) was the transferee of regulated property of the Law Practice; and

(b) because of the Payments, alternatively the Breach of Fiduciary Duties, became indebted or otherwise liable to the respective No Fee Agreement Clients in the amount of each of the Payments.

472 The receivers allege that pursuant to s 5.5.14(2)(a), alternatively s 5.5.14(2)(c) of the Act, the receivers are entitled to recover the Payments from Mr Forster, namely the sum of $217,206.87.

473 Alternatively the receivers allege that pursuant to s 5.5.14(2)(c) of the Act, the receivers are entitled to an order permitting recovery from Mr Forster of another amount, namely the difference between the Payments and the legal costs calculated by reference to the Victorian Scales and/or the New South Wales and Queensland equivalents.

3.4.19 On what basis are legal costs recoverable?

Subject to Division 2, legal costs are recoverable -

(a) under a costs agreement made in accordance with Division 5 or the corresponding provisions of a corresponding law; or

(b) if paragraph (a) does not apply, in accordance with an applicable practitioner remuneration order or scale of costs; or

(c) if neither paragraph (a) nor (b) applies, according to the fair and reasonable value of the legal services provided.

Note

See section 3.4.44(2) for the criteria that are to be applied on a costs review to determine whether legal costs are fair and reasonable.

(a) between a client and a law practice retained by the client; or

(b) between a client and a law practice retained on behalf of the client by another law practice; or

(c) between a law practice and another law practice that retained that law practice on behalf of a client.

(2) A costs agreement must be written or evidenced in writing.

(3) A costs agreement may consist of a written offer in accordance with sub-section (4) that is accepted in writing or by other conduct.

Note: Acceptance by other conduct is not permitted for conditional costs agreements - see section 3.4.27(3)(c).

(4) The offer must clearly state -

(a) that it is an offer to enter a costs agreement; and

(b) that the client may accept it in writing or by other conduct; and

(c) the type of conduct that will constitute acceptance.

(5) A costs agreement cannot provide that the legal costs to which it relates are not subject to costs review under Division 7.

Note: If it attempts to do so, the costs agreement will be void - see section 3.4.31(1).

93. On what basis are legal costs recoverable?

Legal costs are recoverable -

(a) under a costs agreement made in accordance with Division 3; or

(b) in the absence of a costs agreement, in accordance with an applicable practitioner remuneration order or scale of; or

(c) if neither paragraph (a) or (b) applies,

according to the reasonable value of the legal services provided.

(a) between a client and a legal practitioner or firm retained by the client; or

(b) between a client and a legal practitioner or firm retained on behalf of the client by another legal practitioner or firm; or

(c) between a legal practitioner or firm and another legal practitioner or firm that retained that practitioner or firm on behalf of a client.

(2) A costs agreement must be written or evidenced in writing.

(3) A costs agreement may consist of a written offer that is accepted in writing or by other conduct.

478 Mr Forster pleads that in 2008, he and Mr Dawson entered into a costs agreement containing the same terms and conditions as appear in the document marked 'B' and annexed to the defence, the original of which has either been lost or mislaid. The document marked 'B' is a conditional costs agreement prepared for Mr Dawson. It is a time costing agreement providing for an uplift of 25 per cent. Mr Forster now accepts that the agreement was in the form of the copy that Mr Dawson said that he received and has exhibited to his witness statement.

479 Mr Forster pleads that in or about April 2002, he and Mr Martin entered into a costs agreement containing the same terms and conditions as appear in the document marked 'C' and annexed to the defence, the original of which has been lost or mislaid or destroyed under the Mr Forster's document retention policy. Document 'C' is a costs agreement for a client whose name has been redacted. The agreement provided for fees to be calculated according to a particular Court scale and a premium of 25 per cent on the scale.

480 The receivers concede that in the absence of a costs agreement Mr Forster was entitled to charge costs according to the scale of costs.[119] The receivers contend, however, that Mr Forster did not calculate or determine legal costs in accordance with the Victorian Scales but rather calculated the legal costs on the Time Costing Basis and applied the uplift of 25 per cent.

481 Mr Forster required a signed costs agreement to levy the 25 per cent uplift. Also, the client needed the costs agreement, to avail himself of the no win no fee element.

482 The pleadings raise several issues. In relation to Mr Dawson, the issue is whether Mr Dawson signed a costs agreement, and if he did, whether it was the conditional costs agreement a copy of which was in the possession of Mr Dawson and exhibited to his witness statement. If, contrary to the contention of the receivers, he did sign the conditional costs agreement, then there is no challenge to the Legal Costs as Mr Forster would have been entitled to calculate legal costs by time costing and adjusting the hourly rate by an uplift of 25 per cent.

483 Accordingly, in relation to Mr Dawson, there is simply the issue of whether or not he signed the conditional costs agreement. Mr Forster does not argue that Mr Dawson signed any other costs agreement.

484 In the case of Mr Martin, the issue is whether Mr Martin signed a costs agreement, and if he did, whether it was in the form of annexure C to the defence of Mr Forster. If he did not, then the fees could only have been calculated according to scale (which annexure C provided for) and Mr Forster would not have been entitled to an uplift of 25 per cent (which annexure C provided for).

485 Accordingly, in relation to Mr Martin, there are two issues. First, whether or not he signed an agreement in the form of annexure C. If he did, then secondly, whether or not Mr Forster calculated costs on scale or on a time costing basis. If Mr Martin did sign the agreement in annexure C, Mr Forster was entitled to the 25 per cent uplift.

486 The scale versus time costing issue is also raised in the third category of claims that the receivers bring; described as 'Scale Fee Agreements.' Accordingly, in my opinion, it is appropriate to deal with that issue when I address the third category of claims. Unlike the Double Disbursement Claims, the receivers are also seeking to rely on s 5.5.14(2)(a) of the Act in the No Fee Agreement claims. That section is only enlivened if Mr Forster knew or believed at the time of the taking, payment or transfer of the regulated property that it was done in breach of trust, improperly or unlawfully.

487 The first issue is whether the receivers have established that Mr Dawson and Mr Martin did not sign a costs agreement. For the reasons given below, I am not satisfied that Mr Dawson and Mr Martin did not sign a costs agreement.

Mr Forster's evidence on obtaining and filing fee agreements

488 Mr Forster said that his practice, Hollows Lawyers, had three offices: in NSW, Frankston and in the city. Mr Forster said that the costs agreements with his clients could be in any of those three locations, placed in a number of folders.

489 Mr Forster said that he could have put Mr Dawson's fee agreement either in the accounts folder, initial correspondence folder or it could have been put on the shelves with costs agreements.

490 Mr Forster was asked if he had a system of checklists to make sure all documents he required were in place, including costs agreements. He said he was unable to say but after being shown the file note from Marlene, an accounts clerk, he said that, "it seems there must have been some checking going on then..." Mr Forster could not say exactly when or how the checking system operated. It was put to Mr Forster that his practice, Hollows Lawyers, had no system of checking or confirming receipt of signed costs agreements. Mr Forster said that with the exception of two, they had been able to find the costs agreements in relation to 82 files.

491 Mr Forster said that in about 2000, at that stage, the costs agreements would have gone in the original correspondence folder. Mr Forster was asked whether that practice changed over the years. He said that at a later stage when he was using costs consultants for costing files, the costs agreements could have gone in the material for the costs consultants. He said further that at one stage, he would put all the costs agreements into comprehensive files. Mr Forster said that he had handled the filing in different ways. He said that he had opened an office in New South Wales to handle the New South Wales cases. So generally speaking, he would meet with the client, have the costs agreement signed and it would go into a correspondence folder. Mr Forster said that "at a later stage of the litigation, it would be, it could be, put in an accounts folder or it could be put in..."

492 Mr Forster also mentioned that the costs agreements were collated into folders of costs agreements. In summary, Mr Forster's evidence on the filing of costs agreements was poor and vague. From his evidence, it appeared that there were several locations that the costs agreements might be and he was unable to give specific evidence about where the costs agreements would be. It appears, however, that the accounts staff did check to see whether costs agreements and other specific documents had been signed, as shown by the note to Blair Williams from Marlene referred to above. Blair Williams was a solicitor assisting Mr Forster with the Voyager clients.

The receivers' case on Hollows Lawyers' files

493 The receivers say that the record keeping for the Law Practice was ramshackle, to say the least. The receivers received over 400 boxes of files which were in a precarious state.

494 Initially, the receivers believed there was a large number of clients from whom no costs agreements were obtained by Hollows Lawyers. The initial statement of claim issued on 13 February 2012, alleged that 26 Voyager clients were billed for work without a costs agreement being signed. Later in February 2012, Mr Forster, and not the receivers, discovered many signed costs agreements. As a consequence the statement of claim was amended to reduce the number of no fee agreement clients from 26 to 3.

495 The receivers say that, because of the way the files were kept, an extensive search process was then undertaken to see whether or not further costs agreements could be found somewhere else in the 400 boxes and, as a result of that process, one more costs agreement relating to Mr Baker was found.

496 The receivers submit that the Court should infer that, because they had been unable to find costs agreements for two of the 86 clients (and had been able to find costs agreements for the other 84 clients), no further costs agreements were executed.

497 The receivers' case relies on the evidence of searches conducted by the receivers' staff for costs agreements entered into by Mr Dawson and Mr Martin. The receivers also rely on the evidence of Mr Dawson and Mr Martin. Mr Forster relies on his own evidence. Each of these witnesses was crossexamined. In addition the receivers and Mr Forster referred to contemporaneous documents.

498 Mr Batrouney gave evidence by his witness statement of 21 December 2012. He was crossexamined.

499 Mr Batrouney gave evidence of the steps he took to gain possession of the files of Hollows Lawyers relating to the Voyager matters. He said that on 4 May 2010, the files were delivered to his offices at 600 Bourke Street in one commercial moving truck. He said there were approximately 200 boxes of files in various shapes, sizes and conditions, some with lids and some without. Mr Batrouney said one of the boxes was infested with ants and had to be removed and sprayed. Mr Batrouney said there was no order or organisation to the boxes, and he produced photographs of the boxes as initially delivered.

500 Mr Batrouney said that on 6 May 2010, a further delivery of approximately 100 boxes full of Melbourne-Voyager files was delivered to him and on about 25 August 2010, a further four boxes of MelbourneVoyager files were delivered by Mr Forster. All up, he referred to some 304 boxes of files. Counsel for the receivers said that possession was taken of over 400 boxes of files from Hollows Lawyers. It was not clear from the evidence whether or not these were boxes of files relating to Melbourne-Voyager clients. Those not delivered to Hall & Wilcox were kept at a storage facility. This is where Mr Forster located the signed costs agreements for 23 of the no fee agreement clients pleaded in the initial statement of claim.

501 The evidence established that initially Mr Myles Brown and subsequently Mr Uljans were in charge of the searches of the files. Three witnesses gave evidence of searches made before the writ was issued: Mr Brown, Ms Solomon and Ms Weiss. Four witnesses gave evidence of searches made after the writ was issued: Mr Thomas, Mr Wambeek, Mr McCoy and Mr Daly.

502 Mr Brown gave evidence by his statement of 21 December 2012. Mr Brown was crossexamined.

503 Mr Brown gave evidence that between 19 April 2010 and 16 December 2011, he was a solicitor employed by the firm of Hall & Wilcox and performed legal work on the Hollows Lawyers receivership.

504 Mr Brown said that in October 2010, he undertook searches of sample files of Hollows Lawyers and clients involved in litigation against the Commonwealth, for the purpose of identifying key documents, including fee agreements, and preparing reports based on the results of the searches. He said that he was assisted by others.

505 He said that in September, October and November 2011, he supervised Ms Gemma Weiss, a lawyer at Hall & Wilcox, and Ms Zoe Solomon, then a trainee lawyer at Hall & Wilcox, in conducting searches of the Hollows Lawyers hard copy files for each of the Voyager clients.

506 Mr Brown said that at the beginning of the search process, he caused to be retrieved from the storage of Grace Records Management Australia Pty Ltd all boxes of hard copy files which were identified as 'accounts' folders and a list of Hollows Lawyers' boxes maintained by the receivers.

507 Mr Brown said that those were then stored at Hall & Wilcox's offices. Mr Brown said that in about late September 2011, he instructed Ms Gemma Weiss to search each of the folders within each of those boxes, including all 'accounts' folders, for any costs agreements (whether signed or unsigned), and any correspondence evidencing the existence of a costs agreement.

508 Mr Brown said that he also instructed Ms Zoe Solomon to undertake searches of folders within certain of those boxes. Mr Brown said that he was subsequently told by Ms Weiss and Ms Solomon that they completed that task, and that each relevant document they located in the course of that review was marked for photocopying and was subsequently photocopied. Mr Brown said that the photocopied costs agreements were then collated into four tabbed folders and arranged in alphabetical order by Voyager client names. Those folders were marked 'Fee Agreements'. He said he handed those over to Mr Uljans in December 2011.

509 Ms Weiss gave evidence by her witness statement of 21 December 2012. Ms Weiss gave evidence that in September 2011, she was instructed by Mr Brown to undertake searches of folders which were contained in boxes located at the offices of Hall & Wilcox. Ms Weiss said that she conducted searches on eight days. The boxes and files Ms Weiss searched are not identified.

510 Ms Solomon gave evidence by her witness statement of 21 December 2012. Ms Solomon was not crossexamined.

511 Ms Solomon, a lawyer employed by the firm of Hall & Wilcox, gave evidence that on five days she undertook searches of boxes of hard copy files relating to various Voyager clients, including the matters of Norrish, Maultby, Larkin, Barnes and Marks. Ms Solomon said that in the course of those searches, she tabbed any costs agreements or correspondence relating to costs agreements that she located, and those tabbed documents were subsequently photocopied and collated into four folders.

512 Mr Uljans gave evidence by his witness statement of 20 December 2012. Mr Uljans was crossexamined.

513 Mr Uljans said that he is a solicitor employed by Hall & Wilcox and, since April 2010, has undertaken legal work on behalf of the receivers.

514 During the first two weeks of December 2011, Mr Uljans conducted a formal handover with a solicitor of Hall & Wilcox, Mr Myles Brown, who had previously undertaken legal work on behalf of the receivers. As part of that handover, Mr Uljans was provided by Mr Brown with the four folders of Hollows Lawyers' costs agreements that he was told by Mr Brown contained the costs agreements of Hollows Lawyers as they related to the Voyager clients.

515 Mr Uljans was told by Mr Brown that prior to December 2011, he and other lawyers and trainee lawyers from Hall & Wilcox had conducted searches of the hard copy files.

516 Mr Uljans said that in about early January 2012, he undertook, with assistance from Justin Meneguzzi, a paralegal employed by Hall & Wilcox, a review of the Hollows Lawyers costs agreements folders. From discussions that Mr Uljans had had with Mr Brown in early December 2011, he understood at the time that the Hollows Lawyers costs agreements folders contained all the signed costs agreements for Voyager clients. As a result of the review of the Hollows Lawyers costs agreements folders, Mr Uljans determined that those folders did not contain signed costs agreements relating to a number of Voyager clients.

517 On or about 16 January 2012, Hall & Wilcox sent letters to 23 Voyager clients. The standard form letter referred to the proposed legal proceedings against Mr Forster. The letters that Mr Uljans wrote were in a standard form and said, amongst other things, 'Our investigations of the accounts and records of the firm indicate that you may not have signed a valid costs agreement'. The letter asked the recipient to let the firm know by Friday 20 January 2012 whether:

1. you recall entering into or being provided with a written fee agreement at any stage; and
2. if so, whether you have a copy of that fee agreement in your possession.

The recipient was then asked to contact Mr Uljans with any queries.

518 Subsequently, some 12 of the 23 clients, who had been written to, contacted Hall & Wilcox.

519 Despite Hall & Wilcox's searches suggesting that the clients written to may not have signed a costs agreement, some of those clients contacted Hall & Wilcox and informed the firm that they had in fact signed a costs agreement. Mr Uljans said that Mr Larkin wrote to him, saying he had a copy of a signed costs agreement. Mr Bellette called and informed Hall & Wilcox that he had signed a costs agreement. Mr Rann called and informed Mr Uljans that he definitely did not sign a costs agreement. Mr Lewis called him and told him that he had signed an updated costs agreement in 2005. Mr Robinson called him and told him he could not recall any document being signed. Mrs Bate, the widow of Mr Bate, said she could not find an updated signed costs agreement. Mr Edwards called and said he did not recall a costs agreement at the outset and did not recall receiving an updated costs agreement. Mr Mander called, saying he signed something at the beginning which he thought was a costs agreement, but he had not signed any subsequent agreement. Mr Mason called and said he had never signed anything at the beginning.

520 Mr Uljans said that on 19 January 2012, Mr Dawson called him by telephone. Mr Uljans said that, 'During our conversation, I asked Mr Dawson if he had any recollection of being provided with or signing a fee agreement with Hollows Lawyers in connection with work done by that firm for his personal injury claim. Mr Dawson said to me words to the effect that he "did not enter into a written fee agreement"'. Mr Uljans annexed to his statement a copy of a file note of that conversation.

521 Mr Uljans said that on 25 January 2012 Mr Martin called him and said that 'he did not remember signing any fee agreement.'

522 Of the seven employees or former employees of Hall & Wilcox who gave evidence of conducting searches of the Hollows Lawyers files for costs agreements, two (Ms Weiss and Ms Solomon) had done so prior to Mr Brown's departure in December 2011. Their evidence did not include any details of the number of boxes that they searched, unlike that given by Jonathan McCoy and Darcy Daly (who are referred to below).

523 Soon after the writ was issued on 13 February 2012, on 21 February 2012, Mr Forster and Annaliese Farquhar from Hall & Wilcox attended at Anderson's Removals storage facility where some of Hollows Lawyers property was stored. During the visit, Mr Forster discovered a box containing signed costs agreements of several Melbourne-Voyager clients. Mr Uljans gave evidence that Ms Farquhar returned to the offices of Hall & Wilcox from the storage facility and provided him with the box containing, amongst other things, folders marked 'Standard Costs Disclosure and Conditional Costs Agreements' and 'Fee Agreements'. Mr Uljans said that he inspected the folders and found a number of documents that were costs agreements between relevant Voyager clients and Hollows Lawyers, including a number of signed costs agreements, copies of which Hall & Wilcox did not previously have. Mr Uljans said that after reconciling the Hollows Lawyers Fee Agreements that Mr Forster had discovered with the documents previously identified by Hall & Wilcox, amendments were made to the statement of claim on 2 March 2012 that reflected the results of the enquiries and searches that he (Mr Uljans) had undertaken. I infer, therefore, that the costs agreements discovered by Mr Forster included agreements in respect of the 23 clients removed from the claim on 2 March 2012.

524 Mr Thomas gave evidence by his witness statement of 19 April 2013. Mr Thomas was not crossexamined.

525 Mr Thomas said that he is a lawyer employed by Hall & Wilcox. Mr Thomas said that he has read the witness statements of Jonathan McCoy, Steven Wambeek and Darcy Daly dated 19 April 2013. Mr Thomas said that on or about 27 November 2012, he instructed Ms Sharlene Asiack (an assistant employed by Hall & Wilcox) to prepare the documents annexed to each of those witness statements and described therein as the 'Hollows Files Spreadsheet'.

526 Mr Thomas said that in about late 2010, an electronic spread sheet was prepared by former Hall & Wilcox service staff which purported to detail the contents of each box containing files belonging to the Hollows Lawyers practice which were brought to the offices of Hall & Wilcox following the appointment of the receivers of the Hollows Lawyers practice on 12 April 2010. Mr Thomas called this the 'Complete Hollows Files Spreadsheet'.

527 Mr Thomas referred to the Amended Statement of Claim. He said that he instructed Ms Asiack to copy all the entries in the Complete Hollows Files Spreadsheet which referred to either:

(a) any Hollows Lawyers client listed in Table B to Schedule 5 of the Amended Statement of Claim (no fee agreement clients); or

(b) any Hollows Lawyers client listed in Table C to Schedule 5 of the Amended Statement of Claim (scale fee agreement clients)

and paste such entries into a new spread sheet. Mr Thomas said that Ms Asiack performed that work as instructed and in doing so created the Hollows Files Spreadsheet, being the spread sheet which he provided to Mr McCoy, Mr Wambeek and Mr Daly.

528 On 27 November 2012, Mr Thomas also sent to Mr McCoy and Mr Wambeek, with a copy to Mr Uljans, a written procedure for checking boxes for costs agreements. The procedure provided as follows:

2.1 Where the description of the contents of the box indicates that the folders within are unlikely to contain a signed fee agreement, i.e.:

(a) Brief;

(b) Subpoenaed records;

(c) Transcripts;

(d) Appeal book/court book;

then you only need to check that the cover/spine labels of the folders inside the box match the description in the spread sheet.

2.2 Some boxes contain folders relating to several clients - you only need to check the folders related to the relevant clients.

2.3 If you only check a box in accordance with paragraph 2.1 - i.e. by only checking the folder covers, then you only need to write your initials in the column entitled 'Checked Box'.

2.4 Where the description of the contents of a box is such that it might reasonably be expected to contain a signed fee agreement, i.e.:

(a) Correspondence;

(b) Misc; or

(c) Costing;

you must look through the box of folders which may be relevant, and where the folder description indicates that it may yield results, check through the entire folder for the fee agreement/signed fee agreement.

2.5 In relation to the 'Scale Fee Agreement clients', where a potentially relevant folder, i.e. one labelled 'Correspondence', relates to any period prior to 2004, then you do not need to check inside it.

2.6 If you check a folder in accordance with paragraph 2.4, you must write your initials in both right hand columns, i.e. 'Checked Box' and 'Check inside folders'.

(a) Annexed to this memo is a list of the Relevant Clients.

(i) for the 'no fee agreement clients', you are looking for any fee agreement;

(ii) for the 'scale fee agreement clients', you are looking for signed 'time costed' fee agreements, which were sent to clients for signature in 2004.

(b) You have both been provided with example 'scale' and 'time costed' (updated) fee agreements.

(c) The attached spread sheet lists every box in our possession which contains files related to Relevant Clients. Each one of the boxes must be inspected in accordance with this procedure.

530 Mr Thomas said that on 3 April 2013, he undertook searches of certain boxes containing the Hollows Lawyers files. He said that he reviewed the contents of a total of seven boxes. He said that at all stages he followed the procedure set out in his procedure memo.

531 Mr Thomas said that he did not discover any signed costs agreements.

532 As mentioned, one of the persons Mr Thomas sent his procedure memo to was Steven Wambeek. Mr Wambeek gave evidence by his witness statement of 19 April 2013. Mr Wambeek was not crossexamined.

533 Mr Wambeek said that between 26 November 2012 and 14 December 2012, he was employed as a vacation clerk by Hall & Wilcox. He was provided with a copy of the spread sheet and the procedure memo. Mr Wambeek said that, alongside Jonathon McCoy, he reviewed the contents of 14 boxes. He said that during his searches, he did not find any document purporting to be a costs agreement relating to any of the clients described as no fee clients in the procedure memo, which were limited to Baker, Dawson and Martin.

534 On 14 December 2012, Mr Uljans was informed by Mr Baker that he had signed a costs agreement. The costs agreement was subsequently located by Mr Daly as described below.

535 Mr Daly gave evidence by his witness statement of 19 April 2013. Mr Daly was not crossexamined.

536 Mr Daly, a law student completing a Bachelor of Laws/Bachelor of Arts at Monash University, was employed as a vacation clerk on a casual basis by Hall & Wilcox. Mr Daly said that he was instructed by Mr Uljans to search and review the contents of certain boxes which he was told contained the files of Hollows Lawyers and which were in the possession of the receivers.

537 Mr Daly said that between 7 January 2013 and 30 January 2013, alongside Jonathan McCoy, he undertook searches of the boxes containing the Hollows Lawyers files. In doing so, he reviewed the contents of a total of 230 boxes. He said that in doing so he discovered the signed costs agreement of Mr Baker. Mr Baker's name was not removed from the claim until 3 May 2013.

538 Mr Daly said that he followed the procedure set out in the procedure memo. Apart from Mr Baker's agreement, he did not find any costs agreements relating to any of the no fee clients.

539 Mr McCoy gave evidence by his witness statement of 19 April 2013. Mr McCoy was not crossexamined.

540 Mr McCoy said that he was a law student completing a Juris Doctor at the University of Melbourne, and was employed as a vacation clerk by Hall & Wilcox commencing on 26 November 2012.

541 Mr McCoy said that in the course of his employment with Hall & Wilcox, he was instructed by Mr Uljans to search and review the contents of certain boxes which he was told contained the files of Hollows Lawyers and which were in the possession of the receivers of that law practice.

542 Mr McCoy said that he was provided with a spread sheet which identified the contents of the boxes. He annexed a copy to his statement. He was also provided with a copy of the procedure memo dated 27 November 2012.

543 Mr McCoy said that he undertook searches of 209 boxes. He said that he worked alongside Steven Wambeek from 26 November 2012 to 14 December 2012, and he worked alongside Darcy Daly between 7 January 2013 and 1 February 2013. Thus, there is a short period between 14 December 2012 and 7 January 2013 when he was working by himself.

544 Mr McCoy said that at all times when he carried out those searches he followed the procedures set out in the procedure memo. He said he wrote initials in the columns on the Hollows Files Spreadsheet corresponding to each box which he checked.

545 As a result of his searches he located one costs agreement relating to Mr Robinson. Other than that he did not find any costs agreements relating to the no fee agreement clients.

546 Mr McCoy exhibited the spread sheet that he was given and which he filled in. The spread sheet extends to some 40 pages and has six columns. The first column has a code number for the box; the second column refers to the matter by the name of the client; the third column is contents, such as transcripts, exhibits and so forth; the fourth column gives a location; the fifth column indicates the initials of the person who searched the box; and the final column gives the initials of the person who checked inside the folders. It can be seen from the list virtually every box was 'checked' in accordance with the procedure. On the other hand, only about half or less of the boxes were initialled as 'checked inside folders'.

547 As indicated, pursuant to the procedure memo, it was only necessary to look through the box for folders which might be relevant if the description of the contents of the box was such that it might reasonably be expected to contain a signed costs agreement.

548 The receivers also rely upon the evidence given by Mr Forster as to the system that was used for keeping costs agreements by the Law Practice. Mr Forster, under crossexamination, said that he had access to the files of the firm and that costs agreements such as Mr Baker's were placed on the initial correspondence file. Mr Forster said his practice of placing the agreements on the file changed over the years. He said that at one stage he put all the costs agreements into comprehensive files, but at a later stage, costs agreements would be put in an accounts folder. Mr Forster said he had folders of agreements that he could call upon to look at which were kept in one of his offices. Mr Forster acknowledged the importance of the costs agreements as the basis upon which he could charge his fees.

549 The receivers allege that Mr Dawson did not sign a costs agreement. It is convenient to first consider the documents produced by Mr Dawson in his witness statement.

550 On 11 January 2008, Hollows Lawyers sent a letter to Mr Dawson referring to Mr Dawson's recent attendance at the office and confirming his instructions for Hollows Lawyers to act on his behalf regarding the Melbourne-Voyager collision. The file manager is identified as Mr Forster, but correspondence was to be sent to Nelson Pinto.

551 The letter provided general advice and an opinion on the claim, advice on damages, advice on the effect on welfare payments, and set out information that would be required from Mr Dawson.

We enclose for your attention a copy of our Conditional Costs Agreement and Disclosure Statement and copies which sets out the retainer between you and this firm. Please read this document carefully and return the original signed copies. As this is a legal document between you and the this firm, should you require further advice, you should seek independent legal advice.

553 The fee agreement enclosed provided for time costing. The letter stated that it enclosed:

Conditional Costs Agreement and copy (4 pages each)

Disclosure Statement and Copy (5 Pages each)

Proof of Evidence - Guide (8 pages)

Documentation Questionnaire (5 Pages)

Medical Authority x 6 (6 Pages)

ATO Authority (1 Page)

DVA Authority (2 Pages)

Centrelink Authority (1 Page)

Medicare Authority (1 Page).

554 The Conditional Costs Agreement was expressed to be between Hollows Lawyers and Mr George Dawson. The copy produced by Mr Dawson in his evidence-in-chief was not signed and was marked 'copy'. Mr Dawson also produced an incomplete copy of another document which related to contractual terms.

555 The copy of the letter of 11 January 2008 that Mr Dawson produced was missing pages 4 and 5 in which the passage quoted above was contained. Pages 4 and 5 were reproduced in another part of the bundle.

556 Mr Dawson also produced a guide to proof of evidence which was also referred to in the letter as being enclosed.

557 On 25 June 2008, Hollows Lawyers wrote to Mr Dawson informing him of approaches that had been made to the Australian Government on behalf of the Voyager clients. The letter enclosed a copy of the letter sent to the Attorney General.

558 On 11 July 2008, Hollows Lawyers sent to Mr Dawson a press release by the Hon Warren Snowdon MP.

559 On 21 October 2008, Hollows Lawyers wrote to Mr Dawson informing him that a mediation of his claim was scheduled for 29 October 2008.

560 On 28 October 2008, Hollows Lawyers wrote to Mr Dawson enclosing an Executive Summary for the Mediation and the expert report of Commander Mummery RANR.

561 Hollows Lawyers prepared a cost estimate as at 28 October 2008 for Mr Dawson.

562 On 29 October 2008, Mr Dawson signed an instructions to settle document. Also on 29 October 2008, Hollows Lawyers sent Mr Dawson invoice draft 1217.

563 On 29 October 2008, in the Supreme Court of New South Wales, judgment was entered by consent against the Commonwealth in favour of Mr Dawson for $600,000 inclusive of costs in full and final settlement of Mr Dawson's claim against the Commonwealth.

564 On 30 October 2008, Hollows Lawyers sent Mr Dawson invoice 4170. Mr Dawson received $528,221.05 from the settlement.

565 Mr Dawson gave evidence by his witness statement of 14 November 2013. Mr Dawson said that he was a retiree residing at 592 Stafford Street, Stafford, in Queensland.

566 Mr Dawson said that between December 2007 and 22 December 2008, Hollows Lawyers acted on his behalf in relation to a claim for compensation against the Commonwealth Government following the Melbourne-Voyager collision in 1964.

567 Mr Dawson said that he first instructed Mr Forster of Hollows Lawyers to act on his behalf in relation to the Melbourne-Voyager collision in around late 2007. He said that at his first meeting with Mr Forster in Melbourne, Mr Forster did not provide him with any documents, however Mr Forster did send him some documents in the mail shortly thereafter.

568 Mr Dawson said that from his meeting with Mr Forster, he understood that he was engaging Hollows Lawyers on a 'no win no fee' basis and that "he would only be required to pay very small amounts for disbursements." Mr Dawson said that from time to time he was required to pay disbursements and he did so when asked.

569 Mr Dawson said that Hall & Wilcox, under cover of letter dated 22 October 2013, sent him -

(a) a redacted example document which was annexed to his witness statement, being a scale fee agreement (annexure 'A'); and

(b) a redacted example document annexed to his witness statement, being a 'time costing' fee agreement (annexure 'B').

570 Mr Dawson said he does not "recall signing any documents in the form of (or similar to) annexures 'A' or 'B'".

571 Mr Dawson said it was his practice to retain copies of all documents he received from Hollows Lawyers. He said it was also his practice, when he signed a document received from lawyers, to retain a copy of the signed document. He said that he has searched his records and has not located any costs agreement signed by him.

572 Mr Dawson said that on or about 29 October 2013, he sent all documents relating to his engagement of Hollows Lawyers which he still had in his possession to Hall & Wilcox. He annexed those documents to his witness statement.

573 Mr Dawson concluded his written statement by saying, 'I do not recall ever signing any fee agreement prepared by Hollows Lawyers'.

574 Mr Dawson was taken to the letter of 11 January 2008 from Hollows Lawyers to him. The letter detailed likely costs. The letter enclosed for his attention "a copy of our Conditional Costs Agreement and Disclosure Statement and copies which sets out the retainer between you and this firm". Mr Dawson was asked to read the document carefully and to return the original signed copies.

575 It was put to Mr Dawson that Mr Forster would say that not only did he send out a costs agreement but that Mr Dawson signed it and sent it back to Hollows Lawyers. It was put to Mr Dawson that he could not remember either way. Mr Dawson agreed that he would have signed something. He said that as usual he would have signed it without looking.

576 Mr Dawson agreed that he signed all documents that he was asked to sign by Hollows Lawyers and that he did not recall any that he did not sign. Mr Dawson agreed that if Mr Forster said that he had signed a costs agreement, he had no reason to disagree with that evidence.

577 Mr Dawson was taken to an undated handwritten letter that he wrote to Mr Forster. In the letter, Mr Dawson said as follows:

I received a letter from receivers regarding if I had got any fee agreement papers between Hollows Lawyers and myself. I can't remember the date of the letter from the receivers, but I was travelling somewhere at the time. When they asked me if I did or didn't, I couldn't remember much about the paperwork at all. I told them the truth to my knowledge I hadn't I think.

When I got home, I had all my records filed away. On going through them I found I had received statements of costs fees extra expenses. I was very happy with the service provided by "Hollows" and David Forster who was handling the case.

Yours faithfully

GH Dawson.

578 Initially, when shown the letter, Mr Dawson said it looked like his writing. He was asked whether he had sent it to Mr Forster this year and he said he did not think so. He said he had not contacted Mr Forster for a long time. He then said that he had first received contact from Hall & Wilcox three months ago. He accepted, therefore, that the letter must have been written within the last three or four months. He agreed that must be so. This exchange demonstrated the unfortunate state of Mr Dawson's memory.

579 Mr Dawson was taken to the letter of 11 January 2008 from Hollows Lawyers to him which was annexed to his witness statement. He was asked whether this was the first letter that he recalled receiving from Mr Forster. He said, 'My memory at the moment - but it's not too good - that is the first time I can really recall.'

580 Mr Dawson was asked about the meeting referred to in the letter and, in particular, was asked whether his attendance at that meeting was his first attendance at Mr Forster's office. Mr Dawson said, 'Yeah, yeah, I - I had to go down to Melbourne. I had to go down to Melbourne, that was the - or the first one - no, was it the Gold Coast or down in Victoria? I'm not sure now. I can't remember.'

581 It was then put to Mr Dawson that the first face-to-face meeting was on 30 November 2007 at Broadbeach in Queensland. He agreed with that proposition.

582 Mr Dawson was taken to annexure C to his statement, which was the letter of 11 January 2008 from Hollows Lawyers to Mr Dawson. He agreed that he had provided these documents to the receivers. Mr Dawson agreed that pages 4 and 5 of the letter were missing. Page 5 of the letter contained the request for Mr Dawson to sign and return the original costs agreement and disclosure statement enclosed with the letter.

583 Mr Dawson agreed that he had lost those pages between 2008 and 2013. Mr Dawson said, 'I must have - I must have - you see, I was travelling in a motor home. I went travelling everywhere, not - I can't recall it. Dogs eat things? - I've lost it. I've lost it, I must have, because I can't recall it. What is it about anyway?'

584 The missing pages of the letter were tendered as Exhibit D14. The missing pages were in the bundle of documents produced by Mr Dawson but were located behind a subsequent letter of 25 June 2008 rather than as part of the letter dated 11 January 2008.

585 Mr Dawson was taken to pages 4 and 5. At the bottom of page 4, under the heading 'Legal Costs', the letter stated that the firm operated on a 'no win/no fee' policy. There were full details about the likely costs, disbursements and such like. The letter said, 'If you are successful, costs are payable on an hourly basis together with an uplift in fees as allowed by law'. The letter went on to say, 'We now enclose for your attention a copy of our Conditional Costs Agreement and Disclosure Statement and copies which sets out the retainer between you and this firm. Please read this document carefully and return the original signed copy. As this is a legal agreement between you and this firm, should you require further advice, you should seek independent legal advice.'

586 Mr Dawson was asked whether, when he received this letter, he also received the documents that are referred to in the paragraph that had been read to him. He responded, 'Yeah, yeah.'

587 Mr Dawson was then taken to the Conditional Costs Agreement which he had annexed to his witness statement. He was asked whether he understood that the costs agreement set out the basis upon which Mr Forster was working for him. He said, 'Yeah.' He was asked whether he agreed to the terms that were set out in it. He responded, 'Yeah. Well, I'm not a lawyer and I didn't understand half of it but I knew the agreement was...No win, no pay, so I thought, well, I can afford that.'

588 Mr Dawson was also taken to the Disclosure Statement annexed to his statement and he agreed that it was forwarded to him with the Conditional Costs Agreement.

589 Mr Dawson agreed that the Conditional Costs Agreement and the Disclosure Statement were the key documents that set out his agreement with Mr Forster in relation to costs.

590 Mr Dawson said that he agreed that Mr Forster ran the case for him and ultimately settlement was reached, with money being received from the Commonwealth. Mr Dawson agreed that he went down to Melbourne when settlement was reached at a mediation. He agreed that Mr Forster gave him documents before the mediation and after the mediation relating to costs and other remaining matters. He said that his daughter noticed that a mistake had been made in the documents.

591 Mr Dawson gave evidence that he looked for the documents, but has no patience for that sort of thing. He missed things and his daughter went through the documents in detail. He agreed that his daughter is more patient with looking at documents.

592 It was put to Mr Dawson that Mr Forster would say that not only did he send out those documents and not only did Mr Dawson agree to the terms of those documents, but he also signed the Conditional Costs Agreement and sent it back to Hollows Lawyers. He was asked, 'I take it you can't remember either way?' Mr Dawson responded, 'No, well I would have signed something. He said "Can you sign that if you're happy", or something, bang I would have signed it, as usual without looking at it or anything else. I've been caught twice before, not reading through very important documents.' He was asked:

Well, he asked you to sign lots of documents in connection with the settlement, didn't he?---Yeah.

There was never any difficulty, you were happy to sign all of those?---Yeah, I didn't even bother reading half of them, I was that excited about getting me money.

It's not the case that you can ever remember being asked to sign a document by Mr Forster and not agreeing to do so - not doing so?---Yeah, I just signed them.

If Mr Forster were to say that the Costs Agreement was one of a number of documents that you did sign and return to him, you've got no reason to disagree with that?---Yeah, no reason to disagree 'cause the other money come through. Me daughter was that happy to get some money too and everything was all sorted out as far as I was concerned, but - well I'm not a lawyer as they say and I don't know whether he was doing the right thing or the wrong thing or what, but.

593 Mr Forster's evidence was contained in his witness statement. Mr Forster said that he first met Mr Dawson on 30 November 2007 in Broadbeach, Queensland. He referred to a memorandum of conference with Mr Dawson.

594 Mr Forster said he recalls explaining the costs agreement and the rest of the litigation, but he did not have a spare copy to leave with Mr Dawson. He said that Mr Dawson then travelled to Melbourne. Mr Forster referred to the letter of 11 January 2008, and said that it stated:

You confirm at the meeting we discussed in detail the risks and the costs of litigation.

The letter that Mr Forster referred to was in fact written by a Mr Pinto and does not contain the quotation attributed to it by Mr Forster.

595 Mr Forster referred to the letter that Mr Pinto sent on 11 January 2008 and to the fact that it stated that it enclosed for Mr Dawson's attention a copy of Hollows Lawyers' conditional costs agreement and disclosure statement.

596 Mr Forster said that Mr Dawson signed the documents and returned them. Mr Forster said that the costs agreement had been mislaid, but the signed disclosure statement was dated 11 January 2008.

597 Mr Forster said that by letter dated 3 April 2013 he wrote to the receivers asserting that there was a signed costs agreement that has been mislaid. On 8 April 2013, Hall & Wilcox said there was no evidence that the documents were in fact sent to Mr Dawson, or that he signed and returned the costs agreement. The receivers noted that Mr Dawson had previously stated that he did not enter into a written costs agreement with Hollows Lawyers. The receivers declined to remove the allegation concerning Mr Dawson from the claim against Mr Forster.

598 Mr Forster said that as was his practice, he explained to Mr Dawson the breakdown of his bills when he provided Mr Dawson with the costs agreement. He referred to a costs estimate as at 28 October 2008 in respect of Mr Dawson.

599 Mr Forster said that by letter dated 21 October 2008, Mr Pinto explained the mediation process to Mr Dawson.

600 Mr Forster said that on 22 December 2008, he explained to Mr Dawson the settlement terms.

601 Mr Forster said that on 19 March 2009, Mr Dawson was provided a detailed settlement letter and instructions to settle documents. In fact the letter referred to a review of the accounts and said that Hollows Lawyers had ascertained that some errors had occurred. Mr Dawson was informed that as a result of the adjustments, an additional amount of $4,567.56 was payable to Mr Dawson and the cheque was enclosed. Mr Forster said that the letter explained to Mr Dawson the settlement terms. In fact, in the previous year, Mr Dawson had settled his claim and been paid settlement proceeds. It was not a 'detailed settlement letter'.

602 When giving oral evidence, Mr Forster did not expand on the evidence in his witness statement in respect of Mr Dawson.

603 Mr Forster was crossexamined on his dealings with Mr Dawson. He was asked about the occasion when Mr Dawson travelled to Melbourne. In particular, he was asked whether he gave to Mr Dawson a copy of the costs agreement that Mr Forster referred to in his witness statement. Mr Forster said it might have been Mr Pinto, or it could have been himself who gave it to him. Mr Forster said, 'My recollection is we actually gave him - I think he did a letter, Mr Pinto did a letter, and I think I had a letter, my recollection is what occurred, so - - - '.

604 Mr Forster was asked about his assertion in his witness statement that the letter of 11 January 2008 contained the following, 'You confirm at the meeting we discussed and detailed the risks and the costs of the litigation.' Mr Forster said that he thought there was another letter that does not seem to be in his book of documents. Mr Forster was asked whether he compiled the witness statement and documents in volume 19. He said he had assistance with compiling it. He said, 'I think what's occurred is that there's a - there's another letter which should have been in here, but it isn't in here, which should be on the file.'

605 Mr Forster was questioned on the assertion in his witness statement that 'Mr Dawson signed the documents and returned them.' He was asked how he knew that, and he said, 'Because I saw the signed fee agreement;' he said he saw it around that time. He was asked where he put it, and he said he did not have a clue. He said he could have put it in three places. He said it could have gone in the accounts folder or the initial correspondence folder, or it could have been put on the shelves with costs agreements.

606 Mr Forster was asked what sort of agreement it was, and he said he thought it would have been a time based agreement in 2008.

607 Mr Forster was asked whether by November 2007 he had in place a checklist system to make sure that all the documents that he required were in place, for example, for costs agreements and disclosure statements. Mr Forster said he was unable to say.

608 Mr Forster was asked to confirm that he had said earlier in his evidence that when costs agreements were executed they were placed in a correspondence file. He was asked whether that was correct, and he replied, 'Well usually.' He said Mr Dawson would probably be in a different category because his was a much later case. He elaborated later by saying that Mr Dawson's costs agreement could have been put in the correspondence file and he said, 'By the time that his case came around, most of the files would have had a separate file for accounting information, and it may have been put on - on that file.'

609 He was asked whether the costs agreement could have been put in the folder of costs agreements that Mr Forster kept, and he said he would not be able to say.

610 The receivers contended that Mr Forster's evidence regarding Mr Dawson's matter showed how unreliable and reconstructed Mr Forster's evidence was. The receivers submitted that when Mr Forster was asked if he gave Mr Dawson a copy of the costs agreement that he referred to in paragraph 242 of his witness statement, he claimed that Mr Pinto might have given him a copy of the agreement. He then speculated that 'he' (Mr Pinto) wrote a letter to Mr Dawson.

611 The receivers said that Mr Forster was then taken to paragraph 243 of his witness statement, where he referred to a letter he wrote dated 11 January 2008. They pointed out that Mr Forster agreed that the letter was not written by him. The receivers said that Mr Forster then speculated again that the letter he wrote (which was not produced) may have contained a copy of the costs agreement.

612 The receivers said that in his evidence Mr Forster could not recall when he met with Mr Dawson in Melbourne. Mr Forster claimed he saw a signed costs agreement, but he said he 'wouldn't have a clue where he put it' and that Mr Pinto was responsible for making sure clients signed costs agreements.

613 The receivers submitted that Mr Forster agreed that he did not satisfy himself as to the basis on which he was entitled to recover his fees at the time of preparing Mr Dawson's bill. The receivers said that invoice 4170 demonstrated that Mr Dawson was charged on a time costing basis. The receivers pointed out that Mr Dawson's invoice was the same as Mr Martin's, yet Mr Forster denied that Mr Martin was charged professional fees calculated on a time basis.

614 Mr Forster said in his evidence that Mr Pinto was responsible for getting agreements signed by Mr Dawson and Mr Pinto was responsible for his file.

615 The receivers submitted that Mr Pinto was called by Mr Forster but did not give any evidence about Mr Dawson or the costs agreement that he sent to Mr Dawson to sign. Mr Pinto signed the letter of 11 January 2008 that enclosed the costs agreement Mr Dawson was asked to sign and return to Hollows Lawyers. The receivers contended that the only inference that could be drawn was that Mr Pinto's evidence on Mr Dawson would not have been helpful to Mr Forster. I have taken this into account in reaching my decision.

616 On 5 December 2013, Mr Forster produced a further copy of his defence to the further amended statement of claim. Paragraph [910] of the defence alleged that Mr Dawson entered into a costs agreement containing the terms and conditions as appeared in the document marked B and annexed to the defence. That plea was in response to the receivers' allegation that Mr Dawson did not enter into a costs agreement.

617 The receivers contended that annexure B was not put to Mr Dawson as a document he had signed. The receivers submitted that no reason was put as to why the document was not put to him.

618 The receivers submitted that Mr Forster did not give evidence as to any record of when the signed disclosure statement was returned. The receivers said that no checklist program was in place to confirm that the firm had received a signed costs agreement.

619 Accepting that to be the case, Mr Dawson produced from his own records the copy costs agreement that accompanied the letter asking him to sign an original costs agreement as I discussed above. As discussed, Mr Dawson said that he could not recollect signing the costs agreement. I do not accept that Mr Forster's failure to put annexure B to Mr Dawson has any significant evidentiary consequences.

620 The receivers contended that I should find that Mr Dawson did not enter into a written costs agreement with Hollows Lawyers. If I do not make that finding, the receivers do not pursue any alternate claim in respect of Mr Dawson.

621 I have set out the evidence of Mr Dawson in some detail because I formed the distinct view that Mr Dawson had a very poor memory. I believe he was doing the best he could in the witness box, but it was obvious to me from both his demeanour and the way he answered the questions that he had very little recollection of what had taken place. I came to the conclusion, on hearing his evidence, that if Mr Dawson had been asked to sign the Conditional Costs Agreement, he would have done so. He honestly said he could not remember whether he had done that or not.

622 The receivers submitted that I should reject the evidence of Mr Forster that the costs agreement was received from Mr Dawson and has been mislaid. The receivers attacked Mr Forster's credit. The receivers contended that many of Mr Forster's answers contained long and rambling observations; and that he often confused or disguised his answers in providing non-responsive dialogues.

623 The receivers submitted that Mr Forster would occasionally agree with propositions put to him, however, would later try to qualify or attempt to confuse his answers. The receivers gave a number of examples to support this proposition.

624 I consider there is substance in the receivers' contentions that Mr Forster gave his evidence in a long and rambling manner. After carefully considering Mr Forster's evidence in the witness box, I find that he was on this part of the case not a reliable witness but I do not find that Mr Forster gave deliberately false evidence. I consider that in many instances he may have been seeking to reconstruct events but I do not find that in doing so he intended to deliberately mislead the court.

625 As for his evidence concerning Mr Dawson, the conclusion that I have come to does not solely depend on Mr Forster's evidence.

626 Mr Dawson said that he did not recall ever signing any costs agreement prepared by Hollows Lawyers. It is relevant to note that Mr Dawson did not have a positive recollection that he did not sign any costs agreements. This is consistent with the letter that he wrote to Mr Forster where he informed Mr Forster that when Hall & Wilcox asked him whether he had received any costs agreement papers, he could not remember much about the paperwork at all. In other words, Mr Dawson conceded that his memory in regard to the paperwork was poor.

627 This is borne out by Mr Dawson's conversation with Mr Uljans. According to Mr Uljans he asked Mr Dawson whether he received and signed a costs agreement. According to Mr Uljans, Mr Dawson did not inform him that he had received a costs agreement with a request to sign it.

628 Mr Dawson was not informed or reminded that the Hollows Lawyers files recorded that he had in fact been provided with a costs agreement. Accordingly, in my opinion, Mr Dawson's quoted response is substantially weakened, as he was not reminded of the fact by Mr Uljans that he was sent a costs agreement and asked to sign it.

629 As discussed below, Mr Dawson was sent a costs agreement by Hollows Lawyers and was requested to sign it. The letter that Mr Uljans sent to Mr Dawson did not mention that fact.

630 The receivers contended that Mr Uljans' version of the conversation was not challenged. In particular, the receivers submit that it was not challenged that Mr Dawson said that he did not enter into a costs agreement. That may be so, but Mr Dawson in his evidence before me did not claim to remember that he had not entered into a costs agreement. I take into account the evidence of Mr Uljans but on this issue I prefer the evidence that Mr Dawson gave in the witness box.

631 It is also relevant to note that Mr Dawson was not asked by counsel for the receivers whether he had an actual recollection of not signing the costs agreement that he was sent.

632 On the other hand, Mr Dawson conceded that he received the Conditional Costs Agreement attached to the letter of 11 January 2008 and that he understood that the agreement set out the basis that Mr Forster was working for him. This evidence supports the inference that he had no objection to signing the agreement. There was no evidence as to any reason why he would not have signed it. In fact, Mr Dawson conceded that he would have signed something.

633 The receivers contended that Mr Dawson's concession that he would have signed something was in the context of the settlement. In my view, there was no confusion when he said earlier, that he could not recall ever refusing to sign a document that Mr Forster asked him to sign.

634 Mr Dawson said that it was his practice to retain copies of all documents that he received from Hollows Lawyers. Despite this evidence, Mr Dawson had not retained the original costs agreement that was sent to him for him to sign, but he only retained the agreement marked 'copy' that he was asked to keep. Also, Mr Dawson was sent an original disclosure statement and another marked copy. He only retained possession of the disclosure statement marked copy, which raises the inference that he signed and returned the original to Hollows Lawyers.

635 Although neither party raised the point, the absence of the original costs agreement and the original disclosure statement in Mr Dawson's possession supports the inference that both were signed and returned as requested by Mr Forster. This inference is also supported by Mr Dawson not retaining a number of authorities that were sent to him to sign. In substance the documents (including the original costs agreement) that were sent to Mr Dawson and which are no longer in his possession were those he was asked to sign and return to Hollows Lawyers.

636 The receivers contended that there is no credible evidence that a signed costs agreement was ever received and no explanation was given by Mr Forster as to how it was 'mislaid'. In response, Mr Forster submitted that there was credible evidence that a signed costs agreement was received, being Mr Forster's sworn evidence that it was received, and Mr Dawson's acceptance that he had been given a costs agreement and was willing to sign it; and signed anything that he was asked to sign by Mr Forster.

637 The fact that Mr Dawson retained the copy of the costs agreement sent to him by Hollows Lawyers for him to keep but that he did not retain the original of the costs agreement, which he was asked to sign and return to Hollows Lawyers, is consistent with him doing what he was requested to do: that is to sign the original and return it to Hollows Lawyers.

638 A further factor that suggests that it is unlikely that a costs agreement was not signed is that Mr Forster was acutely aware that his entitlement to a 25 per cent uplift was dependent on having a signed costs agreement. There is no doubt that Mr Dawson was told that he would be charged on a no win no fee basis, as were all the other Voyager clients.

639 The evidence establishes that Mr Forster was punctilious in explaining the fee arrangements with his clients. It is extremely unlikely that Mr Forster would proceed to act for Mr Dawson without the signed costs agreement being returned. He acted for some 86 Voyager clients and the receivers only allege that he failed to obtain a signed costs agreement in two cases. The point is that there is no evidence to support the proposition that Mr Forster was lax or careless in obtaining costs agreements. The evidence is to the contrary.

640 Mr Dawson clearly conveyed that he was very happy with the service he had received and, so far as he was concerned, it was manna from heaven that he received a large sum of money in relation to the accident which had happened so long ago. In summary, in my view, the evidence of Mr Dawson and the documents he produced establish that a costs agreement was sent to Mr Dawson and, in my view, merely taking into account his evidence, it is likely that he did sign it.

641 However, the receivers also rely upon their diligent searches not turning up the signed costs agreement. I have dealt with the searches above. Mr Forster submitted that the receivers do not explain how they reached their conclusion other than by referring to 'extensive searches'. The receivers do not say that the content of all files of Hollows Lawyers was searched. Rather, a limited number of boxes were searched and in many cases the procedure established by Mr Thomas did not provide for an exhaustive search of the files. It must be kept in mind that according to the receivers the files were ramshackle.

642 Those involved in the searching did not give evidence for the receivers that any of them discovered or ascertained that Mr Dawson had been sent a costs agreement with a request for him to sign it.

643 Despite the searches of Mr Brown, Ms Weiss and Ms Solomon, a further 20 odd signed costs agreements were subsequently located by Mr Forster in files not kept at Hall & Wilcox's offices but kept by the receivers elsewhere.

644 It is apparent from this evidence that although an extensive search was done, it was not exhaustive. The evidence establishes the contents of all boxes were not searched. The evidence is that the receivers only searched the boxes taken to their office. Mr Forster managed to find costs agreements for 22 clients, which agreements the receivers alleged did not exist.

645 The receivers contended that the mere fact that costs agreements have been found for 84 of the 86 Voyager clients, does not mean that I should draw the inference that the remaining two have been lost or misplaced. Rather, because of the extensive searches I should infer that there were no fee agreements for those two clients.

646 In deciding whether I am satisfied that Mr Dawson did not sign a costs agreement, I must bear in mind the gravity of the accusation. There is no issue that Mr Forster rendered fees to Mr Dawson on a time cost basis plus an uplift of 25 per cent. Thus the nonexistence of a signed costs agreement is fundamental to the receivers' claims. The receivers contend that the conduct of rendering a bill with an uplift and on a time costing basis was unlawful under the Act and was improper. These are serious and grave allegations to make against a solicitor whose reputation is fundamental to his profession.

647 In Briginshaw v Briginshaw[120] Latham CJ said as follows:

The standard of proof required by a cautious and responsible tribunal will naturally vary in accordance with the seriousness or importance of the issue - See Wills' Circumstantial Evidence (1902), 5th ed., p. 267, note n: "Men will pronounce without hesitation that a person owes another a hundred pounds on evidence on which they certainly would not hang him, and yet all the rules of law applying to one case apply to the other and the processes are the same."[121]

In a serious matter like a charge of adultery the satisfaction of a just and prudent mind cannot be produced by slender and exiguous proofs or circumstances pointing with a wavering finger to an affirmative conclusion. The nature of the allegation requires as a matter of common sense and worldly wisdom the careful weighing of testimony, the close examination of facts proved as a basis of inference and a comfortable satisfaction that the tribunal has reached both a correct and just conclusion.[122]

But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency. Thus, Mellish L.J. says: "No doubt the court is bound to see that a case of fraud is clearly proved, but on the question at what time the persons who have been guilty of that fraud commenced it, the court is to draw reasonable inferences from their conduct"....In the same way, in dealing with the question in what county the publication of a criminal libel had taken place, Best J. said: "I admit, where presumption is attempted to be raised, as to the corpus delicti, that it ought to be strong and cogent; but in a part of the case relating merely to the question of venue, leaving the body of the offence untouched, I would act on as slight grounds of presumption as would satisfy me in the most trifling cause that can be tried in Westminster Hall". It is often said that such an issue as fraud must be proved "clearly", "unequivocally", "strictly" or "with certainty". This does not mean that some standard of persuasion is fixed intermediate between the satisfaction beyond reasonable doubt required upon a criminal inquest and the reasonable satisfaction which in a civil issue may, not must, be based on a preponderance of probability. It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained. When, in a civil proceeding, a question arises whether a crime has been committed, the standard of persuasion is, according to the better opinion, the same as upon other civil issues ....But, consistently with this opinion, weight is given to the presumption of innocence and exactness of proof is expected.[123]

650 In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd[124] the High Court of Australia explained the ambit of the principles established by cases such as Briginshaw v Briginshaw. Mason CJ, Brennan, Deane and Gaudron JJ said:

The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found." Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. As Dixon J. commented in Briginshaw v. Briginshaw:

The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved ...". clear and cogent evidence to prove matters of the gravity of fraud or crime are, even when understood as not directed to the standard of proof, likely to be unhelpful and even misleading. In our view, it was so in the present case. [125]

651 Section 140 of the Evidence Act 2008 (Vic) provides:

PART 4.1 - STANDARD OF PROOF

140 Civil proceedings - standard of proof

(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account -

(a) the nature of the cause of action or defence; and

(b) the nature of the subject-matter of the proceeding; and

(c) the gravity of the matters alleged.

652 In considering whether I am satisfied that the receivers have established that Mr Dawson did not sign a costs agreement, I have regard to the matters that I am bound by s 140 to take into account and the authorities I have referred to.

653 In this case I am also asked to draw inferences. I must be careful not to speculate rather than draw rational inferences. A distinction may be drawn between inferences and conjecture or a guess. In Gurnett v Macquarie Stevedoring Co Pty Ltd[126] Street CJ said:

A guess is a mere opinion or judgment formed at random and based on slight or uncertain grounds. In contradistinction to such a conjectural opinion, an inference is a reasonable conclusion drawn as a matter of strict logical deduction from known or assumed facts. It must be something which follows from given premises as certainly or probably true, and the mere possibility of truth is not sufficient to justify an inference of that effect.[127]

See also Nominal Defendant v Owens[128] and the cases cited therein.

654 Accordingly in making my decision I must bear in mind the less than complete nature of the document searches for a costs agreement, the degree of speculation and guess work I am required to engage in, the evidence that Mr Dawson signed all documents that he was asked to sign, and the evidence that he received a costs agreement for him to sign as well as a copy and that he retains the copy but not the original that he was asked to sign.

655 In my opinion, taking into account all the evidence, the receivers have not satisfied me on the balance of probabilities that Mr Dawson did not sign the costs agreement sent to him.

656 The receivers allege that Mr Martin did not sign a costs agreement. Mr Forster says that Mr Martin did sign a fee agreement. Mr Martin says he does not recall doing so. If that allegation is established by the receivers, it may lead to the receivers recovering $169,408.24 from Mr Forster.

657 The receivers also advance an alternate case that even if Mr Martin did sign a costs agreement, it was not an agreement that authorised time costing (although it would have authorised a 25 per cent uplift).

658 Due to my concerns about the inadequacy of the evidence, it is convenient first to consider the relevant contemporary documents tendered in evidence by both Mr Forster and the receivers. As will become apparent, the documents tendered leave a large gap in the understanding of the dealings between Mr Martin and Hollows Lawyers.

659 On 28 March 2002, Hollows Lawyers wrote to Mr Martin in Tregear New South Wales referring to his telephone conversation with Mr Forster on 25 March 2002. The letter recites the fact that Mr Martin had been diagnosed with post-traumatic stress disorder and also that his sister had discovered an entry in the Gold Coast Bulletin relating to Hollows Lawyers.

660 The letter confirmed arrangements for Mr Martin to come to Melbourne on Monday 15 April 2002 where he would meet with Debbie Talora and Mr Forster, and attend subsequent conferences with counsel on Tuesday 16 April 2002. Mr Martin was asked to fill in certain questionnaires.

661 On 24 April 2002, $1,800 was credited to Mr Martin's trust account with Hollows Lawyers for moneys paid on account of disbursements.

662 On 9 May 2002, Mr Martin's trust account with Hollows Lawyers was debited for a Supreme Court of Victoria issuing fee.

663 On 28 April 2004, Marlene, an accounts clerk employed by Mr Forster, sent a note to Blair Williams, a solicitor assisting Mr Forster with the Voyager clients, stating, inter alia, that Mr Martin's file was missing a retainer agreement, a costs agreement, an A1 form and a B2-section 86(3) form. Blair Williams was asked to arrange to get this documentation up to date. Marlene only referred to one other Voyager client whose documents were missing: Mr Bate.

664 According to the interim invoice no 2313 issued by Hollows Lawyers to Mr Martin dated 30 June 2004, no fee was included for professional fees up to that date. The fee was for disbursements only of $14,398.

665 On 25 August 2004, Hollows Lawyers (the reference on the letter is "DBF: JA") wrote to Mr Martin informing Mr Martin of developments in the conduct of his case. The letter was some four pages long and it contained considerable detail and the estimated costs of the litigation. After setting out much information on disbursements, the letter informed Mr Martin of the likely costs if the trial proceeded and that Mr Forster was likely to seek up to $600,000 in costs against him if his case was successful.

666 The letter went on to say, 'Under the terms of your fee agreement, you are responsible for all disbursements and photocopying costs, irrespective of the result. Counsel's fees, however, are generally on a no win no fee basis'. There is no evidence whether by documents or otherwise that Mr Martin raised any suggestion he had not received any costs agreement. The letter informed Mr Martin that certain cases issued in Victoria were handled by Blair Williams. As indicated above on the trust account records, Mr Martin's claim appears to have been issued in the Supreme Court of Victoria.

667 On 19 November 2004, Hollows Lawyers wrote to Mr Martin confirming his instructions to lodge an offer of compromise on his behalf for the sum of $337,000 plus party/party costs. Mr Martin signed that letter, giving instructions to lodge the offer of compromise, and dated it in his own hand, '24 November '04'. Mr Martin faxed it back to Hollows Lawyers on the same day. The file manager was identified as "DF:BW". BW is probably a reference to Blair Williams.

668 According to invoice 4073, dated 27 August 2008, Hollows Lawyers charged Mr Martin $57,499.88 for professional costs from 21 February 2000 to 20 December 2004. No particulars of the work done in that period were provided in the invoice.

669 On 19 July 2005, Hollows Lawyers wrote to Mr Martin informing him of very important developments for the Victorian issued proceedings. The file manager was identified as Blair Williams and there was provision for Blair Williams to sign the letter. The letter informed Mr Martin of a decision in the Victorian Court of Appeal on the interpretation of the limitation of actions proceeding brought by another Melbourne-Voyager client. The letter gave a detailed explanation of the legal issues involved. Mr Martin was informed that the decision involved a setback to his claim and that an appeal to the High Court was being considered. The Hollows Lawyers reference is identified as "BW:GT", suggesting Blair Williams sent the letter.

670 On 22 September 2005, Hollows Lawyers wrote to Mr Martin, informing him of further important developments in the conduct of his case. He was informed that a matter was going to the Court of Appeal of Victoria on whether or not post-traumatic stress was a disorder within the meaning of the Victorian limitations legislation. He was also informed that a relevant case was being appealed to the High Court. The Hollows Lawyers reference is given as "DF".

671 On 3 November 2005, Hollows Lawyers again wrote to Mr Martin to advise on developments in the conduct of the litigation and how it would affect his claim for damages. Again, the letter went into considerable detail of the various court cases that were relevant to Mr Martin's proceedings. The letter was some eight pages long. The Hollows Lawyers reference is given as "DF".

672 In December 2005, Mr Martin was sent a disclosure statement by Hollows Lawyers in which he was identified as the client. The statement said that under s 3.4.9 of the Act, Hollows Lawyers must disclose to him the following information in relation to legal costs. It went on to say 'You may negotiate a costs agreement with us on the basis of the information contained in this agreement'. The document had provision for both Hollows Lawyers to sign and for Mr Martin to sign, and it was dated December 2005. The document was signed off as if it were a letter, as Hollows Lawyers per Blair Williams. The disclosure statement tendered in evidence was in the possession of Mr Martin until January 2012 when it was given to Mr Uljans. Mr Martin did not produce any covering letter or the costs agreement which were most likely sent with the disclosure statement. A covering letter might have explained why the costs agreement was being sought.

673 On 2 March 2006, Hollows Lawyers wrote to Mr Martin, confirming the instalment agreement that he had with Hollows Lawyers that he pay $1,000 each month and thanking him for his payments that were made on 7 February last and then December 2004. The letter said, 'As you appreciate you have previously agreed to pay disbursements as and when they arise or are incurred and we appreciate there was a period that you did not pay these disbursements and were not requested to make the payment in accordance with the client retainer agreement'. The letter identified Blair Williams as the file manager. Despite the reference to the client retainer agreement, the client retainer agreement has not been produced into evidence. No evidence was led to explain the reference to the 'instalment agreement'.

674 On 26 July 2006, Hollows Lawyers wrote to Mr Martin, keeping him informed regarding the litigation. The letter referred to lobbying Parliament and other steps being taken to maintain the litigation. The letter identified Blair Williams as the file manager.

675 On 4 August 2006, Hollows Lawyers wrote to Mr Martin, informing him that they would like to keep him regularly informed regarding the costs of his litigation. Hollows Lawyers enclosed an interim account, bill history and a statement of account. Again, the letter went through Mr Martin's responsibilities to pay for disbursements and service charges, and referred to the fact that Hollows Lawyers were confident that a mediation scheme would be introduced. Again, the letter gave estimates of costs in conducting Mr Martin's litigation. The letter identified Blair Williams as the file manager.

676 On 19 February 2007, Hollows Lawyers wrote to Mr Martin, again keeping him informed regarding the costs of his litigation. A further interim account was enclosed since Hollows Lawyers' last bill. The letter identified David Forster as the file manager.

677 On 18 May 2007, Hollows Lawyers wrote to Mr Martin, stating that they had informed him of the seven mediations that had been held between 13 and 16 March 2007. The letter mentioned that the Commonwealth had informed Hollows Lawyers that it was prepared to conduct more mediations and settlement discussions. Mr Martin was invited to give instructions for a mediation to be held on his matter. Details were given on the mediation and on damages and costs. The letter identified Blair Williams as the file manager.

678 On 23 August 2007, Hollows Lawyers wrote to Mr Martin. The letter was headed 'Professional fees (costs)'. The letter identified David Forster as the file manager and referred to Adam Sleep, who was an associate of the firm, as being responsible for correspondence. Mr Martin was informed that after many years of delay, the government was finally mediating cases. The letter proceeds:

We now write to keep you updated on legal costs.

We confirm that we have previously provided you with detailed advice regarding costs and a costs agreement, which you have signed.

We would ask, however, that you read this letter and then sign the attached copy and return it to our office. For your convenience, a stamped, self-addressed envelope is enclosed.

679 The attached copy whether signed or not was not produced by Mr Martin, nor was it produced by Mr Forster or the receivers.

680 On 20 November 2007, Mr Martin signed a document headed 'Explanation re Disbursements'. The document commenced, 'This document is to keep you informed of the estimated disbursements and services charges involved in your litigation'. It went on to say he was responsible for disbursements and service charges in his case. Mr Martin was provided with a list of disbursements that Mr Martin may be liable for. At the bottom of the document it was stated, 'I, Edwin Martin hereby acknowledge that I have read and understood the above explanation regarding disbursements'.

681 On 22 November 2007, Mr Martin signed an authority to release trust moneys.

682 On 21 April 2008, Hollows Lawyers wrote to Mr Martin, advising him that in recent mediations, the Commonwealth was finally becoming more generous after years of being "mean and miserable." The letter referred to the costs estimates, witness fees, transcript, expert reports, counsel fees and a whole range of expenses. The letter is not complete. The portion included in the Court Book is four pages in length. The letter identified Mr Forster as the file manager and Mr Pinto as being responsible for correspondence.

683 On 15 August 2008, Hollows Lawyers wrote to Mr Martin, advising him that the date of his further mediation was 27 August 2008. The letter gave information about him preparing for the mediation, and it informed him of the costs of the mediation. The letter identified Mr Forster as the file manager and Mr Pinto as being responsible for correspondence. The letter was signed by Mr Pinto.

684 On 27 August 2008, Hollows Lawyers wrote to Mr Martin confirming the matter had been settled at mediation. The letter identified Mr Forster as the file manager and as the person responsible for correspondence. Also on 27 August 2008, Mr Martin signed formal instructions to settle.

685 On 27 August 2008, Mr Martin signed an irrevocable authority for the Commonwealth to pay the settlement sum to his solicitors, Hollows Lawyers.

686 On 27 August 2008, Hollows Lawyers raised interim account invoice no 4073 to Mr Martin for $284,693.71.

687 On 12 November 2008, Hollows Lawyers wrote to Mr Martin confirming the settlement sum and the costs to be paid to Hollows Lawyers, and informing Mr Martin that his account came to $313,417.88, after applying a discount of approximately $50,000. The letter enclosed a cheque for $53,750, the bill history and a trust statement.

688 Mr Martin adopted his witness statement of 13 November 2013. The witness statement contained the following evidence. Mr Martin said that he was a retiree. He said that between about 1963 and 1972, he served as a sailor in the Royal Australian Navy. He said he was aboard HMAS Melbourne when it collided with HMAS Voyager in February 1964.

689 Mr Martin said that in about early 2002, his sister told him that she had seen an article in the newspaper about work being done by Hollows Lawyers and David Forster, representing sailors who were injured in the Melbourne-Voyager collision in 1964, and pursuing claims against the Commonwealth Government for compensation. Mr Martin said that after his sister told him about Mr Forster and Hollows Lawyers, he decided to call Mr Forster. He said that when he called Mr Forster, Mr Forster asked him to come down to Melbourne and meet him as soon as possible.

690 Mr Martin said that after he spoke with Mr Forster, he received a letter from him on around 28 March 2002. He produced the letter. The letter was sent by Mr Forster and referred to the conversation with Mr Forster on 25 March 2002. It confirmed arrangements for Mr Martin to come to Melbourne on Monday 15 April 2002 at 11.00am and meet with Debbie Talora and Mr Forster at his office. The letter enclosed a questionnaire and authorities for Mr Martin to sign.

691 Mr Martin said that he flew down to Melbourne and met Mr Forster for the first time on 15 April 2002. Mr Martin said that on that occasion, Mr Forster told him that he would represent Mr Martin and that Mr Forster thought that Mr Martin had a good case. Mr Martin said that Mr Forster told him that Mr Martin would be charged on a 'no win, no fee' basis, but that if Mr Martin won the case, both Hollows Lawyers and any barristers appearing on his behalf, would be paid all the fees owing out of any amounts received after such a win, and Mr Martin would take the remainder. Mr Martin said that he did not receive from Mr Forster a written explanation of this arrangement at that meeting, nor did he recall being subsequently provided with a written explanation.

692 Mr Martin said that, contrary to his original understanding that he would be charged on a 'no win, no fee' basis, Hollows Lawyers regularly sent him invoices for expenses (such as barristers' fees and photocopying costs). Mr Martin said he paid about $30,000 to Hollows Lawyers for such expenses. Mr Martin said that he refused to pay the invoices after a time. He estimated that he also spent approximately $20,000 in travel and other expenses relating to his case.

693 Mr Martin recalled that Hollows Lawyers sent him correspondence from time to time which contained updates as to the progress of his case. He said that the correspondence was often repetitive. He said that he had kept copies of that correspondence.

694 Mr Martin said that he did not recall seeing or signing a costs agreement at any time prior to December 2005. Mr Martin said that the only costs agreement that he recalled receiving was a document containing information regarding fees, sent by Hollows Lawyers in around December 2005. Mr Martin said that, having read that document when he received it, he refused to sign it as he did not agree to its terms. Mr Martin said he did not tell Hollows Lawyers that he would not sign that document. He said he could not recall whether Mr Forster (or other lawyers at Hollows Lawyers) called him to ask him to sign it. He provided Hall & Wilcox with a copy of that unsigned document in about January 2012, which he exhibited. It was not a costs agreement.

695 Mr Martin said that in about December 2005, he spoke with other ex-sailors he had served with in the Royal Australian Navy who were also represented by Hollows Lawyers. He said that, among other things, they discussed the costs agreement that was sent to him in December 2005 and equivalent documents others received. He recalled telling the others that he had decided that he would not sign it. He said a number of those other ex-sailors said that they shared this view.

696 Mr Martin said that on or about 10 October 2013, James Thomas of Hall & Wilcox emailed him a document which he described as an example of a 'scale' costs agreement prepared by Hollows Lawyers. Mr Martin exhibited that example costs agreement to his statement. Mr Martin said that, having looked at that document and considered its content in detail, he was still able to say that he does not recall having received such a costs agreement.

697 On 10 October 2013, Mr Martin said that Mr Thomas also sent him two documents entitled 'Authority to Transfer Trust Moneys' and 'Authority to Settle'. Mr Martin said he signed those documents, which he exhibited to his statement. Mr Martin said he is confident that, had he signed a costs agreement at the time he first engaged Hollows Lawyers to act on his behalf, he would have kept a copy on file. He said that he searched through his file and had not found any costs agreement from Hollows Lawyers, apart from the costs agreement which he refused to sign. As noted above the document was not a costs agreement.