[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]