96 I have already mentioned the Ombudsman's investigation, pursuant to s.145(2) of the Act, into whether Power's failure to obtain professional indemnity insurance invalidated his practising certificate during the period February 1997 to 5 December 2002. The learned trial judge held that, because Power did not have professional indemnity insurance during that period, his practising certificate did not have effect due to the operation of s.23(3C) of the Act. This was so notwithstanding that the Board had resolved to exempt him retrospectively from the requirement to obtain such insurance and despite the fact that the Law Institute had not issued a notice under sub-s.23(3B), as it was required to do, alerting him to his failure to provide satisfactory evidence of the requisite insurance.
97 Section 23 of the Act dealt with renewals of practising certificates held by current practitioners. So far as is relevant, sub-s.(3A) provided that an applicant for a practising certificate must give "satisfactory evidence ... that the applicant has professional indemnity insurance as required by this Act ...".[78] Sub-section (3B) provided that, if he or she had not complied with sub-s.(3A), the relevant RPA or the Board "must give notice ... of the failure to comply" with that requirement. Importantly for present purposes, sub-s.(3C) effectively stated that, where a practising certificate had been issued under the section, notwithstanding the applicant's failure to provide the required information concerning professional indemnity insurance, that certificate "[did] not take effect" until the failure was remedied.
98 There are a number of reasons why the Ombudsman's investigation into this matter was flawed. First, Ormiston, J.A.'s query in the course of argument as to whether Power was "required by this Act" to have professional indemnity insurance was, with respect, well justified. An examination of the relevant provisions of the Act demonstrates, I think, that Power was not required to hold such insurance as a pre-condition to the operation of his practising certificate during the relevant period.
99 Section 227(1) of the Act provided: "At all times whilst ... a legal practitioner (other than a corporate practitioner) is engaged in legal practice, ... the practitioner must maintain professional indemnity insurance." Thus, if Power was a "corporate practitioner" during the relevant period, he was not obliged to maintain professional indemnity insurance. "Corporate practitioner" was defined by s.3 to mean "a legal practitioner who engages in legal practice as an employee of a person or body other than a firm or another legal practitioner." Power was, at all relevant times, an employee of the Law Institute, which was a "body other than a firm or another legal practitioner". It follows that he fell within the definition of "corporate practitioner" and was, therefore, not required by s.227(1) to have professional indemnity insurance.
100 The only other provisions of the Act that might be said to have imposed on a legal practitioner the requirement to hold such insurance were ss.224 to 226, which imposed such an obligation on, respectively, a "firm", an "incorporated practitioner" and a "sole practitioner". It is plain that Power does not fit the definition of a "firm" or "incorporated practitioner".[79] The Ombudsman argued, however, that Power was a "sole practitioner" - a term that was defined by s.3 to mean "a legal practitioner (being a natural person) who engages in legal practice solely on his or her own account".[80] Thus, it was said, he was required by s.226(1) to hold professional indemnity insurance. The Ombudsman's contention was based, it seems, on the argument that Power derived his authority from the orders appointing him as receiver and authorising him to conduct the legal practices in question. In short, the Ombudsman claimed that it was Power personally, and not his employer, the Law Institute, that was authorised to carry on the legal practices by virtue of the court orders made under s.250(2) of the Act. Moreover, the Ombudsman argued that it was evident that, at the relevant time, Power himself understood that he was a "sole practitioner" because, in the form that he completed on 18 April 2002 for the purpose of gaining the renewal of his practising certificate, he effectively classified himself as a "principal with trust money". As was pointed out for the Ombudsman, Power also described his position in similar terms to the Board when, in late 2002, he applied to it for an exemption from the requirement to hold such insurance.
101 I consider that there is no substance in these contentions. First, the mere fact that Power's appointment as receiver was personal to him does not necessarily mean that he conducted the regulated practices in question in his own right. It might be said, as the Ombudsman contended, that in one sense Power received trust moneys as a principal. After all, it was Power, in his role as the court-appointed receiver, who conducted the legal practice in question. From the point of view of a third party providing funds to him, he would had been regarded as a principal. But, as I have said, he did not conduct the legal practice on his own account. Importantly, he remained an employee of the Law Institute and was paid by it for his services. There was no suggestion that the fees earned through his conduct of the regulated practices were retained by him, which would have been the case if he had conducted them on his own account. It is plain enough, therefore, that Power did not engage in legal practice "on his own account" but did so only in his capacity as an employee of the Law Institute (and as an officer of the court).
102 Furthermore, it is doubtful whether Power actually classified himself in the abovementioned forms as a "sole practitioner" within the meaning of the Act as the Ombudsman claimed. Although the form by which he sought renewal of his practising certificate was signed by him, it was a standard form that was likely to have been completed by the Law Institute on his behalf. The business name and mailing address of Power as shown on the form are those of the Law Institute. Furthermore, in his letter of 8 November 2002 to the Board, Power said that he did not operate a separate legal practice outside his role at the Law Institute - which he had described earlier in that form as the Law Institute's "General Manager Professional Standards". Furthermore, Power stated that he was indemnified under the Law Institute's insurance arrangements. For completeness I note that the Ombudsman purported to rely on Power's implicit acknowledgement, in his letter to the Board of 8 November 2002, that he was required to obtain, or maintain, professional indemnity insurance. But it is trite that such an acknowledgment cannot be determinative of whether he was under a statutory obligation to hold the insurance in question.
103 To reiterate, for the reasons given Power was not a "sole practitioner" within the meaning of the Act; he was a "corporate practitioner" and, therefore, was not obliged to obtain professional indemnity insurance during the relevant period. It follows that his practising certificate must be regarded as having been effective during that time, so that the Ombudsman's investigation of this issue should never have taken place and the learned trial judge should have so ordered.
104 I mention for completeness that, as I understand it, the Ombudsman also contended that, because Power applied for a practising certificate that would authorise him to receive trust moneys, s.22(2)(b)(iv) required him to provide satisfactory evidence of professional indemnity insurance and that, since this was not done, the practising certificate issued to him never took effect, given the provisions of s.23(3C).[81] But this argument is misconceived. First, s.22(2)(b)(iv) operated only in relation to an application made under s.22 by a new or former practitioner for a new practising certificate. It did not govern the obligations of practitioner applying, under s.23, for a renewal of his or her practising certificate. As I have said, Power's relevant applications were made under s.23. Secondly, and in any event, even if sub-s.22(2)(b)(iv) had imposed on Power any obligation, it was one to provide to the Law Institute satisfactory evidence that he had professional indemnity insurance "as required by this Act." For reasons already given, Power was not required by the Act to obtain or maintain such insurance and hence he was under no relevant obligation under that provisions.
Investigation should not continue in any event
105 Even if, contrary to the conclusion I have reached, Power was required to hold professional indemnity insurance during the period in question, I consider that the Ombudsman's investigation into this matter should not continue, for at least the following two reasons. First, the Ombudsman commenced this investigation of her own volition pursuant to s.145(2)(b). A condition of its commencement (or proper continuation) was that she have reason to believe that the conduct in question might amount to misconduct or unsatisfactory conduct as defined by s.137 of the Act. In W.A. Pines Pty. Ltd. v. Bannerman[82], in the context of considering the proper exercise of the power conferred on the Commissioner under s.155 of the Trade Practices Act 1974 (Cth), Lockhart, J. said[83] in relation to the meaning of "reason to believe" that "[w]ords such as these are found frequently in legislation or regulations conferring powers on Ministers of the Crown or public servants. They must be read as limiting otherwise arbitrary powers. If they are to be read as empowering persons in whom the power is vested to determine conclusively whether the limitation has been satisfied, the value of the intended limitation is nugatory." It is now settled law that the question whether there is "reason to believe" a specific matter in a context such as the present is to be determined by the person concerned on an objective basis and that the correctness of the conclusion may be tested in court. Thus, for example, it was said in George v. Rockett[84] that "[w]hen a statute prescribes that there must be 'reasonable grounds' for a state of mind - including suspicion and belief - it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person." Consequently, in order to have launched the impugned investigation lawfully the Ombudsman had to conclude, on an objective basis, that Power's failure to obtain insurance might amount to misconduct or unsatisfactory conduct. The question, therefore, is whether, in all the circumstances, a reasonable Ombudsman would have so concluded.
106 It is not necessary in order to satisfy the requirement that there be "reason to believe" that a prima facie case be made out against the person the subject of the investigation.[85] Moreover, in assessing whether the above requirement has been made out, the investigative nature of the powers must be borne in mind. Nevertheless, the belief must rest on objective facts that would induce the relevant state of mind in a reasonable person. I consider that, given the observations of Cummins, J. to which I have referred earlier,[86] and having regard to the material before the Court, no reasonable person in the Ombudsman's position would have concluded that there was reason to believe that by continuing to practise without an operative practising certificate due to a bona fide failure to obtain indemnity insurance, Power might be found guilty by the Tribunal of misconduct or unsatisfactory conduct. Put another way, it was not open to the Ombudsman to form that view.
107 Secondly, and having regard to the proper purpose of any investigation undertaken by the Legal Ombudsman, I consider that there is no basis for continuing with the investigation into this matter. On the material before the Court, there is no reasonable likelihood that the Tribunal would find Power guilty of unsatisfactory conduct[87] simply because he did not have professional indemnity insurance, given that the impugned behaviour was the consequence of an honest mistake and inadvertence on his part, as was found by Cummins, J. and as accepted by the learned primary judge in the present case. That being so, the Ombudsman is bound not to proceed with the investigation.
108 In the circumstances, there is no need to consider the other arguments made by counsel for Power in support of the claim that there is no reasonable basis for contending that he engaged in unsatisfactory conduct by reason of conducting legal practice without holding professional indemnity insurance. I consider that it is appropriate to order that the respondent be restrained from continuing her investigation as to whether the first appellant held a valid practising certificate during the period February 1997 to 5 December 2002.
Remaining issues
109 The issues dealt with above were the principal matters raised by the appeal. There remain, however, two further matters that the Ombudsman continued to investigate after the learned trial judge's orders were made that require consideration and to which reference has already been made. They are, first, whether Power supervised sufficiently the work of Sapountsis and Horvath; and secondly, whether, when acting in the receiverships, Sapountsis and Horvath failed to comply with the procedures set out in the relevant Rules and/or the Manual.
Supervision
110 The investigation commenced by the Ombudsman in exercise of her power under s.145(2) of the Act concerning the adequacy of Power's supervision of Sapountsis and Horvath arose from a letter of 10 October 2003 written by the solicitors for Power addressed to the respondent. The solicitors said that Power "does not supervise legal work performed by the relevant solicitors, as they are experienced practitioners with full practising certificates". This was taken by the Ombudsman to be an acknowledgement by Power that he did not supervise his delegates in the course of conducting regulated practices of which he was receiver. In the circumstances, the Ombudsman took the view that such a failure might amount to misconduct or unsatisfactory conduct and should be investigated.
111 But, as Power explained in paragraphs 7 and 8 of his affidavit of 24 March 2004, and in paragraph 7 of his affidavit of 5 May 2004,[88] the work of Sapountsis and Horvath pertaining to the receiverships was carried out under his overall supervision and they were required to refer to him any particular concern or issue that arose for his advice or decision as appropriate. He said that it was not practicable for the tasks that were carried out by Sapountsis and Horvath to have been carried out by him personally because of his other commitments as general manager of the Department of Professional Standards. Nor was there any need for him to accord more intensive supervision of Sapountsis and Horvath, each of whom was competent in the relevant areas of receivership, including the conduct of the legal practices. Importantly, Power deposed that he was "involved with all the major decisions taken in the course of each receivership". It seems plain enough, therefore, that, in his letter to the Ombudsman of 10 October 2003, Power acknowledged no more than that he did not oversee the day-to-day work of Sapountsis and Horvath, but exercised general supervision over what they did in the context of the receiverships.
112 Notwithstanding this, by letter of 29 April 2005, the Ombudsman informed Power that she was continuing to investigate his "supervision of legal practitioners engaged by [him] in the performance of [his] responsibilities as receiver authorised to conduct legal practice". She said that, in the exercise of her power under s.149(1)(a), she required him to provide to her a full explanation of his supervision of Sapountsis and Horvath. It is apparent from the material before the Court that the Ombudsman did not identify any specific example, or consequence, of Power's alleged lack of supervision of Sapountsis and Horvath. The Ombudsman's counsel, however, claimed that, although the explanation offered by Power in his affidavits as to his supervision of Sapountsis and Horvath might ultimately be shown to be adequate, that was no reason for the court "to intercept the investigation" at this initial stage. He argued that the investigation was just that - an investigation - and that the Ombudsman should not be prevented from completing it.
113 As I have said, it is plain that the Ombudsman does not have unfettered power to launch, of her own volition, investigations in relation to legal practitioners. Before she can do so lawfully she must form, on an objective basis, the belief required by s.145(2)(b) to which I have referred. I consider that the material before the Court does not disclose any basis on which a reasonable Legal Ombudsman could have formed the requisite belief, more particularly, that Power's supervision of the work of Sapountsis and Horvath was so inadequate that it might amount to misconduct or unsatisfactory conduct. In the circumstances, there is no legal basis for the commencement or continuation of the investigation into this matter and a restraining order to that effect should be made.