Power & Ors v Hamond [2006] VSCA 25

Power & Ors v Hamond [2006] VSCA 25 | Case summary | Zoe

[21]

18 The power under s.149(1) was clearly available to the Ombudsman. Each of Power and Sapountsis was "a legal practitioner subject to an investigation". That being so, the Ombudsman was entitled to ask each of them for an explanation of his conduct, and to provide "any other information or documents." The latter words gave the Ombudsman the widest possible power to seek information on any aspect of the matters raised in the complaint.

19 In the present case, the imposition on Power of the requirement to explain his conduct did not involve, in my view, any difficulty of comprehension or any element of unfairness. On the contrary, there was, as I have said, a detailed and coherent account from Mr Draper of a sequence of events in which Power was said to have been involved and which, on the face of it, was directly connected with the receivership which Power had been conducting. In my view, the Ombudsman was entitled, having given Mr Power a copy of the complaint, to require him to respond by giving a full account of exactly what had, to his knowledge, occurred in connection with the particular contributory mortgage and the mortgaged property, and likewise in relation to the other matters raised. Unlike the position in Bannerman v Mildura Fruit Juices Pty Ltd,[4] this was not a case where the person required to respond was in any doubt about what was being investigated.

20 It was certainly a case where the Ombudsman should have been seeking from Mr Draper much greater specificity in relation to the allegations. This could, and should, have been done despite Power's refusal to respond. Her investigative role demanded nothing less. Indeed, I can see no reason why - pending a resolution of the dispute with Power - she could not have been energetically seeking information and documents from all of the other people mentioned in the complaint. What matters for present purposes, however, is that none of that was a pre-condition of Power being lawfully required to respond.

21 Power was well placed to correct any errors of fact in the Draper allegations and one would have expected him to do so as soon as practicable, so as to ensure that the Ombudsman appreciated what, from Power's perspective, was the true story. If the allegations were groundless, the sooner the Ombudsman was made

aware of that the better.

22 Let it be assumed, for the purposes only of this analysis, that Mr Draper had seriously misunderstood either the transactions which took place, or Power's role in connection with them, or both. Nothing could have been simpler, in my view, than for Power to have spelt that out in his response, and to have made available his files to substantiate his version of events. Had that occurred, the present litigation - at least so far as it concerns the Draper complaint - would have been avoided, and the public interest would have been much better served.

23 One of the unfortunate consequences of the long and expensive legal wrangling between the two agencies is that the public interest in complaint investigation has been almost entirely neglected in the meantime. As I have said, Mr Draper's allegations remain uninvestigated and the concerns he expressed in his complaint have no doubt only been exacerbated by the continuing delay in their being investigated.

24 The maintenance of public confidence in the legal profession, and in the regulatory agencies which supervise the work of the profession, is of the utmost importance to the effective functioning of our legal system. That should have been at all times the paramount concern both of the Law Institute and of the Ombudsman.

[22]

25 This litigation, described in detail by Chernov, J.A., is an unfortunate battle between two regulatory authorities, one entirely the creation of statute, the other the remains of what was a self-regulated body of practitioners, the Law Institute of Victoria, answerable in a different guise in part to the Legal Practice Board and in part (relevantly in the present case) to this Court. Under the Legal Practice Act 1996 ("the Act"), replaced since this appeal was heard, the latter body retained some role in dealing with solicitors whose affairs had fallen into disarray, in particular financial disarray. It is clear that the Legal Ombudsman from a very early stage took

a critical view of what is called the Professional Standards section of Victorian Lawyers RPA Ltd. ("the RPA"), the corporate entity in which rested (for much of the time) what remained of the disciplinary functions of the Law Institute.

26 The Ombudsman for some time perceived that the functions performed by the first appellant, as general manager, Professional Standards, when appointed by the Court as receiver of a substantial number of practitioners' practices, had fallen short of what was desirable and that he was not subject to sufficient supervision and control. In the first place it was thought that the first appellant, as general manager, was not properly qualified for appointment, especially for the purpose of "carrying on" the practices of relevant practitioners under orders made pursuant to s.250(2) of the Act in that, lacking professional indemnity insurance, he was not entitled to a practising certificate, albeit that one had been issued to him for many years by the RPA. Secondly, the general manager, as receiver of various practitioners, had taken the view, wrongly in the eyes of the Ombudsman, that his receipts and accounts were not subject to the trust account provisions of Part 6 of the Act and that his obligations were fully spelt out in Part 9 of the Act and in the terms of the largely identical court orders effecting his appointment in each case. There were also a number of apparently lesser complaints about the general manager's administration of a number of receiverships, as well as about the carrying on of the related practices, to which it was said that the second and third appellants were party, which flowed in part from what was said to be inadequate supervision of those receiverships.

27 If there were any substance in any of these views, then one could well understand that the Ombudsman would wish to draw attention to the perceived deficiencies, so that they might in future be rectified and any risks to clients, in particular, obviated. This she was entitled to do by virtue of her power to include her concerns in her annual report pursuant to s.426 of the Act and pursuant to her power to report to the Attorney-General when thought "necessary or desirable" under s.427. Indeed, as appeared from the materials in the appeal books, the Ombudsman has publicly criticised Victorian Lawyers RPA Ltd.'s procedures both in her annual report for the years 2002-2003 and in a specific report (which appears to be undated) tabled in the Victorian Parliament in October 2003. After dealing in some detail with the matters of general application which concerned her, she concluded variously that the situation was either "highly unsatisfactory" or "manifestly unsatisfactory".

28 It may be conceded that any questions causing concern to the Ombudsman which related to general matters of procedure and administration of this kind could have been the subject of public report for the purpose of contending that they should be remedied. It may well be the case that some of those concerns might fairly be relied upon as the ground for suggested alterations to the way in which receiverships of solicitors' practices were conducted pursuant to the Act. It was quite another matter for these concerns to be made the subject of the Ombudsman's powers to conduct investigations pursuant to Division 3 of Part 5 of the Act. Thereunder, whether in consequence of a complaint or by reason of the Ombudsman's having "reason to believe" that certain conduct should be investigated, the purpose of such an investigation could only have been to ascertain whether there has been either "misconduct" or "unsatisfactory conduct", within the meaning of s.137 of the Act, on the part of the practitioner. Having listened to the argument over three days (and having heard two interlocutory applications relating to the matter) my view has only been confirmed that it is extraordinary, if I may say so, that these general concerns of the Ombudsman have been translated into investigations of the appellants' conduct. I would accept only that the Ombudsman was obliged to consider investigating the complaint formally made to her which set in train one aspect of her enquiries, albeit that the farrago of abuse directed at each of the appellants, as well as at the Legal Practice Board and at various other solicitors and barristers, was (to say the least) not such as to inspire confidence in the accuracy of the complainant's account or his assertion that the complaint so made related to the conduct of the relevant receivership or of the appellants themselves. As analysed by Chernov, J.A., insofar as one could identify precise complaints and the times at which the alleged events occurred from the nine or so disordered pages (from the complainant) forwarded by the respondent to the appellants, most of what occurred took place after the relevant part of the practice had been sold within five days of the commencement of the receivership. As to those complaints, I agree with what Chernov, J.A. has to say about them in his judgment.

29 Since writing this judgment I have had the opportunity of reading what the learned President has said about these allegations. Having re-read them I am still firmly of the view that they are not only unsubstantiated but consist of a torrent of abuse against not only the first and second appellants, but also against a large number of other persons not financially affected by the mortgagee's sale which is in question. Although the practice had been sold and a court application made, it is alleged, for example, that an "illegal payment from funds ... has been kept secret from contributors", and, furthermore this "corruption" was organised "to cover up ... a conspiracy organised by officers of the Law Institute". Later, as to the application which was made[5] to Warren, J. (as she then was) for a declaration permitting a distribution of funds, it is asserted that the application "was basically a criminal fraud on the contributors" and that "the both counsel involved[6] have acted to pervert the course of justice ... There is no doubt that any competent counsel would know that seeking this declaratory judgment was a criminal fraud being perpetrated on the original ... contributors." This is only a small sample of the allegations, with no supporting facts.

30 The Ombudsman, so it would seem to me, was in a position to deal appropriately (under s.141 of the Act) with that complaint which was of a kind not unfamiliar to judges who sit in this Court, but it appears to have remained alive for over three years, and still seems subject to an investigation, while the more general issues were taken up by the Ombudsman, namely those relating to the first appellant's practising certificate and the general conduct of receiverships by the appellants, in particular the failure to keep trust accounts pursuant to Part 6 of the Act. In turn, the appellants were provoked into resisting the Ombudsman's investigations by denying her jurisdiction to do so and by taking up stances which might better have been resolved by some rational discussion between the two bodies whose purposes should have been generally directed to protecting the public against the depredations of incompetent practitioners. One can understand, nevertheless, why the appellants feared what was a difference of opinion being turned into the basis of an investigation which might have led to the preferring of charges before the Legal Profession Tribunal, with consequences for both their rights to practise and their reputations.

31 As to the first of the remaining issues, relating to the first appellant's practising certificate, I think I said enough in the course of the hearing. The outcome is reflected in the judgment of Chernov, J.A. on this issue. Suffice it to say that the public expostulations of the respondent to the effect that it was "surprising and a matter of concern" that the first appellant was "unaware for six years of the insurance requirements imposed by the Act" cannot be seen to be justified. Having regard to the conclusions the Court has now reached on the subject, it is perhaps even more surprising and equally a matter of concern that the respondent, as the principal entity responsible for investigating complaints against, and conduct involving, legal practitioners, should have reached a view sufficiently firm as to give her "reason to believe" that the relevant conduct might amount to misconduct or unsatisfactory conduct. Further, and not unimportantly, it is unfortunate, to say the least, that she should have expressed her conclusions publicly by way of report when, notwithstanding her views, a careful perusal of the relevant provisions relating to professional indemnity insurance ought to have shown that there was at least a doubt whether the first respondent, as a full-time salaried employee of the RPA, was required to take out or maintain insurance, in part for the purposes of obtaining a practising certificate, if one considers with care both the provisions in ss.224 to 227 of the Act and the definitions of "corporate practitioner" and "sole practitioner". Notwithstanding the firm views that I have reached on the subject, I would not, however, have described the Ombudsman's misapprehension of those sections as so serious as to affect her right to act as a lawyer, in whatever capacity, notwithstanding that the insurance provisions might be thought to be a part of the Act requiring close familiarity for a person holding the post of Ombudsman. In short, even if one were to accept the respondent's contentions on this issue, which I do not, it ought to have been seen as a matter of difference upon which persons might disagree and as something about which the relevant parties could genuinely make a mistake without it ever having to be characterised as "misconduct" or "unsatisfactory conduct".

32 As to the need for receivers appointed pursuant to Part 9 of the Act to maintain trust accounts and otherwise comply with Part 6 of the Act, I would likewise believe this to be again merely a matter over which persons might have genuinely disagreed, although in the end I have reached the conclusions expressed by Chernov, J.A. on this subject. It is regrettable that such differences can be converted potentially into charges of misconduct or unsatisfactory conduct for the purposes of the Act when there cannot be the slightest doubt that the views held by the appellants were genuine, particularly where the respondent concedes in one of her reports that it is "not suggested that Victorian Lawyers RPA Ltd. would knowingly mishandle trust moneys" (emphasis added). Whatever be the correct construction of the Act, to treat those appointed officially by the Court pursuant to Part 9, who were only employee solicitors earning a salary and acting on behalf of a body, one of whose principal duties was to oversee the practices of private solicitors whether in or out of receivership, as persons suitable for investigation under the Act, was to create a false analogy which cannot bear close examination. None of the appellants, especially the first appellant, has held himself out as engaged in private practice on his own account, nor sought clients from the public who might have entrusted moneys to him in his capacity as a solicitor. It was the risks of defalcation, relatively small though, in general, they have turned out to be, in such circumstances that led to the requirement for compulsory professional insurance because individual practitioners, even firms, frequently did not insure themselves in the past. The role of the Law Institute and Victorian Lawyers RPA Ltd. was quite different and, as might be expected, those bodies held appropriate insurance to protect those affected against the acts of its employees. As with any large firm or with a corporation employing solicitors, it is up to the employer to ensure that the employees do not misappropriate or otherwise mishandle moneys under the control of a relevant employee, and, if they fail to do so, then not only is the body liable but the employer's insurance can be expected to cover any losses. The scheme relating to insurance of practitioners in private practice, on their "own account", under the Act was reasonably plain, albeit that the Ombudsman has seen it differently.

33 That is not to say, however, that the method of dealing with trust and other moneys under receiverships was ideal, not because there has been evidence of misappropriation or the like - indeed the Ombudsman did not suggest any specific misappropriation[7] or any history of misappropriations in the past - but significant sums were held by receivers appointed under Part 9 of the Act and it may be thought preferable that there be some obligation to account in a way which relevant parties might more easily examine. The Court was told that some such application of the requirements relating to trust moneys had been included in the Legal Profession Act 2004, possibly to overcome the fears of the Ombudsman. We were not asked to look at that legislation and its effectiveness cannot presently be assessed.

34 Nevertheless I should express my own disquiet that the system for appointing receivers by the Court has, at least in recent years, not resulted in the conventional control of receiverships, at least those brought into existence by court order and upon the application of ordinary equitable principles. It is neither sensible nor practical to hold that all the ordinary prudential arrangements relating to court-appointed receivers should necessarily have applied to those receivers appointed pursuant to Part 9 of the Act. Those who appeared for the appellants, effectively as we would understand on behalf of the RPA and the Law Institute, were unable to say why the present bare form of order under s.250 had come into existence. It certainly bears slight resemblance to conventional orders made in the case of partnerships, trusts and the like. One need refer only to standard works on equity and receivers and to the precedents of orders to be found therein, such as that known as a "Pratchett v. Drew[8] order" and those appearing as orders 9 to 18 in Atkins Court Forms (2nd ed.)[9] and in Seton's Forms of Judgments and Orders (7th ed.)[10]. Whether or not it has been thought that the specific provisions relating to "returns" by receivers in s.275 of the Act, expressed in very simple terms, were sufficient, it was not thought appropriate to direct the bringing in of accounts on a periodical or other basis, nor to require security, as must be considered under Order 39 of the Supreme Court (General Civil Procedure) Rules 1996, then in operation.

35 Even if s.275 were treated as supplanting the provisions of Order 39.07, there would in the future be good reason to consider whether more specific requirements should be made for periodical "reporting" by receivers appointed under Part 9 or its new equivalent. They are not conventional court receiverships, in that they do not arise out of any inter partes proceeding to which the "beneficiaries" (here the clients of the practice) have been joined. There was, of course, no requirement that clients be parties in order that they might intervene and seek necessary directions (see especially s.266 of the Act), nor was the Ombudsman precluded from so applying to the Court, but that is not sufficient. Whatever be the new requirements as to keeping trust accounts, judges appointing[11] receivers under the relevant legislation in the future ought carefully to think about including mandatory orders relating to making, filing and publishing reports and the like which will enable those interested to ascertain the current and ultimate state of the receivership. Under the Act, as the Ombudsman suggests, there seemed nobody with an interest in the outcome who

was sufficiently informed so as to decide whether to take any necessary steps by way of seeking further directions or the like. Finally, to my way of thinking also, some consideration ought to be given to separating the role of applicant for receivership orders of this kind from the persons in fact appointed. Swiftly though they may be required to act in the first place, there is no party to the proceedings with any contrary interest or any interest to enquire into what thereafter takes place.

36 Of course this is far from suggesting that there has been any malpractice or any reason to believe that there has been misconduct or unsatisfactory conduct on the part of any of the appellants. The proposals in the latter part of this judgment are designed to obviate potential problems in the future, ones which might from time to time arise out of a more solid foundation than is revealed by the present litigation.

37 I otherwise agree with the orders proposed by Chernov, J.A. and his reasons for proposing them.

[23]

The appeal

38 Kevin Joseph Power, Steven Sapountsis and Charles George Horvath ("the appellants") seek leave to appeal, to the extent that leave is necessary and, if the application is granted, to appeal against the decision of a judge of the Supreme Court given on 22 March 2005. That decision concerned the powers of the respondent ("the Ombudsman"), who was the Legal Ombudsman under the Legal Practice Act 1996 ("the Act"), to investigate the appellants' conduct of receiverships of legal practices in respect of which the first appellant had been appointed receiver by the Supreme Court under Part 9 of the Act.[12] It should be noted at the outset, however, that the

relevant provisions of the Act were repealed on 12 December 2005 and replaced by the Legal Profession Act 2004 ("the new Act"). Relevantly, the new Act provides[13] that the Legal Services Commissioner is substituted as a party to any proceeding pending in any Court to which the Legal Ombudsman was a party immediately before its commencement. As such, the Legal Services Commissioner is respondent to this appeal. [14] For convenience, however, given that the matters in dispute arose when the 1996 Act was in force, making it necessary to consider its relevant provisions, I shall treat the Ombudsman as being the effective respondent to this appeal.

39 In broad terms, the appeal is concerned with three main issues: first, the ambit of the Legal Ombudsman's power under the Act to investigate the conduct of a receiver appointed under Part 9 of the Act; secondly, whether the requirements of Part 6 of the Act - which prescribed how a legal practitioner was to deal with trust moneys - applied to such a receiver, particularly in respect of trust moneys that came into his or her hands while conducting the practice that was the subject of the receivership; and thirdly, whether, prior to 5 December 2002, the first appellant's practising certificate was inoperative due to his failure to obtain professional indemnity insurance. There are a number of associated issues that also arise for consideration and they will be identified later.

Regulatory aspects of the Act

40 Before analysing these matters it is desirable to give a broad overview of the regulatory aspects of the Act, the role of each appellant in respect of the receiverships and the investigations commenced by the Ombudsman into the appellants' conduct. Prior to the introduction of the Act, the legal profession was essentially self-regulatory, albeit with some oversight of its activities being exercised by the Lay Observer since 1978. The Lay Observer had the power to investigate, examine and report to the Attorney-General and the professional associations - namely, the Law Institute of Victoria[15] and the Victorian Bar Council[16] - as to the adequacy of the manner in which those bodies as well as the Solicitors' Disciplinary Tribunal and the Bar Tribunal dealt with complaints against practitioners.[17] The investigation and prosecution of disciplinary matters was, however, "entirely in the hands of the existing professional associations".[18] Thus, the Law Institute of Victoria and the Victorian Bar Council enjoyed almost exclusive jurisdiction over the bringing of disciplinary charges against their respective members. The Act replaced that regulatory system with one that involved the co-regulation of legal practitioners by three bodies, namely, the Legal Practice Board ("the Board"), the recognised professional associations ("the RPAs") and the Legal Ombudsman. It seems that Parliament intended that the new regulatory system would enhance public confidence in legal practice in Victoria by ensuring that legal practitioners were, and were seen to be, publicly accountable and by eradicating the perceived conflict of interest on the part of the professional associations which, as has been noted, were almost entirely responsible for the investigation, prosecution and disciplining of errant practitioners who were also their members.[19] At the same time, Parliament considered that the new system would enshrine the independence of the legal profession from the executive government.[20] The Act also required legal practitioners to comply with a range of rules concerning handling of trust monies,[21] the provision of information to clients about fees they might charge them,[22] and so on.

41 Under the Act, the Board, each RPA and the Legal Ombudsman had the power to receive complaints concerning alleged misconduct or unsatisfactory conduct by a practitioner or firm and to investigate such a complaint, although the Board's power in this regard was limited.[23] The legislation provided that where the investigating body was satisfied that there was a "reasonable likelihood" that the Legal Professional Tribunal ("the Tribunal")[24] - an independent body constituted under the Act - would find the practitioner or firm guilty of misconduct[25], it was required to charge the practitioner before the Tribunal.[26] On the other hand, if the investigating body considered that there was a reasonable likelihood of the Tribunal finding the practitioner guilty only of unsatisfactory[27] conduct, it retained a discretion as to whether to bring charges, caution the practitioner or take no action.[28]

42 The Board, the RPAs and Legal Ombudsman also performed broader regulatory, and not simply investigatory, functions under the Act, which can be briefly stated. In the main, the Board's role in the regulatory regime involved the accreditation of RPAs[29] and the allocation to an RPA of every legal practitioner who wished to practise in the State, such that he or she became a "regulated practitioner" for the purposes of the Act.[30] It was a condition precedent to being permitted to practise law in Victoria that the person be a "regulated practitioner".[31] Importantly, the Board also set rules concerning, inter alia, management, accounting, auditing and reporting obligations of regulated practitioners in relation to trust accounts operated by them.[32]

43 In the event, the Law Institute and the Victorian Bar Inc.[33] were the only two bodies that applied to the Board for accreditation as RPAs. The Law Institute was the primary body responsible for the regulation of solicitors in Victoria. Its functions included issuing practising certificates to legal practitioners who intended to practise as solicitors in this State,[34] setting rules pertaining to the conduct of legal practices[35] and monitoring and supervising the handling of trust moneys by solicitors. Generally, if the Law Institute formed the view that there may have been an irregularity in relation to a trust account (or where it considered that the practitioner had failed or was unable to attend adequately to the legal practice), it had the power to apply to the Supreme Court under Part 9 of the Act for the appointment of a receiver of the legal practice.[36] Where the appointee was a legal practitioner, the court could authorise him or her to carry on the legal practice in question.[37]

44 The Legal Ombudsman's main obligation under the Act was to promote the primacy of the public interest in the regulation of legal practitioners and firms.[38] Accordingly, the Act conferred on the Legal Ombudsman wide powers of supervision and control over the handling by the RPAs and the Board of complaints against practitioners,[39] the investigation of practitioners' conduct[40] and the prosecution of disciplinary proceedings before the Tribunal.[41] For example, the Legal Ombudsman was empowered to give written directions to an RPA or the Board as to its handling of an investigation of allegedly wrongful conduct by a practitioner, and, if such directions were not complied with, the Legal Ombudsman was required to take over the investigation.[42] Moreover, where an RPA or the Board decided to dismiss a complaint against a practitioner or to issue a caution rather than bring a proceeding before the Tribunal, the complainant could apply to the Legal Ombudsman to review that decision.[43] In certain circumstances, the Legal Ombudsman had a statutory duty to investigate complaints against practitioners.[44] In addition, the Legal Ombudsman had the power on his or her own motion to conduct such investigations[45] and to review certain decisions by the Board or RPA in relation to a complaint.[46]

Proceeding wasteful

45 It should be noted that the very extensive and costly proceeding with which we are concerned arose from a dispute between two of the co-regulators of the legal profession - namely, the Law Institute and the Legal Ombudsman - concerning the extent of the latter's powers to investigate the conduct of a receiver appointed by the Supreme Court, at the behest of the Law Institute, under Part 9 of the Act. Given that the protagonists are bodies that were established to pursue their respective activities in the public interest, it is of obvious concern that it was seen necessary to bring such a dispute to court, rather than seek to have it resolved by way of an alternate dispute resolution process as was suggested by the President in the course of hearing the appeal.

46 The wasteful nature of the proceeding is made all the more apparent by the fact that the appeal is most unlikely to determine matters of principle that may give guidance to the parties as to the future conduct of their respective affairs. As I have mentioned, since 12 December 2005, regulation of legal practice in this State has been governed by the new Act, which introduced a new system of regulation. The new Act abolished the Board and Legal Ombudsman, replacing these bodies, respectively, with the Legal Services Board (as a peak regulatory body of the legal profession) and the Legal Services Commissioner (who is charged with receiving and dealing with complaints about members of the legal profession). The new Act also abolished the concept of RPAs and replaced it with "professional associations", namely, the Law Institute, the Victorian Bar Inc. and any other person or body prescribed as such by the regulations.[47] Such professional associations do not have any direct regulatory functions over their members, but bear the primary responsibility for the development of rules relating to the conduct of legal practices, subject to the approval of the Legal Services Board.[48]

Role of appellants

47 At all relevant times after 28 February 1997, the first appellant ("Power"), a legal practitioner, was employed by the Law Institute as general manager of its Department of Professional Standards, which handled the regulatory and disciplinary functions conferred upon the Law Institute by the Act. During the relevant period, it had an annual budget of approximately $7 million and employed some 45 people. The second appellant ("Sapountsis") was at all relevant times the manager of the Department's receivership section and reported to Power. The third appellant ("Horvath") was the solicitor of the section and reported to Sapountsis.

48 From time to time since 28 February 1997, upon application by the Law Institute, the Supreme Court appointed Power under Part 9 of the Act as receiver of a number of legal practices. In most cases he was also authorised by the court to conduct the practice in question. On each occasion, Sapountsis and Horvath assisted him in the administration of the day-to-day affairs of the receiverships. The form of the order appointing Power was typically as follows:

[25]

Overview of investigations

49 It is convenient to outline briefly at this point the circumstances that gave rise to the investigations by the Ombudsman into the appellants' conduct of a number of legal practices in respect of which Power had been appointed receiver. The appellants' impugned conduct and the course of the investigations are discussed in greater detail below, in the context of my dealing with the specific issues raised by the appeal.

Young Hubbard investigation

50 Relevantly, the Ombudsman's investigations of the appellants' conduct began in August 2001. The first investigation related to the receivership of a firm of legal practitioners known as Young Hubbard and Co. ("Young Hubbard"). Power was appointed receiver of Young Hubbard by the Supreme Court on 27 May 1997 and was authorised to conduct its practice, which was concerned largely with the administration of contributory mortgages. With his consent, that part of the practice was sold, on 2 June 1997, to another firm of legal practitioners, MacPherson and Kelley ("M+K"). The Ombudsman's interest in the conduct of Power and Sapountsis in relation to that receivership first arose when a complaint was made to her by Keith Draper ("Draper"), who was a trustee of a number of the contributories to the mortgages that were put together by Young Hubbard. Draper alleged improper conduct by Power, essentially during a period after the sale of the mortgage practice, and more particularly in relation to the sale, allegedly at undervalue, of land known as the "Ringlands property". I will deal with the complaint later, but it is sufficient for present purposes to note that, as a result of Draper's allegations, the Ombudsman wrote to Power and Sapountsis on 27 August 2001 seeking an explanation of the alleged conduct and certain documents. Power and Sapountsis did not relevantly respond to the Ombudsman's letter, essentially because they claimed that the Ombudsman had no power to investigate Power's conduct as receiver or that of his staff. The Ombudsman next wrote to Power and Sapountsis about the Draper complaint on 26 May 2003 but again received no relevant response. It would seem that, at the date of the commencement of the proceeding, 24 March 2004, beyond having taken those steps, the Ombudsman had not progressed her investigation of the Draper complaint. [49]

Practising certificate investigation

51 The second matter that was investigated by the Ombudsman concerned the claim that Power might have been guilty of misconduct or unsatisfactory conduct on the basis that, between February 1997 and 5 December 2002, he conducted the several practices in respect of which he had been appointed receiver without holding an operative practising certificate. The Ombudsman contended that Power's failure to obtain professional indemnity insurance with the Legal Practitioners' Liability Committee - which she claimed he was obliged to do pursuant to s.227(1) of the Act - rendered his practising certificate inoperative. That investigation commenced in early 2003.

52 During the relevant period, the Law Institute issued practising certificates for periods up to 12 months ending on the following 30 June[50] and it was common ground that Power had been issued with a practising certificate for each of the relevant years. It was also accepted that, until March 2003, he did not hold professional indemnity insurance with the Legal Practitioners' Liability Committee, although, on 5 December 2002, he obtained a dispensation from the Board, under s.229A of the Act, from the obligation to do so. It was also accepted that, during this period, Power was covered by the Law Institute's insurance policy in respect of the work that he performed in his capacity as an officer of the Law Institute. Similarly, it was common ground that Power never received from the Law Institute a notice under s.23(3B)(a) of the Act (to which I will refer in more detail later) requiring him to provide satisfactory evidence that he held the requisite professional indemnity insurance. Such a notice was not issued because the Law Institute's internal record system wrongly showed Power as holding an exemption under s.229A of the Act for each of the years in question, so that the mechanism by which such notices were sent was never triggered in respect of him.

53 During the bulk of the relevant period, Power considered that, because he was insured under the Law Institute's policy and did not himself conduct a private practice, he was not obliged to maintain professional indemnity insurance. Consequently, he neither obtained such insurance nor sought a relevant exemption from the Board under s.229A of the Act. Sometime late in 2002, however, he realised that he might be under such an obligation and, in the event, wrote to the Board in November 2002 seeking the relevant exemption. As I have said, on 5 December 2002, the Board granted the exemption sought in respect of the year ending 30 June 2003. Subsequently, in early February 2003, the Board resolved that Power be exempted from the requirement for the period 1 January 1997 until 30 April 2003. It was the Ombudsman's case that insofar as this exemption purported to operate retrospectively it was ineffective. Be that as it may, in March 2003 Power obtained the necessary insurance cover and it was common ground, as I have said, that from 5 December 2002 he had effectively complied with the Act as to the need to hold professional indemnity insurance as a condition precedent to holding an operative practising certificate.

54 In January 2003, and again in May 2003, the Ombudsman wrote to Power requiring him, pursuant to s.149(1) of the Act, to furnish a full written explanation of his conduct in this regard. In light of this investigation, both Power and the Law Institute sought legal advice as to the validity of the Board's above-mentioned retrospective exemption. They received conflicting opinions on the matter and, in order to remove any doubt about the lawfulness of Power's conduct of the relevant legal practices during the period in question, on 29 May 2003 the Law Institute applied ex parte to the Supreme Court for orders authorising Power to carry on those practices. On that day, Cummins, J. made the orders sought, holding that any error made by Power as to whether he was required by the Act to maintain professional indemnity insurance was "honest and inadvertent" and that he had "acted in good faith at all times".[51]

55 The learned primary judge in this case[52] held that, given the findings of Cummins, J., the Ombudsman could not conclude that there was a reasonable likelihood that the Tribunal would find Power guilty of misconduct[53] because Cummins, J. had "in effect, cleared [him] of misconduct." Thus, his Honour concluded,[54] the Ombudsman and the Tribunal were "constrained from coming, on the same material, to a conclusion inconsistent with that result" and, therefore, the Ombudsman could not properly continue her investigation into the matter. Notwithstanding this conclusion, his Honour declined to make the injunction sought by Power to restrain the Ombudsman from continuing her investigation in respect of the validity of the practising certificates in question. Rather, his Honour said[55] that he expected that the Ombudsman would not "continue any investigation to the extent that I have in this judgment indicated that it should not proceed." Despite this intimation from his Honour, the Ombudsman wrote to Power on 29 April 2005 stating that she intended to recommence her investigation into the matter, albeit limited to the question of whether his conduct amounted to unsatisfactory conduct.

Failure to comply with Part 6

56 In April and May 2003, the Ombudsman commenced an investigation into whether Power and Sapountsis had failed to comply with Part 6 of the Act when dealing with trust moneys of legal practices in respect of which Power had been appointed receiver. On 2 March 2004, a like investigation was launched by the Ombudsman into the conduct of Horvath who, at all times, like Sapountsis, acted as Power's agent.

Sundry other investigations

57 The Ombudsman also instigated a number of other investigations into the conduct of each of the three appellants. In respect of Power, in April 2003 she commenced an investigation into whether he had failed to comply with the "Victorian Lawyers RPA Ltd Trust Account Practice Rules 2000" and the 1998 precursor to those rules (collectively, "the Rules") regarding his handling of trust moneys in the course of conducting the various receiverships. In May 2003, the Ombudsman expressed the view that any failure by Power to comply with the Rules might amount to misconduct or unsatisfactory conduct. A month later, the Ombudsman raised yet another issue, namely, whether Power might be guilty of misconduct or unsatisfactory conduct on the basis that he had failed to comply with his obligation under the Act to supervise the conduct of Sapountsis and Horvath in relation to their carrying on of the legal practices of which he was receiver.

58 In respect of Sapountsis and Horvath, in addition to investigating whether they might be guilty of misconduct or unsatisfactory conduct because they had breached their obligations under Part 6 of the Act and the Rules regarding their handling of trust moneys, in March 2004 the Ombudsman commenced an investigation as to whether they had carried out legal work without being authorised so to do by the court[56] or had contravened s.107 of the Act concerning the signing of bills of costs on behalf of Power.

The proceeding

59 The appellants challenged the Ombudsman's investigations by way of an originating motion that was filed in the Supreme Court on 24 March 2004. They sought declarations to the effect that the investigations were beyond power and that the appellants had at all times acted lawfully in the conduct of the various legal practices in receivership. The appellants also sought injunctions restraining the Ombudsman from continuing with the each of the impugned investigations.

60 The appellants' principal case below was that the Ombudsman had no power to investigate the activities of Power and his staff, more particularly, Sapountsis and Horvath, because of his status as a court-appointed receiver. It was said that Power's conduct as receiver did not constitute "engaging in legal practice" so that the Ombudsman had no power to investigate that conduct or the conduct of his staff. As the receiver was an officer of the court, so it was said, any complaint about his conduct (and that of his staff) had to be brought to the court for resolution. The learned trial judge, however, rejected this submission and refused to make the injunctions sought by the appellants restraining the Ombudsman from continuing with her investigations.

61 The appellants also claimed before his Honour that Part 6 did not apply to trust moneys received by or on behalf of Power in his capacity as receiver of the relevant practices, that the Ombudsman's investigation in relation to the validity of Power's practising certificate was misconceived and that, for other reasons, the investigations commenced by her were not authorised by the legislation and were baseless. So far as is relevant, his Honour concluded[57] that "much if not all" of Part 6 of the Act applied to trust moneys received by or on behalf of Power in the course of the receiverships. I have already mentioned his Honour's conclusions about the Ombudsman's investigation into Power's failure to obtain relevant insurance.[58]

62 In relation to Sapountsis and Horvath, his Honour found that Power had properly engaged them to perform legal work on his behalf in order to carry on the legal practices in receivership and that, to the extent that they undertook such work, they did so with proper authorisation. It followed, so the learned judge said, that the Ombudsman could not reasonably have been satisfied that there was a likelihood that the Tribunal would find Sapountsis and Horvath guilty of misconduct or unsatisfactory conduct on the basis that they had performed legal work, and handled trust moneys, without due authorisation. Consequently, his Honour held that the Ombudsman should not continue with her investigations of those issues. His Honour also declared that, given that they were properly authorised to perform legal work on Power's behalf in relation to the legal practices in receivership, it was lawful for Sapountsis and Horvath to sign bills of costs expressed as having been sent on behalf of Power.

63 After the pronouncement of the orders below, in April and May 2005 the Ombudsman wrote to the appellants, informing them that she had re-commenced her investigation into their possible contravention of the Act and the Rules in relation to the handling of trust moneys. The Ombudsman also confirmed that she was re-commencing her investigation into the possible failure by Power to supervise Sapountsis and Horvath properly. Regarding her investigation of the conduct of Sapountsis and Horvath, the Ombudsman said that, in accordance with his Honour's orders, her investigation was "now limited to inquiring into [their] handling of clients' monies in respect of legal practices in receivership." Notably, in her letters to each of the appellants, the Ombudsman indicated - it seems for the first time - that she was concerned that the processes and procedures set by the "Manual for Receiver Accountant" ("the Manual") (which each of the appellants claimed to have followed in his handling of trust moneys) were inadequate from an "accounting and prudential standpoint" because they were less stringent than the obligations imposed by either the Rules or Part 6 of the Act.[59] Similarly, she stated that compliance with the procedures stipulated by the Manual in regard to supervision of receivers' agents or delegates was also insufficient to meet Power's statutory obligations in this regard. Accordingly, she said, the continuance of her investigation into each of these matters was warranted.

Leave to appeal sought

64 On 22 April 2005, the appellants filed a summons in this Court seeking an order that, to the extent that such leave was necessary, they be given leave to appeal from such of his Honour's orders as were unfavourable to them. Each of the appellants also sought an injunction to restrain the investigations pending the hearing and determination of the application for leave to appeal and any appeal. The matter was heard by this Court (constituted by Ormiston and Vincent, JJ.A.) on 20 May 2005. Their Honours ordered that the appellants' application for leave to appeal (to the extent that such leave was necessary) be heard by the same Court, consisting of three judges, as would hear the appeal if leave were granted. Furthermore, the Court ordered that, subject to certain undertakings being given by the appellants, the Ombudsman be restrained from continuing her investigations pending the hearing and determination of the application for leave to appeal and any appeal.

Arguments on appeal

65 I now turn to consider the arguments raised in support of the appeal, and I do so in the order in which they were argued. Mr Brett, who appeared before us for Power, presented all the arguments that related to the Ombudsman's investigations of Power's conduct except for the arguments which challenged her claim that Part 6 of the Act applied to receiverships under Part 9. The latter issue concerned all the appellants and the arguments in relation to it were principally addressed by Mr Merralls, who appeared for Sapountsis and Horvath. Mr Merralls also made submissions on other matters that related specifically to those appellants. Thus, the first matter argued concerned the propriety of the Ombudsman's investigation of the conduct of Power and Sapountsis relating to the receivership of Young Hubbard.

Young Hubbard investigation

66 I have already referred briefly[60] to the circumstances that led to this impugned investigation. It will be recalled that the contributory mortgage practice of Young Hubbard was sold to M+K a matter of days after Power was appointed receiver on 25 May 1997. It seems that M+K realised some of the securities that were held as part of the contributory mortgage portfolio that it purchased and it was essentially in relation to those transactions that, some time in July 2001, Draper complained to the Ombudsman that Power, and Sapountsis as his agent, had acted improperly. The investigation, as I have said, commenced towards the end of August 2001, but, as I have noted, other than writing two letters to Power and Sapountsis, the Ombudsman did not progress the matter.

[27]

67 Mr Brett first submitted that the Ombudsman lacked power to investigate the conduct of a receiver, such as Power, where that conduct related to "non-legal" aspects of the receivership and was not concerned with the conduct of a legal practice. Counsel pointed out that the Ombudsman sought to examine Power's behaviour after the mortgage practice had been sold so that, necessarily, it had nothing to do with his "engaging in legal practice" for the purpose of the definition of "misconduct" in paragraph (a) of s.137 of the Act. It was said that, because Power was an officer of the court, any alleged wrongdoing by him in relation to the receivership could only have been properly dealt with in a proceeding commenced before the court and the Act did not seek to override the court's exclusive jurisdiction in that regard. It was argued that, just as the Ombudsman did not have the power to investigate the conduct of a receiver of a legal practice who was not a legal practitioner, so she had no power to investigate Power's conduct of the Young Hubbard receivership. It was also claimed that the form of the investigation was, or bordered on being, an improper interference with Power as a court officer.

68 I consider that his Honour correctly rejected the contention that the Ombudsman lacked power to investigate the conduct of a receiver in Power's position merely because such conduct was unrelated to the carrying on of a legal practice. Section 137 of the Act relevantly defined "misconduct" to include conduct by a legal practitioner "that is unconnected with legal practice but that would justify a finding that the practitioner ... is not of good character or is otherwise unsuited to engage in legal practice". It seems plain enough that "legal practitioner" in that definition was wide enough to include a legal practitioner who had been appointed receiver under Part 9 of the Act. In my view, there is nothing in the terms of the legislation that suggests that the Ombudsman could not have properly investigated the "non-legal" conduct of such a receiver to determine if it demonstrated that he or she was "not of good character" or was "otherwise unsuited to engage in legal practice" within the definition of "misconduct". It is possible that the behaviour of such a person in conducting a receivership could have been such as to make it plain that it fell within that definition of "misconduct". Of course, the focus of such an investigation would be directed to the suitability of the receiver/legal practitioner to engage in legal practice, rather than to his or her suitability to act as receiver. In that sense, the position of a receiver who is a legal practitioner differs relevantly from that of a receiver who is not a legal practitioner. It seems to me that, by empowering the Ombudsman to investigate such a practitioner, whether in response to a complaint about that practitioner's conduct or on her own motion, the legislation did not seek to override the supervisory jurisdiction of the court in respect of its officers. The power of investigation created by the Act was unrelated to the supervisory jurisdiction of the Court over its officers. Thus, as I have said, provided there was a proper basis for the Ombudsman's investigation of the conduct of Power and Sapountsis in respect of the Young Hubbard receivership, such an investigation would not have been impermissible merely because Power was an officer of the court (and Sapountsis, his agent).

[29]

69 It was next argued that, although the Ombudsman undertook the investigation of the Draper complaint not in the exercise of her discretion under s.145(2) [61] but because she considered that she was required to do so by s.145(1),[62] there was no proper basis for commencing it. Counsel advanced two arguments in support of this submission.

70 It was first said that, although s.145(1) of the Act required the Ombudsman to investigate a complaint made to her under s.138(1) of the Act,[63] Draper's assertions did not constitute a "complaint" within the meaning of ss.138(1) or 145(1) of the Act, because they were plainly incapable of giving rise to a reasonable likelihood that the Tribunal would find relevant misconduct or unsatisfactory conduct on the part of Power. Counsel argued that the purpose of any investigation under s.145(1) was to determine whether, for the purposes of s.151,[64] there was a reasonable likelihood that the Tribunal would find misconduct or unsatisfactory conduct within the meaning of the Act. It was contended that, since it was plain that the Draper allegations could not, on their face, give rise to such a finding, they did not constitute a "complaint" within the meaning of the Act. Therefore, it was said, the allegations could not ground a compulsory investigation under s.145(1). In my view, this argument should be rejected. It overlooks the fact that at the point in time when the complaint was received, it was not inappropriate for the Ombudsman to take the view that the matter warranted, at the very least, some investigation for the purpose of determining whether it was appropriate to take the matter further. In the circumstances, I consider that the Ombudsman did not err in treating the Draper allegations as a "complaint" within the meaning of the Act.

71 It was next submitted that the Draper complaint was so general, vague and extravagant that it should have been apparent to the Ombudsman that it was "frivolous, vexatious, misconceived or lacking in substance" within the meaning of s.141(1) and that, therefore, it should have been dismissed by her almost immediately upon its receipt. Although, as I explain later, I consider that the complaint was couched in general and extravagant language and, on its face, gave rise to doubts as to its credibility, I think that counsel's second submission should also be rejected, essentially for the reasons I have given in rejecting the claim that Draper's allegations did not amount to a "complaint".

[31]

72 It was then argued that, even if the Ombudsman had the power to investigate the Draper complaint and it was appropriate for her to commence such an investigation, she acted improperly in exercising her powers of investigation and, therefore, his Honour should have restrained her from continuing with it. It is convenient to deal first with the Ombudsman's misdescription of one aspect of the Draper complaint. In her first letter of 27 August 2001 to Power about the matter, the Ombudsman stated that the complaint was directed at his alleged failure "as a solicitor, to carry out legal functions"[65] in connection with the receivership. But it is clear from the terms of the Draper documents that his complaint was not directed at the conduct of Power as a legal practitioner. Rather, he asserted that, although Power was appointed to carry on the contributory mortgage practice, he "did not do so - it was sold to MacPherson & Kelley within five days of the relevant court order against the orders of the Supreme Court to carry on the contributory mortgage practice". In other words, Draper's allegations of impropriety were directed at Power's conduct of the receivership and not the legal practice; they dealt with his conduct as receiver after the contributory mortgage practice was sold. Thus, on the face of things, the Ombudsman purported to instigate an investigation into a complaint that was never made. It was accepted by Mr J. Santamaria, who appeared for the Ombudsman, that the letter of 27 August 2001 misdescribed the complaint. Nevertheless, said counsel, it was plain from the whole of the letter and the accompanying material that the conduct sought to be scrutinised was that which related to Power's conduct of the receivership, absent engaging in legal practice. I agree with counsel's characterisation of the Ombudsman's letter. It seems plain enough that she merely misdescribed the nature of the complaint and that the material given to Power would have made that plain to him.

73 Mr Brett nevertheless argued that the Ombudsman's investigation of the Draper complaint was conducted improperly. It is clear enough that her power under the Act to conduct an investigation into the behaviour of a legal practitioner was a wide one. It included the power to require the practitioner the subject of investigation to provide to her "a full explanation of [his or her] ... conduct and any other information or documentation" and to stipulate the form of the response.[66] Importantly, sub-s.149(4) provided that the practitioner was not entitled to refuse to comply with the request on the ground that the provision of such material would involve a breach of confidence, legal professional privilege or might incriminate the practitioner, although sub-s.(5) operated so as to make such material inadmissible against the practitioner for an offence other than one under the Act (and in respect of other specified offences).

74 It is plain enough that such a wide power of investigation was given only for the purpose of enabling the Ombudsman to establish whether the practitioner's impugned conduct was likely to be considered by the Tribunal to amount to misconduct - in the context of this case, whether Power's impugned conduct was so heinous that the Tribunal was likely to conclude that, by reason of that, Power was a person "not of good character" or otherwise "unsuited to engage in legal practice". It is also clear that the power could not be exercised capriciously, but had to be exercised reasonably and fairly[67] to all concerned, including the legal practitioner under investigation. In particular, given that the practitioner served with such a request would have been compelled to respond to the Ombudsman's demand, even if the response was against his or her interests, fairness required that the s.149 request contained sufficient information to enable the practitioner to understand what was the alleged wrongful conduct in respect of which an "explanation" was sought and whether such conduct could constitute relevant misconduct. Without such information, the practitioner would not be able to make an informed decision as to what "explanation" was required or whether the Ombudsman had exceeded the power conferred on her by s.149. As Davies, J. observed in Bannerman v. Mildura Fruit Juices Pty Ltd[68], which was concerned with the validity of a notice issued under s.155(1) of the Trade Practices Act 1974 (Cth) that compelled its recipient to furnish information and produce documents relating to a matter the subject of investigation, such a "notice should give to its recipient sufficient information to enable the recipient to perceive what are the matters in respect of which the Commission requires information or documents, that those matters constitute contraventions or possible contraventions of the Act and that the information and documents sought are relevant thereto". It is true that, in a number of respects, the provision with which that court was concerned differed from s.149, but I think that the principle stated by Davies, J. applies to the present situation.

75 In order to determine whether the Ombudsman's manner of investigation of the Draper complaint was a proper exercise of her power, it is necessary to look first at the terms of the complaint and then see what steps she took by way of an investigation of it. Draper's complaint was made against the background of his earlier complaint to the Law Institute about M+K's dealing with the Young Hubbard mortgage practice, in particular, M+K's sale of the Ringlands property, allegedly at undervalue. Draper was not satisfied with the Law Institute's investigation of the complaint and, on 6 April 2000, requested the Ombudsman to review it.

76 The complaint with which we are concerned was in two parts. The first part consisted of an undated "complaint form", completed by Draper, that was accompanied by a seven-page letter, only three pages of which reached the Ombudsman in about July 2001. The second part of the complaint came a few weeks later when Draper furnished to the Ombudsman a seven-page statement that sought to amplify his earlier complaint. I turn first to the contents of the complaint form. A number of things should be noted about it. First, in it, Draper misdescribed himself as the "client of the legal practitioner" despite never having been Power's client. Secondly, he made extravagant and broad assertions of impropriety not only against Power but also against other members of the Law Institute and the Board, including Ian Dunn (the then Chief Executive Officer of the Law Institute), John Gaffney (the then Manager of the Law Institute's complaints section), the Law Institute itself, the Chairman of the Board and Sapountsis. Thirdly, Draper stated incorrectly in the complaint form that "the legal practitioner was consulted [presumably by Draper] regarding Administrative Law ... [and] Mortgages". Finally, in response to the printed request on the second page of the complaint form for "a brief description of the events that [led] to your complaint [and for a statement] what your particular complaints are", Draper wrote:

[33]

In the three pages that accompanied the complaint form Draper asserted, amongst other matters, that wrongful disclosure of confidential information by, inter alia, Power "has been rampant and formed the basis of the sham sale of the Ringlands property ...". He also contended, as I understand it, that, through Mr Martin, QC, Power "set up a sham mediation" in relation to the dispute concerning the impugned sale and that "money [was wrongfully] paid from a fund organised by the receiver, Kevin Power, to reduce the mortgage commitment of [the mortgagor]".

77 The second part of the Draper complaint - the seven-page statement - was also couched in general and extravagant language. Thus, for example, Draper asserted that Power refused to act against M+K essentially because of "their involvement in a conspiracy to defraud the Ringlands Contributors of $550,000". Later, he claimed again that the "sham sale" of the property fetched $550,000 less than "the Mortgage" and that this was done "with the knowledge of Power". Later still in his statement, Draper repeated that the mediation conducted by Mr Martin was effectively a sham, saying that its "main purpose [was] to protect [Power and the Law Institute] from the truth of their involvement in the conspiracy to defraud the original Ringlands contributors."

78 It is clear enough that, in general terms, Draper alleged that Power had engaged in wrongful, including possibly fraudulent, conduct in relation to the sale of the Ringlands property. But the complaint did not identify what acts on the part of Power might have amounted to such wrongful behaviour. Moreover, it was couched in such general extravagant and assertive language as to be, on its face, of doubtful credibility. Nevertheless, the inadequacy of the complaint, by itself, did not mean that the Ombudsman should not have proceeded to investigate it - she was duty bound to do so, as I have explained. But fairness to Power dictated that the Ombudsman should have sought from Draper greater particularity of his assertions before she effectively sought to compel Power to respond.[69] Instead of adopting that course, the Ombudsman summarised the key aspects of the Draper complaint in her letter to Power of 27 August 2001 and demanded that Power provide a "full written explanation of [his] conduct ... in relation to the subject matter of this complaint in 16 days."

79 More specifically, in that letter, the Ombudsman listed ten assertions, which she called "issues", that she said sprang from the Draper document and demanded that Power respond to them. It is sufficient to refer to three of the "issues" to illustrate the deficiency in the request. The first complaint summarised by the Ombudsman was:

[39]

81 I consider, however, that the letter amounted to an impermissible fishing exercise by the Ombudsman. There was no attempt in it to explain what relationship the documents that were sought bore to any alleged impropriety on the part of Power. Moreover, many, if not most, of the documents sought appear to be outside the scope of the Draper complaint. For example, paragraph 1 sought all the files and "other papers" pertaining to the contributory mortgage practice of Young Hubbard, yet Draper did not assert that Power acted improperly in respect of all the contributory mortgages that were sold to M+K. Similarly, paragraph 2 sought "original litigation files" in terms that encompassed litigation other than that in respect of which Draper complained. Likewise, the demand for documents relating to receipt of trust moneys and the sale of the mortgage practice, referred to in paragraph 3, also appears to be outside the scope of Draper's complaint (which related to Power's conduct after the mortgage practice had been sold to M+K). A like observation can be made in respect of the documents described in paragraphs 2, 4 and 5.

82 Power's solicitors responded to the Ombudsman's two letters in some detail by way of a six-page, well-reasoned letter of 13 June 2003. They said, amongst other matters, that because of the absence of correspondence from the Ombudsman after Power's refusal to provide the "explanation" sought in earlier letter, he had assumed that the investigation had been "finalised". It was also pointed out that, in the circumstances, the only applicable definition of misconduct was that in paragraph (b), which, on the face of things, was not made out by the matters set out in the Ombudsman's correspondence. It was also claimed that the investigation failed to accord Power procedural fairness. In the circumstances, it was said, Power would not comply with the Ombudsman's demands. The solicitors did, however, provide a brief explanation of Power's role in the administration of the Young Hubbard practice. For example, they pointed out that he introduced M+K to the principals of Young Hubbard and consented to the sale in question. Importantly, they also said that, on their instructions, neither Power nor any of his agents "did anything in relation to the mortgages administered by the Young Hubbard practice apart from examining documents, obtaining information and responding to various queries from contributories prior to the sale, facilitating meetings of contributories and being the conduit between the contributories and [M+K]."

83 By letter dated 30 June 2003, the Ombudsman informed Power's solicitors that her investigation of Power's alleged conduct referred to in her letters was not concluded. I note that in the letter, notwithstanding that Draper had not claimed that Power's impugned conduct involved his engaging in legal practice, the Ombudsman said that she was not persuaded that Power did not engage in legal practice while conducting the Young Hubbard receivership.

84 Thus, on the material before the Court, the impugned investigation was limited to the correspondence to which I have referred. Nevertheless, as I have indicated, I consider that it has been improperly conducted in the sense that the power of compulsion accorded to the Ombudsman by s.149 has not been properly exercised by her. The letters to Power were not sent to him for the purpose of putting to him a summary of the Draper allegations so as to give him the opportunity of responding if he so elected, but in order to compel him to "explain" the generalised allegations that were said to amount to improper conduct. For the reasons I have given, the letter of 27 August 2001 does not make it apparent what acts or failures to act on the part of Power could have amounted to improper conduct on his part such as to warrant investigation, let alone whether such improper behaviour could constitute relevant misconduct. And, as I have said, the demand for documents contained in the letter of 26 May 2003 amounted in the circumstances, to an impermissible fishing exercise. It is plain that it was not apparent from the face of the requests what it was that Power had to "explain" or whether the Ombudsman's power had been exercised for a proper purpose.

85 But the mere fact that the investigation - which was lawfully commenced - has, thus far, not been conducted properly does not mean that there is a proper basis for the Court restraining the continuation of it. This is particularly so given that Mr Brett did not contend that Power would be unduly prejudiced by the delay in progressing the investigation if it were to proceed. In certain circumstances it might be appropriate for the court to make a declaration to the effect that a particular step in an investigation has not been carried out lawfully, but I consider that, in this case, it is unnecessary for the Court to make such a declaration in relation to the Ombudsman's impugned requests. Her successor will, no doubt, consider whether the investigation should be continued and, if she so concludes, I am confident that, in conducting it, she will have regard to the Court's views on this issue.

86 As I have mentioned,[70] the Ombudsman conducted a like investigation into the conduct of Sapountsis pertaining to the Young Hubbard receivership and what I have said concerning her investigation into the conduct of Power applies, with equal force, to her investigation of Sapountsis' conduct.

Application of Part 6 to trust money

87 The appellants also challenged by this appeal his Honour's decision that Part 6 of the Act applied to trust moneys received by a receiver appointed under Part 9 of the Act. As his Honour noted, the issue was raised in the context of the Ombudsman's claim that each of the appellants failed to comply with the requirements imposed by Part 6 when dealing with trust moneys received by them in the course of the receivership. Mr Merralls submitted that the regime instituted by Part 9 in respect of a court-appointed receiver made it plain that Parliament intended that he or she was to be regulated by Part 9 alone, and not by Part 6, in respect of dealing with trust moneys received in the course of conducting a legal practice in receivership. Counsel accepted that trust moneys received by an authorised receiver in the course of carrying on a legal practice had to be dealt with as money impressed with a trust, but argued that the provisions of Part 9 exhaustively regulated the receiver's conduct in this regard. Mr Merralls contended that the provisions of Part 9 made it clear that Parliament had intended that its terms "cover the field" and operate to the exclusion of Part 6 in respect of trust moneys received by a duly authorised receiver. He also pointed out that it is apparent that some of the provisions of Part 6 would not operate satisfactorily in the context of a receivership and that, importantly, Part 9 treated all money that fell into the hands of a receiver as money of the receivership, thus permitting the mixing of such funds and other money - something prohibited by Part 6, as has already been noted. In considering this issue it is convenient to look first at the strict regime established by Part 6, which rigidly controlled the handling of clients money by a regulated practitioner, and then consider the operation of Part 9, which gave a receiver considerable flexibility in dealing with property the subject of the receivership.

88 The Act created two types of practising certificate - one that authorised a regulated practitioner to receive trust money, and another that did not confer such authority.[71] "Trust money" was relevantly defined by s.3 as money paid to a legal practitioner on behalf of a person. Part 6 of the Act required a legal practitioner who was authorised to receive trust moneys to establish a trust account with an authorised deposit-taking institution before receiving such funds.[72] The practitioner was also required[73] to inform the Board of certain particulars of the trust account within 14 days of it being opened and, subject to one exception, to deposit trust moneys into it as soon as practicable after their receipt. Moreover, a practitioner was required[74] to deposit with the Board a certain percentage of those moneys. Importantly for present purposes, it should be noted that s.174(3) of the Act stipulated that a regulated practitioner could only withdraw trust money from a trust account in certain, limited circumstances. Any breach of this provision, even if not fraudulent, could amount to an offence.[75] Division 3 of Part 6 set out in some detail the recording, auditing and reporting requirements that applied where trust moneys were dealt with by a regulated practitioner. Breach of those provisions could also constitute an offence.

89 Division 4 of Part 6 dealt with deficiencies in trust accounts. Section 188, for example, provided that a deficiency in a trust account without reasonable excuse constituted an indictable offence that carried a maximum custodial sentence of 15 years. A number of other provisions of Division 4 imposed obligations on legal practitioners to report suspected defalcations in respect of a trust account to the Board. Moreover, where there was a deficiency in the trust account of a legal practitioner, s.23(3C) operated so that a renewed practising certificate did not take effect until the deficiency was restored. Similarly, s.37 of the Act empowered the Board to suspend a practising certificate if a deficiency in a trust account that had been revealed by an audit had not been restored.

90 It is plain enough that the scheme of Part 9 was to facilitate the operation of a receivership of a legal practice where the receiver had been appointed by the Supreme Court in circumstances where there were reasonable grounds for believing that there had been, or may have been, a loss of trust moneys by the legal practice due to a defalcation, or for some other reason, so that the court was satisfied that control of the practice, or a relevant part of it, should be placed in the hands of its appointed officer. The powers of a receiver under Part 9 to deal with property of a legal practice necessarily had a broad ambit, and their exercise was subject to the ultimate supervision of the court. In my view, it is unlikely that Parliament intended that those powers should be limited by the restrictions imposed by Part 6 of the Act in respect of handling trust moneys because this would have resulted in a receiver being unduly constrained in his or her day-to-day conduct of the receivership and, in particular, in respect of any trust moneys received in that context.

91 There are a number of indicators in the legislation that point to this conclusion. First, "property" was defined by s.248, for the purposes of Part 9, as including trust moneys, so that, prima facie, the powers given to a receiver who was relevantly authorised to conduct the practice of a regulated practitioner, and to receive the property of that practice, extended to receipt of trust moneys. Secondly, s.250(1) was very broad in its operation and authorised the court to appoint a receiver of "all or any property ... that is held by the regulated practitioner". As has been noted, under s.250 the court was empowered to authorise the receiver (if he or she was a current practitioner) to carry on the legal practice of a regulated practitioner. Next, s.251 empowered the receiver to issue a notice forbidding an authorised deposit-taking institution from allowing money to be withdrawn from a trust account in the name of the regulated practitioner by any person other than the receiver. Failure by the deposit-taking institution to comply with such a requirement could have amounted to an offence.[76] Moreover, s.251(5) empowered the receiver to withdraw all of the money in a trust account that was the subject of such a notice and pay it into a special account in the receiver's name and deal with those funds as a regulated practitioner may have done. This was almost the reverse of the situation contemplated by s.174(3) of Part 6, to which reference has been made earlier.

92 Section 252(2) of Part 9 specified that all money received by the receiver in the course of carrying on the regulated practice - including that which was paid in respect of services provided before his or her appointment as receiver - was to be regarded as "property of the receivership". The same applied essentially, under sub-s.(3), where the regulated practice was conducted, not by the receiver, but by a current practitioner authorised to conduct the practice on behalf of a receiver. Section 253 gave the receiver scope for investing "any money" that had come into his or her hands. This was far wider than the power of investment of trust moneys conferred on a regulated practitioner by Part 6.[77] Sections 254 and 255 also empowered the receiver to call in property held by the regulated practitioner (or to which the regulated practitioner was entitled), including the right to seek from the court the authority to enter any premises and take possession of any property to which he or she was entitled.

93 Thus, it is clear enough, I think, that, if Part 6 applied as the Ombudsman contends, its provisions would have cut across the much wider powers of dealing with trust moneys conferred on a receiver by Part 9 of the Act. Those powers were no doubt provided so as to enable the receiver to deal with property of a regulated practice for the benefit of all of its creditors, but without disregarding the interests of those who may have been beneficial owners of the money in question. As I have said, it seems to me unlikely that Parliament intended to restrict a receiver appointed under Part 9 of the Act by imposing on him or her the obligations created by Part 6. That Parliament intended Part 9 to "cover the field" regarding the receipt and handling of trust monies by a receiver is unsurprising. The receiver's primary role, as I have noted, was to take in all the property of the regulated practitioner and to deal with competing claims in relation to it for the benefit of all creditors, often in circumstances where there were insufficient funds to accommodate all claimants, including those with a beneficial interest in the money that came into the receiver's hands.

94 I consider that, if Parliament had intended a receiver appointed under Part 9 to be relevantly subject to the restrictions imposed by Part 6, it would have said so in terms, as it did in respect of a manager of a regulated practitioner who was appointed by the court pursuant to Part 8 of the Act. Division 3 of Part 8 dealt with the appointment by the court, at the behest of the Law Institute or the Board, of a manager of a regulated practice. Essentially, the role of a manager appointed under s.278 of the Act was to manage the practice of the regulated practitioner. Section 287 stated explicitly that Part 6 applied to trust accounts kept by a manager in the same way that it applied to trust accounts kept by any other legal practitioner. If Parliament had intended that authorised receivers be subject to Part 6, it would have included in Part 9 a provision corresponding to s.287. It is also significant to note that, pursuant to s.280, where a receiver was appointed under Division 2 of Part 9 in respect of a practice to which a manager had been appointed, that appointment terminated the role of the manager. In other words, the appointment of a receiver - who enjoyed the broad powers conferred on him or her by the Act - dispensed with the need for a manager.

95 In the circumstances, I consider that Part 6 did not regulate the manner in which a receiver appointed under Division 2 of Part 9 of the Act, or his or her agents, was to deal with trust moneys received in the course of the receivership. It follows, therefore, that the Ombudsman's investigations into the appellants' handling of trust moneys, including the conduct of Sapountsis and Horvath in relation to the trust account of various firms of regulated practitioners - namely, Kerr & Thomas, Neil R. Halfpenny and Hicks & Kesik - were misconceived and beyond power. These investigations should not have been commenced. Accordingly, I think, appropriate restraining orders should be made.

Practising certificate investigation

[40]

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.

[41]

114 Mr Santamaria informed the Court that the Ombudsman was concerned that the appellants had failed to comply, not only with Part 6 of the Act in relation to the handling of trust moneys, but also with the Trust Account Practice Rules published by the Law Institute.[89] The Ombudsman was concerned that the procedures which the appellants claimed to have followed - that is, those set out in the Manual adopted by the first appellant and provided to his staff as a guide for conducting court-appointed receiverships - were less stringent than those imposed by the Act or the Rules and hence, that compliance with them was insufficient to meet their legal obligations. Finally, the Ombudsman claimed that Sapountsis and Horvath had, in any event, failed even to comply with paragraph 7 of the Manual, which deals with the opening of new trust bank accounts in the name of the receiver and the steps that should be taken thereafter to deal with trust moneys.

115 In her letter of 29 April 2005 addressed to Power, and her letters of 2 May 2005 addressed to Sapountsis and Horvath respectively, the Ombudsman said "I am now concerned with the adequacy of the processes and procedures [in relation to the handling of clients' money] which, according to [your] evidence in the proceeding and responses in the course of my investigation, you claim to follow." As I have noted, the Ombudsman asserted that the Manual was not as prescriptive as the Rules and opined that her concerns warranted her continuing her investigation into the appellants' conduct in this respect. By her letters, the Ombudsman required, in purported exercise of her power under s.149(1)(b), that each of the appellants provide to her documents in relation to the receivership of Thomas & Kerr, Neil R. Halfpenny and Hicks & Kesik, on the basis that the documents available to her indicated that errors had been made by them in the distribution of trust funds, the recording of trust ledgers and the auditing of trust accounts.

116 Paragraphs [114]-[124] of the Ombudsman's affidavit of 24 May 2004 (filed in the proceeding) summarised her concerns in this regard. The Ombudsman there listed the errors which, she said, demonstrated that the appellants were in breach of their relevant obligations in relation to the handling of trust moneys. It is plain, however, that the "breaches" were no more than bona fide errors that were corrected by the appellants before the Ombudsman's investigation into this issue commenced - albeit, in some cases, some time after the discovery of the error. Thus, for example, in a letter of 19 May 2003 from Power to a client of the firm in question, Power informed the client that the proceeds of the discharge of the mortgage were distributed to contributors on 1 November 2001 and that the principal and interest to which the client was entitled were erroneously paid to another contributor. The letter went on to say that this error had been rectified and it enclosed a cheque to the client in the sum owed, including 5 per cent interest paid on the principal calculated from 1 November 2001.

117 Importantly, the documents exhibited by the Ombudsman to her affidavit make it clear that the transactions upon which she relies, to ground her claim that she had "reason to believe" that the appellants impugned conduct might amount to misconduct or unsatisfactory conduct, did not relate to the carrying on of a legal practice.[90] It follows that the Ombudsman's investigation was thus confined to examining whether the appellants' conduct in relation to those transactions fell within the definition of misconduct in paragraph (b). But the admitted errors were bona fide errors made by Power's staff and could not have given rise to a reasonable concern that they involved misconduct under paragraph (b) of the definition. I mention for completeness that, on the material provided, the so-called "pooling" of mortgage money by the receiver, which the Ombudsman stated caused her some concern, did not involve Power disregarding the separate beneficial interests of those who were entitled to those funds.

118 In the circumstances, I consider that, for reasons which must be apparent, there was no proper basis for the Ombudsman undertaking or continuing an investigation under the Act in relation to the above conduct of the appellants. Accordingly, an order restraining the respondent from continuing such an investigation should be made.

Notice of Contention

119 The Ombudsman, by way of notice of contention filed on 16 September 2005, argued that, even if the Court were minded to make the declarations sought by the appellants, such declarations should not be made in the absence of proper parties - such as, for example, the beneficiaries of the various trust accounts to which the declarations might relate. In short, the Ombudsman contended that the appellants are effectively estopped from seeking such relief because they failed below to join the relevant parties. This point, however, was not taken below and it is clearly too late to raise it at this stage. In any event, it has no merit, given that those who are not parties to a proceeding in which declarations are made would not be bound by them and, in the circumstances, would not be prejudiced.

Conclusion

120 To reiterate, I consider that declarations and orders to the following effect should be made.

[43]

[1] Para [70].

[2] Para 74.

[3] cf. Murray v Legal Services Commissioner [1999] NSWCA 70; (1999) 46 NSWLR 224.

[4] [1984] FCA 156; (1984) 2 FCR 581.

[5] See [1999] VSC 44.

[6] Several experienced counsel appeared on the application.

[7] Two examples of erroneous payments were referred to, but the evidence did not suggest any misappropriation.

[8] [1924] 1 Ch. 280.

[9] See the 1989 issue at pp.200-207.

[10] Vol. 1, esp. at pp.731-737.

[11] It may also be desirable to consider carefully the definition of "property" made subject to the receivership. Under the Act the definition was merely inclusive, whereas under the Legal Profession Practice Act 1958 it was comprehensive. Under the Legal Profession Act 2004 a receiver is appointed "for a law practice" (s.5.5.1) and that carries with it the right (s.5.5.6) to take possession of its "regulated property", defined in s.5.1.2.

[12] The first appellant was appointed receiver by the court upon application by Victorian Lawyers RPA Ltd, which, as I explain later, was a body accredited under the Act as a Recognised Professional Association ("RPA"). Victorian Lawyers RPA Ltd subsequently changed its name, in December 2003, to the Law Institute of Victoria Ltd. For convenience, I will refer to the Victorian Lawyers RPA Ltd and its successor as "the Law Institute".

[13] See item 8.9(1) of Schedule 2 of the new Act.

[14] For convenience, I shall deal with the application as if it were an appeal.

[15] The Law Institute of Victoria was incorporated by the Law Institute Act 1917 - see s.2A of the Legal Profession Practice Act 1958.

[16] The Victorian Bar Council was the committee of counsel on the Bar roll constituted under the Bar rules as the Victorian Bar Council - see s.14A of the Legal Profession Practice Act 1958.

[17] Legal Profession Practice Act 1958, ss.14Q and 32F.

[18] Victoria, Parliamentary Debates, Legislative Assembly, 20 June 1996 at 983 (Attorney-General Jan Wade).

[19] Victoria, Parliamentary Debates, Legislative Assembly, 20 June 1996 at 983-4.

[20] Victoria, Parliamentary Debates, Legislative Assembly, 20 June 1996 at 982.

[21] Division 1 of Part 6 of the Act.

[22] Division 1 of Part 4 of the Act.

[23] See s.138 of the Act. Under s.138(1) of the Act, a person could only make a complaint to the Board if the RPA, of which the legal practitioner the subject of the complaint was a member, was no longer accredited, or if the legal practitioner or firm was a regulated practitioner of the Board at the time of the alleged conduct.

[24] See s.393 of the Act.

[25] See definition in s.137 of the Act.

[26] See s.151 of the Act.

[27] See definition in s.137 of the Act.

[28] See s.151 of the Act**.**

[29] See Division 1 of Part 11 of the Act.

[30] See ss.17-19 of the Act.

[31] See s.19(4) of the Act.

[32] See s.73 of the Act.

[33] The Victorian Bar Inc. was incorporated under the Associations Incorporation Act 1981 - see s.1.2.1 of the Legal Profession Act 2004.

[34] Unless so certified, a person could not lawfully engage in legal practice in Victoria - see s.314 of the Act. Also, see s.318, which provided that a legal practitioner or firm was prohibited from employing a person who did not hold a practising certificate to perform work "in connection with the practitioner's or firm's legal practice".

[35] See s.72. The rules were required to deal with management, accounting, auditing and reporting of trust money and trust accounting.

[36] See s.249 of the Act.

[37] See s.250(2) of the Act.

[38] Victoria, Parliamentary debates, Legislative Assembly, 20 June 1996 at 984.

[39] See s.147 of the Act.

[40] See s.145 of the Act.

[41] See s.151 of the Act.

[42] See s.148 of the Act.

[43] See s.153 of the Act.

[44] See s.145(1) of the Act.

[45] See s.145(2) of the Act.

[46] See s.154(2) of the Act.

[47] See s.3 of the Legal Profession Act 2004.

[48] Victoria, Parliamentary debates, Legislative Assembly, 16 November 2004 at 1543.

[49] In relation to the Draper complaint, I propose, in the first instance, to deal only with the Ombudsman's investigation of the conduct of Power - a like investigation was undertaken in relation to Sapountsis and it is plain that the same considerations apply to both investigations.

[50] See s.21(1)(b) of the Act.

[51] See Victorian Lawyers RPA Ltd v. Daniel Sydney Slattery [2003] VSC 228 at 2[7] per Cummins, J.

[52] [2005] VSC 2.

[53] His Honour limited his discussion on this point to the issue of findings of misconduct. But the investigation commenced by the Ombudsman appears to have been concerned with whether the impugned conduct amounted to misconduct or unsatisfactory conduct. In her letter of 12 September 2003, the Ombudsman explicitly stated that she was investigating Power's conduct having regard to whether it might amount to either misconduct or unsatisfactory conduct.

[54] At [53].

[55] At [95].

[56] More particularly, the Ombudsman alleged that she was concerned by the accounting and auditing practices revealed to her by documents provided by the appellants or others in respect of the practices of Hicks & Kesik, Hussey & Co. and Kerr & Thomas of which the first appellant was the receiver. The Ombudsman later raised similar concerns in respect of the practice of Neil R. Halfpenny.

[57] At [87].

[58] See paragraph [55] above.

[59] Notably, in the Ombudsman's written submissions to this Court filed on 23 September 2005, it was contended that the appellants had, in any event, failed to comply with the procedures set out in the Manual in respect of trust accounting procedures.

[60] Paragraph [50] above.

[61] Section 145(2) relevantly provided:

"(2) The Legal Ombudsman may investigate -

...

[52]

[65] Emphasis added.

[66] See sub-ss.149(1) and (2) of the Act.

[67] See, for example, the observations of Ormiston, Coldrey and O'Bryan, JJ. in Cornall v. A.B. (A Solicitor) [1995] VICSC 7; [1995] 1 V.R. 372 at 396 and 401; and Murray v. Legal Services Commissioner [1999] NSWCA 70; (1999) 46 N.S.W.L.R. 224 at 241 per Sheller, J.A. with whom Priestley and Stein, JJ.A. agreed.

[68] [1984] FCA 156; (1984) 2 F.C.R. 581 at 591.

[69] Such a course would also have assisted the Ombudsman in making her ultimate decision as to the possible resolution of the complaint.

[70] See footnote 49.

[71] See s.20 of the Act.

[72] See s.173 of the Act.

[73] See s.177 of the Act

[74] See s.179 of the Act.

[75] See s.174(5) of the Act.

[76] See s.250(4) of the Act.

[77] See s.174 of the Act.

[78] Emphasis added.

[79] Section 3 of the Act defined "firm" to mean a partnership and "incorporated practitioner" to mean a registered company.

[80] Emphasis added.

[81] Relevantly, s.23(3C) of the Act was in the following terms:

"A practising certificate issued on application under this section does not take effect...until the applicant has remedied the failure to comply [with the requirements of the provision]".

[82] [1980] FCA 79; (1980) 30 A.L.R. 559.

[83] At 571. See also Inland Revenue Commissioners v. Rossminster Ltd [1979] UKHL 5; [1980] 2 W.L.R. 1 at 49 where Lord Diplock said "The grounds on which the officer acted must be sufficient to induce in a reasonable person the required belief before he can validly [exercise his or her powers] under this subsection".

[84] [1990] HCA 26; (1990) 170 C.L.R. 104 at 112 per Mason, C.J. and Brennan, Deane, Dawson, Toohey, Gaudron and McHugh, JJ.

[85] See Pilnara Pty Ltd v. Commissioner of Taxation [1999] FCA 945 at [17]-[18] per Gyles, J.

[86] See paragraphs [54]-[55] above.

[87] As I have said, consequent upon the orders of the learned trial judge, the Ombudsman limited her investigation into this matter to whether such conduct would be likely to ground a finding of unsatisfactory conduct by the Tribunal. This was because his Honour held that the effect of Cummins, J.'s order was to clear the first appellant of any alleged misconduct.

[88] The affidavits were filed in the proceeding.

[89] See paragraph [57] above.

[90] Thus, for example, exhibit "KDH 63" to the Ombudsman's affidavit of 24 May is a copy of the letter of 19 May 2003 written by Sapountsis on behalf of Power to a client of Kerr & Thomas that concerned the discharge of a mortgage. The letterhead makes it plain that it was sent by Power as the receiver of the regulated practitioner and that it was signed on his behalf as "Receiver of the trust mortgage property of Kerr & Thomas, solicitors".

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Judgment (52 paragraphs)

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Legislation Cited (4)

Cases Cited (2)