Supreme Court of Tasmania (Full Court)|2013-02-01|Before: Crawford CJ, Wood JJ, Blow J, Tennent J

The Solicitors' Trust v Oxenbould [2013] TASFC 2 (1 February 2013)

CITATION: The Solicitors' Trust v Oxenbould [2013] TASFC 2

OXENBOULD, Michelle Kay (as trustee of the Trust No 1)

BURLEY, Victoria Rose (as trustee of the Trust No 2)

APPEALED FROM: Oxenbould v The Solicitors' Trust [2011] TASSC 57

Oxenbould v The Solicitors' Trust (No 2) [2011] TASSC 63

Professions and Trades - Lawyers - Fidelity and guarantee funds - Claims against fund - Tasmania - Claims made under Legal Profession Act 1993 - Act repealed by Legal Profession Act 2007 - Claims rejected after the repeal - Which Act applied - Effect of transitional provisions - Whether Solicitors' Trust had a discretion to accept or reject claims - Entitlement to interest and costs.

Legal Profession Act 2007 (Tas), ss381, 382, 388(6); Sch9, cls 23(2), 38(3).

Statutes - Acts of Parliament - Interpretation - Interpretation Acts and provisions - Preservation of rights, liabilities and legal proceedings on amendment, repeal, lapsing etcetera of Act or provision - Accrued right, privileges and liabilities - Right to claim compensation from Solicitors' Guarantee Fund - Claims made under Legal Profession Act 1993 - Act repealed - Claims rejected under the repealing Legal Profession Act 2007 - Which Act applied - Effect of transitional provisions.

Legal Profession Act 2007 (Tas), Sch9, cls 23(2), 38(3).

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; (2009) 239 CLR 27; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, referred to.

Judgment Number: [2013] TASFC 2

THE SOLICITORS' TRUST v MICHELLE KAY OXENBOULD (as Trustee of the Trust No 1) and VICTORIA ROSE BURLEY (as trustee of the Trust No 2)

Both the appeal and cross-appeal are allowed in part.

The further hearing of the appeal and the cross-appeal is adjourned for submissions as to what directions, if any, should be given to the appellant concerning the terms and conditions it should impose on the acceptance of the claims and as to the terms of the Court's orders.

THE SOLICITORS' TRUST v MICHELLE KAY OXENBOULD (as Trustee of the Trust No 1) and VICTORIA ROSE BURLEY (as trustee of the Trust No 2)

1 There is an appeal and a cross-appeal. The appeal is from orders made by Blow J upholding two appeals, one by the first respondent and the other by the second respondent, against the determinations of the appellant ("the Trust") wholly disallowing their claims for reimbursement from the Solicitors' Guarantee Fund pursuant to the Legal Profession Act 1993. Oxenbould v The Solicitors' Trust [2011] TASSC 57. The cross-appeal relates to orders made with respect to interest and costs.

2 Those two appeals related to funds belonging to two discretionary family trusts that were invested in a mortgage loan scheme of Piggott Wood & Baker, a Hobart legal firm. The scheme collapsed in 1998 as a result of imprudent lending. Investors in the scheme made claims against the Guarantee Fund under the 1993 Act and all except the respondents fully recovered the principal sums that had been invested and lost, but not interest. Some of the principal recovered came from the Guarantee Fund and possibly other sources via the Trust, and some from the liquidator who had been appointed under the Corporations Act 2001 (Cth), s601EE(1), in respect of certain loans.

3 As trustees of the two trusts, the respondents sought payment from the Fund of principal sums invested in mortgage loans with the firm and unpaid interest on those investments. They made their claims in 2007 when the 1993 Act was in force. On 31 December 2008 the Legal Profession Act 2007 came into force. It repealed the 1993 Act, created a new scheme for claims for compensation and contained transitional provisions concerning some claims made under the 1993 Act but not finalised. On 7 April 2009 the Trust disallowed the respondents' claims for reasons based on the 2007 Act. In summary, the Trust gave the following reasons for doing so:

(a) The principal sums invested and lost were neither pecuniary losses because of a default nor pecuniary losses resulting from a default as required by the 2007 Act, ss371(1) and 380(1). In essence, the Trust determined that the principal sums were invested on behalf of the respective trusts by one of their trustees, John Thomas Turner, who was also a partner of the firm directly responsible for the loan and aware of the circumstances that imperilled the investment. The Trust was of the view that the loss of the invested money could not be said to be because of the firm's default or to have resulted from the firm's default, but was more properly characterised as a loss which resulted from the trustees investing funds in a loan which the trustees knew was tainted by circumstances which constituted a default. The trustees had assumed the risk of losing the amounts invested by investing with full knowledge of the circumstances surrounding the loans.

(b) Unpaid interest on invested monies was not a pecuniary loss in respect of which a claim might be made against the Guarantee Fund under Pt3.5 of the 2007 Act because it did not fall within the description of the types of loss covered by the definition of "pecuniary loss" in s350.

(c) In the opinion of the Trust, the respondents were likely to be paid the amounts invested from another source, namely the liquidator of the Piggott Wood & Baker Mortgage Fund. In that regard, the Trust relied on the provisions of the 2007 Act, s383(1)(c), that a person is not entitled to recover from the Guarantee Fund an amount equal to the value of other benefits "that (in the opinion of the Trust) are likely to be paid to or received by the person ... from other sources".

4 The principal issues between the Trust and the respondents on the appeal are:

Which of the 1993 and 2007 Acts applied to the determination of the claims in certain regards.
Whether under the 1993 Act the Trust had a discretion to reject the respondents' claims, and whether the matter should be remitted to the Trust to determine under s114(3A) whether it should impose conditions on the acceptance of the claim.
Whether under the 2007 Act the respondents had to prove that there was no other source of funding reasonably available to them and, if so, whether the Trust was entitled to reject their claims in the exercise of a discretion.

The principal contentions of the parties in the proceedings

5 In summary, the respondents' principal contentions in the proceedings were as follows:

Money belonging to the two discretionary trusts was lost as a result of members of the firm breaching their fiduciary duties.
Those losses were compensable pursuant to the 1993 Act.
The Trust had no discretion to disallow claims for compensable losses under the 1993 Act.
After the repeal of the 1993 Act, the provisions of the 2007 Act did not become applicable to the respondents' claims. Those claims should therefore have been determined as if the 1993 Act was still in force.
The involvement of John Turner as a partner in Piggott Wood & Baker and in making decisions as to the investment of funds of the two discretionary trusts was irrelevant to the respondents' rights to claim and receive compensation.

6 In summary, the Trust's principal contentions in the proceedings were as follows:

Under the 1993 Act, the Trust had an unfettered discretion to allow or reject claims.
Claimants under the 1993 Act only had a right to have their claims determined, as distinct from a right to compensation.
After its commencement, the 2007 Act was applicable to the determination of the respondents' claims.
Section 383(1)(c) of the 2007 Act precluded the respondents from recovering any compensation because they were likely to be paid by the liquidators.
Each of the respondents' claims related to losses which resulted, not from conduct by members of the firm of such a nature that the respondents became entitled to make a claim, but from the conduct of John Turner, not in his capacity as a member of the firm, but as a trustee, or the agent of the trustees, of the discretionary trust in question.
Even if compensation was payable under the 2007 Act, no interest was payable because under s382(1) of that Act there were special circumstances warranting a refusal to pay interest.

A summary of some of the provisions of the 1993 Act

7 Under the 1993 Act, a person who claimed to have suffered loss as a result of a "fiduciary default" by a firm of legal practitioners was entitled to make a claim for payment out of a Court fund. A "fiduciary default" was not confined to acts of dishonesty or fraud. It included a failure of a firm to account for money held on trust by it, a breach of any duty by a firm as trustee in relation to money held on trust by it and a defalcation, misappropriation or misapplication of money held on trust by it.[1]

8 Further, because the 1993 Act was silent as to the matter, claims could be made for trust money lost in a managed investment scheme, mortgage financing, or a mortgage investment scheme undertaken by a firm.

9 Under the 1993 Act, certain persons, including the Law Society and a person who claimed to have suffered loss as a result of a "fiduciary default", were permitted to apply to the Court for an order declaring a firm to be in default.[2] Such an order was called a default order.

10 When a default order was made, a Court fund was established in the Court[3] and a right to claim against the firm gave rise to an additional right to claim against that Court fund.[4] There was to be paid into the Court fund such money standing to the credit of the firm in trust accounts as the Court ordered, together with such money from the Guarantee Fund as was necessary to meet the requirements specified in s112,[5] which included compensation to clients for the loss of trust money as a result of a fiduciary default.[6] The Trust was required to pay into the Court fund, from the Guarantee Fund, such amount as was sufficient to enable the payment of 100 cents in the dollar by way of compensation to each person entitled to make, and who made, a claim on that Court fund in the amount accepted by the Trust.[7]

11 Once a Court fund was established, the Court had power to order the Trust to advertise for claims to be made against the Court fund and to ascertain prospective claimants.[8] Only a person within the class of persons for whose benefit a default order had been made had the right to claim compensation out of the Court fund.[9] Thus, when a default order was made in respect of certain specified loans, clients who had lost money invested in other loans could not claim upon the Court fund established in consequence of the default order.

12 On receipt of a claim, the Trust had power to accept it, or reject it in whole or in part.[10]

13 The Court had power to direct that a Court fund be applied in the payment of costs and in the payment of compensation for the loss of interest.[11] If such a direction was given, the Trust was also required to pay into the Court fund, from the Guarantee Fund, an amount sufficient to enable the payment of 100 cents in the dollar in respect of those costs and compensation for lost interest.[12]

14 The Trust had power to determine the time or times at which it made the required payments into the Court fund.[13]

15 A Court fund was to be applied by the Court in the compensation to a client for the loss of trust money as a result of a fiduciary default.[14]

A summary of some of the provisions of the 2007 Act

16 The 2007 Act, Pt3.5, introduced a different procedure for the compensation of clients from the Guarantee Fund. The learned judge noted that a number of those differences were significant for the purposes of this case.

17 Under the 2007 Act claims may only be made for compensation arising out of a loss of trust money by reason of a "default", which requires proof of dishonesty or fraudulent dealing.[15] A mere fiduciary default is insufficient to found a claim.

18 Claims cannot be made under the 2007 Act for trust money lost in a managed investment scheme, mortgage financing, or a mortgage investment scheme undertaken by a firm.[16]

19 The 2007 Act abolished the requirement for a Court fund to be created. Instead, payments are directly made from the Guarantee Fund to claimants. Any person may apply to the Court for an order that there has been, or may have been, a default by a law practice.[17] As was the case under the 1993 Act, such an order is called a default order.

20 When a default order is made, the Court also has power, where a claim has been wholly or partly allowed by the Trust, to order that the Trust compensate the claimant from the Guarantee Fund.[18] The Court may also order that money standing to the credit of any trust account of the law practice be paid into the Guarantee Fund.[19]

21 Once a default order has been made, the Trust may advertise for claims about the default and may fix a final date after which claims relating to the default cannot be made.[20] A person may make a claim to the Trust against the Guarantee Fund if that person has suffered pecuniary loss because of a default in respect of which the default order was made.[21] The Trust is required to determine a claim by wholly or partly allowing or disallowing it.[22] It may wholly or partly disallow a claim, or reduce a claim, to the extent that the claimant knowingly assisted in or contributed towards, or was a party or accessory to, the act or omission giving rise to the claim;[23] the negligence of the claimant contributed to the loss;[24] the conduct or the transaction with the law practice in relation to which the claim was made was illegal, and the claimant knew or ought reasonably to have known of that illegality;[25] proper and usual records were not brought into existence during the conduct of the transaction, or were destroyed, and the claimant knew or ought reasonably to have known that records of that kind would not be kept or would be destroyed;[26] or the claimant had unreasonably refused to disclose information or documents to, or co-operate with the Trust or any other authority in the investigation of the claim.[27] Without limiting those powers, the Trust may reduce the amount otherwise payable on a claim to the extent that the Trust considers appropriate if satisfied that the complainant assisted in or contributed towards, or was a party or accessory to, the act or omission giving rise to the claim;[28] unreasonably failed to mitigate losses arising from the act or omission giving rise to the claim;[29] or unreasonably hindered the investigation of the claim.[30]

22 If the Trust wholly or partly allows a claim, it is required to order payment of the claimant's reasonable legal costs involved in making and proving the claim, unless it considers that special circumstances exist warranting a reduction in the amount of costs, or warranting a determination that no amount should be paid for costs.[31] There is also a power to order payment of the claimant's reasonable legal costs even if the Trust wholly disallows the claim.[32]

23 "In determining the amount of pecuniary loss resulting from a default, the Trust is to add interest on the amount payable (excluding interest), unless the Trust considers that special circumstances exist warranting a reduction in the amount of interest or warranting a determination that no amount should be paid by way of interest."[33] The interest is to be calculated from the date on which the claim was made, to the date the Trust notifies the claimant that the claim has been allowed, at the rate of 5 per cent per annum or as determined under regulations.[34]

24 A claimant is not entitled to recover from the Guarantee Fund any amount equal to amounts that, in the opinion of the Trust, are likely to be paid to or received by the claimant from other sources in respect of the pecuniary loss to which the claim relates.[35] There are additional provisions barring an entitlement to recover from the Guarantee Fund in certain circumstances.

Under the 1993 Act every claimant who was eligible to receive compensation had a right to such compensation and not only a right to a discretionary determination. The Trust had no discretion whether to accept, reduce or reject a claim for compensation by an eligible claimant. This determination is attacked by grounds 1 and 2 of the appeal.
By virtue of the Acts Interpretation Act 1931, s16(1), a claimant who was eligible to receive compensation from a Court fund under the 1993 Act, and who had made a claim which had not been determined by the Trust before the commencement of the 2007 Act, had a right to compensation and neither the right to compensation nor the pending claim was affected by the repeal of the 1993 Act, "unless the contrary is expressly provided"[36] in the 2007 Act.
Having regard to the Acts Interpretation Act, s16(1), and the need to interpret the transitional provisions of cl 23(2) of Sch9 of the 2007 Act consistently with the transitional provisions of cl 38(3) of that Schedule, the meaning of cl 23(2) is that Pt3.5 of the 2007 Act applies to a matter giving rise to a claim under the 1993 Act "with the necessary modifications"[37] required by cl 38(3), if that claim was not made or finalised before the 2007 Act commenced. This determination is attacked by grounds 3, 4 and 5 of the appeal.
The "necessary modifications" required to be made by cl 38(3) are those that are needed in order to give effect to the Acts Interpretation Act, s16(1). This determination is attacked by ground 7 of the appeal.
The consequences of that interpretation in relation to claims made under the 1993 Act, but not finalised before the commencement of the 2007 Act, are as follows:
- Such claims must be rejected unless there was a right to claim against the relevant firm within the meaning of the repealed s111(3).
- Such claims must be rejected unless the claimant was a "client" for the purposes of the repealed s112(1)(a).
- Such claims must be rejected unless there was a "loss of trust money or other property as a result of a fiduciary default" within the meaning of the repealed s112(1)(a).
- Such claims may not be rejected under the new s366(2) on the basis that they relate to mortgage investments. That is a necessary modification to the 2007 Act.
- Such claims may not be rejected under the new s350 on the basis that there was no dishonesty. That is another necessary modification.
- Such claims may not be rejected under the new s383(1)(c) on the basis that, in the opinion of the Trust, the claimants are likely to be paid from other sources. That is a third necessary modification.
- The Trust may not wholly disallow, partly disallow, or reduce a claim on a discretionary basis as provided for in the new s378. That is another necessary modification.
- Since the determinations relating to such claims are made under the 2007 Act, albeit with the necessary modifications, aggrieved claimants may appeal therefrom pursuant to the new s388(1). Thus, the two appeals to the learned judge were competent.
- On the hearing of an appeal relating to such a claim, the appellant need not establish that "the whole or part of the amount sought to be recovered from the Guarantee Fund is not reasonably available from other sources", as required by the new s388(3)(a). That is another necessary modification.
- When such a claim is allowed, interest is payable under the new s382(1), unless it is determined that special circumstances exist warranting the payment of reduced interest or no interest. There is no need for any modification to s382(1).

The sixth and ninth dot points are attacked by ground 8 of the appeal.

Under the 1993 Act, did the Trust have a discretion whether to accept, reduce or reject a claim?

26 The learned judge determined that every claimant under the 1993 Act who was eligible to receive compensation had a right to it, and not just a right to a discretionary determination by the Trust. It was regarded as an important question when considering whether the respondents' rights were accrued rights for the purposes of the Acts Interpretation Act, s16(1)(c).

27 The Trust argues that the determination was erroneous having regard to the 1993 Act, s114(3), which provided:

The Trust's argument is that by the use of the word "may", subs(3) gave the Trust a discretion whether to accept a claim or to reject it in part or in whole.

28 The provisions of the Acts Interpretation Act, s10A(1), that in any Act, the word "must" is to be construed as being mandatory, the words "is to" and "are to" are to be construed as being directory, and the word "may" is to be construed as being discretionary or enabling, as the context requires, do not apply to this case, for by virtue of s10A(2), they apply only to statutory provisions passed after 14 November 2000 and therefore, not to the 1993 Act. Nevertheless, the statement in s10A(1)(c) that the word "may" is to be construed as being discretionary or enabling, as the context requires, highlights the issue with which I am dealing. In light of the use of the word "may" in s114(3), was it to be construed as being discretionary or was it to be construed as enabling? The Trust argues that it was to be construed as discretionary and the respondents argue that it was to be construed as enabling.

29 When construing the subsection, regard must be had to the principles of statutory construction summarised by McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at pars[69] - [71], and by French CJ in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; (2009) 239 CLR 27 at par[47]. The text used, and its context, are paramount considerations.

30 Having regard to the text of subs(3), and to the context in which it appeared in the 1993 Act, my conclusion is that the intention behind it was to prescribe the powers of the Trust following receipt of a claim. In other words, it was facultative or, to put it another way, enabling. It gave to the Trust a power to accept the claim, a power to reject it in part and a power to reject it in whole. Subject to any other specific powers or limitations of powers in the Act, the subsection was the source of the Trust's powers in response to claims. It was empowered to do one of the three things to which it referred. It was not empowered to do anything else. So, effectively the Trust was obliged to do one of those three things.

31 It would be to strain the language used in the subsection to interpret it as meaning that the Trust might in its discretion accept a claim, that it might in its discretion reject a claim in part, or that it might in its discretion reject a claim in whole. If that was the case, the Trust would have a discretion to do none of those things. It would also be straining the language to interpret the subsection as meaning that the Trust had a discretion as to which of the three courses it followed, but was obliged to follow one of them.

32 There was a somewhat similar provision in the 1993 Act that should also be interpreted as facultative and not as bestowing a discretion. It was in s115. Subsection (1) gave to a person aggrieved by a decision of the Trust to reject a claim, or to impose terms or conditions on the acceptance of a claim under s114(3A), a right to apply to a judge to review the decision. In a similar form to s114(3), s115(3) provided as follows:

"(3) On the hearing of an application, a judge may-

(a) affirm the decision of the Trust to reject the claim, or to impose terms or conditions on the acceptance of the claim in part or in whole; or

Subject to s115(4), which concerned the power to order costs, subs(3) prescribed the powers of a judge on a review, and at the same time restricted those powers to the ones stated.

33 On the other hand, s115(4) provided that "a judge, in determining an application, may make such order for costs as the judge considers just". The introduction of the element of what was just into subs(4), together with the use of the word "may", was a clear indication that unlike subs(3), subs(4) contained a discretion. An example of another such provision was s114(3A), which provided "if the Trust is of the opinion that there is a reasonable possibility that the person lodging the claim may recover part or all of the loss to which the claim relates, the Trust may impose terms or conditions on the acceptance of the claim". It indicated that if the Trust formed the necessary opinion, it had a discretion to impose terms and conditions on the acceptance of the claim.

34 That a judge had no discretion under s115(3) is supported by the nature of the fund out of which claimants were to be paid and by the provisions of s112(1). It was a Court fund, and s112(1) gave a direction that was not expressed in the form of a discretion, that a Court fund in respect of a firm "is to be applied by the Supreme Court in ... the compensation to a client for the loss of trust money ... as a result of a fiduciary default" and other associated objects. Section 112(2) excluded the application of the Court fund to compensation for the loss of interest, but that was subject to subs(3), which was so worded as to give the judge a discretion whether to award interest, and also a discretion to make an order for costs.[38]

35 Another provision of the 1993 Act that was similar in form to s114(3), and which supported the respondents' argument that no discretion was created by s114(3), was s111(1). It stated that "the following persons may apply to the Supreme Court for an order declaring a firm or legal practitioner to be in default", and it then listed those persons. It is not arguable that its intent was to empower those persons with a discretion whether to apply for a default order. Plainly, it was intended to be facultative or enabling, and nothing more.

36 Further, the Acts Interpretation Act, s8A, directs that in the interpretation of a provision of an Act, an interpretation that promotes the purpose or object of the Act is to be preferred to an interpretation that does not promote the purpose or object. The direction accords with common law principles of statutory construction. See Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority (supra) at par[47]; Statutory Interpretation in Australia, 7th ed, LexisNexis 2011, by Pearce and Geddes, par[2.10]. I agree with the learned judge that when the purpose or object of the Act is considered, the interpretation he favoured is to be preferred. The provisions of Pt9 of the 1993 Act, in which s114 was contained, had as their object the protection of money belonging to clients of practitioners and the payment of compensation to clients who had suffered losses as a result of breaches of fiduciary duties by practitioners. The provisions amounted to beneficial legislation and they should be interpreted liberally, consistently with the purpose and object of the Act. IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1 per Brennan CJ and McHugh J at 12. An interpretation of s114(3) that the Trust had no discretion to reject a claim that qualified under the other provisions of the Act is to be favoured. See Statutory Interpretation in Australia at pars[9.2] - [9.4].

37 Another provision of the 1993 Act that supports the respondents' argument was s111(3). It is common ground that a qualifying default order had been made under the 1993 Act and a Court fund had been established as a result. Section 111(3) provided that "if a Court fund is established in respect of a firm ... a right to claim against the firm ... gives rise to an additional right to claim against that Court fund". It suggested that if a client had a valid claim to make against a firm for compensation for a loss suffered as a result of a fiduciary default, the client also had a valid claim to make against the Court fund. That would have been subject to the other provisions of the Act that confined an entitlement to be paid compensation out of a particular Court fund, but subject to that, it equated the two rights. An unfettered discretion in the Trust to reject a claim on the Court fund that could validly be made against the firm, appears to be at odds with that provision.

38 I do not ignore the argument of counsel for the Trust that a right to claim against a firm is only a right to make a claim against the firm, and does not in its terms equate to a right to recover compensation from the firm. But notwithstanding that point, the drafting of s111(3) supports the view I take. Of course, any person may make a claim, whether or not the claim is soundly based. But in referring to "a right to claim", the reference is more likely to have been intended to refer to an entitlement to be compensated and not merely some nebulous right that everyone has to make a claim for compensation, whether or not there is an entitlement to it. In this connection, counsel for the respondents pointed out that the definition of "claim" in the Macquarie Dictionary, 5th ed, at 317.7, includes "a right to claim or demand; a just title to something".

39 An argument in favour of the respondents arises out of s111(5) and s111(10) of the 1993 Act. Section 111(5) required that if a default order was made, there was "to be paid into a Court fund established in respect of a firm ... such money standing to the credit of any trust financial institution account and trust deposit account of that firm ... as the Supreme Court orders", and s111(10) provided that in such event, the money paid into the Court fund was to be free from any equity which might affect the Trust account from which that money was derived. As counsel for the respondents argued, a consequence of that would have been that clients who were entitled to the benefit of funds standing in a trust account, which became the subject of a default order, became disentitled to that beneficial interest once the funds had been placed in the Court fund. It is unlikely that the legislature intended that the right of a client to an interest in those funds should be converted into one that depended on the exercise of a discretion by the Trust. Clear language would be required before such a construction could be accepted.

40 I also agree with counsel for the respondents that it is unlikely the legislature intended that the Trust would have a discretion to disallow a claim by a person who had suffered loss, without providing guidance concerning how the discretion might be exercised.

41 I do not ignore the argument of the Trust's counsel raising that a firm may have a valid defence to a claim against it. The examples he gave were of a defence based on the Limitation Act 1974 and one based on laches if an equitable claim. Nor do I ignore the argument based on the fact that not all claims made against the Court fund would succeed. For example, s112(1) appeared to limit a right to payment out of the Court fund to those who had been a client of the firm and had suffered loss by reason of a fiduciary default, and Dobson v The Solicitors' Trust [2001] TASSC 99 is authority that compensation will not be directed by the Court to be paid from the Court fund to a claimant unless the loss suffered by the claimant was one in respect of which the material default order was made. But those arguments do not require an interpretation of s114(3) that would give the Trust a discretion whether or not to accept a claim.

42 The learned judge expressed the view, with which I agree, that it was hardly likely that Parliament intended that a judge hearing an application to review a decision of the Trust under s115(1) would have an unfettered discretion to accept, wholly reject, or partly reject claims by clients who had lost money. In the course of coming to that view, his Honour said that the hearing of the application to review would have been a hearing de novo since the Trust was not obliged to give reasons for its decision. It is common ground that although the judge would conduct a hearing de novo, the second observation of his Honour was erroneous, for s114(4) of the 1993 Act required that if the Trust rejected a claim, it had to notify the claimant in writing of the reasons for the rejection. However, the making of that error does not affect the proper outcome of the appeal.

43 The learned judge also found a "little support" for his view in s116(1) of the 1993 Act, which provided that in administering a Court fund, the Court (not the Trust) "may order ... that advance payments be paid out of the Court fund to a person who, in the opinion of the Supreme Court, is suffering personal hardship". That provision should be interpreted as bestowing a discretion on the Court whether to make an advance payment to a person found to be suffering personal hardship. A judge contemplating its exercise would require a reasonable degree of predictability concerning the eventual success of the claim.

44 For the reasons I have given I conclude that the learned judge was correct in his conclusion that every claimant under the 1993 Act who was eligible to receive compensation under that Act had a right to it, and the Trust did not have a discretion to reject the claim. Grounds 1 and 2 of the appeal fail.

45 The Guarantee Fund that existed under the 1993 Act is continued in existence by the 2007 Act, s358(1). The Solicitors' Trust that existed under the 1993 Act is continued in existence as a body corporate under the 2007 Act by s633.

46 Apart from the transitional provisions in Sch9, there is no mention in the 2007 Act concerning what should happen in regard to any default order that may have been made under the 1993 Act, any Court fund that may have been established under the 1993 Act, or any claim that had been made under the 1993 Act.

47 The respondents' case is that their rights were to be determined under the 1993 Act, notwithstanding its repeal by the 2007 Act. They rely on the Acts Interpretation Act, s16(1), and on authority as to the interpretation of repealing Acts in relation to the preservation of accrued rights. The relevant provisions of s16(1) are:

"(1) Where an Act repeals any other enactment then, unless the contrary is expressly provided, such repeal shall not -

(c) affect any right, privilege, obligation, or liability acquired, accrued, or incurred under any enactment so repealed;

(e) affect any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid -

and any such investigation, legal proceeding, or remedy may be instituted, continued, or enforced, and any such penalty, forfeiture, or punishment may be imposed as if the repealing Act had not been passed."

48 The effect of those provisions is that, assuming that the respondents had rights to be paid compensation out of the Court fund established under the 1993 Act, in which case those rights had accrued before the 2007 Act repealed it, they are not affected by the repeal and their claims are to be determined as if the 2007 Act had not been passed, "unless the contrary is expressly provided" in the 2007 Act. The Trust's case is that the contrary was expressly provided by a transitional provision in the 2007 Act, namely Sch9, cl 23.

49 By s660, "the savings and transitional provisions set out in Schedule 9 have effect." Schedule 9 contains many savings and transitional provisions arising out of or concerning many aspects of the 1993 Act and the 2007 Act. Clause 38 contains some general transitional provisions including subcls (3) and (4) which are as follows:

"(3) Without limiting subclauses (1) and (2), if a provision of the old Act [ie the 1993 Act] that corresponds to a provision of this Act would, but for its repeal, have applied in relation to any thing done or being done or in existence before the commencement of this Schedule, the provision of this Act applies (with the necessary modifications) in relation to the thing.

(4) This clause does not have effect to the extent that -

(a) other provision is made by this Schedule; or

(b) the context or subject matter otherwise indicates or requires."

As the learned judge noted, if those were the only relevant transitional provisions, it would be beyond argument that the 2007 Act applied, with any necessary modifications, to the respondents' rights to compensation and to their pending claims. Those provisions do not expressly provide that rights to compensation or pending claims are affected in any way by the repeal of the 1993 Act.

50 But as I said, it is cl 23 of Sch9 upon which the Trust bases its case. It contains specific provisions in connection with claims under the 1993 Act. It states:

"(1) Division 5 of Part 9 of the old Act continues to apply to a claim made against the Guarantee Fund under that Division and finalised before the commencement of Part 3.5 (Solicitors' Guarantee Fund) of this Act.

(2) Part 3.5 of this Act applies to a default occurring before the commencement of Part 3.5 if a claim had not been made or finalised under Division 5 of Part 9 of the old Act in respect of the default before that commencement."

51 It is the Trust's case that cl 23(2) operates so as to make Pt3.5 of the 2007 Act applicable to claims made under the 1993 Act that were not finalised before the 2007 Act commenced. Part 3.5, which is headed "Solicitors' Guarantee Fund", contains all of the material provisions of the 2007 Act that concern the Solicitors' Trust, the Solicitors' Guarantee Fund, defaults by law firms, the making of default orders, the making and determination of claims arising out of defaults and payments from the Guarantee Fund for the purpose of compensating claimants in respect of claims that are allowed.

52 The learned judge commenced the task of interpreting the transitional provisions of the 2007 Act by considering what is meant by cl 23(1). The first point his Honour made, plainly a valid one, was that the subclause refers to a claim made against the Guarantee Fund under the 1993 Act, Pt9, Div5, but there never was a claim against the Guarantee Fund under that Act. All claims were made against Court funds.[39] The Guarantee Fund may have been a source of the money that went into the Court funds,[40] but claims were not made directly against it. The learned judge resolved that problem by concluding that there was no doubt that the subclause was intended to refer to claims by clients for compensation from Court funds, which could reasonably be regarded as claims for indirect compensation from the Guarantee Fund. That conclusion is not attacked by a party and it was correct. There is no other way in which subcl (1) may reasonably be interpreted.

53 Under the 1993 Act, claims were made against the Court fund by lodging them with the Trust.[41] The Trust was empowered to accept them or to reject them in part or in whole.[42] The learned judge concluded that for the purposes of cl 23(1), a claim was "finalised" when it was either accepted, wholly or in part, and paid out of the Court fund, or rejected. That conclusion is not attacked by a party and should also be treated as correct. The learned judge pointed to a number of things that could be done under the 1993 Act after finalisation of a claim. They included the Trust exercising the rights of the clients to recover their losses from the defaulting firm consequent upon the assignment of those rights by s113; the sale or disposal of the firm, or of a partner's interest in it, and/or personal property used for or in connection with the practice of the firm under s117; an order for costs being made and the costs paid under s112(3); and an order for the payment of compensation for the loss of interest being made and the interest paid under s112(3). Once again, the conclusions of the learned judge about those matters are not attacked.

54 Next, the learned judge turned his attention to interpreting cl 23(2). His Honour determined that the only purpose of cl 23(2) was to make it clear that, except in relation to claims made and finalised before the 2007 Act commenced, the 1993 Act no longer applied to any claims that had been made but not finalised, or could have been made but had not been made, under the 1993 Act. That determination is attacked by grounds 4 and 5 of the appeal. Applying the provisions of cl 38(3), his Honour thought that the 2007 Act applied to such claims, but in a modified way so as not to destroy the rights of claimants to compensation that had accrued under the 1993 Act.

55 While cl 23(1) is expressed to concern a claim made and finalised under the 1993 Act, cl 23(2) is expressed to concern "a default occurring before the commencement of Part 3.5 if a claim had not been made or finalised under Division 5 of Part 9 of the old Act in respect of the default before that commencement". A question that arises concerns the meaning of the word "default" in cl 23(2).

56 The word is not defined for the purposes of the 2007 Act generally, nor for the purposes of Sch9. The only definition of it is to be found in s350, which defines a number of words and expressions for the purposes of Pt3.5. Schedule 9 is not in Pt3.5. For the purposes of Pt3.5, the kind of conduct that is encompassed by a "default" as defined in s350 is confined to acts involving dishonesty. A "fiduciary default" for the purposes of the 1993 Act was far more extensive than that, as I pointed out in par[7] of these reasons. It follows that if the word "default" in cl 23(2) is intended to refer to a default as defined in Pt3.5 of the 2007 Act, the subclause does not extend to all conduct that amounted to a "fiduciary default" under the 1993 Act, for example fiduciary defaults that did not involve dishonesty. It would follow that cl 23 does not deal with many acts of fiduciary default under the 1993 Act.

57 However, both counsel agreed that the word "default" in subcl 23(2) is intended to refer to a "fiduciary default" as that term was defined in the 1993 Act, for there is good reason for thinking that cl 23 was intended to cover the field, that is to say to apply to all forms of fiduciary defaults that occurred before the repeal of the 1993 Act, with subcl (1) applying to cases where a claim had been made and finalised, and subcl (2) applying to all other cases of fiduciary defaults. It would be surprising if, having addressed the need for transitional provisions concerning claims for fiduciary defaults that occurred prior to the repeal of the 1993 Act, it was a deliberate decision that the transitional provisions would not deal with a substantial section of those fiduciary defaults without a clear indication that was intended. The Court should interpret subcl (2) on the agreed basis.

58 It was said by the learned judge that, if the word "default" is interpreted in that agreed way, the ordinary literal meaning of cl 23(2) could bring about substantial injustices. Many claims based on fiduciary defaults that occurred before the repeal would be prohibited by it. For example, claims for misappropriations or breaches of fiduciary duty, that would have succeeded under the 1993 Act, would fail if they concerned defaults that did not involve dishonesty, because the definition of "default" in s350 requires dishonesty; all claims relating to managed investment schemes, mortgage financing or a mortgage investment scheme, that would have succeeded under the 1993 Act, would fail, because s366(2) bars them; and a right to compensation under the 1993 Act would have been extinguished by the repeal if the Trust formed the opinion that the loss was likely to be paid from a source other than the Guarantee Fund, because of s383(1)(c). As pointed out by his Honour, investors in mortgage schemes who thought their money was safe because, as a last resort, they could be compensated with money from a Court fund, could find themselves deprived of rights to compensation because they had learned that they had lost money too late for a claim to be made or finalised before the repeal date. Further, the success or failure of a claim might have depended on when the Trust chose to make a determination in relation to it.

59 Indeed, evidence suggests this case illustrates that last point. The respondents made their claims to the Trust in 2007. The Trust was slow to process their claims. The respondents' lawyers expressed concern to the Trust about the delay and the possible effects of it. In February 2008, the Trust advised the lawyers that it had no intention to take any issue concerning the claims because of the prospective commencement of the 2007 Act. The delay continued. The 2007 Act commenced to operate on 31 December 2008. The Trust reneged on its statement of intention and on 7 April 2009 disallowed the respondents' claims for reasons based on the 2007 Act. It appears that the claims of all other claimants that should have been successful under the 1993 Act were accepted by the Trust, presumably before the repeal.

60 Interpreting cl 23(2) is difficult. Upon the basis that the reference to a "default" is to a "fiduciary default" under the 1993 Act, and that it applies to a claim that was not finalised before the repeal, it expressly provides that Pt3.5 of the 2007 Act applies to the claim. What then is the situation, for example, of a claim based on a fiduciary default that did not involve dishonesty? Section 350 provides that Pt3.5 does not apply to such a fiduciary default, but the effect of cl 23(2) is that it does apply. Further, the respondents' claims concern the loss of money entrusted to a mortgage investment scheme undertaken by a firm. Section 366(2) provides that Pt3.5 does not apply to a default that occurs in relation to money so entrusted, but the effect of cl 23(2) is that it does apply.

61 There is nothing in the 2007 Act that suggests that it is intended to extinguish the rights of persons such as the respondents. Certainly, cl 23(2) does not expressly provide for that. As submitted by counsel for the respondents, it seems that what was intended was that some of the provisions of Pt3.5 apply, but not all of them. The problem becomes one of which provisions apply and which do not.

62 Having regard to the general rule of common law that unless the intention appears with reasonable certainty, a statute changing the law ought not to be understood as applying to facts or events that have already occurred in such a way as to affect rights or liabilities which the law had defined by reference to the past events,[43] it can safely be assumed that at the very least, it was the intention of Parliament, as expressed in cl 23(2), that no matter what the nature of the pre-repeal fiduciary default was, it was to be treated as if it was a default under the 2007 Act, Pt3.5, in respect of which a claim may be made and compensation paid. It follows that claims for a pre-repeal fiduciary default not involving dishonesty, and claims for a pre-repeal fiduciary default concerning the loss of money entrusted to a mortgage investment scheme, are to be treated as compensable claims for the purposes of Pt3.5, notwithstanding what ss350 and 366(2) say.

63 The remaining question is what provisions of Pt3.5, that may affect the outcome of the appeal, do apply. After all, some of them must apply because of what cl 23(2) says. The answer for which the respondents argue, and it was the one favoured by the learned judge, is to be found in cl 38(3). It provides that if a provision of the 1993 Act corresponds to a provision of the 2007 Act, and it would, but for its repeal, have applied to anything done or in existence before the repeal, the provision of the 2007 Act applies in relation to the thing, but "with the necessary modifications".

64 In par[39] of his judgment, the learned judge said:

"The transitional provisions in Sch9 to the 2007 Act do not expressly provide that claimants' rights or pending claims are affected by them. They do not evince a clear intention to extinguish claimants' rights under the 1993 Act in situations where they would have no right to claim under the 2007 Act, or when their claims would be rejected under that Act. Having regard to the Acts Interpretation Act, s16(1), and the authorities that I have referred to, I think that cl 23(2) should not be interpreted so as to have that effect. In my view, it should not be given precedence over cl 38(3), but should be interpreted consistently with cl 38(3). That is to say, it should be interpreted as meaning that Pt3.5 of the 2007 Act applies to a matter giving rise to a claim under the 1993 Act, with the 'necessary modifications' required by cl 38(3), if that claim was not made or not finalised before the 2007 Act commenced. The necessary modifications are those that are needed in order to give effect to the Acts Interpretation Act, s16(1)."

65 With respect, his Honour's reliance on the Acts Interpretation Act, s16(1), seems inappropriate for if it applies, the respondents' remedies for their accrued rights could be enforced "as if the repealing Act had not been passed". Effect must be given to cl 23(2) so that Pt3.5 does apply to their claims, at least to an extent. Therefore, ground 7 of the appeal succeeds, although as will be seen, it should not affect the outcome of the appeal.

Under the 2007 Act, did the respondents have to prove there was no other source of funding reasonably available to them and, if there was another source, was the Trust entitled to reject their claims in the exercise of a discretion?

66 The learned judge did not hold that cl 23(2) did not have any effect. What his Honour held was that it should not be given precedence over cl 38(3), but should be interpreted consistently with it. In par[40] of his judgment, he held that the consequences of his interpretation in relation to claims made under the 1993 Act, but not finalised before the commencement of the 2007 Act, included the following:

a necessary modification to the 2007 Act is that such claims may not be rejected under s366(2) on the basis that they relate to mortgage investments;
a necessary modification to the 2007 Act is that such claims may not be rejected under s350 on the basis that there was no dishonesty;
a necessary modification to the 2007 Act is that such claims may not be rejected under s383(1)(c) on the basis that, in the opinion of the Trust, the claimants are likely to be paid from other sources;
a necessary modification to the 2007 Act is that the Trust may not wholly disallow, partly disallow, or reduce a claim on a discretionary basis as provided for in s378;
a necessary modification to the 2007 Act is that on the hearing of an appeal relating to a claim, the appealing claimant need not establish that "the whole or part of the amount sought to be recovered from the Guarantee Fund is not reasonably available from other sources", as required by s388(3)(a).

67 Ground 8(a) attacks what his Honour held in item 3, and ground 8(b) attacks what his Honour held in item 5.

68 It is of no consequence to the outcome of the appeal, but I do not consider that what his Honour held in items 1 and 2 is correct. As I said in par[62], the claims to which they refer cannot be rejected under s366(2) or s350, because what cl 23(2) requires is that the defaults in question be treated as compensable under Pt3.5. That requirement does not come from any modification required by cl 38(3) but from a proper interpretation of cl 23(2).

69 His Honour did not expressly address the requirement of cl 38(3) for its application that "necessary modifications" may only be made to a provision of the 2007 Act that applies if a provision of the 1993 Act, that corresponded to it, would have applied but for the repeal. If his Honour did not overlook that requirement, it is possible, I suppose, that he regarded all of the provisions of the 1993 Act relating to the Guarantee Fund, and the making of claims in respect of defaulting practitioners (ss107 to 118A), as collectively corresponding with all of the provisions of the 2007 Act in Pt3.5. However, such a conclusion is not reasonably open. Clause 38(3) speaks of "a provision" in the singular and not of provisions. It states that if a provision of the 1993 Act corresponds to a provision of the 2007 Act, then the provision of the 2007 Act applies, with necessary modifications, in relation to anything done or being done or in existence before the commencement of the 2007 Act, and to which the 1993 Act would have applied. Further, it should not be overlooked that cl 38(3) applies generally to the 661 sections and nine schedules of the 2007 Act in the light of about 200 sections and eight schedules of the 1993 Act. It is not confined in its operation to claims for defaults.

70 The 1993 Act, s114(3A), provided: "If the Trust is of the opinion that there is a reasonable possibility that the person lodging the claim may recover part or all of the loss to which the claim relates, the Trust may impose terms or conditions on the acceptance of the claim."

71 The 2007 Act, s383(1)(c) provides: "A person is not entitled to recover from the Guarantee Fund any amount equal to amounts ... that (in the opinion of the Trust) are likely to be paid or received by the person ... from other sources in respect of the pecuniary loss to which a claim relates."

72 Those two provisions correspond to each other, for they both deal with a situation where the Trust forms an opinion that a claimant is likely to recover from another source all or part of a loss to which a claim relates. Having regard to the rule of interpretation that a statute changing the law ought not to be understood to affect rights which the law had defined by reference to past events, the requirement for "necessary modifications" to the provisions of the 2007 Act, that is to s383(1)(c), should operate. As a result, the Trust had no power under that provision to disallow the respondents' claims.

73 The learned judge concluded that the Trust erred by rejecting the claims because the respondents were likely to be paid what they had lost from another source. For the reasons I have given, that conclusion was correct. However, cl 38(3) should not be interpreted so as to give the respondents the best of everything and take away from the Trust not only its right under the 2007 Act, s383(1)(c), to reject the claims for that reason, but also the right it had under the 1993 Act, s114(3A), to impose terms or conditions on the acceptance of the claims. As counsel for the Trust submitted, the learned judge's determination did more than preserve vested rights. It gave the respondents a better right than they had had prior to the repeal.

74 Clause 38(3) only requires that s383(1)(c) be modified, and upon a consideration of s114(3A), that can be done by reading down the new right to reject the claims and restore instead the old right to impose terms or conditions on the acceptance of the claims.

75 The question then arises whether this Court should consider the imposition of terms and conditions or whether the question should be remitted for determination by the Trust. What terms or conditions might be imposed was not an issue before the learned judge. It only became an issue during the hearing of this appeal when it was realised that a possible outcome of the appeal was that the power of the Trust to impose terms or conditions on the acceptance of the claims remained.

76 Counsel for the respondents submitted that the Court should not permit the imposition of terms or conditions six years after the claims were first made. He also submitted that if it happens that the respondents are able to recover part or all of their losses from another source, the Trust will be entitled to exercise their right of recovery by virtue of subrogation under either the 1993 Act, s113, or the 2007 Act, s384. Counsel for the respondents made the point that the claims of all other claimants were accepted and paid a long time ago.

77 In response, counsel for the Trust argued that the question whether terms or conditions should be imposed requires deliberation and not a determination "on the run".

78 The solution I favour is to publish the Court's reasons for determining the appeal and invite the Trust to state what, if any, terms or conditions it seeks to impose on the acceptance of the claim and its reasons for seeking them. After hearing from the parties, the Court will be in a better position to determine whether it should resolve the issue or remit it to the Trust.

79 I turn to deal with the next issue. The 1993 Act, s115(1), gave a right to a person who was aggrieved by the decision of the Trust to reject a claim, to apply to a judge to review the decision. By s115(3), the judge hearing the application had power to affirm the Trust's decision, quash it or substitute another decision in its place. The 2007 Act, s388(1), gives a right to a claimant to appeal to the Court against a decision of the Trust to wholly or partly disallow a claim. Under s338(5), the Court may affirm the decision, vary it, set it aside and make a decision in substitution for it, set it aside and remit the matter for reconsideration by the Trust in accordance with any directions or recommendations of the Court, and it may make other orders as it thinks fit. Section 388(3)(a) provides that on an appeal under the section, "the appellant must establish that the whole or part of the amount sought to be recovered from the Guarantee Fund is not reasonably available from other sources, unless the Trust waives the requirement". There was no comparable provision in the 1993 Act, so that under that Act, the applicant for a review was not obliged to establish that fact.

80 The two sections correspond to each other, for they deal with a situation where an aggrieved claimant seeks to have overturned by a judge or the Court the decision of the Trust to reject a claim. Once again, having regard to the rule of interpretation that a statute changing the law ought not to be understood to affect rights which the law had defined by reference to past events, the requirement for "necessary modification" of the provision of the 2007 Act, that is s388, should be applied. As a result, the respondents were not required to establish that "the whole or part of the amount sought to be recovered from the Guarantee Fund is not reasonably available from other sources".

81 Subject to what I said in par[78], grounds 8(a) and (b) fail.

82 The learned judge upheld both appeals and set aside each decision of the Trust that disallowed the claims of the respondents. It was ordered that each matter was remitted for reconsideration by the Trust in accordance with directions that the Trust must allow each of the claims (subject to a deduction of certain sums) and, subject to any change of circumstances after the making of the order, the Trust was directed to determine that no amount should be paid to the respondents by way of interest. The making of that direction concerning interest is attacked by the cross-appeal.

83 His Honour determined that there should be no order as to the costs of the appeals. His Honour also determined that there should be no order relating to the costs involved in making and proving the respondents' claims prior to the making of the Trust's determination of 7 April 2009 by which it disallowed the respondents' claims. The making of that order and those determinations are also attacked by the cross-appeal.

84 When dealing with the cross-appeal, I will continue to refer to the cross-appellants as the respondents.

(1) In determining the amount of pecuniary loss resulting from a default, the Trust is to add interest on the amount payable (excluding interest), unless the Trust considers that special circumstances exist warranting a reduction in the amount of interest or warranting a determination that no amount should be paid by way of interest.

(2) The interest is to be calculated from the date on which the claim was made, to the date the Trust notifies the claimant that the claim has been allowed, at the rate specified in or determined under the regulations.

(3) To the extent that regulations are not in force for the purposes of subsection (2), interest is to be calculated at the rate of 5% per annum.

(4) The interest is payable from the Guarantee Fund."

86 No regulations have been made under subs(2), so that interest under the section is to be calculated at the rate of 5 per cent per annum.

87 The learned judge gave brief reasons for determining that under subs(1), there existed special circumstances warranting a determination that no amount should be paid by way of interest. His Honour said:

"All of the claims by other investors in relation to Piggott Wood & Baker were determined under the 1993 Act before its repeal. None of those other investors has received any 'compensation for the loss of interest' under s112(3)(b) of that Act, nor any interest from any other source. Clearly those are special circumstances. There is no reason why either of these appellants should receive more generous benefits than all the other investors. The special circumstances warrant a determination that no amount should be paid by way of interest."

88 The ground of the cross-appeal attacking that determination asserts that the learned judge erred when he concluded that the fact that other investors in the mortgage scheme had not received "compensation for the loss of interest" under the 1993 Act, s112(3)(b), was a "special circumstance" under the 2007 Act, s382(1), sufficient to exclude the prima facie entitlement to interest.

89 Under the 1993 Act, s112(1) provided that a Court fund in respect of a firm was to be applied in the compensation to a client for the loss of trust money. Subsection (2) provided that compensation under subs(1) did not include compensation for the loss of interest, unless the Court directed otherwise under subs(3), and subs(3)(b) provided: "A Court fund in respect of a firm ... may be applied as the Supreme Court directs after taking into account any recommendations of the [Law Society of Tasmania] in ... the payment of compensation for the loss of interest."

90 It was not submitted on behalf of the Trust that s382 should be modified in its effect because of Sch9, cl 38, it being accepted that the terms of the section apply to the respondents' claims for interest.

91 The claims of all other claimants for monies lost in the mortgage investment scheme were accepted by the Trust and paid prior to the repeal of the 1993 Act. It was agreed by the parties that nothing in the nature of interest was paid to them. There was no evidence whether the other claimants made any attempt to recover interest or compensation for the loss of interest, and if they did, what recommendations were made by the Law Society. However, the Trust concedes that they did not claim interest.

92 The effect of the provisions of the 1993 Act, s112(2) and (3), was markedly different than the effect of the 2007 Act, s382. Under s112(2) and (3), the prima facie rule was that compensation payable under the Act was not to include compensation for the loss of interest and there was no provision for the payment of interest in any other respect. However, under s382 the prima facie rule is that interest is to be added to the amount payable.

93 Further, if payment was made pursuant to s112(3)(b) it was compensation for the loss of interest, and the claimants would have had to establish that they had lost interest before compensation could be ordered. However, under s382, if payment of interest is made it is not compensation for the loss of interest and claimants are not required to establish that they have lost interest. Instead, the payment is interest at a statutory or regulated rate and is recompense for being kept out of receipt of compensation.

94 Further again, the interest referred to in s112(3) may have been lost from the date when the firm first failed to account to the claimant for interest due on the lost money, or from when the firm failed to account to the claimant for the money that was lost. However, under s382 the interest is to be calculated only from the date on which the claim was made to the Trust to the date upon which the Trust notified the claimant that the claim was allowed. In other words, s382 is aimed at requiring payment of prescribed interest on compensable amounts only in respect of the period of time during which the Trust processes and completes its consideration of valid claims.

95 The learned judge had no information concerning when the other claimants made their claims, or how long it took the Trust to process and accept them. On the other hand, the learned judge had evidence that the respondents' claims were made in 2007 and at the time of the learned judge's order on 3 November 2011, about four years later, they had not been allowed by the Trust. (As at today over five years have elapsed since the claims were made and they have not been allowed by the Trust.)

96 Having regard to those matters, the only conclusion open is that the learned judge erred when he concluded that special circumstances existed warranting a determination that, contrary to the prima facie position of s382(1), no amount should be paid to the claimants by way of interest. The evidence that other claimants were not paid compensation for the loss of interest, without evidence of how their claims were processed by the Trust and how long the Trust took to allow them, made comparison with their circumstances a futile one. There was insufficient material justifying a conclusion that special circumstances existed for not allowing the respondents their prima facie entitlement to interest. Further, there is every reason to think that the respondents have had to wait many years longer than the other claimants to have their claims accepted.

97 For those reasons, that part of the order that directed the Trust to determine that no amount should be paid to the respondents by way of interest should be set aside. In its place, there should be an order directing the Trust to add interest on the amounts payable to the respondents calculated in accordance with the 2007 Act, s382(2) and (3).

The question of the costs of the appeals from the Trust to the judge

98 Under the 1993 Act, s115(4), that applied to a claimant who sought to review a decision by the Trust to reject a claim, it was provided: "A judge in determining an application, may make such order for costs as the judge considers just." On the other hand, the provision in the 2007 Act concerning the costs of an appeal to a judge are harder to satisfy. Section 388(6) requires: "No order for costs is to be made on an appeal under this section unless the Supreme Court is satisfied that an order for costs should be made in the interests of justice."

99 When rejecting the respondents' applications for an order that the Trust pay their costs of the appeals, his Honour correctly identified his power to make an order under s388(6) as a discretion to depart from the general rule that there was to be no order as to costs, and the discretion was not to be exercised unless he was satisfied that the order should be made in the interests of justice. Reference was made to Penfold v Penfold [1980] HCA 4; (1980) 144 CLR 311, as authority for the proposition that there is no principle that an order for costs may only be made in a clear case. All relevant considerations may be taken into account.

100 The learned judge rejected a submission by the respondents that, having regard to the 2007 Act, Sch9, cl 38(3), s388(6) should be read with a necessary modification omitting the requirement of the interests of justice. That was because at the time of the commencement of the 2007 Act, the Trust had made no determinations concerning the claims, no application for a review of such determinations had been commenced under the 1993 Act, s115, and therefore, the respondents did not have any accrued rights relating to costs. The respondents have not appealed against that decision.

101 The arguments for the respondents included that their appeals were successful; they conducted themselves properly in pursuing their claims and prosecuting their appeals; public policy considerations warranted costs orders being made in favour of individuals more readily than in favour of statutory authorities; and it was the first case in which a judge had been asked to determine difficult questions of law concerning the repeal of the 1993 Act and the effect of the transitional provisions in the 2007 Act.

102 Circumstances relied on by the Trust included that the case concerned losses resulting from imprudent investments and not from thefts or other acts of dishonesty; the difficult questions of law resulting from the repeal of the 1993 Act and the transitional provisions confronted the Trust as well as the respondents; the Trust acted properly in determining the claims and resisting the appeals; and it was in the public interest that the Guarantee Fund be conserved for the benefit of future claimants.

103 The learned judge expressed the view that if s388(6) had not been enacted, he would have had an unfettered discretion to make orders as to costs in relation to the appeals, and ordinarily costs would have followed the event and been awarded in favour of the successful parties. His Honour thought it highly likely that Parliament chose a less generous costs regime in order to protect the Guarantee Fund, to a degree, from depletion. Certainly, the prima facie rule of s388(6) tended to have that effect, and his Honour thought that was a relevant consideration.

104 The learned judge then determined that it was not in the interests of justice to make an order for costs, saying:

"There is nothing unusual in appellants being victorious in appeal proceedings, nor in them conducting their litigation reasonably and properly. Some appeals involve questions of law. Other appeals involve questions of fact. Some appeals involve questions of both fact and law. The facts in this case were complex, but substantially uncontroversial. The questions of law were difficult and new, but they involved the not uncommon task of having to apply established rules of statutory interpretation to new legislation. There has been no suggestion that the appellants' costs have been out of proportion to the size of the claims. Having regard to all the relevant circumstances, and particularly to those I have just discussed, I do not think that it [is] in the interests of justice to make an order for costs in relation to either of these appeals."

105 There are four grounds of the cross-appeal that attack that determination. They assert that the learned judge erred in concluding that the prima facie position was that no order as to costs should be made under s388(6); that the learned judge erred in concluding that the interests of justice included the desirability of preventing depletion of the Guarantee Fund; that the learned judge erred in concluding that something in the nature of special circumstances was required to warrant the making of a costs order under s388(6); and that the exercise of the discretion under s388(6) miscarried by reason of the learned judge failing to have proper regard to relevant considerations, and having regard to irrelevant considerations, namely the desirability of preventing depletion of the Guarantee Fund and the need to show that the costs were disproportionate to the size of the claims. All of those grounds assert specific errors and I will deal with them in turn.

106 There was no error in thinking that the prima facie position under s388(6) is that no order as to the costs of an appeal shall be made. The subsection requires, in express terms, that no order is to be made unless the Court is satisfied that it should be made in the interests of justice. What the learned judge said was that the subsection provides, as a general rule, that there is to be no order as to costs. His Honour continued by saying that the subsection confers a discretionary power to depart from that rule in particular circumstances, namely when "the Supreme Court is satisfied that an order for costs should be made in the interests of justice". The learned judge was right. The first ground must fail.

107 Section 388(6) does not confine the matters which may be taken into account when determining whether an order for costs should be made in the interests of justice. Accordingly, all the circumstances may be taken into account, including the scheme of the Act and the circumstances of the case being considered. Counsel for the Trust submitted to the learned judge that one of the relevant factors that needed to be considered by the judge when weighing up whether to make an order was the public interest in conserving the Guarantee Fund for the benefit of future claimants. The learned judge had to deal with the submission. His Honour expressed the view that it was highly likely that Parliament had chosen to protect the Guarantee Fund, to a degree, from depletion. His Honour accepted that it was relevant that subs(6) had that effect. It is difficult to think of any other reason for not leaving the question of costs entirely to the unfettered discretion of the judge hearing the appeal. It cannot be concluded that the learned judge erred in thinking what he did. Certainly, subs(6) will have the effect of preserving the Guarantee Fund more than would have been the case if the discretion as to costs had been left unfettered. The learned judge did not give undue priority to the factor. His Honour emphasised that all relevant considerations may be taken into account. The second ground of the cross-appeal fails.

108 The learned judge did not interpret subs(6) as requiring that something in the nature of special circumstances was required to warrant the making of an order. In support of the ground asserting error in that regard, counsel for the respondent submitted that error should be inferred from the reference by the learned judge to a number of cases in which consideration had been given to a power to make an order for costs in legislation that was in different terms, for example, if "the court is of opinion in a particular case that there are circumstances that justify it in doing so";[44] "unless the Court considers that the making of a cost order is, in the circumstances of the particular case, fair and reasonable";[45] "only if satisfied that it is fair to do so"[46] having regard to certain listed considerations; and if it "considers circumstances justify the order".[47] Counsel for the respondents submitted that the wording of the legislation considered in those cases was different than in this case and that, because there is no reference in subs(6) to the "circumstances" that may be taken into account, there is no occasion to import any requirement into the subsection for special circumstances to be established. That may be accepted, but there is no reason to think that Blow J thought otherwise. In fact, immediately after referring to the other cases, the learned judge said that there is nothing in the 2007 Act that requires particular considerations to be taken into account, or that limits the considerations that may be taken into account, and concluded that all relevant considerations may be taken into account.

109 Counsel for the respondents submitted that it can be seen from the passage I cited from the judgment in par[104] of these reasons, that the learned judge thought there had to be something unusual or uncommon about the circumstances for the discretion to be exercised. I do not agree. It is not what was said by the learned judge. In the cited passage, his Honour was commenting on arguments advanced by counsel. Having done so, his Honour concluded that he did not consider it was in the interests of justice to make an order. That was the test his Honour applied. The comment that it was not unusual in appellants being victorious, nor in them conducting their litigation reasonably and properly, was correct and does not establish that the learned judge thought special circumstances were required by the Act. The third ground of the cross-appeal fails.

110 The fourth ground also fails. It was submitted by counsel for the respondents that the learned judge's reliance on the desirability of not depleting the Guarantee Fund was misdirected. However, the learned judge did not "rely" on that factor, other than to consider it a relevant matter. There was no error in that. The learned judge did not hold that there was a need to show that the appellants' costs were disproportionate to the size of the claims. In that regard, his Honour simply noted that it had not been suggested that they were. In support of the ground, counsel for the respondents did not claim that a relevant circumstance was raised with but not considered by the judge.

111 For those reasons, the costs appeal against the order that there be no order as to the costs of the appeal to the judge, fails.

The question of the costs of making the claims to the Trust

112 The respondents sought to recover the costs of their solicitors' work in relation to making and prosecuting the claims that led to the Trust's determinations from which the appeals to the judge were brought. Those costs did not include their costs of or incidental to the appeals to the judge, nor were they the costs of any litigation in the Court.

113 Although the claims were made at a time when the 1993 Act applied, they were determined after its repeal. Until that repeal, the 1993 Act, s112(3)(a), provided that a Court fund in respect of a firm might be applied as the Supreme Court directed, after taking into account any recommendations of the Law Society of Tasmania, in the payment of the costs incurred by any person in connection with any application relating to the making of a default order pursuant to which the Court fund was established; in any proceedings consequential to the making of the default order; and in connection with any application in respect of the Court fund. The learned judge correctly observed that the subsection gave the Court a discretion whether to give directions requiring the payment of costs. To that I add an additional observation that costs of the kind I am considering did not come within the discretion, that is the costs of making a claim to the Trust. I will deal further with that matter in due course.

114 However, it is not challenged that the 2007 Act, s381, applied to the applications for these costs by virtue of the 2007 Act, Sch9, cls 23(2) and 38(3). It is in somewhat similar terms to s382 that deals with the question of interest. It states:

(1) If the Trust wholly or partly allows a claim, the Trust must order payment of the claimant's reasonable legal costs involved in making and proving the claim, unless the Trust considers that special circumstances exist warranting a reduction in the amount of costs or warranting a determination that no amount should be paid for costs.

(2) If the Trust wholly disallows a claim, the Trust may order payment of the whole or part of the claimant's reasonable legal costs involved in making and attempting to prove the claim, where the Trust considers it is appropriate to make the order.

(3) The costs are payable from the Guarantee Fund."

115 The learned judge considered whether to direct the Trust to pay the costs, pursuant to his power to give directions in s388(5)(b)(iii), and decided that no such direction should be given. The final ground of the cross-appeal attacks that decision upon the basis that the learned judge erred when he concluded that the fact that other investors in the Piggott Wood & Baker mortgage scheme, who had had their claims for compensation successfully determined under the 1993 Act, had not obtained orders as to such costs under the 1993 Act, and that there was no evidence that the costs incurred by the respondents were out of proportion to the size of the claims, amounted to special circumstances within the meaning of s381 sufficient to exclude the prima facie entitlement of the respondents to such costs.[48]

116 It was submitted for the Trust to the learned judge that as none of the other investor clients of Piggott Wood & Baker, who had made claims under the 1993 Act, were awarded costs, there was a special circumstance warranting a determination that no amount should be paid for the respondents' costs.

117 Counsel for the respondents submitted to the learned judge that those circumstances were not special, and he relied on the following circumstances:

the costs of making a claim will vary according to the complexity of the claimants' dealings with the Trust;
the work done for the respondents in relation to their claims was complex, involving much correspondence over a long time;
the respondents and their lawyers acted reasonably in prosecuting their claims;
attempts to accelerate the process were resisted vigorously by the Trust;
the other claimants affected by the collapse of the mortgage practice of Piggott Wood & Baker were unlikely to have incurred such significant costs, something that was suggested by the fact that their claims were finalised much earlier;
in comparison to the other claimants, there had been a substantial delay in the determination of the respondents' claims and the consequent return of the capital sums claimed.

118 Referring to the judgment of Hamilton J in Expile v Jabb's Excavations Pty Ltd [2002] NSWSC 851; (2002) 194 ALR 138, the learned judge determined the question upon the basis that "special circumstances" in s381(1) were circumstances distinguished or different from what is ordinary, usual or common.

119 The learned judge then held that there were special circumstances warranting a determination that no amount should be paid to the respondents for their costs, giving the following reasons:

"Dozens of claimants made claims following the collapse of the mortgage practice of Piggott Wood & Baker. All of those claimants other than these two appellants had their claims finalised under the 1993 Act. No orders as to their costs were ever made under that Act. Those facts alone take the appellants outside the ordinary, usual or common run of cases under the 2007 Act. The critical question is whether, having regard to all the circumstances to which my attention has been directed, those special circumstances warrant a determination that no amount should be paid by the Solicitors' Trust to the appellants in respect of the costs of their claims. I accept that their claims have been unusually slow and complex; that they have been subjected to greater scrutiny than most; and that significant legal costs have been incurred as a result. However I have no reason to think that the costs incurred are out of proportion to the size of the claims. Having regard to all the relevant circumstances, particularly the fact that the other claimants recovered no such costs, I think there are special circumstances that warrant a determination under s381 that no amount should be paid to the appellants for their costs. It remains possible that costs orders could be made in favour of the other claimants. If that were to occur, the special circumstances would cease to exist."

120 With respect to the learned judge and to counsel, they overlooked that under the 1993 Act, claimants could not recover their costs of making a claim to the Trust. The Act made no provision for it. Section 112(3)(a) only provided for the Supreme Court to apply a Court fund in payment for:

(i) Costs in connection with any application relating to the making of a default order pursuant to which the Court fund was established. The costs incurred by a claimant in making a claim to the Trust under s114(2), after the establishment of the Court fund, would not have fallen within that description.

(ii) Costs in any proceedings consequential to the making of the default. The costs incurred by a claimant in making a claim to the Trust would not have amounted to costs "in any proceedings". It would be to strain the meaning of "proceedings" to include within it the making of a claim to the Trust. The usual meaning of the word would extend to an action or other proceeding in a court or before a tribunal, after its commencement.

(iii) Costs in connection with any application in respect of the Court fund. Once again, costs incurred in making a claim to the Trust would not have fallen within that. The Act provided for applications to the Court.

121 By reason of the 2007 Act, s381(1), since the repeal of the 1993 Act, it is mandatory that the Trust order that a claimant's reasonable legal costs in making and proving a claim to it be paid, unless there exists special circumstances warranting otherwise. It has not been suggested that by reason of the transitional provisions in the Act, the effect of that section should be modified for claims that were pending at the time of the commencement of the Act. While the respondents might be considered fortunate, so far as these costs are concerned, that their claims were not accepted by the Trust before the repeal of the 1993 Act, there is no good reason why they should not be permitted to take advantage of the more generous provisions concerning the costs under the 2007 Act. When regard is had to the fact that s381(1) mandates the payment of the costs for the usual case, it can hardly be a special circumstance that earlier claimants had no right to recover those costs. Further, an award of those costs to the respondents will cause no detriment to the earlier claimants. The respondents will simply gain the entitlement which s381(1) gives them.

122 For those reasons, the Court should order that the Trust is directed to order payment of the respondents' reasonable legal costs involved in making and proving their claims.

123 As stated in par[78], the Trust should be invited to state what, if any, terms or conditions it seeks to impose on the acceptance of the respondents' claims and its reasons for seeking them. Subject to the Court's determination of the question of such terms and conditions, the appeal should only be allowed to that limited extent.

124 The cross-appeal should be allowed. The order of Blow J directing the Trust to determine that no amount should be paid to the respondents by way of interest, should be set aside. In its place, there should be an order directing the Trust to add interest on the amounts payable to the respondents calculated in accordance with the 2007 Act, s382(2) and (3). The Court should also order that the Trust is directed to order payment of the respondents' reasonable legal costs in making and proving their claims.

THE SOLICITORS' TRUST v MICHELLE KAY OXENBOULD (as Trustee of the Trust No 1) and VICTORIA ROSE BURLEY (as trustee of the Trust No 2)

125 I have had the opportunity to read the reasons of his Honour the Chief Justice in draft form and in substance I agree with those reasons. I also agree with the outcome he proposes in relation to both the appeal and the cross-appeal.

THE SOLICITORS' TRUST v MICHELLE KAY OXENBOULD (as Trustee of the Trust No 1) and VICTORIA ROSE BURLEY (as trustee of the Trust No 2)

126 I have had the benefit of reading the reasons for judgment of the Chief Justice. I agree with those reasons and the course his Honour has proposed in relation to the appeal and the orders proposed in relation to the cross-appeal.

[9] Dobson v The Solicitors' Trust [2001] TASSC 99.

[38] In terms: "A Court fund ... may be applied as the Supreme Court directs after taking into account any recommendations of the Society in" the payment of costs and the payment of compensation for the loss of interest.

[43] Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261 per Dixon CJ at 267; and see Pearce and Geddes, Statutory Interpretation in Australia, 7th ed, LexisNexis, 2011, Ch10.

[45] Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) [2006] NSWCA 292; (2006) 68 NSWLR 177.

[46] Vero Insurance Ltd v Gombac Group Pty Ltd [2007] VSC 117.

[47] State of Tasmania v Anti-Discrimination Tribunal [2008] TASSC 23; (2008) 17 Tas R 227.

[48] Ground 5 of the cross-appeal erroneously refers to "the prima facie entitlement to such interest". The ground was argued as if the word "costs" appeared instead of "interest" and I have treated it accordingly.

Legal Profession Act 1993

The Solicitors' Trust v Oxenbould [2013] TASFC 2

At a glance

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Judgment (200 paragraphs)

The Solicitors' Trust v Oxenbould [2013] TASFC 2 (1 February 2013)

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Legislation Cited (4)

Cases Cited (9)