Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  •   Notable Unreported Decision
  • {solid} Appeal Determined (QCA)

Nichols v Legal Services Commissioner

 

[2017] QSC 175

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Nichols v Legal Services Commissioner [2017] QSC 175

PARTIES:

GEORGE NICHOLS

(applicant)

v

LEGAL SERVICES COMMISSIONER

(respondent)

FILE NO/S:

BS No 3668 of 2015

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

29 August 2017

DELIVERED AT:

Brisbane

HEARING DATE:

3 February 2017

JUDGE:

Douglas J

ORDER:

The respondent reconsider the applicant’s complaint dated 9 August 2013 according to law.

CATCHWORDS:

ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS OF REVIEW – JURISDICTIONAL MATTERS – where the applicant alleged breach of a Quistclose trust by a firm of solicitors and subsequently made a complaint to the respondent – where a delegate of the respondent investigated the complaint and recommended to the respondent that the complaint be dismissed – where the reasons of the delegate erroneously claimed that no determination had been made as to the existence of a trust, although that determination had been made by the Federal Magistrates’ Court – where the delegate stated that existence of a trust was not a determination that could be made by the respondent, although the respondent was empowered to permit investigation of the issue with a view to establishing such a proposition to be established before the Queensland Civil and Administrative Tribunal – where the applicant seeks statutory review of the decision to dismiss the complaint – whether the respondent committed a jurisdictional error – whether the respondent misapprehended or disregarded the nature of limits of his functions or powers

Judicial Review Act 1991 (Qld), ss 20, 41, 43, 47

Legal Profession Act 2007 (Qld), ss 435, 448

Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146, cited

Leadpoint Pty Ltd v Legal Services Commissioner [2015] QSC 254, cited

Murphy v Legal Services Commissioner [2016] QSC 174, cited

Nona v Barnes [2013] 2 Qd R 528; [2012] QCA 346, cited

Nichols & Nichols & Ors [2013] FCCA 1296, cited

Ross v Council of the City of Logan [2008] QCA 280, cited

COUNSEL:

M D Martin QC for the applicant

M D Nicolson for the respondent

SOLICITORS:

Mills Oakley for the applicant

Legal Services Commissioner for the respondent

  1. The issue which gave rise to this controversy was the alleged misappropriation by a solicitor’s firm, after 28 April 2011, of approximately $92,000 of funds held in its trust account to payment of its fees owing by a client.  The client was said not to have been presently entitled to the funds held in trust as they were moneys to be applied to a company’s debts.  The applicant complained about that conduct to the Legal Services Commissioner who has, on two occasions, refused to take further action on the complaint.  The issue is whether the respondent has properly performed his duties in respect of the complaint and whether he should be ordered to reconsider the applicant’s complaint according to law pursuant to ss 41, 43 and/or 47 of the Judicial Review Act 1991.
  2. An application for a statutory order of review pursuant to s 20 of that Act of a decision of the respondent dated 9 September 2016 to accept and act upon the reports of a senior investigator of the respondent was not pursued as vigorously as the alternative relief sought under the other sections to which I have referred.  Nor was an order persisted with that the respondent comply with undertakings he gave to the court on 28 July 2015 to consider the applicant’s complaint taking into account the applicant’s written submissions filed 21 July 2015 when it became apparent that the senior investigator who looked into the matter had taken those submissions into account in her inquiries.

Background

  1. The background facts were summarised by counsel for the applicant in terms that were relatively uncontroversial. 
  2. In 2009 the applicant and his family were engaged in the subdivision and construction of a number of homes.  The development was pursued through a company called Asden Developments Pty Ltd which was responsible for the payment of builders and contractors.  Its sole director was the applicant’s daughter-in-law.  She separated from his son in 2010. 
  3. The applicant’s son commenced proceedings in the Federal Magistrates Court against his wife with respect to custody and property and the applicant and other members of his family were joined to those proceedings on the basis that the property comprising the development was matrimonial property.
  4. The applicant paid $270,000 in December 2010 at the request of his daughter-in-law to Asden for the purpose of paying its creditors.  That money was banked into a bank account with Suncorp in the name of Asden.  The daughter-in-law then caused $264,531.02 to be withdrawn and to be deposited into another account in the name of Asden with the Bank of Queensland.  On 21 December 2010 she withdrew $236,500 from the Bank of Queensland account and deposited it into another Bank of Queensland account in the name of Urban Property Consulting Pty Ltd whose director was a “pre-insolvency expert” advising her.
  5. Of the $236,500 deposited into the Bank of Queensland account in the name of Urban Property, $180,000 was withdrawn and deposited into a bank account in the name of TGI Investments Pty Ltd, again with the Bank of Queensland.  That company’s sole director was the daughter-in-law.
  6. Between 8 February and 11 May 2011 the sum of $173,831.53 was transferred from the bank account in the name of TGI Investments to the daughter-in-law’s solicitors.  The sum of $30,000 was deposited on 8 February 2011 and $143,831.53 on 11 May 2011.  Thereafter approximately $92,000 was transferred from the trust account to the firm in payment of the daughter-in-law’s legal fees. 
  7. On 16 December 2010 the applicant’s then solicitors had demanded the return of the $270,000 from the daughter-in-law on the basis that it had not been used towards the cost of construction of the development property.  The daughter-in-law gave that letter to the employed solicitor at the practice acting for her to receive advice about it.  The entitlement to repayment of the $270,000 was said to be based upon the existence of a resulting or Quistclose trust in favour of the applicant given that the specific purpose for which the money had been paid, the payment of Asden’s creditors, had failed.  On 22 December 2010 the daughter-in-law had caused Asden to be wound up on a voluntary basis. 
  8. On 1 May 2012 the matrimonial proceedings came on for trial before Federal Magistrate Jarrett.  During the course of her cross-examination the daughter-in-law admitted that between 8 February 2011 and May 2011 she told her solicitor that she had caused the deposits and transfers of the money to which I have referred to be made ending with the deposit of $173,831.53 into the trust account of the firm of whom her solicitor worked.
  9. The matrimonial proceedings were then adjourned to allow the partners of the firm to be joined on the basis that they knowingly received trust property or knowingly assisted in a breach of trust by Asden or the daughter-in-law.  It was also alleged against the solicitors that they applied $91,967 towards their fees knowing that such money was subject to a trust for the interests associated with the applicant and not his daughter-in-law.
  10. When the matrimonial proceedings came back on for trial on 13 March 2013, the partners in the solicitors’ firm consented to judgment against them in respect of the claim brought by the applicant and his family including an amount for interest and costs on the standard basis.  The hearing proceeded and judgments were also obtained on the merits against the daughter-in-law, Urban Property and the “pre-insolvency expert” who had advised the daughter-in-law about these steps.  The daughter-in-law and the adviser were subsequently declared bankrupt and Urban Property was wound up. 
  11. On 9 August 2013 the applicant lodged a complaint with the respondent with respect to the employed solicitor’s conduct in applying the relevant funds towards payment of legal fees when, it was alleged, he knew that the funds had been paid by the applicant for the purposes of paying creditors of Asden.
  12. The complaint was investigated by reference to the Queensland Law Society pursuant to s 435 of the Legal Profession Act 2007.  The QLS investigator prepared a report on 2 September 2014 which recommended that the complaint should be dismissed pursuant to s 448(1)(a) of the Legal Profession Act.
  13. The daughter-in-law did not wish to cooperate with the investigation but the cross-examination to which I have already referred was provided to the investigator.  From that cross-examination it should have been clear that the daughter-in-law’s evidence had been that she told her solicitor that the applicant had provided $270,000 to Asden to pay its creditors but that the daughter-in-law did not use it for that purpose.
  14. The employed solicitor did provide a written response to the complaint in a letter dated 21 August 2014 in which he asserted that the money received from the daughter-in-law when received by the firm was money belonging to the matrimonial property pool.  That was said to follow from the daughter-in-law’s involvement in the family group behind the development.  He also said that the money placed into the trust account was verified by the daughter-in-law and her adviser as having the character of matrimonial property, not the species of trust property alleged by the applicant.  He argued that, therefore, the drawing down of those funds to pay legal fees was completely regular.  He went on to say that the allegations that the property had a particular character were not made until 5 April 2012 which was leading up to a trial on 1 May 2012 where the money had been in the firm’s trust account since February 2011.
  15. He believed the allegation that there had been a Quistclose trust was raised on the first day of the hearing on 1 May 2012, some 18 months after the money was advanced to the daughter-in-law.  He pointed out also that the firm by which he was employed was required to withdraw as the daughter-in-law’s solicitor on the record as a result of the allegations that were then made about the use of those funds.
  16. He asserted legal professional privilege in respect of his communications with the daughter-in-law and claimed privilege in respect of the allegation that he had misappropriated trust moneys.
  17. It was submitted for the applicant in this case that the solicitor admitted receiving the letter of demand from the applicant’s then solicitors dated 23 December 2010 but did not say what he was told by the daughter-in-law in respect of it nor the advice that he gave.  No doubt his concern about legal professional privilege would have been relevant to that response by him.  He was criticised however for not saying what he was told specifically by the daughter-in-law or her adviser that constituted verification that the money placed into the trust account had the character of matrimonial property.
  18. The Queensland Law Society’s investigator concluded his report by seeking directions from the respondent regarding the commencement of a further investigation against the partners of the law practice for failing to supervise their employed solicitor’s conduct after April 2011 regarding the payment of the daughter-in-law’s legal costs and outlays from the trust money.  As the Queensland Law Society’s investigator said:  “After this date, it appears [the employed solicitor] knew or ought to have known that the nature of the trust money had changed and that it should not be applied towards the cost liability” of the daughter-in-law.
  19. That conclusion was available because the daughter-in-law had provided her solicitors with a chronology on 28 April 2011 identifying the source of the funds paid into their trust account.
  20. The respondent forwarded that investigation report and a letter from the Law Society to the applicant on 30 September 2014 agreeing with the investigator’s report, the Queensland Law Society’s recommendation and informed the applicant that no further action would be taken with respect to his complaint.  That letter raised the possibility of also investigating the female partner of the solicitors’ firm in respect of a concern about her supervision of the employed solicitor but said that it would not be in the public interest to undertake such an investigation.
  21. On 13 April 2015 the applicant applied for an earlier review of the respondent’s decision to take no further action with respect to the initial complaint communicated in the letter of 30 September 2014.  That application was dismissed by consent by an order of 28 July 2015 on the respondent undertaking to revoke the decisions the subject of that application and to reconsider them taking into account the matters raised in the applicant’s written submissions filed 21 July 2015.
  22. It is apparent that the respondent delegated his review of the complaint to a senior investigator who, by an affidavit filed in these proceedings, recorded that she had considered those written submissions.  That was a conclusion available also from a comparison of her report with the content of the written submissions.  She, nonetheless, recommended that neither the female partner of the firm nor the employed solicitor be further investigated.  The respondent by his letter dated 9 September 2016 accepted those recommendations. 
  23. There were responses from both the employed solicitor and the partner to the senior investigator’s inquiries which are criticised by the applicant as not addressing the issue of when the employed solicitor and/or the firm were led to believe that the money in the trust account was matrimonial property and available for payment of the fees.  The partner’s contention was that whatever degree of supervision might be thought to have been reasonable, she would not have discovered that the money paid into the trust account was impressed with a trust of the nature alleged by the applicant.  The reconsideration by the respondent’s senior investigator of the complaint pointed out that the applicant’s argument in his complaint against the employed solicitor and in his previous application to this court was that the employed solicitor knew that the money received by the firm into its trust account was the subject of a trust in favour of the applicant.  The investigator then went on then to say:[1]

“I have completed a reconsideration of [the applicant’s] complaint against [the employed solicitor] and I have noted therein that it would have been the court that decided in the end whether it was or wasn’t matrimonial property. In this respect I am in agreement with the statement made about the position being one that needed to be determined on evidence at trial.

However, in this matter, there has been no determination made by the Court as to whether or not the moneys paid to [the daughter-in-law] were ‘impressed with a trust’ or formed part of the ‘matrimonial’ property.

Furthermore, this is not a determination that can now be made by you, the Commissioner. It is simply not within your powers under the Act to make.”

  1. Unfortunately, however, for her proper consideration of the issue, there had been a determination made by the Federal Magistrates Court of this very issue albeit after the judgment by consent had been entered against the solicitors.[2]  In his decision Federal Magistrate Jarrett made it clear that he was satisfied that the funds paid to the daughter-in-law were paid for the specific purpose of paying the creditors of Asden.[3]  He referred to the cross-examination of the daughter-in-law to that effect which I have already mentioned and concluded[4] that a Quistclose trust had been established for the purpose of paying the creditors of Asden.  His Honour also concluded that the daughter-in-law received the funds on behalf of Asden and dealt with them inconsistently with the basis on which they were given to Asden.  He also concluded[5] that this was a case where there had been a very clear breach of trust.

Submissions

  1. The respondent argued that the reasons for that decision were not available to the senior investigator as part of her investigation.  The order made by Federal Magistrate Jarrett was available, however, and the existence of the reasons was referred to in material obtained from the daughter-in-law.  The order recorded the consent judgment against the partners of the daughter-in-law’s solicitors firm.  It should have been apparent that the reasons were also available and the argument by the applicant is that the investigator should have taken steps to obtain the reasons to pursue the inquiry satisfactorily.
  2. That may well be the case but the other and, in my view, more compelling argument available to the applicant relates to the last two sentences of the passage I have extracted above, namely that this was not a determination that could now be made by the respondent, Legal Services Commissioner.  The applicant’s submission was that it was an irrelevant consideration as the Commissioner would not be required to make a determination as to whether the funds were impressed with the trust.  He would be empowered, however, to permit the investigation to pursue that issue with a view to establishing such a proposition before the Queensland Civil and Administrative Tribunal in its disciplinary capacity in respect of lawyers.
  3. That is why the applicant argues that there has been a jurisdictional error by the respondent in accepting a report based on the assumption that he had no power to pursue the allegation that the funds were paid from the solicitors’ trust account to themselves as fees in breach of the Quistclose trust found to have existed by Federal Magistrate Jarrett.  The argument is that the factual error that there was no determination of that issue in the Federal Magistrates Court coupled with the misunderstanding of the nature of the Commissioner’s powers to pursue that issue as part of the investigation led to the respondent clearly misapprehending or disregarding the nature or limits of his functions or powers.[6]
  4. There were further criticisms made of the senior investigator’s analysis of the facts related to the complaint and arguments for the applicant that any proper analysis of the evidence should have led to the conclusion that there was a viable allegation of unsatisfactory professional conduct or professional misconduct as defined in s 418 and s 419 of the Legal Profession Act that the respondent should have pursued.  I would not have regarded those criticisms as sufficient in themselves to justify the relief sought against the respondent.  I should point out, also, that it was accepted by the applicant that the relief he sought pursuant to s 20 of the Judicial Review Act would be affected by the decisions acknowledging that a decision not to start proceedings or prosecute a legal practitioner does not of itself affect any rights or obligations.[7]  His alternative submission in that respect was that the respondent’s acceptance of the senior investigator’s report was itself an administrative decision justifying relief under s 20. 
  5. The respondent’s contrary argument was, however, that the only relevant decision by the respondent was that pursuant to s 448 of the Legal Profession Act to take no further action in respect of the complaints which was not a decision to which the Judicial Review Act applied.  Nor did the acceptance of the senior investigator’s report by the respondent amount to a finding, determination or decision for the purposes of the Judicial Review Act.[8]
  6. That may explain why Mr Martin QC for the applicant focussed his oral submissions on the relief sought pursuant to s 43 of the Judicial Review Act on the basis that the respondent had not performed his public duty.

Consideration

  1. In the circumstances, it seems to me appropriate that an order should be made pursuant to that section.  The applicant’s standing to seek such relief was not challenged by the respondent.[9]  It was advanced on the basis that he is entitled to have his complaint properly considered. 
  2. The respondent did not need to make a determination about whether the relevant funds were impressed with a trust and in misdirecting himself in that fashion erred in the exercise of his jurisdiction by misapprehending or disregarding the nature or limits of his functions or powers.  That the error seems more palpable because the actual decision made by the learned Federal Magistrate emphasises that such a finding had already been made is really strictly irrelevant to the question of principle.

Order

  1. Consequently I shall order that the respondent reconsider the applicant’s complaint against the employed solicitor and the partner of the firm dated 9 August 2013 according to law.
  2. I shall hear the parties as to the form of the order and costs.

Footnotes

[1]Affidavit of George Nichols filed 12 October 2016 at pp 5-6.

[2]See Nichols & Nichols & Ors [2013] FCCA 1296.

[3][2013] FCCA 1296 at [27].

[4][2013] FCCA 1296 at [55], having earlier at [51]-[54] referred to Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 and Quince v Varga [2009] 1 Qd R 359, 375 at [34].

[5][2013] FCCA 1296 at [94].

[6]Ross v Council of the City of Logan [2008] QCA 280 at [57].  See also Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146, 186 at [134].

[7]Leadpoint Pty Ltd v Legal Services Commissioner [2015] QSC 254 at [23] and [35]; Murphy v Legal Services Commissioner [2016] QSC 174 at [90].

[8]See, eg, the discussion by Fraser JA in Nona v Barnes [2013] 2 Qd R 528, 532-536; [2012] QCA 346 at [11]-[19].

[9]  T1-73/25.

Editorial Notes

  • Published Case Name:

    Nichols v Legal Services Commissioner

  • Shortened Case Name:

    Nichols v Legal Services Commissioner

  • MNC:

    [2017] QSC 175

  • Court:

    QSC

  • Judge(s):

    Douglas J

  • Date:

    29 Aug 2017

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 175 29 Aug 2017 Application for statutory order of review granted; respondent's decision set aside; respondent ordered to reconsider applicant's complaint according to law: Douglas J.
Primary Judgment [2017] QSC 203 15 Sep 2017 Form of Orders and Costs
Notice of Appeal Filed File Number: Appeal 9789/17 20 Sep 2017 -
Appeal Determined (QCA) [2018] QCA 158 06 Jul 2018 Appeal and cross-appeal against costs order of Douglas J dismissed: Fraser and McMurdo JJA and Flanagan J.

Appeal Status

{solid} Appeal Determined (QCA)