Citation: Weston v Registrar General of NSW; Weston v The Law Society of NSW & Anor [2002] NSWSC 173
Court: Supreme Court of New South Wales (Common Law Division)
Date: 15 March 2002
Judge(s): Adams J
Background
The plaintiff was a used car dealer who, over many years, had concealed income from the Australian Tax Office and purchased properties in false names. Concerned about exposure following the introduction of the Tax File Number system, he sought assistance from a solicitor, Stephen Beaufils, to transfer and consolidate those assets in a way that would obscure their origins.
Mr Beaufils, instead of merely acting on those instructions, went further and dishonestly misappropriated assets entrusted to him, including a property at 1079 (a shorthand used throughout the judgment for one specific title). He was subsequently convicted of offences arising from this conduct. The plaintiff lost real property and funds as a result.
The plaintiff brought two proceedings: one against the Law Society of New South Wales, seeking compensation from the Fidelity Fund on the basis that Mr Beaufils had failed to account for property entrusted to him in the course of his practice; and a separate claim against the Registrar General under s 120 of the Real Property Act in respect of a property lost through a forged and registered transfer.
Legal Issues
- Whether the property and funds were "entrusted" to Mr Beaufils within the meaning of s 79A of the Legal Profession Act 1987
- Whether any such entrustment occurred "in the course of the solicitor's practice," given that both parties were engaged in conduct designed to conceal assets from the Tax Office
- Whether the plaintiff's knowing participation in the underlying tax fraud disentitled him from recovery under s 80(3) of the Act (which permits the Law Society Council to disallow a claim by a person who knowingly assisted in or contributed to the act giving rise to the failure to account)
- Whether the claim against the Registrar General under the Real Property Act could succeed given the Fidelity Fund claim
Decision
Adams J held that the property at 1079 had been entrusted to Mr Beaufils in the course of his practice as a solicitor. Despite the broader fraudulent context surrounding the arrangement, the core act of placing property under a solicitor's control for the purposes of a conveyancing or property transaction was sufficient to constitute an "entrustment" within the meaning of the statute. The fact that the client's underlying purpose was to conceal assets from the Commissioner of Taxation did not sever the connection between the entrustment and the solicitor's practice.
On the dishonesty condition in s 79A(2), the court noted that Mr Beaufils had been convicted of relevant offences, satisfying that limb of the provision. A finding of dishonesty by the Law Society Council was described as inevitable in the circumstances, though one had not yet formally been made at the time of judgment.
The question of whether the plaintiff's knowing participation in the fraud should reduce or extinguish his claim under s 80(3) was addressed carefully. Adams J held that this was a matter reserved for the Law Society Council to determine, not for the court in the present proceedings. The terms of the statute made the disallowance power discretionary and vested it in the Council, and the court declined to exercise it in the Council's place.
As a consequence of the Fidelity Fund liability being established in respect of 1079, the claim against the Registrar General, described by the court as a remedy of last resort, was dismissed.
Orders Made
• The claim against the Registrar General must be dismissed.
• Final orders deferred pending further submissions as to interest and costs.
Note: Adams J expressly deferred making final orders pending further submissions on interest and costs.
Key Takeaways
- An entrustment of property to a solicitor can fall within s 79A of the Legal Profession Act 1987 even where the client's underlying purpose is unlawful, provided the property was placed under the solicitor's control in the context of the solicitor's practice.
- The solicitor's conviction for offences involving dishonesty satisfied the condition in s 79A(2)(a), engaging the Fidelity Fund's obligation to compensate for the resulting pecuniary loss.
- The power under s 80(3) to disallow a claim by a person who knowingly participated in the conduct giving rise to the failure to account is vested in the Law Society Council, not the court. The Supreme Court held it was not for it to exercise that discretion in place of the Council.
- A claim against the Registrar General under s 120 of the Real Property Act operates as a remedy of last resort. Where the Fidelity Fund is liable to compensate the claimant, the Registrar General claim must be dismissed.
- Participation in tax fraud by a client does not, of itself, automatically preclude a Fidelity Fund claim arising from a solicitor's theft of entrusted property, though the Council retains a discretion to disallow or reduce such a claim.
Legislation and Cases Referenced
Legislation:
- Real Property Act (NSW), s 120
- Legal Profession Act 1987 (NSW), ss 79A, 79B, 80, 88, 89
- Legal Profession Reform Act 1993 (NSW)
- Crimes Act 1914 (Cth)
Cases:
- Weston & ors v Beaufils & ors (1994) 122 ALR 240
- Follett v Jeffryes (1850) 61 ER 1
- Russell v Jackson 63 ER 558
- The Queen v Cox and Railton (1884) 14 QBD 153
- The Queen v Bell; ex parte Lees (1980) 146 CLR 141
- Baker v Law Institute of Victoria [1974] VR 388
- Heraudeau & Anor v Law Institute of Victoria [1991] VR 518
- Orsi v Legal Contribution Trust [1976] WAR 74
- Francis v Law Society of New South Wales (1982) 2 NSWLR 191
- Solicitors' Liability Committee v Gray & Anor (1997) 77 FCR 1
- Ramsay v Pigram (1967-1968) 118 CLR 271
- Blair v Curran (1939) 62 CLR 464