Ama Somaratna reviews the latest batch of cases from the Bureau de Spank … Litigation folly where costs overwhelm a deceased estate … Adelaide high-flyer borrows from Peter to pay Paul … For five years an old solicitor plied his trade without a ticket
For the time being costs have been reserved pending an inquiry by the VicSupremes into whether an order should be made against a plaintiff’s solicitor who brought proceedings on behalf of children so they could access the funds of a deceased estate.
The problem was that the costs of the litigation were almost $60,000 and the estate was valued for probate at just under $152,000.
Christopher Gibb died in January 2013 and left his entire estate to his two infant children on reaching the age of 25.
Megan McAuliffe, the mother of the children, split with Christopher in 2011. She and the children moved out to live with her mother in Williamstown.
Chris moved in with his parents, David and Valerie, after being diagnosed with stomach cancer. He died in January 2013. David and Valerie were appointed executors and trustees of his estate and his sister was back-up executrix in case the parents were incapable.
Megan said she had no relationship with Chris’ surviving parents and that she needed to access the funds of the estate because she could not afford private health insurance, or swimming, dancing and ballet lessons for the children.
She claimed the situation was not workable and that David and Valerie would respond unfavourably if she approached them for money.
Justice Michael McDonald said that Christopher’s will does make adequate provision for the proper maintenance and support of the children. Distributions could be made for the “maintenance, education or advancement, or otherwise for the benefit of such beneficiary” in a manner the trustees think fit.
He found there was no evidence to support the idea that David and Valerie would not make proper provision for the children.
McDonald went on to say:
“It is a most unfortunate irony that the primary threat to the preservation of trust property and the welfare of the children arises not from any conduct of David and Valerie, but from the costs of the current litigation.”
Further:
“I have come to the conclusion that there are prima facie grounds in this proceeding on which the court might be satisfied that the plaintiffs’ solicitors have infringed an overarching obligation under ss.18 and 24 of the Civil Procedure Act.“
The court noted that both solicitors and counsel must have been aware of the outcome if the costs were to be covered by the estate and should have been conscious of their overarching obligations under s.18(d) of the Civil Procedures Act 2010 (Vic) to disallow the commencement of the application without proper factual and legal foundations.
The plaintiffs filed a memorandum of costs and disbursements for $57,394.30, consisting of:
The costs are double those of the defendants. The Civil Procedure Act 2010 requires counsel and solicitors to ensure legal costs are “reasonable and propionate”.
The judge said these costs taken out of the estate would diminish its value and undermine the purpose of the will, which is to leave funds for the advancement of the children.
If Megan herself was left to pay she would be under immense financial stress, which again would cause difficulties to the lives of the children.
The costs are reserved for the time being until an inquiry is completed by the court on a motion to decide whether a costs order should be made against the plaintiff’s solicitors.
Appearances in the case
The principal legal practitioner of Commercial & General (SA) Pty Ltd, Stephen McNamara, has had his ticket suspended and been charged under the Legal Practitioners Act with misappropriating trust money.
Justice Thomas Gray of the SA Supremes granted an interim suspension after ploughing through the affairs of McNamara’s discretionary trust, called Legal Costs Trust.
McNamara is a former director of professional conduct at the SA Law Society, lectured at the University of Adelaide on ethics and trust accounts and is the author of the 1984 tome, Solicitors’ Trust Account Handbook. His partner Robyn Schutte is a parliamentary officer.
The solicitor claimed that Legal Costs Trust received funds for lending to third parties.
He appealed against the decisions of the Law Society to appoint a manager to supervise the law practice and a supervisor of the trust account.
Affidavits were filed by Alison Jane Hodkin a trust account officer employed by the Law Society and Julia Dunstone from the office of the Legal Profession Conduct Commissioner.
In relation to the deceased estate of Neil Devonshire Heanes, Hodkin said:
“A total sum of $385,000 was paid into the LCT account for investment on behalf of this estate and this is the first known investment that was made by the law practice via this account. This $385,000 was made up of several smaller amounts which were paid into the LCT account on different dates between November 2011 and July 2012. Detailed analysis of the LCT account and other accounts held by the law practice have given great cause for concern as to how the funds were used with no evidence of any of the funds being transferred to an interest bearing account for the benefit of the estate.”
There was also a summary as to how the funds were used, including the following:
Schutara Pty Ltd is the trustee for the McNamara Schutte Family Trust and therefore considered to be a personal account belonging to McNamara.
McNamara claimed that the Heanes money was invested in something called the Andamooka Opal Stone Unit Trust. However, the documentation was scant and there was no substantive record from the Andamooka trust confirming this “investment”.
The adult Heanes’ children were also having their own dispute about distribution of the estate and by the time that had been resolved much of the trust money had been dispersed to McNamara and his associates.
Gray found there was evidence of a strong prima facie case of a misuse and misappropriation of trust funds by McNamara in regard to the estate of Heanes.
Robbing Peter to pay Paul
To pay the Heanes’ beneficiaries, McNamara transferred money from the trust fund of the estate of Mildred Matthews, with the solicitor acting for the estate.
A total sum of $465,000 was “invested” via the LCT account on behalf of this estate between January and July 2013. From these funds $405,675.87 was used to pay out beneficiaries of Heanes estate.
The remaining funds were used for purposes that gave the Law Society and the LPCC cause for concern, including:
“The beneficiaries in the estate were advised that the investment was to mature at the end of January 2014. To date no payments have been made to the beneficiaries other than the sum of $22,194.63 in February 2014 representing interest, however this amount was funded by an investment being made on behalf of another estate, being the Estate of Khizam in the sum of $60,000.”
McNamara claimed claim he didn’t get adequate time to properly prepare an answer to the Law Society’s assertions about his misuse of clients’ money. He said that he would be able support his claims, given time.
An affidavit sworn by Philip Pitman, a trustee of the Andamooka Opal Trust, said that the investments have been paid out in full with interest.
Gray J said:
“This affidavit contains a number of bare assertions and includes an exhibit asserting the payment in full of the monies to the Heanes estate and the Matthews estate. Mr Pitman asserts that the Heanes investments have been paid out in full with interest but no regard is had to the evidence that the interest payments were sourced through Mr McNamara. Having regard to the banking records that are now before the court, little or no weight can be attached to Mr Pitman’s affidavit.”
The judge concluded:
“The evidence before the court establishes a serious prima facie case of departures from proper professional standards. Accordingly, an immediate order for suspension is necessary to protect the public and maintain public confidence in the profession.”
McNamara was arrested by detectives outside the Supreme Court. Computers and documents have also been seized from Commercial and General Law’s premises.
Still in Adelaide we find Patric Graham Alderman plying the solicitors’ trade for five years without a ticket.
Last month the Full court (Gray, Stanley & Parker) struck him off the jam roll.
There was no evidence anyone was disadvantaged or that he was paid for this work. In fact, counsel he engaged also remains unpaid.
In one case Alderman thought he was simply helping a friend and assisting the court, despite the rather acrimonious nature of the matter.
The old codger agreed that he misled the Legal Practitioners Conduct Board when, in 2009, he said he had retired from legal practice.
He has served the legal community and the community in general and has been involved in several law society bodies.
In earlier proceedings the Legal Practitioners Disciplinary Tribunal said:
“This is an extremely sad case involving a senior practitioner with a largely unblemished record.”
The Fulls, however, emphasised that it was not a matter of punishing the practitioner, but to ensure the public confidence in the legal profession is maintained.
In an affidavit filed in the court, Alderman said he did not intend to tender any evidence about whether he suffered from a mental or any other health issue related to his age at the time of the matters giving rise to the charges. He consented to his name being struck off the roll.
Editor:
A shame nothing was done by the authorities, tribunals and the court, to protect public confidence in the law and the profession in the case of Eugene McGee. He was the lawyer who killed a cyclist while driving after a long pub lunch and failed to stop and render assistance. He was not struck off.