The Keddies' case never ceases to amaze and confound ... Partners in NSW's biggest overcharging scandal back plying their trade ... Barakat and Roulston succeed in applications to have the Law Society issue them with tickets
Barakat: overcame Law Society objections as to his fitness
THE phone kept ringing to tell me that, incredibly, Tony Barakat and Scott Roulstone were back in business.
Justice Robert Beech-Jones in the NSW Supremes has waved the two former Keddies' boys back onto the track.
Their tickets were cancelled by the Law Society in November 2012.
That decision was upheld by the Administrative Decisions Tribunal. Incredibly, even though it was open to it to consider over-charging as a ground to find the solicitors' unfit to practice, the ADT declined to do so.
The ADT concentrated on the asset manipulations on the basis that the aim was to defeat creditors.
The Law Society rejected their applications for tickets operative from July 1, 2013 to June 30, 2014.
They have now successfully applied to the Supreme Court to overturn the Law Society's decision.
Effectively, they can ply their trade 19 days sooner than would have the case had the current year's suspensions run their course.
It means they are now in a strong position to get tickets for 2014-2015 - unless the Society can come up a fresh ground to block them.
The Law Society did not oppose their applications to the court on the ground of the firm's outrageous billing practices.
Overcharging is just too embarrassing and dicey an issue for the Law Society to pursue.
Instead, the society unsuccessfully contended that Barakat and Roulstone were not fit and proper types because they squirreled assets away from their creditors when they went bankrupt in August 2012.
These are known as the "impugned transactions".
The society's position was that the two deliberately sought to benefit themselves and displayed reckless disregard for their creditors.
From 2010 a large number of claims for overcharged fees were filed against the Keddies' partners.
They said they were unable to meet those claims or the assessment for capital gains tax that arose when their firm was sold to Slater & Gordon.
Instead, assets were transferred to trusts and family members.
Following their bankruptcy, Barakat and Roulstone entered into compositions with their creditors and each of the bankruptcies were annulled.
Roulstone: drive awayBeech-Jones found that prior to the "impugned transactions" Barakat and Roulstone got advice from a serious insolvency specialist, who told them to set aside funds for the purpose of negotiating with their creditors to avoid bankruptcy.
Further, they were advised when bankruptcy loomed not to unravel the squirreled money and assets.
These transactions, apparently, were disclosed to their trustees.
In Barakat's case, the judge was satisfied that his composition proposal offered his creditors a greater amount than the assets shifted to safety.
In Roulstone's case, his composition proposal offered creditors an amount representing the approximate value of two of the three impugned transactions and that the third transaction was found to be undertaken "in the interests of creditors".
Consequently, the court said that these asset transfers were not dishonest.
While the firm was notorious for gouging fees from clients, the bankruptcy-related asset shuffling was not dishonest.
To cap it off, the Legal Services Commissioner didn't take disciplinary proceedings against Barakat and Roulstone, because on the issue of the firm's inflated bills, Russell Keddie took the rap.
The conduct of Barakat and Roulstone "was not necessarily to their credit", but not sufficiently shabby as to deny them their tickets.
The case was heard last week. Beech-Jones delivered oral reasons, which are in the process of being transcribed.
In the meantime, here's the judgment summary.
See: ADT: Roulstone v law Society of NSW; Barakat v Law Society of NSW