All at sea ... Latest round in VicAppeals on the David Forster disaster ... HMAS Voyager tragedy ... Explanations about double payments of disbursements "unsatisfactory" ... "Unorthodox" rectification ... Funds from law firm property sale stay frozen ... Receivers chasing $2.72 million
Justice Harper: historical sweep of events
DE-TICKETED Victorian solicitor David Forster has come to grief, again.
Forster, brother of appeal judge Marcia Neave, and former solicitor to a lifeboat size bunch of HMAS Voyager disaster survivors, appealed against extensions to the receivership of his old law shop and a ruling from Karin Emerton J that money received from the sale of his business premises be frozen.
He failed on both courts in VicAppeals, and in the process Justice David Harper rendered a fascinating judgment embracing the sweep of history: from the collision of the Voyager and the Melbourne at 8.56pm on February 10, 1964 to the minutiae of Forster's hydra-headed struggles against the stipes and the receivers.
Apart from the 82 deaths, many others on the Voyager were physically or psychologically damaged.
Harper quoted naval historian Dr Tom Frame's detailed accounts of individual acts of heroism - the chief petty officer, too large to fit through a hatch that would not open fully, who sacrificed himself to save others.
Forster's firm, Hollows Lawyers, handled more than 80 claims.
The conduct of the files was "questionable" although the initial judgment delivered by Emerton on March 31, 2010, was quite understanding of the pressure Forster was under.
The files were opened in 2000 - 36 years after the collision. Many were not concluded before 2008, when barrister Jeremy Gormly was appointed by the Commonwealth to settle the claims.
"There was a flurry of settlements in early to mid 2008 … Understandably, the appellant and his staff at the law practice were placed under considerable pressure during this period."
At the same time Forster sees himself ...
"as the victim of circumstances which, despite his earnest efforts to act in the best interests of both his clients and his firm, conspired against him with potentially grave consequences."
There was another difficulty.
In Parker v Commonwealth, the wife of the only civilian to die in the Voyager successfully sued. Parker could recover, but Windeyer J said that people in the armed services cannot sue a fellow member in negligence, so there is no liability on the part of the Commonwealth.
This was overturned 17 years later in Groves v The Commonwealth, so the gates were opened to litigation by sailors on the Voyager.
The gates were also open for litigation about the way Forster acted for his Voyager clients.
On June 2, 2009, the Legal Services Board filed an originating motion seeking the appointment of a receiver to Forster's law shop. This followed the appointment of two LIV inspectors who identified some serious problems, including:
- Billing the full amount to clients despite the fact that counsel had agreed to a fees discount. The difference was trousered by the law firm;
- Duplicated payments of disbursements from the trust account. One payment went to the person or entity who had billed the firm, the other went to the firm itself.
The trial over whether receivers should be appointed ran for 16 days and ultimately (March 31, 2010) the LSB triumphed.
Forster put the duplicate disbursement payments down to a fault in his accounting software. Didn't we hear that one in the Keddies Kapers?
Emerton didn't swallow it, although she thought that the duplications were "most likely inadvertent [due to not paying] close attention to trust accounting obligations".
"Once settlement took place and settlement moneys were paid by the Commonwealth, the defendant may have been unduly hasty in taking his professional fees ... the defendant was careless in dealing with settlement moneys [and he] has not given a satisfactory explanation how the double payments of disbursements occurred."
Forster: claim of "mortal damage" Forster sought to rectify the double dipping by an "unorthodox" method.
Amounts that were "written off" clients' bills were "written back in" or new invoices were raised to offset the deficiencies, even though many of the matters had been finalised some time earlier.
That sort of malarky was sufficient ground for the appointment of Noel Batrouney and Andrew Lyle from Hall & Wilcox as receivers.
On April 9, 2010 Forster secretly sold his office premises in Frankston.
Four days later, when the receivers took possession, they found letters and emails to clients transferring files to another law practice.
Seventeen days after that Forster applied to Emerton J for a stay of the receivership.
He told the judge that the receivership was causing "mortal damage to the practice".
It was not until May 6, 2010 that the receivers and the LSB discovered that a month earlier Forster had sold his shop-front property and "by his own hand inflicted mortal wounds on the firm's practice".
Emerton made a freezing order on May 21, 2010, pointing out that Forster had arranged for the purchaser not to say anything to the receiver about the sale of the property.
Instead, he was making loud complaints that receivership was sinking his business.
The battle then moved to other fronts.
There were further extensions of the receivership and summons continued to follow summons with further multiple rulings from Emerton.
The judge was not impressed by Forster's application opposing further extensions of the receivership, largely on the grounds that he had failed to challenge the evidence that $2.73 million had been taken in breach of trust account requirements and that the attempt to remedy the breaches with his written-off-written-back scheme had been "entirely inappropriate".
The receivers have now instituted proceedings to recover from Forster the trust account deficiencies and in the process won another extension.
Meanwhile, Forster had come up with a new argument - that the double payment of disbursements did not involve the payment of trust account moneys in breach of the regulations. Emerton said:
"Such an argument might, if successful constitute a defence to part of the recovery proceedings."
From here it went to VicAppeals with Forster again seeking to overturn the extension of the receivership and the unfreezing of the Frankston property money.
The receivers and the LSB argued there are three reasons that the money should be frozen:
- To pay the costs of the board for its successful application to appoint receivers;
- Payments of costs orders as may be made in favour of the receivers; and
- Anything left over to the former clients of the law shop.
That seems to be the traditional order of priority.
The "utility of the receivership had not been exhausted" - there is, after all, still money to play with.
The CA refused leave to appeal and anyway, even if it wasn't refused, the court wasn't happy with Forster's "unsatisfactory" explanation.
On it rolls, while injured old salts get older.