Pursuing a lawyer in VCAT for non-compliance with a notice issued under s 530B of the Corporations Act

Rohrt v Champion (Legal Practice) [2015] VCAT 1875

A liquidator has successfully relied on legal profession disciplinary legislation to challenge a lawyer’s non-compliance with a s 530B notice. The result is that the dispute was heard and determined in VCAT, as opposed to the Supreme Court of Victoria which traditionally has jurisdiction over s 530B notices

The case concerned a lawyer’s non-compliance with a notice issued (Notice) under s 530B of the Corporations Act 2001 (Cth) (the Act) to produce books of a company. Although a lawyer may have a lien over such books in some circumstances, that lien is expressly overridden by s 530B(1).  Rather than seeking to enforce the Notice through the courts, the liquidator instead made an application to VCAT for orders under the Legal Profession Act 2004 (Vic) (the LPA) compelling the lawyer to comply with the Notice. Throughout the proceeding, VCAT made various orders compelling the lawyer’s production of documents sought. The liquidator sought a costs order on an indemnity basis against the lawyer.

Background

On 24 September 2014, the Applicant, Mr Richard Rohrt (Applicant Liquidator), was appointed the liquidator of the company ARB Developments Pty Ltd (ACN 129 469 101) (ARBD) and wrote to the Mr Michael Champion (Respondent Lawyer) on 25 September 2014, requesting information including whether he held any books, records or documents of ARBD (he had previously acted for ARBD). No response was received. On 8 October 2014, the Applicant Liquidator issued the Notice to the Respondent Lawyer. Again, no response was received.

The Applicant Liquidator then made a formal complaint to the Legal Services Commissioner and subsequently initiated civil proceedings in VCAT under the LPA in relation to the non-compliance (VCAT Proceedings). The application relied on s 4.3.15 of the LPA which specifically gives VCAT jurisdiction, in defined circumstances, over a “civil dispute” that is the subject of a “civil complaint”. The Applicant Liquidator sought costs on an indemnity basis, based on s 4.3.17(1)(a) of the LPA. During the VCAT Proceedings, the Respondent Lawyer continued to resist compliance with the Notice.

Decision

The application for costs on an indemnity basis was successful.Her Honour held that VCAT had jurisdiction over the dispute, as it was the hearing of a “civil complaint against a legal practitioner” (and made clear that this is not a disciplinary proceeding under the disciplinary provisions of the LPA).

The reasoning behind her Honour’s decision appears to be as follows. Following certain procedural steps (often including a complaint to the Legal Services Commissioner), certain persons can apply to VCAT for the resolution of a civil dispute that is the subject of a civil complaint (s 4.3.15). As noted above, this is the legislative basis that the Applicant Liquidator’s VCAT application. The LPA defines the words “civil dispute” and “civil complaint” (s 4.2.2). A civil complaint is defined as (s 4.2.2(1)) a complaint about conduct that involves a civil dispute. A civil dispute is defined as (4.2.2(2)) a dispute in relation to either legal costs (not exceeding $25,000 for one matter), a pecuniary loss due to an act or omission by a legal practitioner or any other genuine dispute arising out of or in relation to the provision of legal services.

Her Honour does not provide any further commentary on why the dispute is a civil complaint or civil dispute. The order that the Applicant Liquidator sought in his original application, an order seeking compliance with the Notice (as opposed to compensation), suggests that the only relevant characterisation of the dispute would be “any other genuine dispute … in relation to, the provision of legal services to the person by the law practice or practitioner [underlining added]” (s 4.2.2(2)(c)). Implicit in this, is that either the relationship between the liquidator and lawyer can be characterised as one of “the provision of legal services”, or alternatively and perhaps more accurately, that the liquidator is to be taken to step into the shoes of the liquidated company, to whom the lawyer provided legal services. It is an interesting interpretation of the application of these civil dispute provisions under the LPA.

In relation to the costs application, her Honour was highly critical of the Respondent Lawyer and described his objections during the VCAT Proceedings as “misconceived and without a tenable basis in fact or law”. Her Honour held, amongst other things, that the Respondent Lawyer’s obligations under s 530B are unambiguous and unconditional” and that the behaviour and inordinate delay by the Respondent Lawyer had “potentially prejudiced the proper administration of the liquidation of ARBD” and outstanding creditors (referring to s 109(3) of the VCAT Act).

Her Honour also clarified that a s 530B does not require a liquidator to “particularise individual documents” and reference to “broad descriptive categories” suffices.

Commentary

• The LPA has been repealed and the Legal Profession Uniform Law (LPUL) is in operation. The LPUL does not include equivalent or even similar provisions as those relied on in this case. The LPUL introduces a markedly different regime for complaints and limits complaints to those that are disciplinary or consumer (rather than ‘civil’) in nature (sch 1, s 268). It is unclear and untested whether this new regime will provide a similar mechanism for liquidators.
• To the extent that the VCAT path remains open for liquidators seeking to enforce s 530B notices against lawyers, it offers a potentially attractive alternative to going to court, which may involve more cost, delay and formality than pursuing compliance through VCAT.
• The decision highlights that legal practitioners must be conscious of their obligations to comply with a notice issued under s 530B and their obligations to co-operate with liquidators. Non-compliance may have ramifications not only under the Corporations Act, but also under the LPUL