High Court turns away lawyer who overcharged client

In the written decision, six of the seven High Court justices said Hartnett’s application has “insufficient prospects of success”.

“It is not in the interests of the administration of justice, either generally on in this case, for special leave to appeal to be granted.”

The inspector-general in bankruptcy and chief executive of the Australian Financial Security Authority (AFSA), Tim Beresford, said the High Court’s decision reinforced the importance of integrity and accountability within the personal insolvency system.

“The original Federal Court proceedings found that Hartnett had abused the processes under the Bankruptcy Act to avoid both bankruptcy and an obligation to pay a debt to a genuine creditor.

“The High Court’s refusal to consider an appeal sends a clear message to all participants that the inspector-general has power to apply to the courts to set aside personal insolvency agreements (PIA), even in circumstances where the PIA has been completed,” Beresford said.

The Federal Court proceedings were the first time the inspector-general made such an application under the Bankruptcy Act 1966.

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The order to set aside the PIA followed 2022 findings that Hartnett had charged a client $288,601 to enforce a $30,000 mortgage.

In one example of overcharging, Hartnett billed the client $36,021 to file and serve a statement of claim for possession of the mortgaged property, which was approximately 27 times greater than the $1,321 allowed under the Legal Profession Regulation 2005 schedule.

In another, Hartnett charged about $44,000 for “care and consideration” for a matter that was not “complex or difficult”.

Hartnett then lost an appeal to have $251,255.53 returned to him by the recipient of his former client’s will, who sought copies of invoices charged by Hartnett when he obtained probate in late 2016.

The bankruptcy proceedings followed shortly thereafter.

In addition to setting aside the PIA, Justice Downes sequestered Hartnett’s estate and appointed a trustee.

Justice Downes was also critical of Hartnett, noting she could not accept his evidence because he was not a “reliable witness”.

Further, she noted that Hartnett, “a solicitor with litigation experience”, had removed a folder of documents given to him in the witness box by senior counsel during cross-examination.

“At the end of the day’s hearing, he waited until the courtroom emptied of all lawyers and my associates and then removed the folder from the courtroom and took it home,” the judge said.

Hartnett admitted doing so in cross-examination the next day, but claimed he did not look at the documents inside the folder.

“I do not accept this evidence as it is objectively unbelievable. Why else remove the folder if not to prepare for what was to come?

“Mr Hartnett’s conduct in the furtive removal of the folder from the courtroom while he is being cross-examined was unacceptable, and he knew it was, and that he behaved in this manner only serves to strengthen my view that I cannot accept any evidence given by Hartnett,” Justice Downes said.