Tribunal: Failure to make super payments is professional misconduct

Two solicitors have been disciplined for failing to pay their employees’ superannuation entitlements.

The recent decisions of The Council of the Law Society of New South Wales v Kernaghan [2021] NSWCATOD 111 (Kernaghan) and The Council of the Law Society of New South Wales v Rodgers [2021] NSWCATOD 124 (Rodgers), highlight the importance for solicitors to comply with fiscal obligations when running a law practice.

In each of these cases, the New South Wales Civil and Administrative Tribunal (the tribunal) held that the principal of the practice was guilty of professional misconduct under the Legal Profession Uniform Law (NSW) (Uniform Law) for, among other things, failing to pay employee superannuation entitlements.


The respondent, Mr Kernaghan, was the sole principal of an incorporated legal practice, Kernaghan and Associates Pty Ltd (KAPL) from February 2010 to March 2016.

In addition to a number of other breaches of the Uniform Law, the respondent failed to make superannuation guarantee payments on behalf of an employed solicitor, Mr Howell, or make payments into Mr Howell’s nominated superannuation fund. Mr Howell was employed at KAPL between February 2011 and March 2016.

Further, evidence before the tribunal showed that KAPL failed to pay significant amounts of company income tax, GST and PAYG to the Australian Taxation Office (ATO), and had a “history of non-compliance with its taxation obligations”.1


Did the principal’s failure to comply with fiscal obligations constitute professional misconduct?

The tribunal held that it did. It was clear that the respondent was aware of KAPL’s obligation to make superannuation contributions in respect of Mr Howell. The respondent did not provide any explanation for his failure to pay.2

Practitioners carrying out legal practice are under an obligation to ensure that certain statutory fiscal obligations of a law practice, including the payment of company income tax, GST, PAYG and superannuation contributions, are met.3 This obligation may be a legal obligation or a “civic duty”.4

As sole director of KAPL, and pursuant to s35 of the Uniform Law, Mr Kernaghan had ultimate control over the allocation of payments to the ATO and for employee superannuation entitlements.5

The tribunal noted that “the mere fact of a failure to pay superannuation guarantee contributions on time does not, on itself, constitute professional misconduct. It is the circumstances surrounding the failure, the consequences of the failure, and the actions subsequently taken by the solicitor, that determine whether the conduct constitutes professional misconduct.”6

In this case, the respondent’s breach of his fiscal obligations represented a “consistent failure… to comply with the fiscal obligations for which he had responsibility”.7 The breaches occurred over a number of years and covered almost the entire time KAPL was in operation.8 Moreover, the respondent had not remedied the disadvantage imposed on Mr Howell, and Mr Howell was required to pursue his outstanding superannuation entitlements with the ATO and the liquidator.


Therefore, in the circumstances, the tribunal considered that Mr Kernaghan’s conduct constituted “a significant failure that amounted to professional misconduct under s 297(1) of the Uniform Law”.9

In addition to his failure to comply with fiscal obligations, Mr Kernaghan was found guilty of professional misconduct for:

  • breaching an undertaking to the Office of the Legal Services Commissioner
  • failing to deposit trust money in the KAPL trust account, in breach of s137 of the Uniform Law
  • failing to hold and disburse trust money, in breach of s138 of the Uniform Law
  • causing a deficiency in the KAPL trust account
  • intermixing trust money with other money without authorisation, in breach of s146 of the Uniform Law, and
  • failing to comply with a notice issued to him under s370 of the Uniform law.

He was also found guilty of unsatisfactory professional conduct for:

  • failing to comply with cost disclosure obligations under s174 of the Uniform Law, and
  • failing to pay an invoice issued by an expert witness.


In Rodgers, the respondent was the principal of an incorporated legal practice, Lawsource. Between March 2013 and November 2014, the practice employed a part-time legal secretary (the complainant).

The respondent was found guilty of professional misconduct for:

  • failing to pay the complainant’s superannuation contributions, and
  • failing to issue to the complainant any group certificates or PAYG summaries in respect of her employment.

The respondent submitted that his conduct fell short of professional misconduct because it was not a deliberate attempt to deprive the complainant or the ATO of their entitlements, and Lawsource was under financial stress, which contributed to the respondent’s failure to establish appropriate cash reserves.


The tribunal highlighted numerous cases where solicitors have been the subject of disciplinary proceedings for failing to comply with statutory obligations to pay superannuation contributions and PAYG tax.10 All resulted in findings of professional misconduct, except in the case of Law Society of NSW v Koffel [2010] NSWADT 149.

In that case, Mr Koffel met with his staff when financial difficulties became apparent and sought their agreement to attempt to trade out of those difficulties. He informed them that the practice might not be able to pay their superannuation contributions as and when they fell due, and they accepted his personal guarantee of their eventual payment.

In this case, the tribunal noted Mr Rodgers “did not offer the complainant that courtesy”. It was held that the respondent’s conduct comprised repeated failures over a period of about 20 months, and were a “conscious exercise in robbing” the complainant and the ATO in order to pay the law practice’s suppliers and other business creditors.11

The tribunal observed that, in some other cases, the solicitor’s breach was accompanied by a breach of other professional obligations (such as in Kernaghan).

In this case, there was no suggestion of any failure by the respondent in any of his other professional obligations. The tribunal nevertheless held that the respondent’s conduct amounted to professional misconduct because it evinced a “consistent failure to reach and maintain a reasonable standard of competence and diligence” and “would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency”.12


The tribunal ordered that Mr Rodgers be reprimanded, undertake further professional education, provide written evidence of having reached an agreement with the ATO for all outstanding amounts, and pay the costs of the applicant.


The tribunal in Kernaghan ordered that consideration of the disciplinary and other orders (including any claim for compensation) that ought to be made, be determined in stage two of the proceedings.


The decisions of Kernaghan and Rodgers serve as a reminder that the courts will treat solicitors’ failure to comply with fiscal obligations very seriously, with nearly all instances of such conduct being held to constitute professional misconduct.13

Queensland Law Society provides a number of resources and services on the day-to-day operation of a legal practice. For more information, see the QLS Ethics and Practice Centre practice support page.

Meagan Liu is a Law Graduate in the QLS Ethics and Practice Centre. This article has been approved by Grace van Baarle, Solicitor and Manager, QLS Ethics and Practice Centre.

1 The Council of the Law Society of New South Wales v Kernaghan [2021] NSWCATOD 111, [211] (Kernaghan).
2 Ibid.
3 Kernaghan (n1) [208] citing Council of the Law Society of New South Wales v Wehbe [2018] NSWCATOD 14.
4 Kernaghan (n1) [208].
5 Ibid [207], [216].
6 Kernaghan (n1) [209] citing Law Society of NSW v Koffel [2010] NSWADT 149.
7 Kernaghan (n1) [220].
8 Ibid [220].
9 Ibid [223].
10 Ibid [31].
11 The Council of the Law Society of New South Wales v Rodgers [2021] NSWCATOD 124, [43].
12 Ibid [44].
13 Ibid [41].

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