CITATION: Law Society of NSW v Minotti [2004] NSWADT 170 revised - 25/08/2004 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Kevin James Minotti FILE NUMBER: 042016 HEARING DATES: 15/07/2004 SUBMISSIONS CLOSED: 07/15/2004 DATE OF DECISION: 08/17/2004 BEFORE: Nader J QC - ADCJ (Deputy President); Molloy GB - Judicial Member; Kirkby E - Non Judicial Member APPLICATION: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - breach of s. 62 of the Legal Profession Act - Professional Misconduct - communication direct with client of another solicitor - Professional Misconduct - delay - Professional Misconduct - misappropriate trust moneys/moneys MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 CASES CITED: APPLICANT REPRESENTATION: P Boyd, solicitor RESPONDENT N Sullivan, solicitor ORDERS: 1.The name of Kevin James Minotti be removed from the Roll of Legal Practitioners in the State of NSW; 2. Kevin James Minotti is ordered to pay the costs of the Law Society of NSW as Informant of and incidental to these proceedings. REASONS FOR DECISION Background 1 By Information filed 16 April 2004 the Law Society preferred certain complaints against the legal practitioner alleging that he, while practicing as a solicitor, was guilty of professional misconduct on the following grounds: 1. The legal practitioner wilfully breached S.61 of the Legal Profession Act. 2. The legal practitioner wilfully breached S. 62 of the Legal Profession Act. 3. The legal practitioner misappropriated trust funds. 4. The legal practitioner took from 17 April 2000 to 12 July 2001 to stamp and register a Lease for the period 8 July 1999 to 7 July 2002 despite costs having been paid by the Lessee for this purpose on 17 April 2000. 5. The legal practitioner did not stamp and register a lease for the period 8 July 1996 to 7 July 1999 despite having been paid costs by the Lessee for this purpose on 3 June 1996. 6. The legal practitioner communicated directly with the Lessee, Mr Zarb knowing that he was legally represented. 2 It is convenient for the purposes of this Judgment to group the Complaints together, by dealing with Complaints 1, 2 and 3 as one bundle of issues, Complaints 4 and 5 as the second bundle of issues and Complaint 6 as a separate issue. 3 Mr Sullivan appeared as amicus curiae. The Tribunal accepted his appearance in that role even though he had signed the practitioner's Reply and his office was given as the address for service in these proceedings. 4 By his Reply the practitioner admitted all of the complaints and did not offer any explanation nor put forward any exculpating submissions. At the hearing before this Tribunal the practitioner did not give any evidence, did not object to any of the evidence sought to be led by the Law Society and did not seek to put before the Tribunal any written material other than the formal Reply. 5 Consequently, the Tribunal had before it the unchallenged material of the Law Society in affidavit form, supported by all appropriate documentation. Notwithstanding the formal Reply admitting all of the allegations there is an obligation on the Tribunal to satisfy itself that the Complaints are properly made out to the requisite standard of proof. 6 With the exception of Complaint 6 the Tribunal was so satisfied. Trust Account Complaints 7 There were six sub-Complaints of breaches of the Legal Profession Act in respect of trust moneys. All of these Complaints alleged breaches of Section 61 Legal Profession Act and 2 (Mordaunt and Torcasio) alleged breaches of Section 62. 8 Relevantly for the purpose of this Judgment Section 61 requires a solicitor who, in the course of practicing as a solicitor in NSW, receives money on behalf of another person, must pay that money into a general trust account in NSW, must hold the money in accordance with the relevant trust account regulations, must hold the money exclusively for and must disburse the money in accordance with the directions of the person on whose behalf the money is held. Wilful contravention of those requirements amounts to statutory professional misconduct and is also no doubt misconduct under the general law. 9 Section 62 requires a solicitor keeping trust money to keep appropriate accounting records that disclose at all times the true position in relation to the moneys received by the solicitor and to keep those accounting records in a manner that enables them to be conveniently and properly audited. Wilful contravention of those requirements is statutory professional misconduct. 10 Dealing now with the six instances brought before the Tribunal, the Tribunal makes the following findings. Helen Wearne 11 The practitioner held $137,005.12 in trust for Ms Wearne in an IMB Passbook Account. On 1 February 1995 he withdrew $100,000.00 and on 16 February 1995 he withdrew $37,005.12. The practitioner's file is missing but in an interview held 25 February 2003 between the Receiver of the practitioner's trust moneys and the practitioner himself (in the presence of Mr Sullivan) the practitioner admitted that he utilized those funds (controlled moneys) to pay his own personal debts. Frank Fitzsimmons 12 On 2 September 1998 the practitioner received from Mr Fitzsimmons the sum of $100,000.00, provided by Mr Fitzsimmons to be placed in the practitioner's trust account for the future use of Mr Fitzsimmons. The practitioner failed to deposit the moneys into his trust account but rather deposited them into a joint account held in the name of himself and his wife. No files or other evidence of the receipt of the money has been discovered by the Receiver but the cheque has been traced into that personal bank account. At the same interview 25 February 2003 the practitioner stated that the moneys were "probably used to pay tax debts but not definitely used for that purpose"; but it really does not matter because on any view the moneys were not used for the purposes of Mr Fitzsimmons and were not held in the practitioner's trust account exclusively for the client and not disbursed in accordance with his directions. M. Mordaunt 13 Here the solicitor, on 5 September 2002, received from Mr Mordaunt the sum of $140.000.00, the money being deposited in order to be lent to another client of the practitioner . A formal loan agreement was drawn up. However, the only security put in place for the loan was a personal guarantee. 14 A cheque for $140,000.00 was drawn by the practitioner on the trust account on the following day (6 September). The cheque butt is blank but the cheque is in fact made out to a "J R Jamieson". 15 At the interview 25 February 2003 the practitioner agreed that he had used the $140,000.00 to cover discrepancies in his trust account arising from a series of transactions over an extended period of time, which transactions arose due to the practitioner withdrawing funds from various trust account moneys to pay personal debts of his. It is plain that there has been a breach of Sections 61 and 62. S. Torcasio 16 The practitioner received from Ms Torcasio the sum of $200,000.00 in November 2001, which sum was deposited into his trust account. The purpose of the deposit was to lend the moneys to another client of the solicitor. Four days after the deposit the practitioner drew three cheques in total $200,000.00 and drawn in favour of various parties. Again, at the interview 25 February 2003 the practitioner agreed that the cheques were drawn to cover discrepancies in the trust account occurring over a period of time, which discrepancies arose as the practitioner withdrew moneys from his trust account to cover personal tax and other debts. Estate late Kurt Brunhoff 17 This was a slightly different scenario: the practitioner acted as trustee of the Estate and from time to time received moneys on behalf of the Estate, being rental income for rented property owned by the Estate. The practitioner opened a separate bank account for this rental income and from which expenses pertaining to the Estate were met. At the meeting 25 February 2003 the practitioner admitted that of the rental money received $17,000.00 (for which there was no written explanation in the bank records or the practitioner's records) was probably used to pay personal debts and correct discrepancies in his trust account. No other explanation was offered and it would seem plain that the practitioner misappropriated the moneys. Estate late A H Bowles 18 This misappropriation was slightly different: under the Will of the late A H Bowles a Mr Robert Bowles was to receive a legacy of $10,000.00. On 31 January 2004 the practitioner paid to himself the sum of $3,664.46 and on 8 March 2002 the sum of $616.00 (total $4,280.46) which sums were paid into his office account. No Memoranda of professional charges and expenses were rendered by the practitioner. The Trust Account Regulations require a Memorandum of professional charges and/or expenses to be rendered prior to transferring moneys from trust to office in satisfaction of professional costs. Clearly the practitioner's conduct was in breach of the Regulations (Clause 32 Legal Profession Regulation 1994) . There was otherwise no approval from the client to withdraw the funds such that there is a clear breach of Clause 32 and a clear breach of Section 61. 19 The practitioner also wrote to the sister of one of the beneficiaries (letter dated 10 June 2002) confirming that the legacy of $10,000.00 had in fact been paid to Mr Robert Bowles, a statement that was clearly false. Estate late F P Manasseh 20 The practitioner operated a controlled money account in relation to this Estate. On 25 February 2000 he opened a money market call account with the Commonwealth Bank in $464,412.33, being the closing balance of the controlled money account. 21 On 20 March 2000 he withdrew from the money market call account $155,005.00 (inclusive of a bank fee of $5.00) and on 24 March 2000 two payments in total $155,000.00 were made by the practitioner to the Australian Taxation Office. 22 The Bank statement of the money market call account showed that on 31 March 2000 the sum of $249,800.00 was deposited. The source of those funds has not been determined by the Receiver. However, this does not matter simply because the payment of the $155,005.00 was clearly in breach of Section 61. 23 The Tribunal has no hesitation at all in finding that the practitioner was in breach of Sections 61 and 62 (relevantly) in the factual circumstances as stated above. If further corroboration is required then the practitioner's Reply is sufficient. Stamping and registering Lease 24 The practitioner acted for the Lessor in respect of the lease of commercial retail premises at Shop 9, The Centre, Forestville. The lease was registered (I880760) and expired on 7 July 1996 with an option for renewal for a further period of three years. The lessee (Mr Zarb) exercised the option for renewal. A new lease was prepared, executed and returned to the practitioner on or about 3 June 1996 together with payment of the practitioner's costs of $1,625.00 which included registration fees of $51.00 and stamp duty of $542.00. 25 The practitioner did not stamp and register the lease until 7 July 1999 despite having been paid for that service on 3 June 1996. 26 Secondly, a further lease of the premises was entered into between the same parties for a term of 3 years commencing 8 July 1999. The lessee paid to the practitioner his costs (which included fees for stamping and registration) on 17 April 2000 but the practitioner did not stamp and register the lease until 12 July 2001. 27 In respect of the first delayed period the practitioner offered the explanation that "the lease was, due to an oversight, neither stamped or registered". In respect of the second delay, the practitioner advised the solicitors acting for the lessee by letter 25 October 2000 that "the registered lease will be delivered to your firm within the next 10 days". It was not. In his explanation to the Legal Services Commissioner by letter 5 March 2002 the practitioner offered the excuse that there were "a number of outstanding issues … relating to arrears … (and) … there was also a delay in having the lease documents executed by our clients due in part to the erratic nature of rent and other payments due under the lease and our client's overseas travel … (and that the) file was misplaced and only retrieved after receipt of the letter dated 2 April 2001 from the lessee's solicitors". The practitioner during this period moved offices twice, once in October 2000 and again in February 2001. 28 This Tribunal rejects those explanations, explanations which were not tendered at the hearing but rather appeared in the correspondence and in the filed Information. 29 It is distinctly arguable that these two matters, if considered in isolation, would not, either taken individually or jointly, amount to professional misconduct, but rather constitute unsatisfactory professional conduct. However, having regard to the other matters relating to the trust account and the practitioner's conduct as a whole in our opinion these two lease matters fall within the category of professional misconduct. Communication direct with the client of another solicitor 30 The Society alleged that the practitioner communicated directly with Mr Zarb (the lessee) knowing that he was represented by his own solicitors. The facts show that on 22 October 2001 the practitioner forwarded a letter to Mr Zarb requiring payment of increases of rent, presumably pursuant to the second lease (referred to above) commencing 8 July 1999. 31 The solicitor for Mr Zarb complained to the Legal Services Commissioner that although the solicitor "knew we were acting for Mr Zarb for some reason the letter was sent direct to Mr Zarb". There is no question that at the time the practitioner (on behalf of his client) wrote on 22 October 2001 he had not returned to the solicitor for Mr Zarb the lease – indeed, it was not actually returned until 4 December 2001. Consequently, and putting aside the formal complaint for the moment, the solicitor would not have been able to check whether the claim for increase in rent was justified under the terms of the lease simply because the practitioner had not sent a copy (or the original) to him. 32 In response to the Legal Services Commissioner's enquiry the practitioner advised that his letter 22 October 2001, "was written to Mr Zarb on instructions from the lessor. In the writer's experience it is not unusual for such correspondence to be sent to the Lessee direct and in fact would be unusual to be sent to the solicitor who acted on behalf of the lessee in respect of documentation of the lease". The Commissioner wrote to the complaining solicitor stating that "the practitioner's response suggests that he wrote to your client on matters which did not fall within the scope of your firm's retainer" and inviting those solicitors to make comments on that issue. No comments were forthcoming. 33 The Tribunal did not have before it the actual lease. But suffice it to say that most commercial/retail leases have as part of their terms and conditions a specified method of service of notices that in all likelihood would not have included service of this type of notice on the solicitor for the lessee but rather on the lessee direct. In any event, it would seem that the practitioner's explanation is probably correct and there being no evidence that would support a conclusion that the solicitor for Mr Zarb was instructed to accept service of this type of notice we do not find any substance in this complaint and this allegation is dismissed. Conclusions 34 The practitioner has been found guilty of professional misconduct in all of the allegations (with the exception of Complaint 6) made against him by the Law Society. Even discounting those allegations relating to the delay in stamping and registering two leases the conduct of the practitioner relating to his trust account and his dealings with trust money not only constitute statutory professional misconduct under the Legal Profession Act but also clearly constitute professional misconduct under the general law. 35 In these circumstances the Tribunal has no alternative but to order that the name of the practitioner be removed from the Roll of legal practitioners in this State. It also follows that the practitioner must pay the costs of the Law Society as Informant of and incidental to the proceedings. Orders: 36 The Tribunal makes the following Orders; 1. The name of Kevin James Minotti be removed from the Roll of Legal Practitioners in the State of NSW. 2. Kevin James Minotti is ordered to pay the costs of the Law Society of NSW as Informant of and incidental to these proceedings. Revised 25 August 2004 – Order 1 amended by replacing "Roll of Solicitors" with "Roll of Legal Practitioners" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.