CITATION: Law Society of New South Wales v Pitsikas [2006] NSWADT 102 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Spero Pitsikas FILE NUMBER: 052012 HEARING DATES: 20/09/05 SUBMISSIONS CLOSED: 09/20/2005 DATE OF DECISION: 04/07/2006 BEFORE: Karpin A - ADCJ (Deputy President); Fox R - Judicial Member; Dyster B - Non Judicial Member CATCHWORDS: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - breach of s. 62 of the Legal Profession Act - Professional Misconduct - fail to carry out instructions - Professional Misconduct - fail to comply with s. 152 Notice - Professional Misconduct - fail to honour undertaking - Professional Misconduct - fail to transfer file to newly appointed solicitor - Professional Misconduct - lying to client - Professional Misconduct - wilful breach of Legal Profession Regulations 1994 MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 Legal Profession Regulation 1994 APPLICANT P R Boyd, solicitor REPRESENTATION: RESPONDENT No appearance ORDERS: 1. The respondent is guilty of unsatisfactory professional conduct; 2. The respondent is guilty of professional misconduct ; 3. The name of Spero Pitsikas be removed from the Roll of Legal Practitioners; 4. The respondent is to pay the Informant's costs as agreed or assessed. REASONS FOR DECISION 1 By Information filed in the Tribunal on 17 May 2005, the Council of the Law Society of New South Wales alleges that pursuant to findings following an investigation of complaints made under Part 10 Legal Profession Act 1987, the Respondent is guilty of professional misconduct. The Grounds of Complaint: The Respondent: a. Wilfully breached section 61 Legal Profession Act 1987; b. Wilfully breached section 62 Legal Profession Act 1987; c. Wilfully breached Regulations 36,38,39 and 42-45 of the Legal Profession Regulations 1994; d. Failed to carry out instructions to institute proceedings in the Supreme Court; e. Failed to disclose to his client that he had failed to carry out instructions to institute proceedings in the Supreme court; f. Misled his client and lied concerning the institution of proceedings in the Supreme Court; g. Failed to transfer the file to the new solicitors appointed by the client; h. Breached an undertaking to the Law Society; i. Failed to comply with a Section 152 Notice The Informant sought the following Orders: The legal practitioner's name be removed from the Roll The legal practitioner be ordered to pay the Informant's costs Reply On 28 May 2005 the respondent was served with the Information and supporting affidavits. The Respondent has not filed a Reply and did not appear at hearing. An affidavit of Service was tendered by the Informant. 2 The Tribunal was satisfied that the respondent was served with the Information and supporting affidavits, and that he was advised in writing of the date of hearing, accordingly the matter proceeded ex parte. Particulars of Complaint: 3 The Informant relied upon the Information; affidavit of Raymond John Collins sworn 17 May 2005; affidavit of Lynda Jane Muston sworn5 July 2004; Report of David Lombe, Chartered Accountant, dated 25 January 2001; Affidavit of Geoffrey David Edwards sworn 2 October 2002; oral evidence of Gavin Taylor Connor, Trust account inspector. 4 On 14 December 2000, Andrew Brown, Solicitor, [the Manager] was appointed Manager to the practice of the respondent pursuant to the provisions of s.114B Legal Profession Act 1987. On the same date, the Manager appointed David Lombe, Chartered Accountant [the Accountant], to assist. 5 On 15 December 2000 the Manager and the Accountant attended the practice conducted by the respondent and commenced an inspection of trust account books and records maintained in the practice. 6 Considerable difficulty was encountered in locating all trust account records. A quantity of floppy discs was recovered which ultimately proved of no assistance due to an error which prevented these records being downloaded. The reconciliations were prepared from the available hard copies of trust records which did not include trust ledgers. 7 On 25 January 2001 the Accountant produced an accountant's report setting out breaches by the respondent of the Legal Profession Act 1987. 8 On 5 December 2001 the Law Society resolved to make a complaint against the respondent pursuant to section 134 Legal Profession Act 1987. By letter dated 19 December the Society advised the respondent of that resolution and sought responses from him in respect of the alleged breaches of sections 61 and 62 of the Legal Profession Act 1987; and regs. 36,38,39,42(1), 43,44,and 44, of the Legal Profession Regulations 1994. No response having been received from the respondent, the Society again wrote to him on 2 May. On 23 November the Society advised the respondent that his application for an annual practising certificate had been refused. On 25 November 2002 he was advised that his current Practising Certificate had been cancelled. The respondent has not again been issued with a Practising Certificate. Breaches Section 61 Legal Profession Act 1987 9 (1) The Reconciliation as at 30 June 2000 disclosed a deficiency of trust account monies in the sum of $2,187.65. The majority of the deficiency arose from 14 matters in which the amount of the cheque as shown in the cash book, was exceeded by the amount on the face of the cheque as presented to the bank. The total is comprised of nine client debit trust balances, $1,803.59 together with adjustments of $384.06. Those consisted of a trust account cheque drawn in favour of N. Pitsikas in the sum of $360.00, no funds having been received from N. Pitsikas to cover that payment; a cashbook receipt for $10.00 but no consequential deposit into the Trust account; and a miscellaneous debit of $14.06 carried forward, which cannot be identified. These facts disclose a wilful breach of s.61 Legal Profession Act 1987. 10 (2) The reconciliation as at 14 December 2000 disclosed a deficiency of trust funds in the sum of $2,235.85. However, $733.30 of that deficiency may be accounted for by unposted deposits, the result of incompetent bookkeeping practices. The sum includes client debit trust balances of $1,851.79 comprised of deficiencies in thirteen client trust ledgers, together with adjustments of $384.06.These facts disclose wilful breaches of s.61 Legal Profession Act 1987 Breaches of Section 62 Legal Profession Act 1987 11 The Accountant was informed by the respondent's office staff that no trust account receipts or payments had been entered into the accounting system since mid July 2000. 12 (1) As at 20 October 2000 the respondent had not prepared bank reconciliations for the months November 1999 to September 2000 inclusive. 13 (2) As at 15 December 2000 no trust trial balance statements had been prepared for July to November 2000, inclusive, although the reconciliations had been prepared up to 30 June 2000. 14 (3) Between approximately mid July 2000 and 14 December 2000, Trust account receipts and payments had not been entered up. 15 (4) As at 30 June 2000 14 Trust account cheques had not been posted to the cash payments book, in total comprising a sum of $3,235.55. 16 (5) The respondent failed to maintain trust records relating to the controlled money account maintained by the respondent as Trustee for two clients, in that he did not maintain a Controlled Money Register; failed to provide a Form 4 to either client; and failed to prepare a trust trial balance of the controlled money account. 17 Unposted Deposits: The Accountant identified two unposted deposits to the Trust account for which there were no entries in the trust receipt or deposit books. Those were deposits of $400.00 on 30 August 2000, and $333.30 on 29 November 2000, a total of $733.30. In each case on the day the funds were deposited there were transfers to the respondent's office account in the total amount received. The failure to maintain records of these monies constitutes a breach of s.62 Legal Profession Act 1987. Breaches Regulation 36 of the Legal Profession Regulation 1994 18 (1) As at 20 October 2000 the respondent had only prepared bank reconciliations up to 31 October 1999 19 (2) From mid July to 14 December 2000 the respondent failed to maintain a record of daily receipt and payment transactions. 20 (3) As at 14 December 2000 the respondent had not prepared bank reconciliations for July to November 2000, inclusive. Breaches of Regulation 38 Legal Profession Regulation 1994 21 Between mid July 2000 and 14 December 2000 the respondent failed to record daily receipt and payment transactions into individual trust ledgers. Breaches Regulation 39 Legal Profession Regulation 1994 22 (1) The Accountant's report discloses that as at 20 October 2000, trial balances for October, November, and December 1999 had been prepared in March 2000. Trial balances for January 2000 were prepared in July 2000. Those for February and March 2000 were prepared in August 2000. 23 (2) As at 14 December 2000 the respondent had not prepared trial balances for July to November 2000 inclusive. Breach of Regulation 42 Legal Profession Regulation 1994. 24 Controlled Money was held in respect of one matter between March and June 2000. The sum of $185,000 was entrusted to the respondent pending settlement of a conveyancing transaction. He placed the funds with the National Australia Bank. Upon completion of the transaction the funds were withdrawn and distributed as required. However, the respondent failed to issue a Form 4 Notice to either party to the transaction, in breach of Regulation 42. Breach of Regulation 43 Legal Profession Act 1994 25 The respondent failed to maintain a Controlled Money Register in respect of the sum of $185,000. Breach of Regulation 44 Legal Profession Regulation 1994 26 The respondent failed to open and maintain a Controlled money ledger in respect of the above transaction. Breach of Regulation 45 Legal Profession Regulation 1994 27 The respondent failed to prepare trust trial balance statements relating to the non-existent controlled money ledger. Complaints referred from Legal Services Commissioner 28 On 3 July 2002 the Legal Services Commissioner referred to the Law Society a complaint from Macedone Christie Willis, solicitors, dated 24 June 2002, setting out complaints from a former client of the respondent. As a consequence of the investigation of those complaints, the Informant further complained that: 29 (i) The legal practitioner failed to carry out instructions to institute proceedings in the Supreme Court on behalf of Paltrono Pty. Limited [Paltrono] against McGinn Pty Limited [McGinn] and Milano Pty Limited [Milano]; 30 (ii) The legal practitioner failed to disclose to his client Paltrono that he had not followed the instructions to institute proceedings in the Supreme Court on behalf of Paltrono against McGinn and Milano; 31 (iii) The legal practitioner misled clients and lied to clients concerning the institution of proceedings against McGinn and Milano; 32 (iv) The legal practitioner failed to transfer the file in the matter of Paltrono to Messrs. Macedone Christie Willis. 33 On 22 March 2000 a Director of Paltrono signed an affidavit to commence proceedings against McGinn. A search of the Supreme Court records indicates that proceedings have never been instituted. The respondent failed to advise Paltrono that proceedings had not been instituted. On 12 September 2001 the respondent wrote to his client saying, in part: "We refer to our telephone conversation with Mr. Carwana of the 12th September 2001 and would advise that the above matter will be before the Court on 12th of October 2001." A search of the Supreme Court records located no proceedings that had been commenced at that time, accordingly the letter to the clients was, prima facie, a deliberate lie. In the absence of any explanation from the respondent, the Tribunal is comfortably satisfied that the complaints of the Legal Services Commissioner (i) to (iii) inclusive have been made out. Under letter dated 7 December 2001, Messrs Macedone Christie Willis forwarded an authority from Paltrono requiring the file to be transferred to those solicitors. Despite a reminder letter dated 17 January 2002, the respondent failed to transfer the file in accordance with the authority. In the absence of any explanation from the respondent, the Tribunal is comfortably satisfied that this the Legal Services Commissioner's complaint (iv) is also established. Breach of Undertaking 34 The Informant further complains that the respondent breached an undertaking he furnished to the Law Society of New South Wales in response to a letter from the Society dated 13 August 2001 regarding renewal of his practising certificate for the year commencing 1 July 2001. The undertaking was in the following terms: "Request for Extension of Time - Undertaking I, Spero Pitsikas have not attained my required MCLE units for 2000/2001. I undertake to complete the outstanding units within 90 days and request an extension of time for this period." The respondent was granted an extension to 11 January 2002. He failed to comply with that undertaking dated 28 September 2001. Reminders were sent to him by the Society on 11 February, 22 March and 15 April 2002 without response. 35 On 20 November 2002 the respondent faxed a handwritten response to the Society in which he admits a number of allegations including the failure to honour the above undertaking to the Society. The respondent put forward a number of reasons for his failure, none of which are regarded by the Tribunal as constituting a reasonable or satisfactory excuse for his failure to comply. Practitioners must understand the importance of compliance with undertakings given by them, whether given to other members of the profession, members of the public, their professional body, or in any circumstances in which that undertaking is given in the course of acting as a legal practitioner. In the absence of an acceptable explanation or excuse, the failure to honour undertakings fits comfortably within the long accepted definitions of common law professional misconduct. Law Society v. Hinde [2005] NSWADT 199. Failure to Comply with Section 152 Notice 36 The Informant complains that the respondent failed to comply with a Section 152 Notice. 37 In the course of investigating the complaint relating to the respondent's failure to comply with his undertaking to the Society, the Professional Conduct Committee resolved to serve upon the respondent a notice pursuant to section 152 Legal Profession Act 1987. That notice was personally served on the respondent on 4 October 2002. It required a response within 14 days. By 21 October 2002 the respondent had failed to comply or provide reasons why he had not complied. 38 The material tendered by the Informant discloses numerous letters from the Society to the practitioner advising him of the complaints received, investigations carried out, and findings made, by the Society over the course of these various complaints and investigations. The Tribunal is satisfied that the practitioner has been afforded ample and repeated opportunity to respond to the complaints. His hand written letter to the Society of 20 November 2002, contains both admissions and apologies. It does not, however, in the opinion of the Tribunal, provide acceptable explanations or reasons for the various breaches of the Legal Profession Act 1987 and Legal Profession Regulations 1994. 39 Section 152 (4) of the Legal Profession Act 1987 provides that a legal practitioner who, without reasonable excuse, fails to comply with a notice under s.152, is guilty of professional misconduct. The respondent has failed to provide a reasonable excuse, and is, accordingly, guilty of professional misconduct in respect of this complaint. The Respondent's failure to provide a satisfactory Response 40 The Tribunal is satisfied that the breaches of section 61 and 62 Legal Profession Act 1987 have been established on the evidence furnished to the Tribunal. None of the individual sums of money is substantial. Indeed, the accumulated breaches in monetary terms cannot be said to be large. They are, however, evidence of the chaotic state of book keeping in the solicitor's practice. The respondent clearly failed to comply with the requirements of section 61 dealing with the manner in which monies received by a solicitor are to be treated. Similarly the bookkeeping or lack thereof resulted in breaches of section 62, in that such records as were maintained did not disclose at all times, or in some cases, at all, the true position in relation to monies received by the respondent on behalf of another person; nor were those records kept in a manner that enabled them to be conveniently and properly audited. So poor was the record keeping that the investigators were unable to determine the appropriate allocation of some funds. The Tribunal is satisfied that the breaches of sections 61 and 62, constitute very serious professional misconduct, despite the relatively small amounts involved. 41 The breaches of the Legal Profession Regulations 1994, being Regulations 36, 38 and 39, are breaches of the regulations contemplated in sections 61 and 62. The evidence demonstrates that those breaches were persistent and extended beyond those matters which are the subject of complaint pursuant to sections 61 and 62. In the opinion of the Tribunal the breaches of these regulations demonstrate such disregard for the respondent's obligations, that they constitute professional misconduct. 42 The breaches of Regulations 42-45 inclusive of the Legal Profession Regulations 1994 are referrable to the failure of the respondent to comply with his obligations in relation to one transaction that required compliance with those regulations relating to the receipt of Controlled Money. In the circumstances, the Tribunal is satisfied that the breaches of Regulations 42-45 inclusive constitute unsatisfactory professional conduct. 43 The complaints outlined in the section 152 notice served on the respondent were of a grave nature reflecting adversely on his fitness to hold a practising certificate. They required immediate and detailed response, which was not forthcoming. The respondent's failure in this matter deserves to be characterized as disgraceful. His response of 20 November 2002, cannot be said to provide an adequate level of information or assistance. The Tribunal is satisfied that the respondent, without reasonable excuse, failed to comply with the Section 152 Notice. It follows that the respondent is guilty of Professional Misconduct pursuant to section 152(4) Legal Profession Act 1987. 44 The Tribunal accepts that the respondent had a problem with the breakdown of computer records, however, that does not provide a satisfactory explanation for the substantial failure on the part of the respondent, over an extended period, to maintain his Trust account and practice records in compliance with the requirement of the Legal Profession Act 1987 and the Legal Profession Regulations 1994. It is neither a full nor satisfactory explanation for the substantial deficiencies in compliance identified in the accountant's report. In so far as the respondent complains of health and other problems in his letter to the Society of 20 November 2002, there has been no evidence adduced before the Tribunal in support of those assertions. Similarly, the respondent does not deal with the allegations concerning his alleged failure to commence proceedings for Paltrono, and the consequential allegations flowing from that alleged failure. In the circumstances, the Tribunal is comfortably satisfied that the respondent failed to institute proceedings in the Supreme Court in accordance with his instructions, and misled and lied to his client to cover that failure. We are comfortably satisfied that these actions, and this failure constitute professional misconduct within the well established parameters for the common law concept. 45 Having regard to the totality of the respondent's breaches of the Legal Profession Act 1987, and the Legal Profession Regulations 1994, the Tribunal is comfortably satisfied that the practitioner is guilty of disgraceful and dishonourable conduct and is not a fit and proper person to hold a practising certificate. The Tribunal is satisfied that the respondent's conduct on each count, should be categorized as either professional misconduct, or unsatisfactory professional conduct, as set out above, and that the only appropriate order is that the name of the respondent be removed from the Roll of Legal Practitioners. 46 The orders of the Tribunal are: (1) That the respondent is guilty of unsatisfactory professional conduct. (2) The respondent is guilty of professional misconduct. (3) That the name of Spero Pitsikas be removed from the Roll of Legal Practitioners. (4) That the costs of the Informant be paid by the respondent. 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.