The Legal Services Tribunal of New South Wales CITATION : Vincent Cofini [1994] NSWLST 25 PARTIES : Vincent Cofini FILE NUMBER(S) : of 1993 CORAM: Mr D E Hunt (Presiding Member) - Mr G B Molloy - Mr D Mahon Professional Misconduct - prefer own interests to those of others :- s.41 of the Legal Practitioners Act 1898 CATCHWORDS: (5) wilful breach of s.42 of the Legal Practitioners Act 1898 (6) wilful breach of Paragraph 27 of the Legal Profession Regulations (7) acting in breach of fiduciary duty Legal Profession Regulations, 1987 LEGISLATION CITED: Legal Practitioners' Act 1898 Legal Profession Act 1987 Fraser v Law Society (1992 5 LPDR 12) ; CASES CITED: Allison v General Council of Medical Education and Registration (1984 1QB ; Ian Gordon Dun (1994 3 LPDR 5 DATES OF HEARING: 14th, 15th, 28th June, 25th July, 16th September, 1994 DATE OF JUDGMENT: 11/18/1994 Mr I. Wales (instructed by Mr L. Pierotti) for the Law Society of New South Wales; LEGAL REPRESENTATIVES: Mr D. De Carvalho of Messrs Carol & O'Dea, on behalf of Mr & Mrs Sam Panebianco and Mr & Mrs Antonio Panebianco. Mr D. Davoren (instructed by Mr I. Genge) on behalf of the Solicitor; JUDGMENT: Complaint: (1) inducing a lender to make advances through false representations; (2) signing false statements in documents; (3) breaching undertaking; (4) wilful breach of s.41 of the Legal Practitioners Act, 1898; (5) wilful breach of s.42 of the Legal Practitioners Act, 1898; (6) wilful breach of Paragraph 27 of the Legal Profession Regulations; (7) acting in breach of fiduciary duty; (8) preferring own interest to the detriment of those of client. Tribunal finds against the Solicitor in respect of (1)-(3) and dismisses (4)-(8) above. Tribunal Orders that the Solicitor's name be removed from the Roll. Tribunal indicates that it is able to consider matters which may amount to unsatisfactory professional conduct or professional misconduct although not specifically pleaded – Tribunal makes further finding of professional misconduct. Role of the Tribunal in making compensation orders considered. Background The solicitor is aged 35, is married with three children. He completed his legal studies in mid-1982, subsequently obtained employment with the Australian Taxation Office and the Bankruptcy Office and by January, 1985 was employed as a solicitor in a private firm. He only worked there until Christmas 1986 and in the following month he commenced his own practice as a sole practitioner at Hurstville. During the period of his employment with a private firm of solicitors he became acquainted with two people, Mr Carl Spies and Mr George Whitfield. About a month after he commenced private practice, Mr Spies asked the solicitor to act for him, and Mr Spies later brought along Mr Whitfield and Mr Whitfield became a client of the solicitor. Mr Spies became the solicitor's substantial and fundamental client, almost to the exclusion of all others. As well as being that type of client, the solicitor became heavily involved with business dealings with Mr Spies, including being a director of many companies in what might be described as "The Spies' Empire" and a shareholder in many of those companies. There is no need to set out all of the companies in which the solicitor and Spies were involved, but it is important to recognise that the solicitor and Spies held a one-half share each in Herdale Pty. Limited, Ballinrobe Holdings Pty. Limited, Minelake Pty. Limited and the solicitor was also a director and secretary of all of those companies and a director and secretary of yet another company, Ryleclimb Pty. Limited. All of these various companies were involved in the buying and selling of properties, the buying and selling of hotels, the raising of huge amounts of finance (sums in excess of $25m were in evidence before the Tribunal), all accompanied by appropriate mortgages, deeds, guarantees, declarations and the like, as well as being supported by all necessary documents filed with the Australian Securities Commission and its predecessor. It is out of all of this "wheeling and dealing" and involvement by the solicitor in the affairs of Mr Spies that the problems arose that bring the solicitor before the Tribunal. The Council of the Law Society brought a number of Complaints against the solicitor, particularised in Matter No. 25 of 1993. This formal Complaint also included a referral of an alleged Complaint by Mr Sam Panebianco pursuant to Section 134(1)(c). In circumstances set out below in this Determination, that alleged Complaint was dismissed and became the subject of a discrete Complaint, being Matter No. 31 of 1994. This latter Complaint was subsequently dismissed by consent on 16th September, 1994 in circumstances that are also set out below. It is convenient to deal with the various Complaints made against the solicitor by dealing, firstly, with those Complaints about which there is little factual dispute, then with those Complaints about which there is considerable factual dispute and, finally, with the Panebianco matter. Use of the name "John Shepherd" In about August, 1990 the solicitor acted for Minelake Pty. Limited in respect of an advance made to that company by St George Commercial Credit Corporation Limited, guaranteed by Ryleclimb Pty. Limited, Ballinrobe Holdings Pty. Limited, the solicitor and a "John Shepherd". In the records of the Australian Securities Commission the directors and shareholders of Minelake Pty. Limited, Ryleclimb Pty. Limited and Ballinrobe Holdings Pty. Limited were the solicitor and "John Shepherd". The solicitor was, at all material times the secretary of all three companies. The advance by St George Commercial Corporation Limited arose out of a commercial necessity to re-finance a loan in respect of the Mt. Druitt Inn owned by Ballinrobe Holdings Pty. Limited and a loan in respect of the Pacific Hotel at Balmain owned by Ryleclimb Pty. Limited. Documents lodged with the Australian Securities Commission show the address of John Shepherd as 11C/153 Bayswater Road, Rushcutters Bay. In relation to the re-financing, the solicitor appended his name as Secretary of Ryleclimb Pty. Limited and Ballinrobe Holdings Pty. Limited to the execution by those respective companies of various security documents under company seal in which the co-signatory was "J. Shepherd" who was stated to be a director of those companies. The solicitor also purported to witness the signature of "John Shepherd" as part of the execution by that alleged person of a personal guarantee and indemnity. Similar activities took place in relation to Minelake Pty. Limited in the granting of two registered mortgages and in relation to other security documents. In addition, the solicitor made a number of Statutory Declarations dated 30th August, 1990 in which he stated that the directors of those three companies were himself and "John Shepherd", that he, the solicitor, was the Secretary of each company and that the shareholders of each company were himself as to one issued fully paid share and "John Shepherd" as to the other one issued fully paid share. The solicitor's explanation for all of this is that the name "John Shepherd" was a name used by Carl Spies. The solicitor says that Mr Spies was "known as John Shepherd" but the plain fact is that, even if one accepts the evidence of the solicitor, Mr Spies was only "known as John Shepherd" in relation to the purchase and insurance of two motor vehicles. The solicitor also said that Mr Spies occasionally resided at the Rushcutters Bay home unit and he paid the rates, electricity and telephone expenses in relation to that unit in the name "John Shepherd". The home unit was owned by one of the Spies' companies, Delado Pty. Limited. Why Mr Spies would want to create the " John Shepherd" deception is not entirely clear, although there was some suggestion that he did not wish a lady friend to know of his occupation of those premises and his ownership of the motor vehicles. But in any event, it appears that it became necessary to re- finance the Mt. Druitt Inn and the Pacific Hotel at Balmain. It was Minelake Pty. Limited who sought the re-financing funds from St George. Mr Spies was initially a director of the various companies in his own name. The solicitor's evidence is that Mr Spies ceased to be a director in his name and assumed that directorship in the name "John Shepherd". Similarly, Mr Spies' father, Mr Oswald Spies, also ceased to be a director and the solicitor appears to have become a director in his stead. The purpose of this deception was that St. George would lend the money to Minelake, the security would be put up by Ryleclimb and Ballinrobe, and "John Shepherd" and the solicitor would appear to be acquiring those companies from Mr Spies and his father. In other words, Mr Spies would buy himself out using the name "John Shepherd" and "John Shepherd" would be the person taking over the control of those companies from Mr Spies. It was suggested that this scam was a concoction of an officer of St George Commercial Credit Corporation Limited because Mr Spies had previous borrowed some $20m (or thereabouts) from St George and he had reached the limit of his borrowing and it was necessary for a new borrower to come into being, Minelake, which was to be the borrower for the purposes of the re- financing loan and Ryleclimb and Ballinrobe would put up the security. In our view, it is not necessary for us to resolve the question of whether it was the St George officer who put up the plan or whether it was a plan concocted by Mr Spies or, indeed, concocted by the solicitor. But the clear idea was to substitute "John Shepherd", who did not exist, for Carl Spies, who did exist. And the purpose was to induce St. George to lend sufficient moneys to pay off the then current mortgagee (who had placed the hotels into receivership) in circumstances where St George would not otherwise have advanced the necessary moneys. It is not an argument, in our view, to say that Mr Spies was known as "John Shepherd", in either the general sense of the word or in his limited application to the purchase and insurance of two motor vehicles and in relation to the payment of certain outgoings in relation to a home unit owned by yet another company. The solicitor was aware, at all material times, that "John Shepherd" was not a real person using that name in relation to his ordinary dealings, he knew that if the loan proceeded with Mr Spies using his real name it would not be granted, he knew that it was an utterly dishonest and devious procedure for borrowers to use different names to obtain finance and he knew that his conduct as set out above including witnessing the signature of Mr Spies when he wrote "John Shepherd" as his signature was conduct that was completely incompatible with the obligations of a practising solicitor. Indeed, the deception went further – the solicitor admitted that Mr Spies endeavoured to adopt a different handwriting from his normal handwriting when he, Spies, wrote the name "J. Shepherd" on the various documents and that that fact was obvious to the solicitor when Mr Spies was signing the documents in front of the solicitor. We therefore conclude that Mr Spies embarked upon a course of conduct that was intended to deceive St George Commercial Credit Corporation Limited and that the solicitor actively participated in that conduct with the knowledge that what he was doing was dishonest. The solicitor also knew, and was a party to, Mr Spies and his father creating a fictional sale of the shares in the three companies to the solicitor and "John Shepherd" and the solicitor knew, and was a party to, the consequent deception of St George and the solicitor was fully aware that, in the absence of the fiction, St George would not re-finance the hotel loans. Having regard to the subsequent history of the Spies' "empire" one might not unreasonably conclude that it was absolutely vital for Mr Spies to try and keep the whole financial structure afloat in the hope that, in some way or other, he might be able to trade out of his financial difficulties. The solicitor had a direct interest in the fate of the Spies' "empire" because not only was Mr Spies his major, almost only, client but the solicitor had a one-half interest in Herdale Pty. Limited and the solicitor, with Mr Spies, had granted personal guarantees and indemnities in relation to various loans granted by outside lenders to the numerous companies operated by Mr Spies. It is not uncommon in human affairs for persons to adopt different names for different purposes. A writer may use a nom de plume. An actor may use a stage name. A married woman may use her maiden name. A person may change their name by Deed Poll. But it is unusual, to say the least, and consistent with fraudulent activities, for a person to use a name that is not their own only for restricted purposes. Indeed, in those circumstances, it would be a clear breach of the trust account requirements if moneys had been passed by the solicitor through his trust account in the name of "John Shepherd". It is clear, in the instant case, however, that the use of that name was created to mislead and deceive St George Commercial Corporation Limited and the solicitor's active participation in the manner outlined above was, in our view, clearly professional misconduct. We find accordingly. In addition, and it is not insignificant to note, there was evidence before us that showed that in records kept by the Australian Securities Commission "John Shepherd" is listed as a director of the three companies, together with the solicitor and, although there was no precise evidence before us as to whether the solicitor prepared, or signed or lodged the relevant documents with the Commission, one can only assume that, at the very least, the solicitor consented to the words "John Shepherd" being inserted in documents lodged with the Commission. In itself that is also a very serious matter because, if officers of the Commission were to look for "John Shepherd" or other persons in the community were to look for "John Shepherd" they would not be able to find him at all. For the purposes of the Corporations Law, which fixes certain duties and liabilities on Corporation Officers, "John Shepherd" would not be able to have been found. Alteration of solicitor's certificate: Although, curiously, there is no specific particularised complaint preferred against the solicitor in relation to this particular matter, it was squarely before this Tribunal, was specifically in evidence and the solicitor was cross examined on it. Counsel also addressed on it but, curiously, only in relation to the deception that was practiced upon St George. The facts are that as part of one of the documents required by St George to be executed before the re-financing loan would be approved, namely an Agreement of Guarantee and Indemnity, there was a Solicitor's Certificate to be completed by an independent solicitor. The persons giving the guarantee and indemnity were, respectively, Ryleclimb Pty. Limited, Ballinrobe Holdings Pty. Limited, the solicitor and "John Shepherd" and the Solicitor's Certificate was to be given in relation to the two individuals, the solicitor and "John Shepherd". The independent solicitor, Mr J. Catanzariti, swore a Statutory Declaration which was admitted into evidence without objection and without cross-examination of the declarant and its contents were admitted as being true and correct by the solicitor. The gravamen of the declaration was that on the 22nd August, 1990 the solicitor attended upon Mr Catanzariti requesting Mr Catanzariti to sign the Certificate "stating that you have explained this Agreement to both myself and to "John Shepherd"". Mr Catanzariti, correctly of course, refused to sign it in relation to "John Shepherd" and Mr Catanzariti wrote on the document "Vince Cofini" after the word "Guarantor" so that the Certificate was in relation only to the solicitor, Mr Cofini. The Certificate itself has the words "and J. Shepherd" inserted after "Vince Cofini" – Mr Catanzariti said that those words were not made in his hand writing and were not made either by him or before him. The solicitor was cross examined about this aspect. He was reluctant to admit that he had in fact inserted the additional words "and J. Shepherd" but he accepted that in all probability it was he who wrote those additional words on the Certificate and, shortly thereafter, the following exchange took place: Q: And you did that to deceive St George? A: To enable settlement to go through, yes. Q: You did it to deceive St George? A: If you want to use that word, yes. We are satisfied to the requisite standard of proof that it was the solicitor who inserted the words "and J. Shepherd" on the Certificate, that he falsified that Certificate and that was done for the purposes of deceiving St George. In addition, the solicitor's conduct was extremely selfish and had the potential of creating considerable difficulties for Mr Catanzariti and his firm and showed a complete lack of understanding of the duties and responsibilities of a solicitor, not only to fellow legal practitioners but also to members of the public. It is not uncommon, in the course of hearings before this Tribunal, for additional matters to arise that may amount to professional misconduct or unsatisfactory professional conduct, when those matters have not been pleaded. Although it is adequately clear that allegations of professional misconduct or unsatisfactory professional conduct must be pleaded and particularised, it would not be appropriate for this Tribunal to close its eyes to conduct which fell within the statutory or common law definitions where that conduct is, not only squarely before the Tribunal but also where the conduct was squarely before the solicitor and dealt with in considerable detail, without ambush, before the Tribunal. The alteration by the solicitor of the Solicitor's Certificate is conduct that falls within that principle and, in our view, constitutes professional misconduct. Breach of undertaking The solicitor acted for Janrobe Pty. Limited, yet another of the Spies' companies, in relation to the sale of a property known as the Segenhoe Inn. This property was the subject of a mortgage to Pegasus Leasing Limited. Upon exchange of contracts, the deposit was received by the solicitor as stakeholder and deposited into the credit of a specially opened account. By letter dated 19th December, 1990 to the solicitors for Pegasus Leasing Limited, Messrs Mallesons Stephen Jaques, the solicitor said:- "The deposit held by this firm of $6,000.00 will also be available to your firm. Immediately after settlement our firm will close the account and have the amount less half the interest earned forwarded to your firm." When the matter was settled in December, 1990 and the account closed, the balance in the account at that date ($6,038.45) was withdrawn by the solicitor, not forwarded to Messrs Mallesons Stephen Jaques but in fact paid (less half the interest) to Mr Spies in accordance with his instructions. The solicitor's explanation of this extraordinary behaviour was that he had calculated the amount due to Pegasus Leasing Limited and that the payments made to that mortgagee more than adequately, in his view, covered repayment of the loan plus the associated costs of its solicitors. The solicitor was evasive during the course of his examination in chief and cross-examination on this matter. He admitted that he had breached the Undertaking, that the Undertaking remains outstanding, that he did not raise with Messrs Mallesons Stephen Jaques the matter of his calculations, that he told his agent on settlement to confirm the Undertaking on settlement, that the solicitor to whom the Undertaking was given attended settlement with the belief that the solicitor would honour his Undertaking and that his conduct in regard to the breach of the Undertaking was deceitful and devious. In addition, although there is no need to go through the various details, the solicitor was asked by the Law Society, on a number of occasions, to honour the Undertaking but the solicitor has failed so to do and the Undertaking remains outstanding even at the date of hearing. There are limited circumstances in which an undertaking should not be honoured. There is no need, here, to examine those circumstances. This is not one of them. Undertakings are given by legal practitioners for the specific purpose of enabling legal activities to be carried out. Other persons rely upon those undertakings. The undertakings are personal to the legal practitioner and bind that practitioner, not as a matter of contract but as a matter of professional conduct and comity, and will be enforced by the Courts because legal practitioners are officers of the Court and because without enforcement undertakings would be worthless, persons and Courts would be unable to rely on the word of a legal practitioner and this aspect of legal practice, that demands compliance for legal efficacy, would collapse. A breach of an undertaking in these circumstances amounts to professional misconduct. We find accordingly. Breach of section 42, Legal Practitioners Act 1898 This Section, which is similar to Section 62 of the Legal Profession Act, 1987, required a solicitor to keep trust records in such a way that they could be conveniently and properly audited. A wilful breach of this Section amounts to professional misconduct. The solicitor acted for Mr & Mrs Whitfield with respect to a variation of a mortgage to the State Building Society. On settlement, certain moneys were deposited to the credit of the solicitor's trust account in the correct names of his clients. From those moneys two cheques were drawn, one for $305,000.00 on 25th September, 1987 payable to Herdale Pty. Limited, whereas the entry made in the trust ledger account for that cheque shows the cheque payable to "G. Whitfield" and another cheque was drawn on the 1st October, 1987 payable to C. D. Spies but the entry made in the trust ledger account with respect to that cheque showed it payable to Ernst Whinney, Accountants. The solicitor admitted that the trust ledger accounts did not show the correct payee of either cheque. He was unable to explain how the incorrect entries were made in the trust ledger because there was nothing to hide and he had not acted against any instructions. Indeed, there is no allegation against the solicitor of a failure to account because, in fact, the solicitor had acted in accordance with his instructions to repay or discharge a mortgage to Herdale Pty. Limited and make available the rest of the moneys as required by Mr Spies. The cheques were drawn upon the instructions from his clients, Mr Whitfield and Mr Spies. The only error, it appears, was incorrectly entering the name of the respective payees in the trust account ledger. There was no evidence before the Tribunal of any intent to deceive or mislead or otherwise structure the trust account records by way of some deliberate intent. The Section is not designed to capture conduct that is not wilful. The onus of proof is on the Law Society to prove a wilful breach of the Section and, in our view, that onus has not been discharged. There is no evidence before us of anything other than an ordinary mistake and we find this ground of complaint not made out. Herdale Pty. Limited and Nello Faraone Herdale Pty. Limited was a company owned as to one-half by the solicitor and as to the other half by Mr Spies. Mr Faraone swore a number of Statutory Declaration in these proceedings and gave oral evidence. He has also made a claim on the Solicitors' Fidelity Fund. In his claim against the Fund he alleges that he is owed, by the solicitor, some $460,000.00, being $300,000.00 principal sum advanced to the solicitor in September, 1987, bearing interest at 20% per annum upon terms that the money was advanced to the solicitor "or his associated company" and was to be secured by first mortgage over real estate owned by the solicitor "or his company". The claim states that the borrower was the solicitor or "Herdale Pty. Limited", that the term of the loan was 12 months but was subsequently extended to 30th May, 1990 and that the claimant, Faraone, had received by way of (presumably) interest some $125,000.00 from October 1987 to September 1990. Mr Faraone, in his Declaration 16th November, 1992, stated that he understood that the money was to be advanced through the solicitor to the solicitor's client as borrower. He then stated that he was "not aware" that Mr Cofini or Herdale Pty. Limited was in fact the borrower. He thought that Herdale Pty. Limited was the name under which Mr Cofini practised as a solicitor. He believed that "the standard practice" was to pay the money to the solicitor who would then advance the money to the client. He said it was not his intention to advance the money to Mr Cofini or his company. These statements, clearly, were at variance with the Statements made by Mr Faraone in his claim on the Fund. Mr Faraone attempted to correct this by a Declaration sworn by him 29th June, 1993 in which he states that it was incorrect for him to have stated to the Fund that the advance was to be made to the solicitor or his associated company and to be secured by first mortgage over real estate owned by the solicitor or the company. Mr Faraone then stated that "the only specific instructions that I gave the solicitor regarding the moneys was that the loan should be secured by first mortgage over real estate. I had no idea who the borrower would be but understood that the loan was to be made to a client of the solicitor". He then went on to repeat that he had no knowledge of the name of the borrower. Mr Faraone signed a Loan Agreement dated 8th September, 1987 between himself as lender as trustee for his mother and Herdale Pty. Limited as borrower. This Deed recites that Mr Faraone has agreed to advance to Herdale $300,000.00 for 12 months on a "interest only" basis, bearing interest at the rate of 20% per annum with interest payments to be $5,000.00 per month in arrears. Clause 6 of the Deed provides that Herdale would invest the $300,000.00 "on loans secured by Real Property Act Mortgages or charges and shall not make any loans unless secured by such a mortgage". Clause 7 provides that Mr Faraone "shall be at liberty to place a charge over Herdale to secure the loan in the event of any default", and clause 8 provides that the solicitor personally guarantees to Mr Faraone "the full amount outstanding in the event of any default". The claim on the Fund by Mr Faraone is based upon his allegation that there was a relationship of solicitor and client between himself and the solicitor. In order to succeed in his claim against the Fund, Mr Faraone must establish this relationship. The Deed, in its terms, flies in the face of such an alleged relationship and, throughout the whole of these proceedings, including quite robust cross-examination, the solicitor has maintained throughout that he did not act for Mr Faraone. We have had the benefit of seeing both the solicitor and Mr Faraone in the witness box. In weighing up their respective evidence in relation to this transaction we have considered their respective demeanours and the consistency of their evidence. Although we have formed a clear view about the solicitor's conduct in other respects, the solicitor has stoutly and consistently maintained that he was never the solicitor for Mr Faraone. Mr Faraone's evidence, on the other hand, is riddled with inconsistencies and his general approach seemed to be one designed to maintain a position, however untenable. He was prepared to make statements in his Claim on the Fund which were, at least on his view, incorrect. Indeed, it is distinctly arguable that by stating that the moneys were to be advanced to the solicitor or his associated company and by stating, quite clearly, that the borrower was the solicitor or Herdale Pty. Limited, were statements inconsistent with an entrustment of funds to the solicitor sufficient to support a claim on the Fund. The Claim Form as completed and sworn by Mr Faraone does not evidence an entrustment – on the contrary, it evidences a loan made direct to the solicitor in his personal capacity or to the solicitor's company. The Claim Form is dated 25th August, 1992. It was not until 29th June, 1993 that Mr Faraone saw fit to attempt to correct it by alleging an entrustment. Of course, it is absolutely essential for there to be a successful claim on the Fund for a claimant to allege an entrustment to the solicitor. A loan to the solicitor direct will not amount to an entrustment. In his declarations of 28th September, 1992 and 16th November, 1992 Mr Faraone stated that he was not aware that the borrower was the solicitor or his company but that he believed the standard practice was to pay the loan moneys to the solicitor who would then in turn advance the money to the particular client. All of this may sound very reasonable, and is based on a premise that Mr Faraone was genuinely of that belief. However, it flies in the face of his claim on the Fund and it is also challenged by his statement "this was the first time I had been involved with lending moneys through solicitors and I had no idea of the usual practice". It transpires that that sworn statement is palpably incorrect. It appears that some time previously a Mr Ovidi, an uncle of the solicitor, approached Mr Faraone direct, stating that he, Mr Ovidi, knew someone who wanted to borrow some money. Mr Faraone gave Mr Ovidi some cash and some cheques, in total about $200,000.00. Mr Faraone initially could not recall to whom the money was to be lent – he thought it was to the solicitor but he could not "remember this part of the story because I did not know". He could not recall whether he signed any documents. He did not give any instructions about that first loan having to be secured by first mortgage and the loan was repaid to him in full, plus interest, plus a "$15,000.00 present". Mr Faraone never saw Mr Cofini in relation to that first loan although it is quite clear that Mr Cofini was the recipient of it. So it is quite false for Mr Faraone to swear in his Declaration 16 November, 1992 that, effectively, he had not been involved with lending moneys through solicitors on a previous occasion. And it seems extraordinarily strange, to say the least, that Mr Faraone would advance a considerable sum of money, partly by cheque and partly by cash, with no pre-condition relating to security and not having any idea of the entity or person to whom the money was being advanced or how it was going to be repaid. The fact that it was repaid, with a "$15,000.00 present" was more good luck, so it seems, than good management on the part of Mr Faraone. The second advance of $300,000.00 about which Mr Faraone now complains, was also an advance arranged through Mr Ovidi. On this occasion Mr Faraone obtained two cheques and $15,000.00 cash (all of which he says he held in trust for his mother) and he took this to the solicitor. In cross examination he admitted that, in relation to both loans, on neither occasion did he go to the solicitor and say "invest this money for me" and he tries to escape the consequences by stating that he thought that "Herdale Pty. Limited" was the name under which the solicitor practiced. Although Mr Faraone continued to use the word "Herdale" he admitted that the solicitor asked him to draw the cheques in favour of "Herdale Pty. Limited" and this is, of course, consistent with the Deed made 8th September, 1987. It is also consistent with a number of letters forwarded by the solicitor to Mr Faraone and titled "Loan to Herdale Pty. Limited". In all the circumstances we are not satisfied, even to the very basic civil standard of proof, that, at the time of the making of the loan, Mr Faraone was a client of the solicitor. We are further not satisfied, as a consequence, that the solicitor breached Section 41 of the Legal Practitioners Act, 1989. We have formed the very clear view that Mr Faraone simply did not care to whom the money was advanced provided that he received his 20% interest (an interest rate incidentally that is inconsistent with a requirement for first mortgage security and more consistent with a loan with little or no security and of a high risk proposition) and the principal sum was subsequently repaid. The terms of the Deed are also inconsistent with the claim of Mr Faraone, in particular the personal guarantee of the solicitor and the ability of Mr Faraone to be able to take a charge over Herdale Pty. Limited "to secure this loan". The Law Society alleged in paragraph 6 of the Complaint that the solicitor had wilfully breached paragraph 27 of the Legal Profession Regulation 1987 in that the solicitor did not ensure that Mr Faraone received advice in relation to the loan to Herdale Pty. Limited by a solicitor who was unrelated to and acting independently of any party to the loan. However, it is quite clear that paragraph 27 of that Regulation was not in force in 1987 when the loan was made. This paragraph of the Complaint was not, ultimately pressed by the Law Society and is dismissed. Finally, it was alleged that the solicitor acted in breach of his fiduciary duty by creating a mortgage dated 7th March, 1990 purporting to secure the sum of $320,000.00 (being the $300,000.00 loan from Mr Faraone together with unpaid interest of $20,000.00) and "securing" that mortgage by a caveat and causing that caveat to be withdrawn on 10th July, 1990, without instructions from Mr Faraone. Of course, yet again, this complaint is based upon there being a solicitor/client relationship coming into being, having regard to our original finding, subsequent to the date of the original loan. It was submitted that, if there was no solicitor/client relationship in 1987, there was a solicitor/client relationship in 1990, created by the preparation by the solicitor of the mortgage, its stamping, the creation of a caveat, its execution by the solicitor and lodgment by him and its subsequent withdrawal. The solicitor's explanation of all this activity was that by March, 1990 the Spies group of companies was in considerable financial difficulty, the State Bank was threatening to sell up all the securities and one method of trying to forestall that was to place a caveat on the title of the property owned by Herdale Pty. Limited, 8 Wentworth Avenue, Sydney. The $300,000.00 originally advanced by Mr Faraone to Herdale Pty. Limited was used by Herdale as part of the purchase moneys of that property, the balance of $400,000.00 being advanced by the State Bank. However, the State Bank had alleged that its mortgage over this property also secured, as one of the securities given by other companies within the Spies group, moneys advanced by the State Bank to those other companies and that, therefore, the amount of the mortgage exceeded the principal advanced of $400,000.00 and, effectively, absorbed all of the security in the property. It was thought by the solicitor and Mr Spies that by placing a caveat on the title by Mr Faraone this would stave off the evil day when the State Bank would sell up the Wentworth Avenue property. The intent was to enable the Spies' companies to borrow more money. The solicitor stoutly and consistently rejected the proposition that he was acting for Mr Faraone in all of these activities. The solicitor stated that his client was Mr Spies, that he owed Mr Spies a duty to do what he could to protect his interests but he denied that that duty conflicted with his duty to Mr Faraone simply because he was not acting for Mr Faraone. He perceived his position when speaking to Mr Faraone as the borrower, not as his solicitor. It was clear that unless the State Bank was taken to Court, it being the first mortgagee, it would simply appropriate all of the moneys on any sale of the Wentworth Avenue property. The solicitor's evidence was that when he prepared the mortgage and the caveat and signed that caveat, he was acting as the agent of Mr Faraone, not his solicitor. The purpose of the exercise was to put pressure on the State Bank and the result could have been for the benefit not only of Herdale Pty. Limited but also Mr Faraone. When the solicitor signed the caveat, he left open his description as to whether he was the solicitor for the caveator or the agent for the caveator. In evidence the solicitor maintained that he was only the agent for the caveator. And although the caveat had written upon it the lodging party as being Mr Faraone, it would seem that the person who actually lodged the document, perhaps a clerk, altered that to read the firm of the solicitor as the lodging party. The solicitor also maintained that when he requested Mr Faraone to sign the withdrawal of caveat he explained to him the problem with the State Bank, that he put to Mr Faraone that he should seek separate advice without actually urging him so to do, that he could not have forced Mr Faraone to sign the withdrawal and that there was a chance at the end of the day that some money may be salvaged from the wreckage. Ultimately, of course, there was nothing left for Mr Faraone except the personal covenant of the solicitor. But the plain fact is that there was nothing that could have been done further in relation to the State Bank unless somebody challenged that Bank in Court. Nobody seemed prepared so to do or, alternatively, nobody had the money so to do. Very little was put to Mr Faraone about this aspect, either by way of examination in chief or cross examination. In all the circumstances the Tribunal, by majority, is not prepared to find that the solicitor acted for Mr Faraone in relation to the preparation of the mortgage dated 7th March, 1990, the preparation and lodgment of the caveat and the subsequent withdrawal of that caveat. Consequently, the Complaint that the solicitor acted in breach of his fiduciary duty is not made out. Similarly, the Complaint that the solicitor preferred his own interests to the detriment of the client by preparation and lodging the withdrawal of the caveat is also not made out simply because the Tribunal, again by majority, has concluded that Mr Faraone was not the client of the solicitor. The dissenting Member in respect of this aspect of the Faraone matter, is of the opinion that when the solicitor prepared and lodged the caveat and subsequently withdrew it he was acting as the solicitor for Mr Faraone and, in those circumstances, should have referred the client for independent advice because at these stages the interests of the solicitor and Mr Faraone were in conflict. Panebianco – Matter no. 31 of 1994 When the proceedings commenced before the Tribunal on 14th June, 1994 Mr De Carvalho appeared on behalf of Mr & Mrs Sam Panebianco and Mr. and Mrs. Antonio Panabianco. As part of the formal Complaint, the Council of the Law Society purported to refer a Complaint by Mr Sam Panebianco to the Tribunal pursuant to Section 134(1)(c) Legal Profession Act, 1987. The particulars of that Complaint were said to be contained in a Statement of Mr Sam Panebianco attached to his claim on the Solicitors' Fidelity Fund dated 8th May, 1992. This was a claim for some $246,761.08 or $248,000.00 (approximately) plus interest. The claimant was stated to be Mr Sam Panebianco and Mr Antonio Panebianco but it transpired that the claimants were effectively Mr & Mrs Sam Panebianco and Mr & Mrs Antonio Panebianco. The allegation on behalf of these claimants was that certain moneys were given to the solicitor with instructions to invest by way of first mortgage for one year at 15% per annum payable quarterly. In his Statement, Mr Sam Panebianco alleged that the solicitor acted as the solicitor for himself and his wife. The solicitor was his brother-in-law. The Legal Profession Act, 1987 sets out the procedure whereby a member of the public can complain to the Law Society Council and how those Complaints are to be dealt with. Section 130 provides that a Complaint shall be in writing, identify the complainant and the legal practitioner and give particulars of the unsatisfactory professional conduct or professional misconduct that is alleged to have occurred. Section 130(3) states that a complainant who has suffered a loss as a consequence of the alleged conduct may, in the Complaint, request the making of an order for compensation, but a compensation order exceeding $2,000.00 shall not be made unless the complainant has, in the Complaint, requested the making of a compensation order and the complainant and the legal practitioner both consent to the making of the Order – see Section 149(3) and (4). It is important also to note that a compensation order cannot be made "in respect of any loss for which the complainant has received, or is entitled to receive compensation pursuant to an order of a Court or compensation from the Fidelity Fund". At the outset, therefore, it is difficult to conceive that the Tribunal would be empowered to make an order for compensation arising out of a claim made against the Fidelity Fund – either the Fund would have to have rejected the claim made on it or the Tribunal would have to find that the Fund would not be entitled to make a payment out from its resources to the complainant. The Legal Profession Act, 1987 creates a Solicitors' Fidelity Fund. Claims may be made against that Fund pursuant to Section 80. Part 7 of the Act creates the Fund, its procedures and the method of making claims against it. On the other hand, Part 10 deals with professional conduct and Division 3 of that Part deals specifically with complaints against legal practitioners. It became clear during the course of argument that, although the solicitor and the Panebiancos consented to the matter being heard as a joint application on behalf of all the Panebiancos and without any restriction on the amount of compensation that could be awarded by the Tribunal, the question was clearly before us as to whether there had been a proper complaint within the provisions of Section 130. The Tribunal would need to be satisfied that there was a complaint made pursuant to Section 130, that that complaint was considered by the Council and that it included a claim for compensation and that the complainant had not received nor was entitled to receive compensation pursuant to either a Court order or from the Fidelity Fund. After hearing detailed argument it became clear that there was no proper complaint by the Panebiancos within the terms of Section 130. In substance it was only a claim on the Fidelity Fund and, in the view of the Tribunal, a claim on the Fidelity Fund is not a Complaint pursuant to Section 130 of the Act. The Tribunal ruled that it did not have jurisdiction to deal with that aspect of the formal Complaint against the Solicitor. When the matter came back before the Tribunal on 28th June, 1994 it transpired that the Panebiancos had made a formal complaint pursuant to Section 130 and that complaint had resulted in a formal Complaint filed in the Tribunal in matter No. 31 of 1994. The Tribunal made some consequent orders relating to the hearing of this latter Complaint, which required it to proceed as an independent matter before the Tribunal but the evidence in the first matter (No. 25 of 1993) would be evidence in the subsequent matter, but only so far as it was relevant. When this matter came on for actual hearing on 16th September, 1994, orders were made, by consent, that the Complaint be dismissed with no order as to costs. Summary of findings The Tribunal has found the solicitor guilty of professional misconduct by inducing St George Commercial Credit Corporation Limited to make certain advances through false representations, by signing false statements in documents, by altering a Solicitor's Certificate after execution, and by breaching an undertaking upon which other persons relied. The complaints against the solicitor alleging wilful breaches of Sections 41 and 42 of the Legal Practitioners Act, 1898 of wilfully breaching paragraph 27 of the Legal Profession Regulations, 1987, of acting in breach of his fiduciary duty and of preferring his own interests to the detriment of those of his alleged client, the Tribunal has found not made out and those complaints are dismissed. Conclusions The Tribunal has found serious breaches by the solicitor of his duties, breaches amounting to, in a number of distinct circumstances, professional misconduct. It is quite clear that the solicitor embarked upon and was an active participant in a course of conduct designed to falsify records and to create a fictional scenario to mislead St George Commercial Credit Corporation Limited into thinking that he and "John Shepherd" acquired from Mr Spies and his father a number of corporations with a view to obtaining substantial monetary advances in circumstances where, at all times, the solicitor knew that Mr Spies effectively retained control of the various corporations. As part of that scheme the solicitor made certain Statutory Declarations and executed documents that in all cases were false, deceptive and misleading, and actively falsified an independent Solicitor's Certificate. In addition, but as a discrete matter, the solicitor breached an undertaking upon which a fellow solicitor relied in effecting the settlement of a mortgage and that undertaking has yet to be honoured. The solicitor's primary, and effectively only, client was Mr Carl Spies. The solicitor allowed himself, in breach of his duties as a solicitor to become so embroiled in the affairs of Mr Spies that he, the solicitor, appeared unable to understand that his conduct was quite improper, was deliberately misleading, deceitful and fraudulent. The Tribunal finds that the conduct was disgraceful and dishonourable and constitutes professional misconduct under the general law (see Allison v General Council of Medical Education and Registration (1984 1QB 750 at 763) and the discussion of this concept in the matter of Ian Gordon Dun (1994 3 LPDR 5). And it should have been seen by the solicitor to have amounted to professional misconduct at the time the solicitor carried out the various offensive activities. Having made such a finding, the Tribunal's powers are indicated in Section 163. In this case the Tribunal has formed the view that the solicitor is not a fit and proper person to remain on the roll of solicitors. The view that the Tribunal takes is that the conduct of the solicitor was of such seriousness and carried out with such deliberate intent that it is difficult to reach a different conclusion. We are acutely aware of the observations of the Court of Appeal in Fraser v Law Society (1992 5 LPDR 12) but the conduct of the solicitor in the case now before us was not simply a one-off event – it was a whole series of events, some of which were related and all of which were designed to further the financial interests of a powerful client with whom the solicitor had more than a solicitor/client relationship and whose financial affairs, and those of the solicitor, were inextricably entwined. The solicitor should, in our view, have been acutely aware of the very clear warning signs and the alarm bells that must have been ringing but he chose to ignore those and he put his own personal interests in front of his clear obligations as a legal practitioner. It is often a dangerous practice for a solicitor to become too involved with the affairs of his/her client and it is also often a dangerous practice to embark upon business ventures with one's clients. Great care needs to be taken by solicitors in their professional dealings with their clients and even greater care needs to be taken where a solicitor joins with a client in commercial ventures in circumstances where the solicitor continues to act for the client, the latter often creating a milieu where the commercial risks and dangers can cloud the otherwise clear view that the solicitor should have of the solicitor/client relationship. The solicitor, in this case, appears to have become so involved with his client that his perception of his professional duty, not only to the client but his duty as a solicitor, became so clouded that, at least in some circumstances, the actions of the solicitor showed a total lack of appreciation of his professional duties. In our view, therefore, his name should be removed from the roll. Orders The Tribunal makes the following Orders:- 1. The name of Vincent Cofini be and the same is removed from the Roll of Solicitors in New South Wales. 2. The costs of the Law Society, excluding all costs in relation to matter No. 31 of 1994 and all costs in relation to the Panebianco aspects of matter No. 25 of 1993, be paid by the solicitor, such costs to be assessed as if taxed in the Supreme Court on a solicitor and client basis, and paid by the solicitor to the Law Society. 3. If the parties cannot agree on the quantum of those costs, either party to have liberty to apply to the Tribunal to determine the amount of those costs. 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.