CITATION: Law Society of New South Wales v Laftsidis [2010] NSWADT 317 DIVISION: Legal Services Division APPLICANTS The Law Society of New South Wales PARTIES: The Legal Services Commissioner RESPONDENT Dimitrios Laftsidis FILE NUMBER: 102006; 102011 HEARING DATES: 10 December 2010 EXTEMPORE DECISION DATE: 10 December 2010 BEFORE: Mullane G - Judicial Member; Fairlie D - Judicial Member; Fitzgerald R - Non-Judicial Member CATCHWORDS: Solicitor – Professional Misconduct MATTER FOR DECISION: Principal Judgment LEGISLATION CITED : Legal Profession Act 2004 Revised Professional Conduct and Practice Rules 1995 Applicants Law Society Mr A Matalani REPRESENTATION: Legal Services Commissioner Ms L Muston Dimitrios Laftsidis In person ORDERS: 1. The name of Dimitrios Laftsidis is removed from the roll. 2. Dimitrios Laftsidis must pay the costs of the Law Society of New South Wales of an incidental to these proceedings. Reasons for Decision a) In this matter, the Applicant, the Council of the Law Society of New South Wales ("the Society"), made an Application against the Respondent, Dimitrios Laftsidis ("the Solicitor") alleging that he was a legal practitioner within the meaning of the Legal Profession Act 2004 ("the 2004 Act") and that while practising as such he was guilty of professional misconduct on numerous occasions. b) The Society sought the following orders: 2.1 That the Solicitor's name be removed from the Roll; 2.2 That the Solicitor pay the costs of the Society; and 2.3 Such further orders as the Tribunal sees fit. INSTRUMENT OF CONSENT c) The Society, the Solicitor and the Legal Services Commissioner on 27 September 2010 filed an Instrument of Consent pursuant to Section 564 of the Legal Practitioners Act 2004 ("the Act") consenting to orders 2.1 and 2.2 above and setting out grounds of professional misconduct complained of by the applicant and the agreed facts of those grounds. d) The Society did not press grounds 1 & 2 in proceedings 10211 because the Solicitor was no longer a law practice at the time and for that reason the section of the Act relied upon in each of those grounds did not apply. With regard to proceedings 102006, the Society did not press the allegations of breaches of Sections 255, 260, 262, and 264 of the Act in relation to the Solicitor's conduct described in particulars P to T of the Consent Instrument (dealings with a deposit of on the sale of land by a client Danny Assabgy). Those particulars are relied upon, though, as evidence of a ground of misappropriation. And the conduct is elsewhere relied upon in relation to other grounds. e) Pursuant to subsection 564(10) the tribunal conducted a hearing and considered the evidence in relation to the alleged instances of professional misconduct, rather than just make the consent orders without a hearing. f) At the end of the hearing the tribunal pronounced the orders made and informed the parties that detailed reasons would be prepared. These are those reasons. THE EVIDENCE g) The evidence comprised 6.1 The Instrument of Consent filed with the Tribunal on 27 September 2010; 6.2 The affidavit of John Ernest Mitchell sworn 22 April 2010; 6.3 The affidavit of Raymond John Collins sworn 30 April 2010; 6.4 The affidavit of Raymond John Collins sworn 4 May 2010; 6.5 The affidavit of Raymond John Collins sworn 1 June 2010; and 6.4 The affidavit of Raymond John Collins sworn 3 June 2010. FINDINGS - BREACHES OF SECTION 255 OF THE LEGAL PROFESSION ACT, 2004 h) Subection 255(1) of the Act provides: (1) A law practice must: (a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and (b) disburse the trust money only in accordance with a direction given by the person. Maximum penalty: 50 penalty units. i) Ground 1. The solicitor breached the subsection on 31 December 2008. he drew from his trust account $26,000 from monies held by him on behalf of his clients Mr & Mrs Sidoni without any authority of those clients. The funds he held were the deposit on the sale of Mr & Mrs Sidoni's property. He transferred the money to the account of a property development company controlled by him. j) Ground 2. The Solicitor breached the subsection on 15 January 2009. He received from a client, Mr Tadros, a an electronic funds transfer of $51,500 for payment of Stamp Duty on a purchase. The transfer was into his general account and the Solicitor did not transfer it to the trust account. FINDINGS - BREACHES OF SECTION 260 OF THE LEGAL PROFESSION ACT, 2004 k) Subection 260 of the Act provides: (1) A law practice must not, otherwise than as permitted by subsection (2), mix trust money with other money. Maximum penalty: 100 penalty units. (2) A law practice is permitted to mix trust money with other money to the extent only that is authorised by the Law Society Council and in accordance with any conditions imposed by the Law Society Council in relation to the authorisation. l) Ground 3. The Solicitor breached the section in December 2008/January 2009 when he received a cheque for $28,000 for a client to be used to pay the deposit for the purchase of a property. He deposited the cheque into his general account thereby mixing it with money other than trust money, without any authorisation from his client or the Law Society Council. The money was used for his personal purposes. m) Ground 4. The Solicitor breached the section in December 2008/January 2009 when he allowed the $51,500 received from Mr Tadros for payment stamp duty to be deposited to his general account and remain there, thereby mixing with other non trust monies without any authorisation from his client or the Law Society Council. The money was used for his personal purposes. FINDINGS - BREACH OF SECTION 262 OF THE LEGAL PROFESSION ACT, 2004 n) Section 262 of the Legal Profession Act 2004 provides: (1) An Australian legal practitioner is guilty of an offence if he or she, without reasonable excuse, causes: (a) a deficiency in any trust account or trust ledger account, or (b) a failure to pay or deliver any trust money . Maximum penalty: 200 penalty units. (2) A reference in subsection (1) to an account includes a reference to an account of the practitioner or of the law practice of which the practitioner is an associate . (3) In this section: "cause" includes be responsible for. "deficiency" in a trust account or trust ledger account includes the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account. o) Ground 5. The Solicitor breached the Section in that he caused a deficiency of $13,153.69 in the trust account of his law practice "SL Lawyers" as at 15 April 2009. The Deficiency was discovered on investigation of the law practice by Mr John Mitchell, the Chief Trust Account Inspector and Supervisor. p) Ground 6. In July 2009 Mr Mitchell was appointed Supervisor of the law practice. He discovered a deficiency of $6,454.94 in the law practice trust account and informed the Solicitor. On 19 June 2009 the Solicitor corrected the deficiency by depositing $6,500 into the trust account. On 22 June 2009 the Solicitor withdrew in cash $2,500 from the trust account. On 20 June 2009 the Solicitor withdrew in cash another $4,000 from the trust account. The remaining amount in the trust account was $5. The solicitor caused the deficiency in the trust account. FINDINGS - BREACH OF SECTION 264 OF THE LEGAL PROFESSION ACT, 2004 q) Section 264 of the Act provides: (1) A law practice must keep in permanent form trust records in relation to trust money received by the practice. Maximum penalty: 50 penalty units (2) The law practice must keep the trust records: (a) in accordance with the regulations, and (b) in a way that at all times discloses the true position in relation to trust money received for or on behalf of any person, and (c) in a way that enables the trust records to be conveniently and properly investigated or externally examined, and (d) for a period determined in accordance with the regulations. Maximum penalty : 100 penalty units r) Ground 7. The Solicitor breached the section in that he failed to keep any reasonable records in relation to trust monies received by the practice SL Lawyers. From July 2006 to February 2009 he was the principal of SL Lawyers. As at 17 September 2007 there were no balances recorded in the trust account records. The trust account was closed in March 2009, but the trust account records had not been written up since July 2008. FINDINGS – MISPPROPRIATION OF TRUST MONEYS s) Ground 8. In December 2008/January 2009 the Solicitor received $28,000 in trust for his client, Mr Assabgy, being payment by a purchaser of the deposit on the purchase of a property from Mr Assabgy . The Solicitor misappropriated those funds. He deposited the cheque in his general account and used it for his personal purposes. He later wrote a cheque on his trust account for the deposit of $28,000 but when the cheque was presented, it was dishonoured by his bank. t) Ground 9. On 23 December 2008 the Solicitor received $26,000 in trust for his clients Mr & Mrs Sindoni by way of payment by the purchaser of the deposit on the sale of a property by the clients. On 31 December 2008 without any authorisation by his clients, the Solicitor took the money and transferred it to the account of Silverstone Properties Group, a development company he controlled. u) Ground 10. On 22 June 2009 the Solicitor withdrew in cash $2,500 from his trust account. On 20 June 2009 the Solicitor withdrew in cash another $4,000 from the trust account. The Solicitor used the $6,500 he withdrew from the trust account for personal purposes. Those withdrawals by the solicitor were misappropriations of trust money. BREACH OF RULE OF THE REVISED PROFESIONAL CONDUCT AND PRACTICE RULES v) Rule 12.1 provides: 12.1 A practitioner must not borrow any money, nor assist an associate to borrow any money from a person: 12.1.1 who is currently a client of the practitioner, or the practitioner's firm; 12.1.2 for whom the practitioner or practitioner's firm has provided legal services, and who has indicated continuing reliance upon the advice of the practitioner, or practitioner's firm in relation to the investment of money; Or 12.1.3 who has sought from the practitioner, or the practitioner's firm, advice in respect of the investment of any money, or the management of the person's financial affairs. w) Ground 11. The Solicitor acted for the Vendor on a real estate sale and also for the purchaser. Mr Chronopoulos, a director of the vendor, was also a client. The Solicitor received the deposit as stakeholder on 18 February 2009 and it was deposited into his trust account. He asked Mr Chronopoulos if he could borrow some money from him and Mr Chronopoulos said "you can have the money in the account so long as we are OK for the settlement." The solicitor drew a total of $27,000 from the trust account in 4 withdrawals in February. He transferred all of the monies to his property development company. He breached Rule 12 by borrowing from a client. x) The sale was to be completed on 17 April 2009. When Mr Mitchell saw him on 15 April the Solicitor said he was in the process of arranging a loan from his mother so that the settlement would occur on 17 April. y) Ground 12. The Solicitor acted for Mr Tadros on the purchase of a property which settled on 29 January 2009. Mr Tadros was to provide $51,500 for stamp duty. The Solicitor asked if he could borrow some money from Mr Tadros for a short period of time. Mr Tadros told him, "I do not care what you do with the money as long as I have no problems on settlement as I am short of money." The Solicitor took the whole of the $51,500. He breached Rule 12 by borrowing from his client. z) He planned to borrow the money for the stamp duty from his wife's family and John Simonetta, who had worked in the law practice, by the last day for payment. He had 3 months to pay the duty from the date of the contract. The settlement took place in late January or early February. By 15 April the stamp duty payable to the Office of State Revenue with interest was about $53,500. The Solicitor agreed to provide Mr Mitchell by close of business that day with evidence of payment of the stamp duty and interest. He did not. The Solicitor did not pay the duty until 17 April. On 17 April he sent Mr Mitchell instead "copy of cheques as discussed". Attached was a copy of a cheque for $53,000 dated 16 April drawn on the St George Bank on the account of Perfection Fresh Australia Pty Ltd (a company of which Mr Simonetta is a director) and payable to "Sarvaas Ciappara". MISUSE OF THE OFFICE OF STATE REVENUE ELECTRONOIC DUTIES RETURN PROGRAM aa) Ground 13. On 29 January 2009 the Solicitor accessed the online duties lodgement system of Sarvaasciappara Lawyers where he was employed. He had been authorised to use the system for stamping of documents. He made entries into the system falsely advising that he had funds of $51,531.50 for payment of the stamp duty on the contract by his client Mr Tadros for purchase of a property. bb) The Solicitor did not have any funds for payment of the duty. His client had deposited with him $51,500 for the duty on 15 January, but the Solicitor had borrowed that money from the client and used it for personal and business expenses. He had arranged to borrow the money to pay the duty from his wife's family and John Simonetta, but had not received the money yet. He did not receive it till 17 April. PROFESSIONAL MISCONDUCT cc) Section 496 of the Act provides: For the purposes of this Act: "unsatisfactory professional conduct" includes conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner . dd) Section 497 of the Act provides: (1) For the purposes of this Act: "professional misconduct" includes: (a) unsatisfactory professional conduct of an Australian legal practitioner , where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and (b) conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice . (2) For finding that an Australian legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the matters that would be considered under section 25 or 42 if the practitioner were an applicant for admission to the legal profession under this Act or for the grant or renewal of a local practising certificate and any other relevant matters. ee) Each of the grounds established is a contravention of the requirements of the Act, except grounds 11, 12 and 13. 11 and 12 are both breaches of the Professional Conduct and Practice Rules. All of the first 10 Grounds are conduct that consists of a contravention and offence under the Legal Practitioners Act 2004 and grounds 11 & 12 are conduct that contravened the professional Conduct and Practice Rules. Ground 7 demonstrates a serious inadequacy; an inability to keep or cause to be kept, basic trust account records. All of the grounds except grounds 7 & 13 involve the Solicitor giving preference to his own financial interests over his client's interests. Ground 13 involves obtaining a benefit by false representation. Grounds 1-3, 6, 8-10 and 13 all involve dishonesty. ff) We have considered, so far as relevant, the matters raised in sections 25 & 42 of the Act (the matters that would be considered if he were an applicant for admission to the profession or for renewal of his practising certificate). gg) Every one of the grounds is in our view demonstrates a substantial and consistent failure to reach or maintain a reasonable standard of competence and diligence. They each amount to professional misconduct. They together establish clearly that the Solicitor is not a fit and proper person to engage in legal practice. REMOVAL FROM THE ROLL hh) The evidence establishes that the Solicitor should be removed from the roll. COSTS ii) Subection 566(1) of the Act provides: The Tribunal must make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner , a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist. jj) The Solicitor has not submitted that there are any exceptional circumstances and we are not aware of any. The practitioner also consents to the order for costs. There should be such an order. CONCERNS WE RAISED AT THE HEARING AND WOULD LIKE THE REGISTRAR TO CONVEY TO THE LAW SOCIETY AND TO THE ATTORNEY GENERAL kk) On 15 May 2009 Mr Mitchell produced a report to the Council of the Law Society after investigation of the Solicitor's practice and trust account. The report revealed that the Solicitor had failed to maintain proper trust account records, had disbursed $26,000 from his trust account without the authority of the clients, had deposited about $28,000 in trust money into his general account, had borrowed money from clients (2 instances), and had misused the Office of State Revenue Electronic Duties Return Program by falsely confirming that at the time he was in possession of cleared funds for the duty. In that report Mr Mitchell said he was not yet able to identify a deficiency of trust funds, apparently because of the inadequate records. ll) On 21 May 2009 the Professional Conduct Committee of the Law Society of NSW resolved, exercising delegated authority, that disciplinary proceedings be taken against the Solicitor for misappropriation of trust funds, breaches of Section 255 of the Act and borrowing from clients. On 28 May 2009 the Council of the Law Society suspended the Solicitor's practising certificate. mm) On 30 May 2009 the solicitor was served personally with notice of the decision to suspend his practising certificate. Mt Mitchell later discovered a deficiency of $6,454.94 in the law practice trust account (which had been closed in March 2009) and informed the Solicitor. On 19 June 2009 the Solicitor corrected the deficiency by depositing $6,500 into a new trust account. On 22 June 2009 the Solicitor withdrew in cash $2,500 from this trust account. On 20 June 2009 the Solicitor withdrew in cash another $4,000 from the trust account. nn) Our concerns are twofold: 40.1 Subsection 255A(2) of the act specifically prohibits cash withdrawals from a general trust account but the Solicitor was able to make 2 such withdrawals from branches other than the branch where the account was conducted and remove virtually all the funds in the account. It seems remarkable that there are not legislative or other arrangements for general trust accounts not to be subjected to cash withdrawals. 40.2 When he made the cash withdrawals it was more than 3 weeks since his practising certificate had been suspended for, among other things, misappropriation. It seems that where such a suspension occurs there should be legislation and systems in place to ensure that the remaining funds in any trust account are protected. oo) We request the Registrar of the Tribunal to provide a copy of our reasons to each of the Chief Executive of the Law Society of NSW and to the Attorney General of NSW. 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.