Council of the Law Society of New South Wales v Konstantinidis

Introduction

1. On 3 July 2019 we published our reasons for decision in Council of the Law Society of New South Wales v Konstantinidis [2019] NSWCATOD 104. We found Simon Konstantinidis (the Solicitor) to have engaged in professional misconduct on two grounds in proceedings brought against him by the Council of the Law Society of New South Wales (the Law Society). We also found that he had engaged in unsatisfactory conduct in relation to a further ground. The proceedings were stood over for a further hearing on the penalty to be imposed as a result of our findings.
2. In our reasons for decision of 3 July 2019 we found that the Solicitor had failed to account in the amount of $33,000 to Apostolos and Ilias Stoikos (the Stoikos brothers) by retaining this money in his trust account between July 2012 and December 2016, contrary to a written direction from the Stoikos brothers Ground 1). We also found that by retaining this money in his trust account, the Solicitor had acted in contravention of s 255(1)(b) of the Legal Profession Act 2004 then in force (the LPA) (Ground 2).
3. In relation to a separate allegation, we found that the Solicitor had breached an undertaking that he had given in a letter sent to another practitioner dated 6 September 2011. We characterised this breach as unsatisfactory professional conduct (Ground 3). We dismissed an additional allegation that he was in breach of a second undertaking in his letter dated 6 September 2011.
4. The penalty proceedings were listed for hearing on 17 December 2019. In preparation for the hearing, the parties had filed and served written submissions and the Solicitor had also filed and served further affidavit evidence. Just before the hearing date we were informed that the parties were content for the Tribunal determine the matter ''on the papers". Accordingly we ordered, pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (the NCAT Act), that the matter be so determined and that the hearing set down for 17 December 2019, be vacated.
5. These are our reasons for decision in relation to penalty. They should be read in conjunction with our reasons for decision dated 3 July 2019. As detailed below, we find that the Solicitor should be reprimanded, that he should pay a fine of $8,000 and that he should undertake trust accounting and ethics courses. We also find that the Solicitor should pay the costs of the Law Society, as agreed or assessed.

The Law Society's Submissions

1. The Law Society submitted that we should make the following orders: 1. An order that the Solicitor be reprimanded; 2. An order that the solicitor pay a fine of $10,000 within 60 days; 3. An order that the Solicitor undergo education as follows: 1. The Solicitor must, at his own expense, complete within 6 months of the date of the orders made by the Tribunal, (and during which the Solicitor holds a current practising certificate) (Period), an appropriate course in Legal Ethics (Course) as approved by the Director Professional Standards of the Law Society (Director) and therein achieve a pass mark of not less than 50% (Pass Mark); 2. The Solicitor will, within 7 days of receipt of notification of the result of his participation in the Course, provide to the Director the original result notification from the provider of the course; 3. Should the Solicitor fail to achieve the Pass Mark, he shall complete any further course in legal ethics approved by the Director until such time as he achieves the Pass Mark in any further nominated course; and 4. Should the Solicitor fail to achieve the Pass Mark within the Period, his practising certificate shall be suspended from the expiry of the Period until such time as he has achieved the Pass Mark. 1. An order that the Solicitor pay the Law Society's costs of the proceedings pursuant to Schedule 5, clause 23(1) of the NCAT Act, as agreed or assessed.
2. The Solicitor did not oppose the Law Society's submission that the Tribunal should make orders in terms of paragraphs (a) (b) and (d) above, at least in principle. Both parties also proceeded on the basis that in penalty proceedings the Tribunal is exercising a protective and educative function. The purpose of the penalty is not to punish the Solicitor. We accept that proposition and these reasons for decision adopt that approach.

Reprimand

1. The Law Society submitted that our "'bare finding" of professional misconduct and unsatisfactory professional conduct may not be sufficient to fulfil this educative function. We were referred to statements to this effect in Law Society of New South Wales v Dib [2019] NSWCATOD 15 at [125]. Dib, however, involved very different factual circumstances. The Tribunal in those proceedings reprimanded the solicitor to ensure the profession's compliance with the Law Society's investigative processes. That is not an issue in these proceedings,
2. We were also referred to a passage in the Tribunal's decision in Council of the Law Society of New South Wales v Winter (No 2) NSWCATOD 57 at [11], where it was said that reprimanding the solicitor would: …denote significant admonition of the solicitor's conduct so as to satisfy the necessary general and specific deterrence aims of protective orders in the disciplinary jurisdiction and to ensure that the integrity of the profession is upheld publicly.

Fine

1. In relation to the size of the fine, the Law Society referred us to a number of recent decisions of this Tribunal. These were: Council of the Law Society of New South Wales v (Brent) Hedges [2018] NSWCATOD 149, Council of the Law Society of New South Wales v (Stephen) Hedges [2018] NSWCATOD 150, Council of the Law Society of NSW v Adamson [2019] NSWCATOD 7, Council of the Law Society of NSW v Messiha [2019] NSWCATOD 32 and Council of the Law Society of New South Wales v Searle [2019] NSWCATOD 70.
2. These decisions involved breaches of the trust account regulations and/or a failure to account. In Brent Hedges, the Tribunal considered further recent Tribunal decisions where fines of between $1,000 (in Council of the Law Society of NSW v Gallego (No 2) NSWCATOD 61) and $20,000 (in Russo v Legal Services Commissioner [2016] NSWCA 306) had been imposed. The Tribunal in Brent Hedges determined that the appropriate fine for breaches of ss 254 and 255 of the LPA involving "relatively small" amounts of trust funds, was $6,000. It also found that the solicitor had not acted fraudulently. In Stephen Hedges, his partner was fined $5,500 in relation to the same breaches.
3. In Adamson, Messiha and Searle the fines imposed were, respectively, $10,000, $12,500 and $12,000. In each case there were findings of serious misconduct and in two instances, findings of misappropriation of trust funds.
4. We were also referred by the Law Society to Tribunal decisions where fines were imposed when solicitors had not honoured undertakings. These were Council of the Law Society of New South Wales v Lewis [2019] NSWCATOD100, Council of the Law Society of NSW v Powell [2019] NSWCATOD 24 and Council of the Law Society of NSW v Marando [2018] NSWCATOD 194. In Lewis a fine of $4,000 was imposed, in Powell $1,000 and in Marando, $10,000. Each decision concerned a breach by the solicitor of an undertaking given to the Law Society, rather than to another practitioner.
5. Having regard to the penalties imposed in these decisions, the Law Society considered the fine that should be imposed on the Solicitor in these proceedings to be in the middle of a range of between $1,000 and $20,000 - that is $10,000. It was also relevant to our consideration of the size of the fine, according to the Law Society, that the Solicitor was likely to continue to practise and to earn an income. In those circumstances, a fine of $10,000, together with a reprimand would have "a meaningful deterrent effect, in both a general and a specific sense".

The Solicitor's Disciplinary Record

1. We were referred to two earlier disciplinary findings against the Solicitor. In 1992, the Legal Services Tribunal found the Solicitor guilty of professional misconduct for stating that he had witnessed the signature of a person signing a document, when he had not done so, and for giving a "solicitor's certificate" certifying that he had explained to a mortgagor and guarantor the legal effect of those documents, when he had not done so. He was fined $4,000.
2. In 2005, in the Administrative Decisions Tribunal, the Solicitor was found guilty of professional misconduct in failing to comply with a request made by an investigator appointed by the Law Society, and in failing to comply with an undertaking given to the Law Society. On this occasion the Solicitor was fined $5,000. Although the proceedings were not determined until 2005, the relevant events occurred between 1996 and 2001.
3. The Law Society submitted that the findings and penalties in these earlier cases were relevant to our consideration because, citing the Court of Appeal's comments in Council of the Law Society of New South Wales v Kim [2017] NSWCA 292 at [23], they should have: "instilled in the [Solicitor] a consciousness of the need to be scrupulously attentive to [his] professional duties".

Education Order

1. The Law Society said that the Solicitor's evidence, particularly his reasons justifying why he was entitled to retain the $33,000 in his trust account, which we had referred to in our reasons for decision of 3 July 2019, demonstrated that he did not understand the law in this area. He lacked insight into the "serious deficiencies of his conduct and the gravity of the consequences not only for his clients, but for the legal community more broadly". It was said that he would be likely to derive real benefit from a "refresher" course of education in legal ethics.

Costs

1. Schedule 5, cl 23(1) of the NCAT Act specifies that when a solicitor has been found to have engaged in professional misconduct, the Tribunal must make an order for costs against the Solicitor unless exceptional circumstances exist. The Law Society submitted that no exceptional circumstances existed in these proceedings to displace the usual order.

The Solicitor's submissions

1. As we have noted above, the Solicitor conceded that it was appropriate that he should receive a reprimand, that he pay a fine (though less than $10,000) and that the Tribunal should order that he pay "some costs". He did not consider it appropriate that he be required to enrol in and complete a legal ethics course.
2. The Solicitor relied the following affidavits attesting to the Solicitor's good character and reputation: 1. The affidavit of Andrew Davis, barrister, sworn 28 November 2019 (a redacted version was filed and served on 6 December 2019); 2. The affidavit of Peter Joseph Mooney, barrister, affirmed 28 November 2019; 3. The affidavit of Patricia Frances Lowson, barrister, affirmed 28 November 2019; 4. The affidavit of Peter Mark White, chartered accountant, sworn 28 November 2019; 5. The affidavit of Emmanuel Karamihas, accountant, sworn 29 November 2019; and 6. The affidavit of Panagoula Penny Andricopoulos, real estate agent, sworn 29 November 2019.

Fine

1. The Solicitor's submission also analysed the Tribunal decisions referred to by the Law Society. It concluded that there were differences between the objective circumstances in each those cases and in these proceedings. The amount of a fine in these proceedings should be appreciably less than $5,000.
2. The submission made the point that Grounds 1 and 2 - that the Solicitor had failed to account to his clients and was in breach of s 255 of the LPA, arose out of identical factual findings. Thus there was "one act as a matter of substance in respect of which a fine may made, notwithstanding that two complaints were established".
3. The Solicitor's conduct also did not involve the use of client money for his own advantage. Although we had found in our reasons for decision of 3 July 2019, that the Solicitor's conduct was ''deliberate", he had always believed that he was acting lawfully in refusing to pay the trust moneys in accordance with the direction from his clients. The Solicitor's subjective belief, although wrong as a matter of law, distinguished this case from the circumstances in the other cases referred to by the Law Society, and in particular from Brent Hedges.
4. In relation to our finding that the Solicitor had breached his undertaking (Ground 3), we were directed to the Tribunal's decision in Powell where a solicitor had failed to honour for an extended period an undertaking that she had given to the Law Society. The Tribunal found that this failure constituted professional misconduct and a fine of $1,000 was imposed. The Tribunal had also given serious consideration to not imposing any fine and to reprimand the solicitor only.
5. In our reasons for decision of 3 July 2019 we had made a finding of unsatisfactory professional conduct in respect of Ground 3, and the objective facts of the breach in Powell were "starkly more grave" than the Solicitor's "inadvertent" breach of the undertaking that he had given. In these circumstances no fine at all was warranted for this breach and the amount of the fine should be assessed having regard only to our findings in relation to the Grounds 1 and 2.
6. The earlier disciplinary findings against the Solicitor were also not matters which the Tribunal should take into account as matters increasing the amount of the fine which would otherwise be appropriate due to the nature of the conduct and their age.

Education Order

1. The Solicitor did not accept that he should be required to undertake the ethics course proposed by the Law Society. He submitted that there was nothing in our reasons for decision of 3 July 2019, which pointed to a systematic ignorance of either his ethical responsibilities or his legal responsibilities about the operation of trust accounts. The conduct was "one off" and the circumstances did not indicate that there would be any utility to be had from the proposed education.

Costs

1. The Solicitor accepted his liability for the costs of the preliminary hearings in the proceedings on 20 February and 26 May 2017, but in relation to the substantive hearing in August 2018, it was submitted that a considerable amount of time was taken up by the Law Society's endeavours to read the affidavits of the Stoikos brothers, although they had they had indicated that they no longer wished to pursue their initial complaint to the Law Society. The Solicitor offered to pay 2/3 of the costs for those days.

Character Evidence

1. The Law Society submitted that the Tribunal should not place any significant weight on the character and reputation affidavits supporting the Solicitor because they did not establish that he had developed any insight into his conduct. It was telling that the Solicitor had not himself made an affidavit demonstrating that he had reflected on the findings made against him or developed any insight in relation to the findings made by the Tribunal.

Fine

1. The Law Society did not agree that a fine of "appreciably less than $5,000" was appropriate. It submitted that the Solicitor's conduct was arguably more serious than that in Messiha where a fine of $10,000 was imposed.

Education Order

1. The Law Society noted that the Solicitor did not give any direct evidence as to why he believed that he would not benefit from the course proposed. It also drew our attention to the affidavit of one of the Solicitor's character witnesses, which demonstrated that their relationship went beyond a solicitor/client relationship and involved advice in respect of "business, financial and personal'" matters. The Solicitor would benefit from a course regarding legal ethics so as to ensure those business and personal matters did not give rise to difficulties in respect of his carrying out his obligations as a solicitor.

Costs

1. The Law Society said that only a part of the hearing on the morning of 29 August 2018 was taken up with its unsuccessful attempt to adduce the affidavit evidence of the Stoikos brothers, and that ultimately parts of the exhibits to those affidavits were admitted as evidence by agreement the following day.
2. More generally, there was nothing exceptional in the manner in which the Law Society conducted the proceedings that would constitute exceptional circumstances within the meaning of Schedule 5, cl 23(1) of the NCAT Act, to displace the usual order that it should be entitled to its costs.

Reprimand

1. S 562(2)(e) of the LPA entitles the Tribunal to issue a reprimand after a finding of professional misconduct. The parties have agreed that it was appropriate that we should make this order, given the findings in our reasons for decision of 3 July 2019. However we are not constrained by this or any agreement between the parties. We are entitled to impose a more serious sanction, such as placing a restriction on the Solicitor's practising certificate, as was done in Gallego pursuant to s 562(2) (d) of the LPA. Alternatively we are entitled to consider not reprimanding the Solicitor at all.
2. However having considered all of the evidence and the submissions, we agree that a reprimand should be issued to the Solicitor. We do not believe that a more serious sanction is warranted in the circumstances, but we also do not accept the bare finding of professional misconduct to be sufficient. We consider a reprimand to be appropriate because, as the Tribunal noted in Winter, it denotes not only a significant admonition of the Solicitor's conduct personally, but it also promotes the integrity of the profession generally.

Fine

1. S 562(4)(a) of the LPA entitles the Tribunal to order a practitioner to pay a fine of a specified amount, not exceeding $75,000. The Solicitor again accepted that his conduct warranted the imposition of a fine. We agree that a fine is warranted.
2. As we have set out above, there was considerable debate about the amount of the fine. We do not agree with the Law Society that the "range" of fines for comparable cases is between $1,000 and $20,000. In Gallego, a fine of $1,000 was imposed by the Tribunal, but this was considerably less than would have been imposed, but for the practitioner's difficult financial situation. The Solicitor's capacity to pay was not an issue in these proceedings.
3. In Russo, the Court of Appeal, having set aside the Tribunal's order that the solicitor's name be removed from the roll, imposed a fine of $20,000, noting that his conduct involved obvious deficiencies in the application of trust monies, and was exacerbated by the high handed and dismissive manner in which he responded to queries made on behalf of his client. Neither Gallego nor Russo assists us in determining the size of the fine in these proceedings.
4. To the extent that it is helpful, we regard the actual range for cases comparable to these proceedings to be between $4,000 and $12,000. However, whilst there is some benefit in conducting an analysis of comparable cases to determine where this matter falls within this range, ultimately each case must be determined on its own facts and circumstances.
5. Taking this approach, we have decided that a fine of $8,000 is appropriate and that it be paid within 60 days, as requested by the Law Society. In reaching this position the following factors are relevant to our decision: 1. Our findings in relation to Grounds 1 and 2 arose out of the same facts; 2. The Solicitor's conduct in relation to these Grounds was deliberate and continued for a long time, but it did not involve any dishonesty on his part or personal gain; 3. We did not take into account our finding of unsatisfactory professional conduct in relation to Ground 3 when assessing the amount of the fine. If the only finding against the Solicitor were that in Ground 3, we would have given serious consideration, as the Tribunal had done in Powell, to not imposing any fine; 4. We gave little weight to the reputation and character evidence relied on by the Solicitor; and 5. We gave little weight to the previous disciplinary findings against the Solicitor given the length of time that has elapsed since those matters were determined.

Education Order

1. The Tribunal's power to make an educative order is set out in s 562(4)(b) of the LPA. We have come to view that the Solicitor should undergo further education. As the Tribunal observed in Messiha when considering a similar proposal, the Tribunal has a responsibility to ensure that the Solicitor "understands (his) duty to the law, the profession and the wider public".
2. We are not persuaded by the submission that the Solicitor would not gain any benefit from the proposed course. He has not provided any evidence to support this proposition, for example, that he has recently undertaken a similar course. It is also an annual requirement for each member of the profession to complete a course in ethics and professional responsibility. The Solicitor has also not provided any evidence that he has developed any insight into our findings in relation to Grounds 1 and 2 and what he would do differently if similar circumstances were to arise in the future.
3. Given our findings in relation to Grounds 1 and 2, we will amend the order proposed by the Law Society and specify that the Solicitor complete separate courses, to be approved by the Director, in both trust accounting as well as in legal ethics, as was ordered in Messiha.
4. The Period, as that expression is defined by the Law Society in sub paragraph (c) i of its proposed orders, will now extend into the new practice year. The Solicitor will therefore be entitled to be issued with a new certificate from 1 July 2020, although he may not have completed the prescribed courses by that time. Nevertheless he remains subject to the requirement in sub paragraph (c) iv of the proposed orders.

Costs

1. We had already observed in our reasons for decision of 3 July 2019 that the manner in which these proceedings had been conducted was not consistent with the Tribunal's guiding principle, set out in s 36(1) of the NCAT Act, to facilitate the just quick and cheap resolution of the real issues in the proceedings. Those remarks were directed to both parties equally and are not relevant to the Solicitor's submission that he should be obliged to pay only a part of the Law Society's costs on 29 and 30 August 2019.
2. Clause 23(1) in Schedule 5 of the NCAT Act is in the following terms: Despite section 60 of this Act, the Tribunal must make orders requiring a respondent lawyer 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.
3. Having reviewed the transcript of the hearing, we are not persuaded that the Law Society's ultimately unsuccessful efforts to compel the Stoikos brothers to attend the hearing and to read their affidavits, occupied a significant amount of time in the context of the proceedings as a whole.
4. We agree with the Tribunal's comments in Council of the Law Society of New South Wales v Wehbe [2018] NSWCATOD 14 at [400] that it is not uncommon for the Law Society to fail to establish every element of its case whilst succeeding overall. We are not satisfied that this issue concerning the affidavits of the Stoikos brothers constitutes "exceptional circumstances" sufficient to displace the usual cost order when a finding of professional misconduct has been made by the Tribunal.

Orders

1. We therefore make the following orders: 1. The Solicitor is reprimanded. 2. The Solicitor is to pay a fine of $8,000 within 60 days. 3. The Solicitor is to undergo education as follows: 1. The Solicitor must at his own expense, complete within 6 months of the date of these orders (and during which the Solicitor holds a current practising certificate) (Period), appropriate courses in trust accounting and legal ethics (Courses) as approved by the Director Professional Standards of the Law Society (Director) and therein achieve in each a pass mark of not less than 50% (Pass Mark); 2. The Solicitor will, within 7 days of receipt of notification of the result of his participation in the Courses, provide to the Director the original result notification from the provider of the Courses; 3. Should the Solicitor fail to achieve the Pass Mark in each Course, he shall complete any further course in trust accounting and/or legal ethics approved by the Director until such time as he achieves the Pass Mark in any further nominated course; 4. Should the Solicitor fail to achieve the Pass Mark within the Period, his practising certificate shall be suspended from the expiry of the Period until such time as he has achieved the Pass Mark. 1. An order that the Solicitor pay the Law Society's costs of the proceedings pursuant to Schedule 5, clause 23(1) of Civil and Administrative Tribunal Act 2013, as assessed or agreed.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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. Decision last updated: 14 August 2020