The Law Society of New South Wales (the applicant) has brought this application by which it seeks the following orders affecting the respondent:
1. The name of Tereze Vilhelmina Dzitars (the respondent) be removed from the Supreme Court roll;
2. Tereze Vilhelmina Dzitars pay the costs of the applicant; and
3. Tereze Vilhelmina Dzitars be subject to any other order as the Tribunal deems fit.
The application was filed on 16 September 2016. The grounds for the application state that the respondent is guilty of professional misconduct because:
1. She breached s 255 of the Legal Profession Act 2004 (LP Act) (Ground 1); and
2. She misappropriated entrusted funds (Ground 2).
A summary of the particulars providing the basis for Ground 1 is as follows:
1. Some time prior to 14 September 2009 Mr J Ozols retained the respondent and the respondent acted to prepare his will and power of attorney. The will made provision for gifts to named individuals and for the residuary estate to pass to a relative in Latvia. Mr Ozols died and probate of his will was granted by the Supreme Court appointing the respondent the sole executrix and trustee;
2. On or about 26 June 2013 the respondent deposited into the trust account maintained by the respondent a cheque for $964,764.23 and credited that sum to the estate of Mr Ozols trust ledger;
3. Some time prior to 17 December 2010 a Ms Bukavs retained the respondent to prepare her will. The will provided for gifts to named individuals and for the respondent to be her sole executrix and trustee;
4. After Ms Bukavs died, probate of her will was granted and the respondent became the sole executrix and trustee;
5. On or about 17 December 2013 the respondent caused the sum of $45,000.00 to be deposited into the trust account, being the deposit paid by purchasers of land owned by the estate of Ms Bukavs;
6. On or about 18 February 2014 the respondent caused the sum of $450,000.00 to be deposited into her trust account, being the proceeds of the settlement of the sale of Ms Bukavs' land; and
7. In breach of s 255 of the LP Act, the respondent, without authority, on dates shown in a schedule attached to the application drew trust account cheques or otherwise made withdrawals in the stated sums in favour of the persons detailed in the table attached to the application and identified as Schedule 1.
A summary of the particulars supporting Ground 2 is set out as follows:
1. The sum of unauthorised payments from the Ozols' estate is $202,279.34 less an amount for scale costs of the application for probate and reasonable costs for the administration of the estate;
2. The total of the unauthorised payments from the Bukavs' estate is $73,010.00;
3. In the circumstances described above, the respondent misappropriated $275,289.34 less an amount for scale costs of the application for probate and reasonable costs for the administration of the Ozols' estate; and
4. The sum misappropriated by the respondent for her personal expenses and use was $162,807.15.
Schedule 1 (being the attachment to the application referred to above) lists a number of trust account cheques drawn by the respondent during the period 29 June 2013 to 24 April 2014.
[2]
Evidence
At the hearing the applicant tendered the following affidavits without objection:
1. The affidavit of AM Foord dated 13 September 2016 (marked as Exhibit A);
2. The affidavit of Richard Stephen Savage dated 12 September 2016 (marked as Exhibit B); and
3. The affidavit of Terrence Mark Copas dated 14 September 2016 (marked as Exhibit C).
[3]
The position of the respondent
The respondent did not appear at the hearing but she was represented by her son, Robert Dzitars who sought and obtained leave to appear for the respondent. Mr Dzitars informed the Tribunal that he had the authority of his mother to appear for her. He is not a legal practitioner. However, he is his mother's attorney under a power of attorney.
On 3 October 2016 the respondent filed a Reply to application for disciplinary findings. The relevant parts of the Reply state that: "all grounds are admitted and particulars are admitted". The Reply also stated that the respondent agrees to have her name removed from the roll. To the Reply was an attachment which stated that the respondent has no money, is not in good health and has mild dementia. Mr Dzitars confirmed at the hearing that the respondent was suffering ill health. However, he also confirmed that the admissions contained in the Reply continue to remain in place.
[4]
Relevant Law
Although the Application was filed after the commencement of the Legal Profession Uniform Law (the Uniform Law Act) and the repeal of the LP Act, we are satisfied that the provision of the LP Act properly apply to this matter. This is because cl 26 of the Uniform Law Act provides that a complaint or an investigation begun but not completed before the commencement of the Uniform Law (1 July 2015) is to continue to be dealt with in accordance with the old legislation. The evidence discloses that the applicant commenced its investigation into the respondent's activities in 2014.
[5]
The Applicant's Case
The applicant summarised the allegations against the respondent in the following terms:
The respondent without authority dispersed funds from one or other of the two estates referred to in the application as:
1. Gifts in excess of testamentary entitlements to certain named individuals or;
2. Gifts when there was no testamentary entitlement to certain named individuals or;
3. To pay personal bills or expenses; or
4. To purchase for herself a new car, a vacuum cleaner and a new kitchen.
The applicant's representative took the Tribunal to Schedule 1 which identifies each trust account cheque drawn by the respondent, the payee, the amount and the purpose of such payment. There are payments to discharge personal bills of the respondent, such as a payment to Telstra, the St George Bank - Visa, David Jones and Toyota Finance. There is a payment to the respondent's son for dental expenses.
The representative for the applicant also identified in Schedule 1 the evidentiary material which supported the assertions contained in Schedule 1. The evidentiary material came from the affidavits of Richard Savage (Exhibit B) and Terrance Copas (Exhibit C). Mr Savage was appointed as manager of the law practice from 29 May 2014 and receiver of trust property by the Supreme Court of New South Wales on 24 October 2014. Mr Copas was employed as an administration manager, external interventions within the trust account department of the applicant and he reviewed the trust account records of the respondent.
The applicant submitted that the Tribunal had before it evidence of sufficient strength to be satisfied on the balance of probabilities, given the nature of the proceedings and the potential consequences for the respondent, that the allegations made against the respondent are made out.
[6]
Decision
On the basis of the evidence tendered by the applicant, we are satisfied that the respondent made a number of unauthorised withdrawals from her trust account, details of which are recorded in Schedule 1 to the application. In particular, we are satisfied that between 13 February 2014 and 8 March 2014 the respondent made four unauthorised withdrawals from the Bukavs' estate totalling $86,010.00. We are also satisfied that between 29 June 2013 and 7 November 2013 the respondent made 27 unauthorised withdrawals from monies properly belonging to the Ozols' estate and totalling $229,041.15.
We are satisfied that the transfers of monies by the respondent referred to above were done without the authority of the beneficial owners of the funds and accordingly we are satisfied that the respondent failed to hold the entrusted monies of the Ozols' estate and the Bukavs' estate, being trust money in a general trust account of the respondent's law practice exclusively for the persons on whose behalf it was received and that the respondent dispersed the trust money otherwise than in accordance with the direction given by the persons on whose behalf it was held.
Accordingly, we are satisfied that the respondent has contravened the provision of s 255 of the LP Act. We note that the respondent has admitted such contravention.
We are satisfied that Ground 1 of the application has been made out.
Insofar as Ground 2 is concerned, the applicant submitted, and we agree, that in order to establish an allegation of misappropriation it is necessary to demonstrate that there was some deliberate act which is objectively dishonest applying the "ordinary standards of reasonable and honest people" but without the need to demonstrate any intention to misappropriate or to identify any subjective dishonesty: see for example Council of the Law Society of NSW v Nicholls [2012] NSWADT 222 at [7] - [36].
The applicant submitted that a wrongful conversion of another's money that is attended by subjective dishonesty (possibly demonstrated by an intention to permanently deprive the beneficial owner of entrusted funds) will have no impact on the bare finding of misappropriation but will properly be a factor for consideration when making dispositive orders.
The applicant asserted that the respondent's actions were deliberate.
In this case the respondent drew a cheque in her favour for "past costs and disbursements" totalling $33,139.07 in circumstances where there was no evidence that any money was due for past costs and disbursements. The applicant submitted that the actions of the respondent in taking monies from the estates for her own purposes were dishonest by "the ordinary standards of reasonable and honest people" not just because she was not entitled to the money, but because her administration of the estates was antithetical to the trust reposed in her by Mr Ozols as testator and Ms Bukavs as testatrix.
We agree with the applicant that given the respondent's position and presumed knowledge of her obligations, we are satisfied that she engaged in deliberate acts, namely the transfers of large amounts of entrusted funds and the disbursement of the funds which wrongfully converted the client's property for the respondent's own use. This was dishonest by the ordinary standards of reasonable and honest people. Accordingly, the Tribunal is satisfied on the balance of probabilities that the respondent misappropriated trust funds.
We were taken to examples of evidence which the applicant cited to support the proposition that the respondent was aware of her dishonesty. For example, the evidence of Mr Savage refers to a conversation he had with the respondent in which she initially stated that the money paid to Toyota Finance was due in respect of a car which the deceased Mr Ozols owned. Mr Savage records that the respondent then admitted that she used the estate funds to purchase a car for herself. She also admitted using a sum of $5,000.00 to pay for her son's dental costs.
We agree with the applicant that the Tribunal can infer with confidence that when the respondent bought a new car she knew she had acted dishonestly and that she was aware that what she did was wrong. This knowledge caused her to attempt to conceal her purchase of the car by telling Mr Savage that the car belonged to Mr Ozols.
The Tribunal agrees with the respondent that the Tribunal can infer that the respondent knew that she was not entitled to deal with the entrusted monies as she did, but chose to do so because she was in financial difficulty. This is supported by not only her statement to Mr Savage that she could not pay for her son's dental care but also by the fact that she was being pressured by a debt collecting agency to pay an outstanding debt to David Jones in the sum of $9,374.84.
We are satisfied that the respondent had the knowledge, intention and belief that rendered her misappropriation subjectively dishonest. We are comfortably satisfied that Ground 2 has been made out.
We agree with the submission of the applicant that the allegations of misappropriation which have been established are grave and render a finding of deliberate dishonesty appropriate and inescapable.
Section 498(1)(a) of the LP Act provides that contraventions of the Act may constitute professional misconduct and applies in this case. We find that the respondent's conduct is such to justify a finding that she has demonstrated a substantial and consistent failure to reach or maintain a reasonable standard of competence and diligence, that she is not a fit and proper person to engage in legal practice and that therefore she has engaged in professional misconduct.
We also find that the respondent has been guilty of professional misconduct in the sense used in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 at [758] where Lopes LJ considered the phrase "infamous conduct in a professional respect" and concluded that it meant that conduct "which would be reasonably regarded as disgraceful or dishonourable" by other members of the profession. This test has been applied in other decisions of the Tribunal.
We agree with the applicant's contention that the Tribunal is faced with conduct from the respondent which demonstrates a breach of the respondent's duties to her clients, the estate of Ozols and the estate of Bukavs and that there has been a failure by the respondent to avoid a conflict of interest. It is the existence of a fiduciary duty and the fulfilment of its content (which includes a duty to avoid a conflict of interest) that marks a solicitor as a fit and proper person to engage in legal practice. As the respondent breached her fiduciary duties she has shown that she is not a fit and proper person to engage in legal practice and has engaged in conduct which would be "reasonably regarded as disgraceful or dishonourable" by other legal practitioners.
The respondent's conduct can be categorised as professional misconduct either by virtue of s 497(1)(b) of the LP Act, or by the common law definition or by both.
In our view there is sufficient evidence to justify the conclusion that the respondent consciously stole client's money and that she intended to use client's entrusted funds without authority to facilitate her own financial difficulties and to make gifts for her children and others.
In our view, the conduct alleged and found by the Tribunal leads to only one conclusion, namely that the respondent's name must be removed from the roll.
With respect to costs, the applicant submits that cl 23 of Sch 5 of the Civil and Administrative Tribunal Act 2013 regulates the position. In summary that provides that an order for costs to the effect that the respondent must pay the applicant's costs is mandatory unless there are exceptional circumstances. In our view, there are no exceptional circumstances in this matter, which would justify a departure from the usual required requirement of cl 23.
We record that Mr Dzitars did not make any submissions disputing those made by the applicant.
[7]
Orders
The Tribunal having found the practitioner is guilty of professional misconduct orders that :
1. The respondent's name be removed from the roll of legal practitioners; and
2. The respondent pay the Council of the Law Society's costs as agreed or as assessed
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: 28 March 2017