1. The Respondent having pleaded guilty to a charge of professional misconduct and the Tribunal being satisfied on the evidence that the Charge is proven, the Tribunal finds the Respondent Timothy Kaine guilty of professional misconduct within the meaning of section 4.4.4(a) of the Legal Profession Act 2004 in that contrary to Rule 22.1 of the Professional Conduct and Practice Rules 2005, between 10 November 2010 and 12 November 2010 Timothy Kaine deposited a cheque payable to the Bendigo and Adelaide Bank Ltd (the Bank) in the sum of $57,500 into his trust account, then withdrew the full amount and disbursed it to persons other than the Bank, in breach of an undertaking given to Mr Lachlan Donaldson (a solicitor employed by the firm Donaldson Trumble Lawyers) in his letter to Mr Lachlan Donaldson dated 9 November 2010.

1. Pursuant to ss 4.4.16 and 4.4.19 of the Legal Profession Act 2004, the Tribunal makes the following Determinations:
   • (a) Timothy Kaine is reprimanded in relation to the professional misconduct;
   • (b) Timothy Kaine is ordered to pay a fine of $10,000 to the Legal Services Board by 30 September 2013, such fine to be paid in quarterly instalments of $2,500 on or before each of the dates specified under Order 2(d) below;
   • (c) Timothy Kaine is ordered to complete one point of Continuing Professional Development in Ethics, prior to 30 April 2014, in addition to any mandatory Continuing Professional Development which he is required to undertake pursuant to his practising certificate;
   • (d) Timothy Kaine shall pay the Applicant's costs of this proceeding fixed by the Tribunal as agreed by the parties in the amount of $12,000, such costs to be paid in quarterly instalments of $3,000 on or before each of the following dates: 24 September 2013; 24 December 2013; 25 March 2014; and 25 June 2014.
2. If any instalment of fine or costs owing in accordance with Orders 2(b) or 2(d) above, is not paid within 14 days of its due date, the entire remaining debt becomes due and payable.

Mr G Gilbert, instructed by the Solicitor to the Legal Services Commissioner

1. Michael McGarvie - Legal Services Commissioner (the 'Commissioner') applies to the Victorian Civil and Administrative Tribunal (the 'Tribunal') pursuant to s 4.4.13(2) of the Legal Profession Act 2004 (the 'Act') for an order under Division 4 of Part 4.4 of the Act in respect of Timothy Kaine, the Respondent.
2. Following an initial investigation conducted by the Law Institute of Victoria and a subsequent own motion investigation of the Commissioner, on 18 January 2013, the Commissioner applied to the Tribunal, pursuant to s 4.4.13(2), for a determination of two charges of professional misconduct and consequential orders.
3. Subsequently, the Commissioner withdrew Charge 2, relating to improper use of trust money contrary to s 3.3.14(1) of the Act.
4. The Respondent now comes before the Tribunal pleading guilty to Charge 1 of Professional Misconduct. Accordingly, the Tribunal is now only concerned with an appropriate Determination.

1. The parties jointly filed a summary of agreed facts as follows.
2. The Respondent was admitted to practice in Victoria on 29 February 1988. At the relevant time he was a legal practitioner director of Legal Services Pty Ltd, trading as Kaine Lawyers, at Level 40, 140 William Street, Melbourne 3000.
3. The Respondent (also known as Efthimios Karagiannidis) and his mother, Despina Karagiannidis, jointly owned a property at Unit 8, 1163-1165 Nepean Highway, Highett (the 'Property'). The Property was subject to a first registered mortgage to the Bendigo and Adelaide Bank Ltd (the 'Bank'). On 8 August 2010, the Respondent and his mother (the 'Vendors') entered into a contract of sale with Mrs DeKoster (the 'Purchaser'), to sell the Property for $584,000. The Purchaser paid a deposit of $57,500 to Mr Frank Hellier, the real estate agent acting on behalf of the Vendors in the sale of the Property.
4. Settlement was to take place on 21 January 2011. The Respondent acted as solicitor for the Vendors, under his firm name, Kaine Lawyers. Mr Lachlan Donaldson, a solicitor with the firm Donaldson Trumble Lawyers, acted on behalf of the Purchaser.
5. At or around the time of entering into the contract of sale, the Vendors were in default under the mortgage. Gadens, solicitors for the Bank, issued proceedings in the Supreme Court of Victoria against the mortgagors (the Respondent and his mother), for possession of the Property. The Respondent acted as solicitor on behalf of the mortgagors in these proceedings, through his firm Kaine Lawyers. In the course of the proceedings he filed an affidavit, sworn by himself on 29 October 2010.[1] Mr Frank Hellier also filed an affidavit on behalf of the Respondent dated 3 November 2010.[2] The proceedings in the Supreme Court were settled on the terms set out in the order of Associate Justice Gardiner dated 5 November 2010 (Annexure 1, TK 6). One of the terms was that the Respondent was to pay the sum of $57,500 to the Bank by 4pm on 22 November 2010.
6. The Respondent sought an early release of the deposit monies from the Purchaser. For this purpose, on 8 November 2010, he provided Mr Donaldson with a section 27 (Sale of Land Act 1962) statement.[3] At the same time, the Respondent sent Mr Donaldson a letter from Gadens Lawyers, which had been directed to himself.[4] This letter set out the amount required at settlement ($529,583.76). Mr Donaldson wrote to the Respondent on 8 November 2010, pointing out that the amount owing to the Bank was in excess of the balance of the purchase monies due at settlement.[5] Mr Donaldson was concerned to ensure that his client obtained a clear title at settlement.
7. The Respondent replied by letter dated 9 November 2010:[6]

We refer to the above matter and to your facsimile of yesterday's date.

Please note that the amount claimed in Gadens letter that would be required to be paid to its client at settlement would be reduced by the amount of the deposit in the sum of $57,500 which is currently held by the agent once it has been paid to them. If that amount is deducted from the amount Gadens have claimed the amount payable at settlement to Gadens client would be only $472,083.76.

Clearly therefore the amount payable by your client at settlement of $526,500 plus or minus adjustments is more than sufficient to pay out Gaden's client and the caveator. I will call you to discuss this matter so you clearly understand the position. I would be grateful therefore if you would authorize the agent to release the deposit held today so that the payment can be made to Gadens to ensure compliance with the Court order.

1. On this assurance, Mr Donaldson arranged for his client to sign the section 27 statement. Mr Hellier, who had earlier agreed to forego his commission and other expenses until settlement, drew a trust account cheque in favour of the Bank, for the full amount of the deposit ($57,500). The cheque was dated 10 November 2010.[7] The Respondent collected the cheque from Mr Hellier the same day. Instead of forwarding it to the Bank, he deposited it into his firm's trust account.[8] Two days later, it was transferred from the Kaine Lawyers trust account, to the Respondent's personal account.[9]
2. The Respondent failed to make any payments to the Bank in accordance with the terms of settlement reached in the Supreme Court. The Bank entered into possession of the property. Settlement did not take place on the due date, being 21 January 2011. At or around this time, Mr Donaldson spoke to the Respondent by telephone on a number of occasions, trying to effect settlement. There was an exchange of emails regarding settlement, in particular, from Mr Donaldson to the Respondent on 28 January 2011, the Respondent in reply on 2 February 2011, and then a response to that email by Mr Donaldson (Annexure 1, Exhibit TK 9). In this last email Mr Donaldson wrote:

2. My client paid a deposit of $57,500 as agreed to the agent, Malcolm's Real Estate.

3. Unbeknown to our client you were in financial difficulty and Bendigo and Adelaide Bank as mortgagee was threatening to foreclose under its mortgage. You urgently sought our client's release of deposit both directly of us and through the agent.

4. We denied a section 27 release because the margin of equity was small but in conversations on 8 and 9 November you pointed out that BAB would foreclose if the deposit was not released and paid to BAB to reduce the mortgage debt. You spoke with my secretary and then with me. With some reluctance, I agreed to seek a section 27 release from our client on the faith of firm undertakings by you to me and by the agent to me that the deposit in full would be paid directly to BAB in reduction of the secured debt and to avoid foreclosure.

1. Settlement took place almost a month late, on 23 February 2011. The delay caused inconvenience to the purchaser, Mrs DeKoster, as she had arranged settlement of her purchase of Unit 8, 1163-1165 Nepean Highway, Highett to coincide with settlement of the sale of her former property. She did not bear any additional legal costs, because Mr Donaldson did not render an account to Mrs DeKoster for the additional legal work required to renegotiate settlement with the various parties involved.
2. In addition to the agreed facts, Respondent's Counsel confirmed that:
   • (a) the deposit which the Respondent withdrew from his trust account was applied for his own personal needs;
   • (b) the Respondent did not provide any further funds to the Bank;
   • (c) the Bank took control of the Property settlement which was eventually effected, approximately one month late, directly between the Bank and the Purchaser;
   • (d) the Purchaser was able to continue to reside in her former home, which had been sold, pending settlement; and
   • (e) the Purchaser did not incur any additional legal expenses as a consequence of the delayed settlement.

1. Section 4.4.3 of the Act provides for an inclusive definition of professional misconduct:

(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.

1. Charge 1 has been brought under s 4.4.4(a) of the Act which provides as follows:

4.4.4 Conduct capable of constituting unsatisfactory professional conduct or professional misconduct

Without limiting section 4.4.2 or 4.4.3, the following conduct is capable of constituting unsatisfactory professional conduct or professional misconduct -

(a) conduct consisting of a contravention of this Act, the regulations or the legal profession rules;

1. Charge 1 made against the Respondent provides as follows:

Professional misconduct within the meaning of section 4.4.4(a) of the Act in that contrary to rule 22.1 of the Professional Conduct and Practice Rules 2005, between 10 November 2010 and 12 November 2010 you deposited a cheque payable to the Bendigo and Adelaide Bank Ltd (the Bank) in the sum of $57,500 into your trust account, then withdrew the full amount and disbursed it to persons other than the Bank, in breach of an undertaking given to Mr Lachlan Donaldson (a solicitor employed by the firm Donaldson Trumble Lawyers) in your letter to him dated 9 November 2010.

The particulars relied upon are those set out in paragraphs 1 to 16 above.

1. The paragraphs referred to in the particulars are those paragraphs set out in the Commissioner's Application to the Tribunal.
2. Rule 22.1 of the Professional Conduct and Practice Rules 2005 provides as follows:

A practitioner who, in the course of the practitioner's practice, communicates with another practitioner orally, or in writing, in terms which expressly, or by necessary implication, constitute an undertaking on the part of the practitioner personally to ensure the performance of some action or obligation, must honour the undertakings so given strictly in accordance with its terms, and within the time promised, or, if no precise time limit is specified, within a reasonable time.

1. After hearing an application, if the Tribunal is satisfied that the practitioner is guilty of professional misconduct, it may make any orders it thinks fit including, for the purpose of this application, those specified in s 4.4.17 and s 4.4.19 of the Act.

1. Neither party called any witnesses and relied upon oral submissions of Counsel.

1. The Respondent is currently aged 52 years. He was born in Greece and arrived in Australia with his parents and younger brother when he was four years old. All of his schooling has taken place in Australia.
2. The Respondent was admitted to practice as a barrister and solicitor by the Supreme Court of Victoria on 29 February 1988. He worked as an employee solicitor for two law firms: Bourke Law Offices under the employ of Morris Milder and Marshalls and Dent, before commencing practice as a sole practitioner.
3. While in the employ of Morris Milder, he took over certain clients after his employer suffered significant personal difficulties. There followed disputes with these clients which could be traced to their dealings with the Respondent's employer. In any event, the Respondent was subject to investigation and ultimately cleared of any professional wrongdoing.
4. While in the employ of Marshalls and Dent, the principal Mr Dent, who was a mentor to the Respondent, died. The Respondent fell into disputation with the remaining principal over difficulties he was experiencing with clients from his former firm.
5. Following the death of the Respondent's father and the retirement of his mother it was decided that he and his mother would buy a house together where his mother could reside. The purchase of the Property coincided with the Respondent resolving disputes with Marshalls and Dent and commencement of his sole practice. As a consequence he was under some financial strain, which only worsened over time.
6. The Respondent was obliged to refinance the Property shortly prior to the global financial crisis on terms which added to his financial pressure. At about this time, he also became divorced with a young child to support.
7. The Respondent continues to practise as a sole practitioner.

1. Respondent's Counsel relied upon the following matters in mitigation of any Determination to be made by the Tribunal.
2. First, the Respondent pleads guilty to the Charge of Professional Misconduct.
3. The Tribunal accepts that a guilty plea, consistent with sentencing principles generally, of itself, is usually evidence of some remorse and acceptance of the wrongdoing which is the subject of the Charge. It carries with it the added advantage of saving the Tribunal and the Commissioner the expense of a contested hearing. However, in view of the weight of evidence in support of the Charge and the apparent reluctance of the Respondent to concede his wrongdoing, only moderate weight can be given to such guilty plea in the circumstances.
4. Secondly, the Respondent has been in legal practice for 25 years without any adverse finding having been made against him.
5. The Tribunal accepts and takes into account that the Respondent comes before the Tribunal as a practitioner of prior good character, there have been no subsequent adverse findings and there are no matters pending.
6. Thirdly, at the relevant time, the Respondent was under significant financial stress and simply made the wrong decisions.
7. While the Tribunal accepts that the Respondent was under financial stress at the relevant time, there has been no reasonable explanation for his conduct or extenuating circumstances consistent with any alleged misunderstanding on the Respondent's part.
8. Fourthly, the charged breach of undertaking, within the context of Rule 22.1 of the Professional Conduct and Practice Rules 2005, was not in the same category as the breaches of undertaking in other cases to which the Tribunal was referred.[10] In particular, it was not a blatant or flagrant breach of undertaking but should be treated as something less and more in the nature of an error of judgment.
9. Furthermore, Counsel submitted that the Respondent initially believed that there were grounds to contest the Charge on the basis that his letter to the Purchaser's solicitor dated 9 November 2010, extracted in paragraph 6 of the agreed facts, did not amount to an undertaking.
10. For reasons more fully developed below, the Tribunal rejects these submissions.
11. Finally, whilst there were no written character references tendered on behalf of the Respondent, his Counsel submitted that he had been instructed by the Respondent on approximately 15 occasions in the past, over many years and in that context could attest to his professional character and integrity.

1. In the Tribunal's view, consistent with the submissions made by Counsel for the Commissioner, there is no reasonable basis upon which it could be concluded that the Respondent had not given an undertaking to another solicitor, in the manner alleged.
2. The agreed facts indicate that:
   • (a) Prior to settlement of the Property, the deposit of $57,500, paid by the Purchaser, was held in the trust account of the selling agent;
   • (b) Release of the deposit to a vendor prior to settlement requires compliance with s 27 of the Sale of Land Act 1962;
   • (c) Prior to settlement of the Property, the Vendors were in breach of the mortgage to the Bank. Proceedings in the Supreme Court were issued on behalf of the Bank for possession of the Property. An extract from the affidavit of the Respondent dated 29 October 2010 and filed in the Supreme Court proceedings, states in paragraph (e) on page 7:[11]

... The purchaser has indicated that she is prepared to authorise the release of the full deposit held by the agent in the sum of $57,500 to the Plaintiff [ie the Bank] immediately upon confirmation that it will permit my mother and I to remain in the property and to complete the contract. The agent has agreed to wait until settlement to be paid its commission and other expenses in relation to the sale...

(d) In the same Supreme Court proceedings the selling agent filed an affidavit dated 3 November 2010, which stated in part:[12]

My office is holding the sum of $57,500 in its trust account and I have agreed to wait for payment of the agent's commission and expenses until the settlement of the sale so that the whole of the deposit can be paid to the Plaintiff [ie the Bank] which will greatly reduce the arrears on the Defendant's [ie the Vendors] loan account with the Plaintiff...

(e) The Supreme Court proceedings were settled on the terms set out in the Order of Associate Justice Gardiner, dated 5 November 2010, which included an Order that the Respondent pay the sum of $57,500 to the Bank by 4 pm on 22 November 2010;

(f) On 8 November 2010, the Purchaser's solicitor wrote to the Respondent pointing out that the balance of purchase price due at settlement was not sufficient to discharge the mortgage. In response, by letter dated 9 November 2010, an extract of which appears in the agreed facts, the Respondent explains that the amount payable by the Purchaser at settlement is more than sufficient to pay out the Bank once the deposit sum has been paid to the Bank. On this basis, the Respondent requested that the Purchaser authorise the selling agent to release the deposit so that payment can be made to Gadens [ie solicitors for the Bank] to ensure compliance with the Court order.

(g) In reliance upon the representations and assurance given by the Respondent in the above letter, the Purchaser's solicitor arranged for a s 27 Statement to be signed. The selling agent issued a trust account cheque in favour of the Bank. However, the cheque was not delivered to the Bank, but paid into the Respondent's trust account and the funds representing the deposit were subsequently withdrawn by the Respondent for his own personal purposes.

1. In the Tribunal's view, the above sequence of agreed facts constitutes compelling objective evidence that the Respondent consciously and deliberately represented to the Purchaser's solicitor, in circumstances amounting to an undertaking as between solicitors, whereby the Respondent, on behalf of the Vendors, agreed to immediately pay the deposit, upon early release, to the Bank, and thus ensure that the balance of purchase monies due at settlement would be sufficient to discharge the mortgage.
2. The deposit was released early by the Purchaser on the clear understanding that it would be immediately paid to the Bank. This was also the clear understanding of the selling agent. It was also consistent with the affidavit of the Respondent filed in the Supreme Court proceedings and the Orders made in such proceedings.
3. In the Tribunal's view, Rule 22.1 does not require the use of any form of wording or indeed the use of the word 'undertaking.' However, it must be objectively clear from the form and meaning of words used and the context in which representations or assurances were made, that the intention was to give an undertaking by a solicitor upon which the recipient solicitor would rely.
4. In the Tribunal's view, the only reasonable conclusion to be drawn from the above agreed facts is that the Respondent did indeed give an undertaking to the effect that, if the Purchaser agreed to an early release of the deposit, then it would be wholly and immediately paid to the Bank to reduce the mortgage debt thus giving comfort and assurance to the Purchaser that the balance of purchase monies due at settlement would be sufficient to discharge the mortgage debt. Equally, there is no question that the Purchaser authorised release of the deposit and the selling agent deferred his commission and charges, in reliance upon such deposit being wholly paid directly to the Bank.
5. The circumstances and concerns of the Purchaser, as conveyed by her solicitor to the Respondent, were clear. The Purchaser required a clear title at settlement upon payment of the balance of purchase money, plus or minus adjustments. The enquiries made by the Purchaser's solicitor revealed that there was a shortfall of approximately $3,000 between the mortgage debt and the balance of purchase money. The request for release of the deposit money made by the Respondent, was made only in the context of the concerns raised by the solicitor. If the deposit were not paid to the Bank, the concerns, and potential predicament for the Purchaser in securing settlement, remained. The Respondent clearly procured the release of deposit upon the representation and assurance that it would be paid directly to the Bank and there is no indication whatsoever that such deposit would have been released in the circumstances otherwise.
6. Respondent's Counsel referred to ongoing disagreements between the Respondent and the Bank as to amounts owing under the mortgage. Such disagreement was irrelevant to the circumstances of the Purchaser or any undertaking which the Respondent had given to the Purchaser in order to procure early release of the deposit, solely for the purpose of paying same to the Bank.
7. Respondent's Counsel further submitted that the Respondent made a miscalculation following release of the deposit and believed there would be sufficient funds from the settlement monies to discharge the mortgage. In the Tribunal's view, having regard to the agreed facts, such a proposition is completely disingenuous.
8. It is apparent from further submissions made on behalf of the Respondent that following the release of the deposit, the Respondent did not facilitate the final settlement or in anyway cooperate with the Purchaser's solicitor to this end. The Purchaser's solicitor was left to negotiate with the Bank to effect settlement, with consequent delay, distress and anxiety to the Purchaser.
9. Noting the plea of guilty, the Tribunal is satisfied that the Charge is proven on the evidence.
10. There is no question that undertakings between solicitors are sacrosanct. They facilitate efficient dealings between parties where the interests of one party may be advanced without prejudice to the interests of another party. Rule 22.1 is worded in uncompromising terms. An undertaking must be honoured strictly in accordance with its terms. Rule 22.1 reinforces the integrity of an undertaking by directing a practitioner not to give another practitioner an undertaking where compliance may rely upon a third party whose cooperation cannot be guaranteed.
11. The Tribunal endorses the following comments of Member Butcher in Legal Services Commissioner v Sappountzis (Legal Practice),[13] a case which also involved a breach of undertaking:

Strictly is there to emphasise the very serious nature of giving an undertaking. An undertaking is not something given lightly. It is a personal promise by a legal practitioner and it is a mechanism whereby practical courses of action can be taken based upon the reliance by one legal practitioner upon the undertaking of another that the contents of that undertaking will be observed, again I use the word with emphasis strictly. If there was not such a requirement there would be a breakdown in what is a very important mechanism employed by members of the legal profession. The breach of an undertaking strikes at the heart of such a system.

1. In the Tribunal's view, the conduct of the Respondent was reprehensible and without satisfactory explanation, it amounts to a serious breach of a solicitor's undertaking.
2. Professional misconduct of the kind committed by the Respondent reflects not only upon the practitioner directly involved but also the legal profession as a whole and fundamentally erodes public confidence. General deterrence must be a paramount objective in any sanction which this Tribunal now imposes.
3. In reaching appropriate Determinations, the Tribunal has had particular regard to:
   • (a) the serious nature and circumstances of the breach of undertaking;
   • (b) the absence of any significant extenuating circumstances or other acceptable explanation given for the Respondent's conduct;
   • (c) the failure or refusal of the Respondent to alert the Purchaser to his intention not to pay the released deposit to the Bank;
   • (d) the Respondent's apparent delay or reluctance to concede his wrongdoing;
   • (e) the Respondent's apparent lack of insight by seeking to minimise the seriousness of his conduct; and
   • (f) the significant objectives of general deterrence; and maintaining public confidence in practitioners dealing with each other with trust and integrity.
4. The Tribunal also takes into account that the Respondent has pleaded guilty; and is a practitioner of prior good character.
5. After taking all circumstances into account the Tribunal has concluded that appropriate determinations should encompass:
   • (a) a reprimand;
   • (b) a substantial fine, reflecting the serious nature of the breach of undertaking; and
   • (c) a direction that the Respondent undertake a unit in Ethics in addition to the usual Continuing Professional Developments units required as part of his licensing obligations.

1. Finally, Clause 46D of schedule 1 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) provides that:

(2) The Tribunal must make an order requiring an Australian legal practitioner whom it has found guilty of unsatisfactory professional conduct or professional misconduct to pay costs (including the costs of the Commissioner and the complainant (if any)) unless the Tribunal is satisfied that exceptional circumstances exist.

1. No exceptional circumstances were raised and the parties otherwise agreed that the Applicant's costs be fixed at $12,000. Accordingly, it is proposed to order that the Respondent pay the Applicant's costs of the proceeding in the sum of $12,000.
2. Final Orders are made as set out above.

[1] Part reproduced at Annexure 1, TK 2 to the Application.

[2] Part reproduced at Annexure 1, TK 8 to the Application.

[3] Annexure 1, Exhibit TK 3, page 2 to the Application.

[4] Annexure 1 Exhibit TK 3, page 1 to the Application.

[5] Annexure 1, Exhibit TK 4 to the Application.

[6] Annexure 1, Exhibit TK 5 to the Application.

[7] Annexure 1, Exhibit TK 7 to the Application.

[8] Annexure 1, Exhibit TK 10 to the Application.

[9] Annexure 1, Exhibit TK 10 and TK 11 to the Application.

[10] Legal Services Commissioner v Sappountzis (Legal Practice) [2010] VCAT 1124; Legal Services Commissioner v D'Alessandro (Legal Practice) [2009] VCAT 1129.

[11] Annexure 1, TK 2 - referred to in the agreed facts.

[12] Annexure 1 TX 8, referred to in the agreed facts.

[13] [2010] VCAT 1124 at paragraph 17.