1. On the basis of the facts and circumstances in these proceedings, which I have outlined, and for the reasons indicated I find the caveats lodged by Mr Giarratana personally and by the Solicitors on behalf of TGY had no proper basis, in spite of the warning from Justice Ferguson on 26 July 2012... Further, I find that the caveats were maintained by the Defendants and defended by the Solicitors without any prospect of success and in wilful disregard of known facts and law...
2. In relation to costs, I find that the conduct of the Solicitors in preparing and lodging the TGY caveat, and in defending the Defendants' claim of a caveatable interest before the Court on 30 August 2012 was in wilful disregard of known facts and law which, in all the circumstances, constitutes serious misconduct and a serious dereliction of duty justifying an indemnity costs order against the Solicitors personally. As indicated previously the Defendants' solicitor agreed that an indemnity costs order ought to be made against the Defendants.

[In paragraph [29] His Honour set out the orders made, including the removal under section 90(3) of the Transfer of Land Act 1958 of the caveats which had been lodged by or on behalf of Mr Kotsifas' clients.]

1. Finally, because of the nature and seriousness of my findings, I will forward a copy of these reasons (and make any papers available) to the Victorian Legal Services Commissioner with a request that the Commissioner take further action as considered appropriate.

1. The three caveats relevant to these proceedings, all relating to the same land, are as follows:
   • The 'First Caveat' was lodged with the Land Titles Office on 4 June 2012. It was drawn and lodged by person(s) other than Mr Kotsifas. The caveator was Tina Giarratana. It was not the subject of any charge brought by the LSC.
   • The 'Second Caveat' was lodged on 25 July 2012 by Mr Kotsifas' client, Mr John Giarratana. It had been partially drawn by Mr Kotsifas.
   • The 'Third Caveat' was drawn and lodged by Mr Kotsifas himself on behalf for TGY Pty Ltd on 30 July 2012. Further details are set out below.

1. Mr Kotsifas pleaded guilty to the following three charges brought by the LSC:

Professional misconduct within the meaning of section 4.4.3(1)(a) of the Act for engaging in conduct that involved a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence:

The respondent provided the incomplete Second Caveat to his client to be completed and lodged in circumstances where he:

1. had not considered the underlying documents said to support the caveatable interest, instead relying on instructions provided by the defendants; and
2. acted in disregard of known facts and law.

Professional misconduct within the meaning of section 4.4.3(1)(a) of the Act for engaging in conduct that involved a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence:

The respondent drew and lodged the Third Caveat in circumstances where he:

1. had not considered the underlying documents said to support the caveatable interest, instead relying on instructions provided by the Defendants; and
2. acted in disregard of known facts and law.

Professional misconduct within the meaning of section 4.4.3(1)(a) of the Act for engaging in conduct that involved a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence:

The respondent attended Court to defend the Second and Third Caveats in circumstances where he:

1. had not considered the underlying documents said to support the caveatable interest, instead relying on instructions provided by the Defendants; and
2. acted in disregard of known facts and law

1. At the commencement of the hearing, the parties advised that they had reached agreement on particular factual matters, and the disposition that they submitted should be imposed. I was told some aspects of findings of Justice Croft were in dispute, but that these disputed issues did not prevent agreement being reached on facts relevant to the application.[2]
2. The agreed 'Background Facts' are as follows[3]:

Mr Kotsifas acted for each of Mrs Giarratana, TGY Pty Ltd (TGY) and Mr Giarratana (collectively the clients). Mr Giarratana and Mrs Giarratana were directors of TGY.

There was a course of dealing between various parties related to different entities, including TGY, and a company called Pearl Lingerie Australia Pty Ltd (Pearl Lingerie).

The relationship between TGY and Pearl Lingerie broke down, and it is in the context of the breakdown of these relationships that proceedings were instigated.

The First Hearing - 26 July 2012 - Before Ferguson J

The First Hearing took place on 26 July 2012. It concerned a caveat lodged on behalf of Ms Giarratana over a property owned by Pearl Lingerie. Mr Kotsifas did not draw the caveat, however, he did appear to defend it. Mr Kotsifas defended the caveat on the basis that the interest it protected arose by way of a proposed joint venture and oral agreement. The total quantum of the claim in question was, at its highest, "about half a million dollars".

In the course of the First Hearing, her Honour said that:

...the affidavit material doesn't satisfy the requirements for establishing that in respect of this particular caveat there is a prima facie case. In fact, it shows there's not.[4]

The Court then went on to hear submissions about whether Mr Kotsifas and his clients should be restrained from filing a further caveat in respect of the property. In the course of that submission, Mr Kotsifas was informed that settlement of the sale of the property was to occur on Tuesday of the following week.

In opposing the grant of an injunction to prevent the lodging of any further caveats, there were a number of relevant exchanges:

1. Counsel for Pearl Lingerie highlighted the case of Piroshenko v Grojsman,[5] a case where the Court indicated:
   1. The time for gathering [and presenting] material to support a caveat was at the time of making the application;
   2. More than a simple assertion that there would be some sort of implied or constructive trust without supporting material would be required to support a caveat.
2. Her Honour drew Mr Kotsifas' attention to the difference between a joint venture and an interest in land.

1. Her Honour expressed herself to be 'very doubtful' that a resulting or constructive trust could succeed [ie stand as a sufficiently arguable basis for a caveat not to be removed] in circumstances where a caveat had been lodged on a different basis.

1. Her Honour noted that Mr Kotsifas' client only had a right to lodge a caveat if it had a proper interest.

Indemnity costs were awarded in respect of the removal application..

The Second Proceeding - 30 August 2012 - Justice Croft

Mr Kotsifas drew a caveat on behalf of TGY which claimed an 'estate in fee simple' over the whole of the land pursuant to an implied, resulting or constructive trust (the Third Caveat).

An incomplete caveat was provided to Mr Giarratana to complete and lodge (the Second Caveat).

On 30 August 2012, proceeding No 4798 of 2012 came before Justice Croft in the Practice Court. Mr Black appeared for Pearl Lingerie, while Mr Kotsifas appeared for TGY, the Defendant. Proceeding No 4799 between Pearl Lingerie and Mr Giarratana was heard at the same time, with the same representation.

The concept of the implied, resulting or constructive trust was similar to the alternative basis for the caveat the subject of the First Proceeding, which caused counsel for Pearl Lingerie and the Judge to observe the difficulties in maintaining such an approach.

The Honourable Justice Croft concluded, and Mr Kotsifas agrees, that there was no basis for the caveats to be drawn or maintained.

The caveats were removed. At a further hearing on the following Monday, Mr Kotsifas' firm's representative then consented to indemnity costs against both the firm and the clients.

Mr Kotsifas personally paid the indemnity costs of approximately $29,500.

The LSC and Mr Kotsifas submit that the above conduct may constitute professional misconduct, and in this case does so.

1. Each of the three charges alleges (and Mr Kotsifas accepted) that he engaged in professional misconduct within the meaning of s 4.4.3(1)(a) of the Legal Profession Act 2004 (the Act). That is, that he engaged in unsatisfactory professional conduct involving a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence. Misconduct at common law (namely, conduct which practitioners of good repute would regard as disgraceful or dishonourable) is not alleged. Ms Bennett (for the LSC) submitted, and Mr Corrigan (for Mr Kotsifas) did not dispute, that because lodgement of a caveat has an effect similar to an ex parte injunction, a high level of candour and preparation (in terms of gathering evidence to support the existence of the interests claimed by the lodgement of the caveat) is required on the part of the solicitor who lodges it.
2. The joint submission referred to the decision of Chief Justice Warren in Piroshenko v Grojsman & Others[6] in which her Honour stated that caveats are 'analogous to applications for interlocutory injunctive relief'.[7] Her Honour in that case made it clear that it was

...not sufficient for the caveator to establish a prima facie case that they have a contractual, equitable or statutory right against the caveatee; their interest or rights must attach to the property with respect to which the caveat has been lodged[8].

1. Further, the Chief Justice in that case also said that parties should avoid placing an 'absolute' caveat over a property unless this was necessary. A caveat should be in a form commensurate with the interest it is designed to protect. For example, a caveator may only be entitled to a lessor equitable remedy such as an order requiring the registered owner of the subject land to hold some of the moneys realised through the sale of property on trust pending final determination of the dispute.[9]
2. The parties jointly submitted that when a client requests that a caveat be lodged, a solicitor has an independent duty to assess whether or not it should be. The solicitor's duty cannot be delegated to counsel, much less the client.[10] This was in circumstances where, here, Justice Croft found that in the absence of evidence to the contrary, the solicitors lodged the Third Caveat in circumstances where they could not have formed a professional view at the time of preparing and lodging that TGY had a caveatable interest in the subject land.[11]
3. The parties also jointly referred to the solicitor's analogous duty to make an independent assessment of whether proceedings should be instituted[12]. This is reflected in the various provisions of the Civil Procedure Act 2010 which require that practitioners sign a 'proper basis certificate' to ensure that proceedings are not issued without such insurance and to drive home the practitioner's responsibility.
4. In summary, solicitors have a duty to satisfy themselves before lodging a caveat on behalf of a client, that there is a proper basis for doing so. Clients may be very eager to restrict the ability of a party with whom they are in dispute to be able to deal with their land. But as the Chief Justice made clear in Piroshenko v Grojsman, a caveat is not a 'bargaining chip'.[13] Solicitors must bear in mind that a contractual, equitable or statutory right against a caveatee is not enough ─ there must be a right which attaches to the property over which the caveat is lodged. Further, under 'Extent of prohibition' on the form of caveat they lodge, solicitors must not state 'Absolutely', where only a lesser restriction on dealing with the land is justified.[14]

1. In light of the relevant findings of Justice Croft, the agreed facts and the plea of guilty, I find the three charges proved.

1. The parties jointly proposed that Mr Kotsifas be required to complete nine additional CPD units, and be mentored for 12 months, as well as paying the LSC's costs of this application. Their joint submissions stated that in the ordinary course, it would be open to the Tribunal to suspend the practitioner's practising certificate for between three and six months. However, in light of the practitioner's guilty plea, co-operation and other mitigating factors, they submitted that the above disposition would be appropriate.
2. The Tribunal is not bound by the agreement reached between the parties,[15] however, it is a significant factor to be taken into account.
3. In the case of Legal Services Commissioner v Mercader[16] a practitioner lodged a caveat on the property of her client's husband as security for her costs. Despite a number of requests, the practitioner refused to withdraw the caveat. Following a contested hearing, the Tribunal accepted that there was no basis to lodge the caveat. The Tribunal commented that it was 'strongly arguable that when viewed in total, the practitioner's conduct could amount to professional misconduct...and [the practitioner's] conduct in relation to these charges falls towards the upper end of unsatisfactory professional conduct'.
4. In Mercader, the Tribunal ordered that the practitioner:

1. be reprimanded 2. undertake an additional 10 points of CPD over a 12 month period, in conveyancing, trusts and family law practice.

1. pay the LSC's costs.
2. In contrast, Mr Kotsifas accepted the matters put against him, and pleaded guilty here.
3. In my view, the most significant aggravating factor in Mr Kotsifas' case is the fact that a warning was given by Justice Ferguson that a sufficient interest would be required to support the lodgement of a caveat, and that the claim of an implied resulting or constructive trust was unlikely to be a sufficient basis.
4. Mr Kotsifas gave sworn evidence in the Tribunal. He said that additional documentation was provided by his client after the decision of Justice Ferguson in relation to the First Caveat, lodged in the name of Tina Giarratana. At the time, he believed this was sufficient to constitute a prima facie case to support claims by Mr Giarratana and TGY Pty Ltd that they had caveatable interests in the land. At the time of giving evidence to the Tribunal, however, he unreservedly acknowledged that this was an incorrect view, and that at the time, he had failed properly to consider the matter. I note that the First Caveat, considered by Justice Ferguson, did not in fact claim an interest arising out of a trust. Rather it claimed an 'equitable interest as chargee'. I also note that the LSC did not rely on several of the conclusions reached by Justice Croft, which would apparently have been contested by Mr Kotsifas, in particular, that the caveats were lodged for an ulterior purpose, namely as a 'bargaining chip' in negotiations between the caveators and the caveatee.
5. The upshot is that while the statements made by Justice Ferguson, and the orders she made (including an order for indemnity costs against Mr Kotsifas' client in that matter, Tina Giarratana) did to some extent operate as a warning to Mr Kotsifas, there was not a complete identity between the circumstances before Justice Ferguson and those before Justice Croft.
6. It was beneficial for the Tribunal to hear sworn evidence from Mr Kotsifas himself in this case. It is clear that his errors ─ made during a time when he was experiencing other difficulties in his life ─ have had significant consequences for him. He has personally paid the indemnity costs ordered by Justice Croft, amounting to approximately $29,500. His conduct has now been the subject of two published decisions, one by the Supreme Court and one by this Tribunal.
7. I am satisfied from Mr Kotsifas' evidence that he is now vigilant in relation to the lodgement of caveats. He gave an example which demonstrated this. He also articulated his higher duties as an officer of the Court in relation to the lodgement of caveats, as well as the commencement of legal proceedings. He also demonstrated an understanding that his actions have harmed the reputation of the profession, and expressed remorse for that.
8. I am satisfied that in these circumstances specific deterrence is not a major issue.
9. Overall, I am satisfied the public is sufficiently protected now in the sense that this conduct is unlikely to occur again. The CPD and mentoring proposed, which I will order, will provide benefit to him in terms of dealing with the challenges he faces concerning ethical and practice issues, in his position as the sole principal of a small practice.
10. Of more significance here is general deterrence. Solicitors need to be aware that if they breach their duties in relation to the lodgement of caveats, they are liable not only to have to pay indemnity costs personally and to be found guilty of professional misconduct. They are also at risk of having their practising certificate suspended or cancelled.
11. Ultimately, in the circumstances of this case, however, that message is clearly conveyed to the profession and it is not necessary for the practitioner to lose his right to practise for the ends of general deterrence to be served.
12. I have also taken into account the potentially devastating effect suspension or cancellation would have on Mr Kotsifas' practice, his financial position, and on the livelihood of his three employees.

1. Accordingly, I make the orders stated for CPD, mentoring and costs, which are set out above.

[1] [2012] VSC 451.

[2] The text omitted from paragraph [27] of his honour's decision, above, contained reference to these disputed facts.

[3] Slightly amended for the purposes of inclusion in this decision.

[4] Transcript of the First hearing, before Ferguson J, on 26 July 2012, page 6, lines 24-27.

[5] [2010] VSC 240.

[6] [2010] VSC 240.

[7] [2010] VSC 240 at [7].

[8] [2010] VSC 240 at [23].

[9] [2010] VSC 240 at [8]- [10] and [39] - [40]; see also Schmidt v 28 Myola Street [2006] VSC 343.

[10] Boland v Yates Property Corp Pty Ltd [1999] HCA 64; (1999) 167 ALR 575 at 615-616 (Kirby J); applied by Darvall McCutcheon (a firm) v HK Frost Holdings Pty Ltd (in liq) [2002] VSCA 85; (2002) 4 VR 570 at [32] - [40] (Court of Appeal).

[11] [2012] VSC 451 at [25].

[12] Flower & Hart v White Industries [1999] FCA 773; (1999) 87 FCR 134 at [48] and [57] (Full Court).

[13] Piroshenko v Grojsman & Others [2010] VSC 240 at [23].

[14] Piroshenko v Grojsman & Others [2010] VSC 240 at [8]- [10] and [39] - [40]; see also Schmidt v 28 Myola Street [2006] VSC 343.

[15] Legal Services Commissioner v O'Haire [2014] VCAT 9.

[16] Legal Services Commissioner v Mercader [2011] VCAT 2062.