The Tribunal records Mr Koltay's undertaking given to the Tribunal during this hearing that he will not apply for a practising certificate, nor engage in legal practice, at any time in the future in any Australian jurisdiction.

The Tribunal having found Mr Koltay guilty of two charges of professional misconduct under section 4.4.3(1)(b) of the Legal Profession Act 2004, having found that he is not a fit and proper person to engage in legal practice, and having accepted his undertaking, orders by consent, as follows:

1. By 4 August 2017, Mr Koltay is to pay his former client, Mr Tamas Zahonyi-Abel compensation in the sum of $25,000.
2. By 4 August 2017, Mr Koltay is to pay the Victorian Legal Services Commissioner's (VLSC's) costs, in the agreed amount of $9,000.

1. In July 2007, Mr Alexander Koltay, a solicitor, received $30,000 on behalf of a client, the husband in a family law proceeding. The payment was made pursuant to the orders of the Family Court resolving a property dispute. Mr Koltay had written to his client requesting instructions how to forward the $30,000 to him, less $5,000 for his fees. The client did not reply. The client went overseas to look after his elderly mother. During the period July 2007 to March 2014, Mr Koltay first loaned the $30,000 to the Dar-Alawda (Wendel Street) Community Centre Inc (the Community Centre). That group repaid $25,500 of the loan. Then, Mr Koltay utilised that money for his own business purposes, such as covering his overdraft.
2. In March 2014, the client finally returned to Australia, and asked for his money back. Mr Koltay could not pay it. As at 10 April 2014, there was only $36 left. The client complained to the Legal Services Commissioner[1]. The LSC's investigation was put on hold between January and October 2015 while criminal charges of theft of the $30,000 from the client, brought by the police, were dealt with. These were ultimately withdrawn.
3. The VLSC then resumed its investigation, and in August 2015 it brought two disciplinary charges against Mr Koltay. The ultimate form of the charges was as follows:

Professional misconduct within the meaning of section 4.4.3(1)(a) or (b) of the Act[2], in that between 13 July 2007 and March 2014, the respondent failed to pay or deliver trust money, contrary to section 3.3.21(1)(b) of the Act.

Professional misconduct within the meaning of section 4.4.3(1)(a) or (b) of the Act, in that between 18 December 2007 and 10 April 2014, the respondent, in his use of trust monies (deposited in his ANZ Bank Account - [BSB and account number details specified]) for personal purposes, misappropriated those trust monies.

1. Mr Koltay accepted the following:
   • That he owes his client $25,000.
   • That he did not at any relevant time hold a practising certificate entitling him to hold trust moneys.
   • That he placed the money he received in his private bank account.
   • That he had taken money out of this account to pay personal or business expenses.
   • That he lent $30,000 to the Community Centre and of this $25,500 was re-paid.
   • That although he has been trying to borrow funds to repay the client, he has not been able to secure a loan, as he does not have sufficient security to offer a lender.
2. These admissions, together with the evidence of the background circumstances which was also not contested, are sufficient to prove the charges. Nevertheless, and despite discussions with the VLSC over the weeks prior to the hearing, Mr Koltay firmly indicated at the hearing that he pleaded not guilty.
3. In his defence, Mr Koltay said he had complied with the Family Court orders of 24 November 2006. These specified addresses for service of his client, being Mr Koltay's office, a specified street address in Hungary, and the address of the client's brother, also in Hungary. Mr Koltay's letter of 7 March 2007 to his client had asked for details of an account into which the $25,000 could be deposited, and attached a form for the client to fill in, providing that information. But the client never responded. Mr Koltay stressed that the client had had the opportunity to receive the money in that way, but had not availed himself of it.
4. Mr Koltay's submissions made it clear he believed that in those circumstances, it was acceptable for him to use the funds for his own personal business expenses, always with the understanding that he remained obliged to repay the money if his client returned, and asked for it to be paid over.
5. Mr Koltay was very upset that the criminal charges had been brought against him. This seemed to be a major factor motivating him to plead not guilty to these disciplinary charges.
6. Clearly, Mr Koltay was misguided in relation these submissions. He appeared not to understand:
   • That it was unacceptable for him to use the funds he held in trust on behalf of his client to offset his overdraft, or as working capital for his practice.
   • That the client's failure to contact him for seven years did not alter that obligation to keep his money safe. (Ultimately, if the client had completely disappeared, the process in the Unclaimed Money Act 2008 could have been invoked.)
   • That the criminal proceedings conducted against him, by the police, and later withdrawn, are an entirely separate matter to the disciplinary process in which the VLSC has a regulatory, and if necessary, disciplinary prosecutorial role, in proceedings brought in VCAT.
7. After hearing the cases of both the applicant and the respondent, I found the two charges proved. The moneys received by Mr Koltay were 'trust money' because they were moneys 'entrusted to the law practice in the course of or in connection with the provision of legal services by the practice' (s 3.3.2 of the LPA). Mr Koltay had misappropriated them by making withdrawals from the account in which they were deposited, and putting the money to his own use. Then, he had failed to repay his client, contrary to section 3.3.21(1) of the LPA.
8. Next, I found that this constituted conduct falling within section 4.4.3(1)(b) of the LPA, that is, professional misconduct, defined as follows:

(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. This is for the following reasons. Trust account breaches are in the most serious category of professional misconduct by practitioners. The decision in Re a Practitioner[3] is an authoritative and comprehensive statement of the significance of trust accounting breaches.

... it is important to bear in mind the truth which is expressed in the passage from the judgment of the Full Court in In re a Practitioner[4] that the 'trust account should be sacred, so that moneys paid into the account should only be paid out to the persons to whom the money belonged, or as they directed'. In this case there was clearly an intentional misuse of trust moneys. The practitioner made use of moneys entrusted to him for his client's purposes for the purposes of the companies in which he had an interest. It is true that he intended to pay the money back and, in fact, did pay the money back in the sense of banking the cheques from the hospitals in due course and rectifying the irregularity in the Trust Account. His conduct nevertheless was an affront to the sanctity of a practitioner's Trust Account and this Court has a duty to vindicate the inviolability of the trust imposed upon a practitioner to treat his clients' money in all respects as their money and to use their money for their purposes and no other. The public can feel confidence in legal practitioners and their handling of their money only if they know that there is involved no element of judgment on the part of the practitioner, and that their money must remain in his Trust Account until it is disbursed in accordance with their direction; because no matter how good the intentions of a practitioner might be, no matter how confident he might be that the money can be made good, whenever a client's money is deliberately used for a purpose other than the purpose for which the client entrusts it to the practitioner, there is an act of dishonesty on the part of the practitioner and one which exposes the client to some element of risk as to his money. There are two aspects of such misuse of trust moneys held for clients: (1) the clients are exposed to some risk, great or small, depending upon the situation, as to their money, and (2) there is a dishonest misuse by the practitioner of money which does not belong to him for his own purposes and, of course, free of interest.

1. One of the defining characteristics of being a solicitor is that you can be trusted to protect clients' money which is given into your custody no matter what happens. Trust money is sacrosanct.
2. It makes no difference that the practitioner here did not hold a practising certificate which authorised him to hold trust moneys. As stated, Mr Koltay still held his client's money on trust. He was under a fiduciary duty to protect and preserve it.
3. Here, Mr Koltay inexplicably believed that the client not having arranged to collect his money, meant that he was entitled to use it for his own purposes.
4. Mr Koltay said he intended to pay the money back, and still does. I accept that. I accept that he did not intend permanently to deprive his client of the money.
5. But that is not enough. Simply, a practitioner must not take or utilise trust money for the reasons explained in Re a Practitioner above.
6. Mr Koltay has in the past held a practising certificate authorising him to hold trust money. Over the course of his long career, he must have been familiar with the obligations referred to above.
7. His conduct in misappropriating the moneys he held on trust, and thus failing to repay them to his client when he finally did request them in 2014, demonstrates a fundamental lack of understanding of a solicitor's duties. And this has continued over the period 2007 to the present day - nine years. Clearly it is not a momentary lapse.
8. In these circumstances it is clear that Mr Koltay's conduct justifies a finding that he is not a fit and proper person to practise law.

1. Mr Koltay is 90 years old and has practised for 69 years. He said he has only practised in a minor way over recent times, mainly acting as a Notary Public. He has not renewed his practising certificate which expired on 30 June 2016.
2. This is a sad way for his career to end. He has never had any disciplinary findings made against him until now. His financial circumstances are not good. He is on a pension.
3. However, not only has his conduct undermined the trust which the community has in the legal profession, it also deprived his client of $25,000 (albeit the client has subsequently been partially reimbursed by the Fidelity Fund - see below).
4. Mr Koltay gave an undertaking (in writing and orally to the Tribunal) that he will not apply for a practising certificate, nor engage in legal practice, at any time in the future in any Australian jurisdiction.
5. This comprehensively serves to protect the public, since an undertaking given to the Tribunal imposes an obligation on a practitioner (or former practitioner) which is equivalent to a Tribunal order.
6. In addition, the parties sought orders by consent that Mr Koltay pay his client $25,000 by way of compensation (pursuant to ss 4.4.19(a) and 4.3.17(1)(a))[5] and that he pay the VLSC's costs in the agreed amount of $9,000. In my view, in the circumstances described above, this combination of undertaking and orders appropriately serves the purposes of general deterrence and protection of the public, as well as requiring recompense for the client.

[1] From 1 July 2015 the functions of the Legal Services Commissioner (LSC) were taken over by the Victorian Legal Services Commissioner (VLSC) under the Legal Profession Uniform Law Application Act 2014 (Vic). Schedule 1 to that Act is the Legal Profession Uniform Law. References in this decision are to the LSC or VLSC as appropriate.

[2] The Act referred to is the Legal Profession Act 2004 (LPA). This was repealed on 1 July 2015 and replaced by the Legal Profession Uniform Law (Vic). However, under the applicable transitional provisions, this matter falls to be determined under the LPA.

[3] [1982] 30 SASR 27 at 29 - 31.

[4] [1941] SAStRp 11; [1941] SASR 48, at p. 51.

[5] I was told that the client at some point received a payment of $22,500 from the Fidelity Fund - that is, $2,500 less than the amount taken by Mr Koltay. As discussed during the hearing, arrangements for the payment by Mr Koltay of the amount ordered by the Tribunal will take into account that payment, in accordance with the provisions of Part 3.6 of the LPA - so as to limit the funds which the client is able to retain to the amount of his entitlement.