Council of the Law Society of NSW v Farah

Case •

[2013] NSWADT 110

•

21 May 2013

Administrative Decisions Tribunal


New South Wales

Medium Neutral Citation: Council of the Law Society of NSW v Farah [2013] NSWADT 110
Hearing dates:20 February 2013
Decision date: 21 May 2013
Jurisdiction:Legal Services Division
Before: S. Hale, Judicial Member
D Fairlie, Judicial Member
E Hayes, Judicial Member
Decision:

1.Order pursuant to S. 18(2) of the Legal Profession Act, 2004 prohibiting (without approval under section 17) any law practice from employing or paying the Respondent in connection with the legal practice engaged in by the law practice

2.Order that pursuant to S 20(3) of the Legal Profession Act, 2004 the Respondent to pay the Applicant's costs of the proceedings as agreed or assessed

Catchwords: Lay Person carrying on conveyancing business - not qualified - misappropriation of moneys - forgery -
Legislation Cited: Legal Profession Act, 2004
Financial Transaction Reports Act, 1988 (Cth)
Cases Cited: Allinson v General Counsel of Medical Education and Registration [1894] 1QB 750
Stanoevski v Council of the Law Society of New South Wales [2008] NSWCA 93
Briginshaw v Briginshaw (1938) 60 CLR 368
Rejfek v McElroy (1965) 112 CLR 517
Category:Principal judgment
Parties: Council of the Law Society of New South Wales
(Applicant)
Nagib Farah (Respondent)
File Number(s):122024

REASONS FOR DECISION

THE CONDUCT COMPLAINED OF:

  1. The Respondent, despite being neither a solicitor nor a licensed conveyancer, conducted a conveyancing business for reward in breach of S 6 of the Conveyancers Licensing Act, 2003 NSW.

  1. The Respondent's conveyancing business was styled J J Service Providers ('JJSP') and operated from a space within the offices of Farah Lawyers, Level 6, Suite 4, 410 Chapel Road, Bankstown NSW ('the Practice') The Principal of the Practice was the Respondent's brother, Elias Farah.

  1. Since about 2002, under the auspices of the Practice and JJSP, the Respondent had carriage of conveyancing matters from start to finish, including legal searches, lodgement and stamping of documents, settlement and registration.

  1. The Respondent was not an employee of the Practice.

JJSP acted as an agent for the Practice. In this capacity it:
a) Had no authority to deal with Trust monies of the clients of the Practice other than by way of deposit into the Trust Account. Trust monies expected and required to be deposited into the Trust Account included monies forwarded by clients for deposits paid before exchange of contracts, deposits paid in cash, stamp duty, settlement monies and balance of mortgage monies received from incoming mortgagees.
b) Received a fee per file on settlement. This fee was separately charged to and collected from the clients by the Respondent on behalf of JJSP.

  1. The Applicant ('the Law Society') became involved in late 2011 following a complaint by a former client of the Practice, Ahli Ahmed, who was experiencing problems in obtaining his files from the Respondent having been told that the Respondent had 'disappeared'.

  1. The Law Society's investigation established that the Respondent had misappropriated client funds in a number of conveyancing matters over a three year period. There was a small deficiency of $4,562.50 in general trust account monies relating to a forged trust account cheque, which had been corrected by the Respondent's brother. As far as deficiencies in other trust monies were concerned, there were three matters with unusual circumstances, in which monies were being claimed by former clients of the practice. It was found there had been significant manipulation of trust monies through bank accounts of the Respondent and other bank accounts, however, the Respondent had borrowed monies from money lenders to make good the deficiencies during the tenure of the fraud. The Respondent's brother informed the Law Society that he and his family had given in the vicinity of two million dollars to the Respondent, supposedly to repay the money lenders.

  1. Following the discovery of the fraud, the Respondent disappeared. At the date of hearing the proceedings, his whereabouts were unknown.

GROUNDS FOR APPLICATION

  1. The Law Society put forward two (2) grounds to support its Application, based on the above conduct.

Ground 1

The Respondent is not a fit and proper person to be employed or paid in connection with any legal practice; and/or

Ground 2

The Respondent has been guilty of conduct that, if the person were an Australian legal practitioner, would have constituted unsatisfactory professional conduct or professional misconduct.

PARTICULARS

Ahmed Homsi purchase

  1. Mr. Homsi contracted to purchase the property known as 5/100 Yangoora Road, Lakemba. The deposit was in the sum of $12,112.50 and was payable to Ray White, Punchbowl. Mr. Homsi paid the deposit in cash to the Respondent and depending on the time of its receipt by the Respondent, the deposit was either trust property or cash transit monies. It was not deposited into a trust account nor reported to Austrac as required by the Financial Transactions Reports Act 1988 (Cth).

  1. The Respondent misappropriated the cash deposit. He drew a trust account cheque on the Practice's trust account, forged his brother's signature and presented that cheque to the Agent. This caused a deficiency in the said Trust Account of $12,112.50.

  1. The settlement sheet for the purchase was published on the Practice's letterhead and dated 4 October, 2011. Six cheques were requested including a cheque in favour of JJSP for $440.00 and one in favour of Farah for $6,135.71. Of this cheque, the Respondent gave $5,000 in cash to Mr. Homsi and the remainder remains unaccounted for. The Practice received nothing.

Ahmed home loan payout

  1. In late 2009 Mr. Ahmed sought the assistance of the Respondent to discharge the mortgage on his parent's home.

  1. On 27 November, 2009 Mr. K and Mrs. N. Ahmed (the Mortgagors) signed a discharge authority to Challenger Bank with a view to paying out their home loan. Settlement was anticipated for 16 December, 2009.

  1. The Respondent advised that the payout figure of $220,000 should be forwarded to him by way of a cheque drawn in favour of JJSP This was done by Mr. Ali Ahmed on behalf of his parents.

  1. The cheque for $220,000 was properly characterised as trust property.

  1. The amount of $220,000 was credited to the JJSP account on 2 December, 2009 and misappropriated by the respondent.

  1. The mortgage was eventually paid by the Respondent after 21 August, 2010 using an unknown source of funds.

Adam Hamad Suleiman Purchase

  1. Mr. Suleiman received net payment of about $224,000 from a compensation claim.

  1. On 2 September, 2009 Mr. Suleiman contracted to buy land known as 3/23 Carramar Avenue, Carramar for a purchase price of $205,000. The deposit on the purchase was $20,500. Mr. Suleiman paid the vendor's agent an initial holding sum of $515.00 so that the deposit remaining to be paid was $19,985.00. The respondent acted on the purchase.

  1. Mr. Suleiman paid the balance of the deposit by bank cheque for $19,985.00 in favour of JJSP.

  1. The bank cheque was properly characterised as trust property.

  1. On 10 September, 2009 the Respondent obtained special clearance of the bank cheque and deposited it into JJSP Account which until then had a debit balance of $300.83.

  1. The Respondent misappropriated the proceeds of the bank cheque.

  1. By cheque dated 15 September, 2009 and drawn from the JJSP Account the Respondent forwarded the sum of $9,735.00 to the vendor's agent. This amount was half the deposit less $515.00 already paid to Mr. Suleiman. The remaining half of the deposit was retained by the Respondent.

  1. On or about 15 September, 2009 Mr. Suleiman attended his bank and withdrew the sum of $184,520.00 to settle his purchase. On the advice of the Respondent, Mr. Suleiman produced this sum as to bank cheques drawn in favour of Perpetual Limited in the sum of $97,219.00 and JJSP in the sum of $87,281.00.

  1. The cheques were properly characterised as trust property.

  1. Perpetual Limited had no involvement in this conveyance and so no entitlement to receipt of any portion of Mr. Suleiman's money.

  1. The cheques were misappropriated by the Respondent.

  1. Without Mr. Suleiman's instructions, the Respondent by letter dated 2 February, 2010, authorised the release to the vendor's solicitors of the deposit monies held by the vendor's agent.

  1. By letter dated 26 February, 2010, the Respondent forwarded a letter to the vendor's solicitor together with a part payment of $25,000.00 falsely representing that Mr. Suleman's loan facility had expired and that a further two weeks was required to refinance. A new settlement date was agreed by the Respondent and the solicitors for the vendor.

  1. By letter dated 16 March, 2010 purportedly signed by Mrs. Hibah Hazim, solicitor of the Practice, the Respondent wrote to the vendor's solicitors falsely representing there was an incoming mortgagee involved in the purchase and requesting a further and final extension of two weeks on the basis of a further part payment of $20,000.00. At the time that letter was written, the settlement monies had been provided by the purchaser to the Respondent six (6) months earlier, on 15 September, 2009.

  1. On 16 March, 2010 the vendor attended upon the offices of the Practice and collected an amount of $20,000.00. The source of these funds is unknown.

  1. The purchase finally settled on 2 June, 2010. The source of funds to settle the purchase is unknown.

Naim and Patricia Rihana ('the Rihanas') Purchase

  1. By contract for sale dated 18 October, 2007 the Rihanas agreed to purchase land known as Unit 11, 10/19A Meadow Way, Banksmeadow, for a purchase price of $319,000.00. The purchase was a cash purchase. The full deposit was paid to the vendor's agent. The Respondent acted on the purchase.

  1. In anticipation of settlement, the Respondent wrote to the Rihanas on 1 May, 2008 requesting settlement cheques one of which was a cheque in favour of the Office of State Revenue for $10,267.48.

  1. The Respondent misappropriated $10,267.48 due to the Office of State Revenue.

  1. By fax dated 15 September, 2008 to the Respondent, the vendor's solicitors noted that Sydney Water and the Land Titles Office had not been notified of the Rihanas' status as registered proprietors of the land.

  1. By Contract dated 12 November, 2010, the Rihanas agreed to buy adjoining land known as Unit 10, 10/19A Meadow Way, Banksmeadow.

  1. At this time, the Respondent had still not paid stamp duty on the Contract for No. 11.

  1. The Respondent altered the date of the Contract for Unit 11 from 18 October, 2007 to 23 February, 2011.

  1. Duty was erroneously assessed on the Contract for Unit 11 and the Contract for Unit 10 as though they were a single purchase costing $704,000.00. This resulted in duty payable of $27,170.00 which was paid on both contracts on 12 May, 2011, the source of funds for this payment is unknown. Had the contracts been stamped individually and in timely fashion, the stamp duty would have been less than what was paid.

NOTICE TO THE RESPONDENT OF PROCEEDINGS

  1. Since the commencement of these proceedings, the Law Society has never been aware of the whereabouts of the Respondent and all process was served on the Respondent's brother who informed the Law Society he did not have contact with the Respondent but that his parents maintained contact with the Respondent's children. The Respondent's brother agreed to accept copies of the originating process, supporting affidavits and a letter advising of the hearing date ('the documents') on the basis that he would attempt to bring them to the Respondent's notice.

  1. The Law Society subsequently received a letter dated 5 November, 2012 from the Respondent's brother advising the Respondent had been served with the documents at Bankstown Court on 30 November, 2012.

  1. The Respondent did not file any Response to the documents served on him nor did he appear at the hearing.

  1. In order to satisfy itself, the Tribunal requested the Law Society to provide evidence in an admissible form from the Respondent's brother attesting to the fact that the Respondent had been served. That evidence was received in the form of an Affidavit from Elias Farah sworn on 7 March, 2013, paragraph 1 stating, 'On 30 November, 2012, at Bankstown Local Court, I personally gave Mr. Nagib Farah the parcel of Documents that was sent to me by Ms. Cora Groenewegen.'

  1. Based on this evidence together with an Affidavit sworn by Ms. Groenewegen on 20 February, 2013 annexing copies of relevant correspondence comprising the 'parcel of documents' that was served on the Respondent by his brother, the Tribunal is satisfied that the Respondent was given proper notice of the proceedings in the circumstances and on that basis heard the matter in the absence of the Respondent.

THE ORDERS SOUGHT

  1. The Applicant sought the following orders:

a. An order pursuant to S 28(2) of the Act prohibiting (without approval under S 17) any law practice from employing or paying the respondent in connection with the legal practice engaged in the law practice.
b. An order pursuant to S 20(3) of the Act that the Respondent pay the applicant's costs of these proceedings.
c. Such further or other orders as the Tribunal deems fit.

THE EVIDENCE

  1. The evidence adduced by the Law Society comprised an Affidavit sworn on 6 September, 2012 by Ann-Marie Foord, Solicitor for the Council of the Law Society, Affidavit sworn on 16 August, 2012 by Garry Terence Napper, Trust Account Investigator for the Law Society and Affidavit sworn on 20 February, 2013 by Cora Groenewegen, Litigation Solicitor, Professional Standards Department of the Law Society.

  1. Ms. Foord's evidence was directed to the investigation of the complaint as a result of Mr. Napper's Report following his investigation of the Practice. The evidence of Ms. Groenewegen dealt with service matters as referred to above.

  1. The Tribunal also called for further evidence to satisfy itself as to the link between the Respondent and the business name JJSP together with details as to the owner of and signatory to the NAB Bank account number 082128-83-339-6396 styled 'J J Service Providers' as these matters were not evident from the material before the Tribunal. In this regard, the Tribunal noted that all letters written by the Respondent in relation to the matters he conducted were written on the letterhead of the Practice and the NAB Bank Account Statements for JJSP showed the Practice's office address.

  1. Subsequent to the hearing of the proceedings, the Tribunal was provided with a Business Name Search of JJSP dated 20 February, 2013 which shows Nagib Farah as the business name holder of JJSP. The Tribunal is satisfied that the requisite link between the Respondent and the subject business name has been made out.

  1. In relation to the enquiries regarding the JJSP NAB Bank Account, the Tribunal was provided with copy of a letter dated 26 February, 2013 written by the Law Society to NAB, 402-410 Chapel Road, Bankstown setting out information it required in order to satisfy the Tribunal's queries. The Tribunal has been advised by letter dated 3 May, 2013 from the Law Society that it has not received any reply to the said letter and that its phone enquiries have not been successful in obtaining the relevant information and it is unable to provide further details. The Tribunal is therefore left in the position of having to make its own finding as to this aspect.

  1. The Tribunal notes that the Respondent was very deliberate in his request to his clients to provide cheques payable to JJSP when ordinarily, the cheques should have been made payable to third parties or at the very least, the trust account of the Practice. Once the cheques were handed to the Respondent by the clients, the subject Bank Statements show the cheques were quickly deposited into the said bank account and dealt with as set out above. In these circumstances, the Tribunal is of the view that it could only have been the Respondent who was operating the said Bank Account and no other person and accordingly, makes that finding.

  1. The Tribunal notes there is no suggestion that the Respondent's brother operated that Bank account or was complicit in assisting the Respondent in the operation of the said Bank Account. Indeed, the Tribunal was informed by the Law Society that no fraud was committed by the Solicitor, Elias Farah the operator of the Practice.

CONCLUSION

  1. The common law test of whether a legal practitioner has been guilty of professional misconduct is that promulgated in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750, namely conduct which 'would be reasonably regarded as disgraceful or dishonourable' by professional brethren of good repute and competency.'

  1. The onus of proving misconduct lies with the Law Society: Stanoevski v Council of the Law Society of New South Wales [2008] NSWCA 93, while the standard of proof to be applied by the Tribunal is the civil standard, on the balance of probabilities. The degree of satisfaction for which the civil standard of proof calls in professional discipline matters may vary according to the gravity of the fact to be proved: see Briginshaw v Briginshaw (1938) 60 CLR 368 and Rejfek v McElroy (1965) 112 CLR 517 at 521. See also Riley Solicitors Manual at 34,145.10.

  1. The Tribunal is satisfied that the evidence sufficiently establishes the conduct of the Respondent that was alleged and particularised in the Disciplinary Application to the extent that had the Respondent been an Australian legal practitioner, at the time the conduct took place, such conduct would justify a finding by the Tribunal that the Respondent is not a fit and proper person to be employed or paid in connection with any legal practice and has been guilty of conduct constituting professional misconduct.

ORDERS

1. Order pursuant to S. 18(2) of the Legal Profession Act, 2004 prohibiting (without approval under section 17) any law practice from employing or paying the Respondent in connection with the legal practice engaged in by the law practice.

2. Order that pursuant to S 20(3) of the Legal Profession Act, 2004 the Respondent to pay the Applicant's costs of the proceedings as agreed or assessed.

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Decision last updated: 21 May 2013

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