Law Society of New South Wales v Dzitars
[2014] NSWSC 1545
•20 October 2014
Supreme Court
New South Wales
Medium Neutral Citation: Law Society of New South Wales v Dzitars [2014] NSWSC 1545 Hearing dates: 20/10/2014 Decision date: 20 October 2014 Jurisdiction: Common Law Before: Garling J Decision: (1) Order pursuant to s 630(2) of the Legal Profession Act 2004, that Richard Stephen Savage be appointed receiver to the law practice known as Tereze V Dzitars situated at 29 Parkhill Avenue, Leumeah Heights NSW 2560 ("the law practice").
(2) Order that the receiver, within one month of appointment and from time to time afterwards, furnish to the plaintiff as it requires, reports of the receivership and that no further or other reports need to be furnished by the receiver.
(3) Subject to the plaintiff giving an undertaking as to damages, an order that all transactions involving the receipt or disposal of trust moneys of clients of the law practice be effected and transacted through the trust account of which Richard Stephen Savage has been appointed receiver.
(4) Order that the defendant and her servants or agents are restrained from:
(a) removing or causing or permitting to be removed from the State of NSW; and
(b) selling, charging, mortgaging or otherwise dealing with or disposing of; and
(c) causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of,
any of her assets within the State of NSW without first obtaining permission of the plaintiff provided that this order shall not prevent the defendant from paying her ordinary living and practice expenses up to a sum of $1000 per week.
(5) Order that the defendant within 21 days of being served with a copy of this order, deliver or cause to be delivered to the plaintiff an affidavit sworn or affirmed by her setting out:
(a) the name and address of every bank, building society or other financial institution at which there is an account in any name that the defendant is entitled to operate in any capacity together with all the particulars of the account known to the defendant, including its name, number and balance at the date of service of a copy of this order upon her;
(b) the name and address of any entity and/or person indebted to the law practice and/or the defendant at the date of service of a copy of this order upon her and the amount of the debt owed by that entity or person;
(c) an itemised inventory of all business assets owned by the law practice and/or the defendant;
(d) an itemised inventory of all other property, whether real or personal, owned by the law practice and/or the defendant or in respect of which the law practice and/or the defendant has an interest; and
(e) in respect of any of the property referred to above, whether it has been given as security for any debt, and if so, the nature of the security and the debt secured.
(6) Order that the defendant pay to the plaintiff a sum equal to the legal costs and expenses that may be incurred by the receiver in relation to the receivership.
(7) Order that the defendant pay to the plaintiff a sum equal to any fees paid by it to the receiver by way of remuneration.
(8) Order that the defendant pay the costs of this Summons.
(9) Order that both parties have liberty to apply.
(10) Order that these orders may be taken out forthwith.
Catchwords: PROCEDURE - civil - interlocutory issues -appointment of receiver, application for - Legal Profession Act 2004, s 615(d) - irregularities in conduct of trust account - protection of the public - related orders Legislation Cited: Legal Profession Act 2004 Category: Interlocutory applications Parties: The Law Society of NSW (P)
Tereze Vilhelmina Dzitars (D)Representation: Counsel:
C Groenewigen (P)
In person (D)
File Number(s): 2014/294336
EX TEMPORE Judgment
In this proceeding, the Law Society of New South Wales seeks a principal order appointing Mr Richard Savage as the receiver for the law practice known as Tereze V Dzitars, which is situated at 29 Parkhill Avenue, Leumeah Heights. In support of that application made by Summons, filed on 8 October 2014, the Law Society relies upon the affidavit of Ms Ann-Marie Foord, sworn 8 October 2014. No objection is taken to the contents of that affidavit and no other evidence has been led by Ms Dzitars to contradict any of the facts set out in that affidavit.
Proceedings of the Plaintiff
At a meeting of the Council of the Law Society of New South Wales ("the Council") on 18 September 2014, it was resolved that based upon its belief that one or more of the circumstances referred to in s 615(d) of the Legal Profession Act 2004 ("the Act"), existed in relation to Ms Dzitars' law practice and also because Ms Dzitars had ceased to be an Australian legal practitioner, that external intervention was warranted. Having so decided, the Council determined to apply to this Court for the appointment of a receiver to Ms Dzitars' law practice and obtain a series of consequential orders.
At the time the Council made that decision, it had before it a Memorandum which adequately and amply proved that on 13 May 2014 an assistant trust account investigator had reported of a number of serious breaches of the trust account regulations in respect of Ms Dzitars' law practice, in respect of the trust account which she maintained.
On 29 May 2014, the Council resolved to appoint Mr Savage as the manager of the law practice, to suspend the solicitor's practising certificate and make complaints about the solicitor. Mr Savage, as manager of the law practice, was able to attend the law practice and take possession of all of the current files disclosed to him by the solicitor on 22 July 2014.
Report of Assistant Trust Account Investigator
I should draw attention to the contents of the report of the assistant trust account investigator. The assistant trust account investigator noted that Ms Dzitars' law practice operated a trust account with the Commonwealth Bank at Campbelltown. He was contacted by Ms Dzitars in late April 2014 and was advised that she was having trouble completing the law practice declaration and trust money statement (Part A) for the financial year ended 30 June 2014.
The assistant trust account inspector was also advised by Ms Dzitars that she had been ill and had been unable to write up her trust account. She sought assistance from him to complete the requisite statement. He attended her practice on 9 May 2014 and reviewed such trust accounts as then existed. His review demonstrated the trust account had last been balanced on 30 June 2013, and that whilst Ms Dzitars had attempted to write up the records, from July 2013 onwards, she told him that she was unable so to do due to the ongoing effects of her illnesses.
She advised him that she had had a spinal operation and had a number of dental procedures and teeth removed and had a cancer in her top lip, which resulted in admission to hospital and surgery. With Ms Dzitars' consent, the assistant trust account investigator attempted to write up her trust account record. His estimate was that there were no more than three to five current files.
His writing up of the trust account disclosed that there were a series of irregularities in such trust account records as had existed, and he identified a number of debit balances with respect to various ledger accounts in the trust account. He concluded, as a result of the matters in his report, that the trust account had a deficiency of $46,235.51. He drew these matters to the attention of Ms Dzitars and asked if she was in a position to replace the deficiency of trust money. He was advised that she was not.
The assistant trust account investigator recommended that the matter be referred to the Professional Standards Department of the Society for consideration of the immediate appointment of an external investigator.
Report of Mr Savage - Manager
According to the material before the Council, when it resolved to seek relief from this Court, including a report of the inspection of files by Mr Savage, which took place after 22 July 2014, it was noted that the files had not been maintained in any recognisable order, and that following an inspection of the files relating to a particular identified estate matter, Mr Savage observed that there had been a number of cheques drawn in dispersing the estate funds which were in the trust account for which there did not appear to be any authority on the file, nor in the will of the deceased.
At an interview on 4 September 2014 between Mr Savage and Ms Dzitars, Mr Savage raised a series of particular questions with the solicitor about the identities of the recipients of a number of trust account cheques and what the sums contained in those trust account cheques were intended to be used for. With one exception, each of those cheques were drawn against one estate matter.
It is apparent from the answers given by Ms Dzitars to Mr Savage that the monies drawn from the trust account were used substantially to pay personal costs and expenses of the solicitor or others, and could not in any way be justified as being authorised by the estate. In particular, two cheques were drawn totalling $50,000, one of which was paid to the Latvian Evangelical Lutheran Church for $30,000 and the other for $20,000 to a pastor of that Church.
The solicitor informed Mr Savage in respect of the first payment that although there was no gift of those monies in the will of the deceased, the church had asked for the money and she had given it to them. She said, further, that with respect to the personal payment to the pastor that it was a personal payment as he was going overseas to visit some Latvians.
As well, Mr Savage noted in respect of another estate an issue as to why monies were paid from the estate to beneficiaries when there was no gift to them in the will.
Mr Savage concluded that from the first estate the solicitor had disbursed over $200,000 without any authority. The sum thereby misappropriated needed to be included, subject to any adjustment, by way of costs, on the application for probate and, as well, the reasonable costs for the administration of the estate. Mr Savage identified and requested that in respect of the second estate, there had been a total of unauthorised payments of over $70,000.
Discernment
In those circumstances, and having regard to all of the material which has been placed before me, I am well satisfied that there have been such irregularities in the conduct of the trust account by Ms Dzitars, that it is necessary to appoint a receiver to Ms Dzitars' law practice which conducted that trust account. In making the orders sought, I am conscious that the obligation of the Law Society and, further, the obligation of this Court is to act in the public interest and for the protection of the public.
I am satisfied that the orders which are sought are no more or less than what is necessary to protect the public. I note in this respect that Ms Dzitars has appeared before the Court when the Law Society made this application and has informed the Court that she does not oppose the orders being made.
Orders
Accordingly, I make the following orders and these, for more abundant caution, I indicate are Orders 1 to 9 in the Summons filed on 8 August 2014. They are as follows:
(1) Order pursuant to s 630(2) of the LegalProfessionAct 2004, that Richard Stephen Savage be appointed receiver to the law practice known as Tereze V Dzitars situated at 29 Parkhill Avenue, Leumeah Heights NSW 2560 ("the law practice").
(2) Order that the receiver, within one month of appointment and from time to time afterwards, furnish to the plaintiff as it requires, reports of the receivership and that no further or other reports need to be furnished by the receiver.
(3) Subject to the plaintiff giving an undertaking as to damages, an order that all transactions involving the receipt or disposal of trust moneys of clients of the law practice be effected and transacted through the trust account of which Richard Stephen Savage has been appointed receiver.
(4) Order that the defendant and her servants or agents are restrained from:
(a) removing or causing or permitting to be removed from the State of NSW; and
(b) selling, charging, mortgaging or otherwise dealing with or disposing of; and
(c) causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of,
any of her assets within the State of NSW without first obtaining permission of the plaintiff provided that this order shall not prevent the defendant from paying her ordinary living and practice expenses up to a sum of $1000 per week.
(5) Order that the defendant within 21 days of being served with a copy of this order, deliver or cause to be delivered to the plaintiff an affidavit sworn or affirmed by her setting out:
(a) the name and address of every bank, building society or other financial institution at which there is an account in any name that the defendant is entitled to operate in any capacity together with all the particulars of the account known to the defendant, including its name, number and balance at the date of service of a copy of this order upon her;
(b) the name and address of any entity and/or person indebted to the law practice and/or the defendant at the date of service of a copy of this order upon her and the amount of the debt owed by that entity or person;
(c) an itemised inventory of all business assets owned by the law practice and/or the defendant;
(d) an itemised inventory of all other property, whether real or personal, owned by the law practice and/or the defendant or in respect of which the law practice and/or the defendant has an interest; and
(e) in respect of any of the property referred to above, whether it has been given as security for any debt, and if so, the nature of the security and the debt secured.
(6) Order that the defendant pay to the plaintiff a sum equal to the legal costs and expenses that may be incurred by the receiver in relation to the receivership.
(7) Order that the defendant pay to the plaintiff a sum equal to any fees paid by it to the receiver by way of remuneration.
(8) Order that the defendant pay the costs of this summons.
(9) Order that both parties have liberty to apply.
(10) Order that these orders may be taken out forthwith.
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Decision last updated: 06 November 2014
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