THE LEGAL PRACTITIONERS ACT 1981 (SA) RE NICHOLAS NIARCHOS - [2009] SASC 43

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules)
THE LEGAL PRACTITIONERS ACT 1981 (SA) RE NICHOLAS NIARCHOS
[2009] SASC 43
Reasons for Decision of The Honourable Justice Duggan
26 February 2009
PROFESSIONS AND TRADES - LAWYERS - PRACTISING CERTIFICATES
Application pursuant to s 49 of the Legal Practitioners Act 1981 for authority to practise as a legal practitioner – practitioner entering into a Personal Insolvency Agreement – application granted subject to conditions.
Legal Practitioners Act 1981 (SA) s 49; Bankruptcy Act 1966 (Cth) Part X, referred to.
Re Read [2006] SASC 35, considered.

THE LEGAL PRACTITIONERS ACT 1981 (SA) RE NICHOLAS NIARCHOS
[2009] SASC 43
Civil
DUGGAN J.

The applicant applied pursuant to s 49 of the Legal Practitioners Act 1981 (SA) (“the Legal Practitioners Act”) for an authority permitting him to practise as a legal practitioner. The application was made prior to the applicant entering into a Personal Insolvency Agreement under Part X of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”).
The applicant practises as a barrister. On 17 October 2008 he authorised trustees registered under the Bankruptcy Act to call a meeting of his creditors. The meeting was held on 19 November 2008. At the meeting, the creditors approved the applicant’s proposal that he execute a Personal Insolvency Agreement. It was a condition of the Personal Insolvency Agreement that the applicant provide the trustees with a copy of an approval pursuant to s 49 of the Legal Practitioners Act permitting him to continue in practise as a barrister.
Section 49 provides as follows:
(1)A legal practitioner—
(a) who has become bankrupt or subject to a composition or deed of arrangement or assignment with or for the benefit of creditors; or
(b) who is or has been a director of an incorporated legal practitioner during the winding up of the company for the benefit of creditors,
must not, without the authority of the Supreme Court, practise the profession of the law.
Maximum penalty: $10 000.
(1a)Authority may be granted under this section on the application of a legal practitioner who is or is about to become bankrupt or subject to a composition or deed of arrangement or assignment with or for the benefit of creditors or who is or has been a director of an incorporated legal practitioner that is being or is about to be wound up for the benefit of creditors.
(2)The Supreme Court may grant an authority under this section on such conditions as it thinks fit.
(3)A legal practitioner must not contravene or fail to comply with any condition of an authority granted by the Supreme Court under this section.
Maximum penalty: $10 000.
At the hearing of the application I received an affidavit sworn by the applicant and heard submissions from counsel for the applicant, counsel for the Law Society of South Australia and the Solicitor‑General for South Australia representing the Attorney‑General.
The applicant was born on 15 January 1948 and migrated to Australia with his parents in 1954. After gaining the necessary tertiary qualifications, he was admitted as a practitioner of the Court on 13 December 1971. He practised in a firm of solicitors until July 1975 when he commenced practice as a sole practitioner. He has practised as a barrister at the independent bar since October 2004.
It would appear that by 2000 the applicant was in financial difficulty. One of the reasons he advanced for this situation was his involvement as counsel in a civil case which he undertook on a pro bono basis. He stated in his affidavit that the fees and disbursements which he lost as a result of the case exceeded $600,000.
It was at about this time that he failed to lodge a tax return and this failure was repeated each year until 2006. The applicant met with his accountant on 22 May 2006 and instructed him to prepare all the returns which had not been filed. These returns were lodged with Australian Taxation Office and the tax liability for those years was assessed.
The applicant’s indebtedness to the Australian Taxation Office eventually amounted to $493,353.49. Income tax liability totalled $268,111 and the remainder of the amount owed was made up of penalties and interest. This and other debts precipitated the applicant’s actions in authorising trustees to call the meeting of creditors.
The nature of an inquiry under s 49 of the Legal Practitioners Act was considered by Besanko J in Re Read.[1] His Honour said:[2]
The inquiry under s 49 is whether the applicant is a fit and proper person to practise the profession of the law, having regard to the fact that he or she has become a bankrupt. The relevant consideration is the protection of the public: Reynolds v Law Society of South Australia [2002] SASC 223. Often, the question is to be decided in the context of proposed conditions that will limit the way in which the applicant is to practise. A consideration of the circumstances under which the applicant has become bankrupt may reveal conduct which is or which may be unprofessional or unsatisfactory, and to that extent the distinction between proceedings under s 49 and disciplinary proceedings may not be a neat and clearly defined one. However, the purpose of an inquiry under s 49 is not to discipline a practitioner: see Re Legal Practitioners Act 1981 (SA); Re Jordan [2005] SASC 367. That is not to say that should evidence of unprofessional or unsatisfactory conduct emerge during the course of an inquiry under s 49, a Court must ignore it or is powerless to act. In the case of what seems to be serious misconduct, the Court may consider it appropriate to adjourn, or perhaps dismiss, the application pending the outcome of disciplinary proceedings.
[1] [2006] SASC 35.
[2] Ibid at [20].
As has been pointed out, in the present case the applicant did not become bankrupt. However, s 49 of the Legal Practitioners Act applies also to practitioners entering into arrangements for the benefit of creditors and the approach referred to by Besanko J is equally applicable to such cases.
I was informed that it is not intended to bring disciplinary proceedings against the applicant, nor are charges for any offences pending. It is, of course, a matter of concern that the applicant did not file income tax returns over a period of some years. On the other hand, I was told that he took the initiative to bring this to the attention of the Australian Taxation Office and he appears to have co‑operated in all respects with the taxation authority since that time. It was not suggested that there was any other aspect of his past practice as a legal practitioner which gives rise to concern.
During the hearing I was invited to consider draft orders which contain strict conditions with respect to the applicant’s practice. The Law Society did not oppose the making of the orders and, when the Solicitor‑General appeared in the case to represent the Attorney‑General, he contributed to the formulation of the draft.
After considering the material before me and the submissions which were made, I reached the conclusion that it was appropriate to grant an authority to the applicant to practise under the conditions set out in the draft. In doing so I had regard to the importance of protecting the public and maintaining proper standards of conduct within the profession. I considered the conduct involving failure to lodge taxation returns and the safeguards in the draft orders aimed at preventing a recurrence of such conduct and ensuring that there would be adequate supervision of the applicant’s financial affairs. The conditions include the requirement to practise only as a barrister, the duty to provide such information to the Law Society as it requires from time to time, compliance with the conditions set forth in the Personal Insolvency Agreement, submission to supervision in financial affairs by a Chartered Accountant and compliance with taxation obligations.
After deciding to grant the applicant the authority to practise which he sought, I made the following orders:
Upon the undertaking of Nicholas Niarchos to comply with the conditions hereafter set forth, the Court orders that:
1.In the event that Nicholas Niarchos (hereinafter referred to as “the practitioner”) enters into a Personal Insolvency Agreement, the practitioner is hereby authorised until further order to practise the profession of law, subject to the following conditions:
1.1     Unless otherwise approved by the Law Society of South Australia, the practitioner’s right of practice is limited to that of a barrister.
1.2     The practitioner will not engage in any other work, business or occupation than that of a barrister.
1.3     The practitioner will provide such information to the Law Society of South Australia as the Society may require from time to time.
1.4     The practitioner will report to the Society on such matters relating to compliance with the conditions set forth in the Personal Insolvency Agreement as may be required from time to time.
1.5     The practitioner will provide to the Law Society of South Australia, if it so requires, a copy of the periodic (quarterly or annual) reports that he is required to provide to the Trustees under the Personal Insolvency Agreement.
1.6     The practitioner will comply with the reasonable directions of the Trustees appointed pursuant to the Personal Insolvency Agreement and his statutory obligations.
1.7     The practitioner will retain Mr Neil Wallace, chartered accountant of Shearer & Ellis, Chartered Accountants, Level 1, 5 King William Road, Unley, South Australia 5061, as his accountant until further order, to manage his financial affairs and to assist him in ensuring compliance with his financial and taxation obligations.
1.8     The practitioner will cooperate with Mr Wallace and provide him with all documentation sufficient to enable the practitioner to attend to the timely filing within the prescribed periods of all future Business Activity Statements and income tax returns with the Australian Taxation Office.
1.9 Subject to the operation of the Bankruptcy Act 1966, the practitioner will pay all amounts, self-assessed or assessed as payable by the Australian Taxation Office as and when such payments fall due for payment.
1.10   The practitioner will comply with all his taxation obligations without limitation, including the preparation and lodgement of returns and payments of moneys to the Australian Taxation Office.
1.11   The practitioner will forthwith advise the Law Society of South Australia should he cease to practise in the manner provided in this order.
2.Mr Neil Wallace will provide a written report to the Law Society of South Australia on a quarterly basis as to the practitioner’s compliance with his financial and taxation obligations, the first report to be provided by 15 March 2009 in respect of the quarter ending 31 December 2008.
3.The Trustees will provide to the Law Society of South Australia and the Attorney‑General of South Australia, on a quarterly basis, notification of continuing compliance with the Personal Insolvency Agreement, the first report to be provided by 21 April 2009 in respect of the quarter ending 31 March 2009.
4.The practitioner will advise all solicitors who have retained his services both at present and in the future of the existence of this order and the existence of the Personal Insolvency Agreement and that breach of this order or the Personal Insolvency Agreement may result in the loss of the right to practise.
5.Liberty to apply to the practitioner, the Law Society of South Australia and the Attorney-General of South Australia.
6.If the practitioner fails to comply with any of the conditions in para 1 hereof, leave to the Law Society of South Australia and the Attorney‑General of South Australia to apply for an order revoking this order.
7.Any reference to the Personal Insolvency Agreement is a reference to the Personal Insolvency Agreement in the terms set out in Exhibit NM5 to the affidavit of the practitioner sworn at Adelaide on 3 December 2008.
8.A true copy of the Personal Insolvency Agreement entered into by the practitioner will be served on the Attorney-General of South Australia and the Law Society of South Australia within 48 hours of the execution of the document.